1.

1 Introduction of the study:

In general sense we mean Bank as a financial institution that
deals with money. Now-a days banking sector is modernizing
and expanding its hand in different financial events every day.
At the same time the banking process is becoming faster,
easier and is becoming wider. In order to survive in the
competitive field of the banking sector all organizations are
looking for better service opportunities to provide their fellow
clients.
In this research study the researcher conducted a research on
A causal study on the influence of Internet Banking in
Customer retention in the context of
Bank . The main
objective of this research is to identify the key factors that
influence the internet banking and Helps to retain customers of
the Bank. By this research we will able to know that which
factors and how they influence internet banking
retain
customer.
1.2 Statement of the Problem:
By this study, researchers will investigate the impact of Internet
Banking on customer retention. Bank. is a well-established
Bank over the last few years, but due to rise in customer
complaints and customers preferring- banking services of other
banks, it has come to the light that their Internet banking
service quality is not one of the best compared to their other
banking services. Thats why is threatened to lose their
customer. This has enticed them to conduct a survey to find
alternative solutions to improve service quality of their Internet
Banking. I was assigned to find the factors (that they need to
look at or do further research) of Internet Banking that can help
them to improve service quality and retain customers.
1.3 Purpose of the Study:
The purpose of this study is to find out the factors of internet
banking that can impact to retaining customer in the context of
Bank. It will help the researchers to look into the overall
condition of internet banking service of Bank.
1.4 Objective of the study:

Broad objective: Prepare the report on The impact of

internet banking on customer retention in the context of
Bank.
Specific Objectives:

To understand the internet banking system of Bank.

To identify the problems of internet banking system of Bank.

To find out the problem of client and employees to changes in
internet banking of of Bank..
To identify the problem in operation of internet banking in the banks
website.

To know the terms, rules and condition of internet banking

given by of Bank. to their clients.
To provide suggestions for the improvement of the internet
banking system of the Bank.

1.5 Methodology of the study:

There are two sources from which I have collected data,
Primary source and Secondary source.

Primary Data:
1. The information, which is gathered from while I worked
with them.
2. Personal observation.
3. Face to face conversation with the officers.
4. Face to face conversation with the clients.
5. Working at different desks of the bank.
Secondary data:

Secondary Sources: Secondary data are collected in the

following ways:

Data gathered within the organization itself.

Data gathered from Texts
Internet sources.
General reports.
Annual reports.
Official documents

1.6 Limitations of the study:

There were some limitations of doing the study:
We have completed our within 3 months only
3.1 Literature Review:

Internet Banking: The rise of Internet Banking is also due to

its number of benefits for both the provider and the customer
as well. From the banks perspective these are mainly related
to cost savings (Sathye, 1999; Robinson, 2000) and Internet
Banking remains one of the cheapest and more efficient
delivery channels (see Pikkarainen et al., 2004). Other
rationales for the adoption of such services are also related to
competition as Internet Banking strategy has been an
interesting way to retain existing customers and attract new
ones (Robinson, 2000). Among the numerous advantages to
banks feature mass customization, more effective marketing
and communication at lower costs amongst others (Tuchila,
2000). Benefits for the end users are numerous as well and
include mainly convenience of the service (time saved and
globally accessible service); lower cost of transaction and more
frequent monitoring of accounts among others (see Pikkarainen
et al., 2004). It is noteworthy that there is also a number of
push factors encouraging the adoption of internet banking that
have been evoked in the literate In spite of all these numerous
advantages of Internet Banking, many people still prefer to
conduct their banking transactions at the bank, something
which they had been doing for years. Thus, apart from security
aspects, there are numerous factors and barriers that making
people still prefer the traditional way for their banking
transactions. Internet banking is advantageous to both the
banks and customers.
Service Quality: Service quality has become an issue that
businesses have focused up on with e-services that enable
electronic communication; information gathering, transaction
processing and data interchange between online vendors and
customers across time and space (Featherman and Pavlou,
2002). In online environments, service quality is defined as the
extent to which a website facilitates efficient and effective
shopping, purchasing, and delivery of product and services
(Zeithaml et al., 2002). Santos (2003) described e-service
quality in terms of overall customer evaluations and judgments
regarding the excellence and the quality of e-service delivery in
the virtual marketplace. A study by Parasuraman et al. (2005)

on the Internet service quality of online shopping websites

resulted in the development of a service quality scale, the e-SQ
scale, consisting of seven dimensions: efficiency, system
availability, fulfillment, privacy, responsiveness, compensation
and contact. It is slightly different from the e-SQ scale
developed by Zeithaml et al. (2001) which has 11 dimensions:
reliability, responsibility, access, flexibility, and ease of
navigation, efficiency, assurance, security, price knowledge,
site
aesthetics
and
customization
/
personalization.
Furthermore, a study by Ribbink et al. (2004) in an e-commerce
context (online book and CD stores) the service quality
dimensions consisted of: ease of use, escape, responsiveness
and customization. Cristobal et al. (2007) further developed a
service quality scale which consists of multidimensional
constructs of web design, customer service, assurance and
order management.
Responsiveness: Responsiveness is the willingness to help customers
and provide Prompt service (Zeithaml et al, 2006). This dimension is
concerned with dealing with the customers requests, questions and
complaints promptly and attentively. Handling of problems and returns
through the site. A Bank is known to be responsive when it communicates
to its customers how long it would take to get answers or have their
problems dealt with. To be successful, companies need to look at
responsiveness from the view point of the customer rather than the
companys perspective (Zeithaml et al., 2006). Responsiveness also
captures the notion of flexibility and ability to customize the service to
customers need. Standard for speed and promptness thats refects the
companies view of process requirement may be very different from the
customer requirement. Responsiveness concerns the willingness or
eagerness of employees for service provision. It involves turnaround time
of service actions like timely dispatch of a receipt or quickly calling back
the customer (Zethaml et al., 2002).

Privacy and Security: Trust has been identified as an

important factor for those financial related internet services;
moreover, empirical study supports that consumers make many
online decisions almost solely on the basis of trust (Avinandan
& Prithwiraj, 2003; Urban, Sultan and Qualls, 2000). For Internet
banking, trust plays an extremely important role for the
acceptance and use, which has been supported by both
research and empirical studies, especially in developing

countries (Benamati and Serva, 2007). Trust building is very

important for internet banking adoption. Privacy and security
concern are the two crucial factors for trust building, which has
been pointed out as the top two factors influencing user
adoption. Privacy and security have been discussed broadly
both in academia and practice. Privacy is defined as the ability
to control and manage information about oneself (Belanger,
Hiller and Smith, 2002). Security is defined as the ability to
protect against potential threats.
From consumers standpoint, security is the ability to protect
consumers information from information fraud and theft in the
online banking business. Customers have doubts about the
trust ability of the e-bank's privacy policies (Gerrard and
Cunningham, 2003). Trust has striking influence on user's
willingness to engage in online exchanges of money and
personal sensitive information (Friedman et al, 2000; Wang et
al, 2003). Privacy is an important dimension that may affect
users' intention to adopt e-based transaction systems.
Encryption technology is the most common feature at all bank
sites to secure information privacy, supplemented by a
combination of different unique identifiers, for instance, a
password, mother's maiden name, a memorable date, or a few
minutes of inactivity automatically logs users off the account.
Besides, the Secure Socket Layer, a widely-used protocol use
for online credit card payment, is designed to provide a private
and reliable channel between two communicating entities; the
use of Java Applet that runs within the user's browser; the use
of a Personal Identification Number, as well as an integrated
digital signature and digital certificate associated with a smart
card system (Hutchinson and Warren, 2003). Thus, a
combination of smart card and biometric recognition using
fingerprints offers a more secure and easier access control for
computers than the password method. Zeithaml et al (2000)
developed e-SERVQUAL for measuring e-service quality,
identifying 11 dimensions: access; ease of navigation;
efficiency;
flexibility;
reliability;
personalization;
security/privacy;
responsiveness;
assurance/trust;
site
aesthetics; and price knowledge. Hence, it is hypothesized that
privacy has a positive effect on customer satisfaction.

Assurance: Assurance refers to the ability the internet banking

convey trust and confidence to their consumers. Madu and
Madu argued that the online banking must ensure that their
employees are knowledgeable about their operation, and
courteous in their responses to the customers. Schneider and
Perry suggested some web features that help promote the
assurance to consumers. For instances, providing detailed
banks information (e.g. background, mission statement,
announcement, banks handling private data, a direct
relationship might be established among the three concepts.
Assurance is defined as the employees knowledge and
courtesy and the service providers ability to inspire trust and
confidence (Zeithaml et al., 2006). According to Andaleeb and
Conway (2006), assurance may not be so important relative to
other industries where the risk is higher and the outcome of
using the service is uncertain. The trust and confidence may be
represented in the personnel who link the customer to the
organization (Zeithaml et al., 2006. Assurance is a set of
courtesy and knowledge of employees along their ability to
instill confidence. The assurance dimension is taken from an
integrated Assurance is a set of courtesy and knowledge of
employees along their ability to instill confidence. The
assurance dimension is taken from an integrated.
Reliability: Reliability means the quality of being dependable
or reliable on something (Lin and Chin 2007). Reliability is
defined as the ability to perform the promised service
dependably and accurately or delivering on its promises
(Zeithaml et al, 2006, p. 117)
.Regarding to service quality dimension of reliability the
internet has big affect on it. Madu2002. Santos 2002 defines
reliability as the ability to perform the promise service
accurately and frequently updating the website. Since most of
the online customers are really concerned about the reliability
of virtual service providers. (Yant and fand 2004).( Gilly 2002)
sate reliability as the product that came was represent
accurately by the website, you get what you ordered from the
site the product was delivered in time promise by the bank.
Based on the theoretical review in this study it is found that

reliability is one of the most highly frequently mention

dimension in e service quality. (Parasyraman 1985, Johnston
1988). Reliability is found as important in banking perspective
however its different from customer perspective. For internet
banking reliability is mostly based on physical bank. It is
important for the bank to conduct business both online and
offline. It is also suggest that technical function and accurate
record provided by internet should be focused on by banking
service provider in on line services. Madu2002. Reliability
involves dependability and uniformity in performance. It means
the firm honors the commitments it makes. Specifically, billing
accuracy, proper record maintenance and delivering the service
within acceptable time limit describes the reliability of online
services (Saha and Zhao, 2005).
Customer Retention: Customer retention means the activity
that a selling organization undertakes in order to reduce
customer defections. Successful customer retention starts with
the first contact an organization has with a customer and
continues throughout the entire lifetime of a relationship.
Previous studies have identified the benefits that customer
retention delivers to an organization. In fact, the longer a
customer stays with an organization or company the more
utility than seeking new customers. (Edvardsson et al, 2000).
Many factors consisting of higher initial costs of finding and
attracting new customers, increases in both the value and
number of purchases, positive word of mouth promotion and
the customer
better understanding of the organization affects the loyalty of
customers and the time that customers stay with the
organization. Apart from the benefits that the longevity of
customers brings, research findings also suggest that the costs
of customer retention activities are less comparing the costs of
acquiring new customers. For example, (Rust and Zagorsk)
declared that the cost of attracting new customers may be five
times of keeping existing customers. However, maintaining
high levels of satisfaction will not, by itself causes customer
loyalty. Today, retaining customers becomes a priority. In spite
of importance of customer retaining, some research shows that
longevity does not alone leads to profitability (Andreassen,
1999). In other research, (Beckett et al, 2000) found interesting
conclusions as to why consumers appear to remain loyal to the
same financial provider such as banks, in spite of in many

factors they hold less favorable views toward these service

providers. For example, many consumers appear to perceive
little differentiation between banks, because according to their
opinion, the change of banks essentially is useless. Secondly,
consumers appear motivated by convenience. Finally,
consumers associate changing banks with high switching costs
in terms of the potential sacrifice and effort involved.
Furthermore, it is necessary for bank management to be
carefully considering the factors that might increase customer
loyalty and retention rates. There are little empirical researches
that investigate the reasons result in customer loyalty and
retention. Previous surveys focused on identifying factors which
causing customer retention. Others researches have focused on
developing measures of customer satisfaction, customer value
and customer loyalty without specifically looking into other
potential meaningful factors. Examples of mentioned factors
are competitive advantage.
3.3 Research Questions:
1. Does Service Quality affect Customer retention in context
of Bank?
2. Does Responsiveness affect Customer retention in context
ofBank?
3. Does security and Privacy affect Customer retention in
context of Bank?
4. Does Assurance affect Customer retention in context
Bank ?
5. Does Reliability affect Customer retention in context of
Bank?
3.4 Hypothesis:
1. Service Quality affects Customer retention in context of
Bank.
2. Responsiveness affects Customer retention in context of
Bank.
3. Privacy and Security affects Customer retention in context
of Bank.
4. Assurance affects Customer retention in context of Bank.
5. Reliability affects Customer retention in context Bank.

4.1 Research Design:

As shown in the diagram of the conceptual framework of the
research there are five independent variables and one
dependent variable. The conceptual framework also shows that
there is a direct relationship between the Independent variables
and the dependent variable. It is very important to explore the
type & intensity of this relationship so that the earlier
mentioned purpose of the study can be met. The study will
enable the bank to understand the factors of internet banking
which actually helps to improve the Customer retention. Thus
they can plan for their future plan of action or strategies and try
to provide a good internet banking service to retain more
customers.
4.2 Research Type:
This research is Descriptive in nature. Under descriptive
research it will be a causal study. Because the type of study
that will be carried out to test the hypothesis and to answer the
research questions will be a causal study. This type of study will
show a cause and effect relationship of the independent and
dependent variables.
4.3 Sampling Method:
The sampling methods that have been adopted for the research
is as follows:

Sampling Frame: The population of the research is

formed by the customers of bank, Branch. The sampling
frame for the research will be the official list of
customers in the Banks database in branch. So it will be
the probability sampling. Which is a subset of a
statistical population in which each member of the
subset has an equal probability of being chosen.(Levin
& Rubin,2000)
Sampling Technique: A systematic random sampling
method has been used where every 3rd customer
arriving in the branch will be contacted. Among those
whoever fall under the criteria of holding an account
and use internet banking for more than a year & visiting
the branch at least once every two weeks will be
interviewed.

Sample Size: 30 clients were interviewed who are using internet

banking of Mutual Trust Bank. So the sample size is 30.

4.4 Instrument:
A structured questionnaire was selected for this study. The
questionnaire is consisting of 18 questions regarding Service
Quality, Responsiveness, Privacy & Security, Assurance and
Reliability. Each item is of 5 point Liker scale, that ranges from
1(strongly disagree) to 5 (strongly agree).
4.5 Data Collection:
For collecting the data both primary and secondary sources are
used.
Primary Sources:

Conversations with the bank employees and customers.

Discussions with the employees who handle the internet banking system.
Questionnaires used in interview.

Secondary Sources:

Mutual Trust Banks global and regional websites.

Various Publications and manuals on their internet banking.

4.6 Data Collection Method:

The questionnaire is distributed among the 30 respondents.
The questionnaires were surveyed personally at the branch of
Bank branch. This was possible because of a prior notice from
the branch officers of an arrival of a client. There was an
economy in data collection due to the focus provided by
standardized Questions. Only questions of interest to the
researcher are asked, recorded, codified, and Analyzed.
Because they are standardized, they are relatively free from
several types of errors. They are relatively easy to administer.
4.7 Data Analysis:
For data analysis purpose, SPSS software have used as it
provides in-depth investigation in data analysis and
visualization. Reliability analysis, regression analysis and corelation analysis have used to analysis of the data. Stepwise
regression analysis can be carried out to test hypotheses to find
which independent variable(s) individually and collectively

provide a meaningful contribution towards the explanation of

the dependent variable noted that if an investigator wishes to
determine whether some conceptually newer measures add
anything to the depending variable. MS Excel has also used to
carry out calculations in some cases. The researchers have
investigated Internet banking Factors impact in Customer
retention of Bank branch.