internet banking & customer retention-a study on...

GALAXY International Interdisciplinary Research Journal_______________________ ISSN 2347-6915 GIIRJ, Vol.2 (2), FEBRUARY (2014)

218

INTERNET BANKING & CUSTOMER RETENTION-A STUDY ON THE

IMPACT OF INTERNET BANKING ON CUSTOMER RETENTION OF

HDFC BANK

GAURANG TRIVEDI*; RICHARD REMEDIOS**

*SENIOR LECTURER

S.V.E.T COMMERCE & BBA COLLEGE

JAMNAGAR

**PRINCIPAL

S.V.E.T COMMERCE & BBA COLLEGE

JAMNAGAR

ABSTRACT

The key purpose of the study is to find out the impact of internet banking to retain customers in

the context of HDFC Bank LTD, Joggers Park branch, Jamnagar. There are some key factors that

have an important impact on customer retention in the internet banking. The main findings of the

study will indicate that the factors, which are Service Quality, Responsiveness, Security and

Privacy, Assurance, and Reliability, have impacts on customer retention in terms of Internet

Banking of HDFC Bank LTD, Joggers Park branch, Jamnagar. In the study, the factors are being

treated as the Independent variables and Customer Retention as the Dependent variable. It will

be a causal study aimed to measure that, the existence of or a change in Independent variables

causes or leads to a change in the Dependent variable. This study is based on the primary data to

understand the level of Service Quality, Responsiveness, Security & Privacy, Assurance, and

Reliability and their impact on the retention of customers in the context of internet banking of

HDFC Bank LTD, Joggers Park branch, Jamnagar. The information for this research have been

gathered by a questionnaire survey among the customers of HDFC Bank LTD, Joggers Park

branch, Jamnagar. We have distributed 30 questionnaires among 30 respondents, who are the

clients of HDFC Bank LTD, Joggers Park branch, Jamnagar and use their internet banking

service. A random sampling technique was adopted to do the survey. After analysis, we got

significant results of both the dependent and independent variables. From this, now we can get a

clear idea that how internet banking impacts on customer retention.

KEYWORDS: Internet, Banking, Responsiveness, Retention, Questionnaire, Independent.

1.1 Introduction of the study:

For last few years, internet banking is a very common service that is provided by most of

the commercial banks in India. HDFC Bank Ltd. is one of them. Now internet banking is a very

popular form of transaction among peoples. 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 HDFC Bank LTD, Joggers Park branch, Jamnagar.”. The main objective of this

research is to identify the key factors that influence the internet banking and helps to retain


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customers of HDFC Bank LTD, Joggers Park branch, Jamnagar. By this research we will able to

know that which factors and how they influence internet banking of HDFC Bank LTD, Joggers

Park branch, Jamnagar to retain customer.

1.2 Statement of the Problem:

By this study, researchers will investigate the impact of Internet Banking on customer

retention. HDC Bank Ltd. 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. So, in this research we shall 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 HDFC Bank Ltd. It will help the researchers to look into the

overall condition of internet banking service of HDFC Bank Ltd.

1.4 Objective of the study:

To understand the internet banking system of Mutual Trust Bank Ltd

To identify the problems of internet banking system of Mutual Trust Bank Ltd.

To find out the problem of client and employees to changes in internet banking of HDFC

Bank Ltd.

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 HDFC Bank Ltd. to

their clients.

To provide suggestions for the improvement of the internet banking system of the bank.

1.5 Methodology of the study:

We have got all the relevant information from my working experience in HDFC Bank,

their Annual report, various brochures, HDFC Bank web site. There are two sources from which

we have collected data, primary source and secondary source.

Primary Data:

1. The information, which is gathered from MTBL 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.


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Secondary data:

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:

Due to the time constraint, the data has only been collected from the clients of HDFC

Bank Ltd. Jamnagar branch only, which may fail to represent the factual scenario of the

relationship between measurable variables.

We faced some limitations to collect some information about internet banking of

HDFC Bank as these were not so available for the general peoples.

Respondents were too busy to read the questions properly and tick the answer just for

the sake of completing the survey quickly. So there is no guarantee that the data

collected is 100% correct and hence while analyzing the researcher has considered

level of significance.

Time constraint was also one of the factors that curtailed the scope of the study.

1.7 Conceptual Frame Work:

Dependent variable

Independent variable

Service Quality

Responsiveness

Privacy and Security

Assurance

Reliability

Customer Retention


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1.8 Research Questions:

1. Does Service Quality affect Customer retention in context of HDFC Bank?

2. Does Responsiveness affect Customer retention in context of HDFC Bank?

3. Does security and Privacy affect Customer retention in context of HDFC Bank?

4. Does Assurance affect Customer retention in context of HDFC Bank?

5. Does Reliability affect Customer retention in context of HDFC Bank?

1.9 Hypothesis:

1. Service Quality affects Customer retention in context of HDFC Bank.

2. Responsiveness affects Customer retention in context of HDFC Bank.

3. Privacy and Security affects Customer retention in context of HDFC Bank.

4. Assurance affects Customer retention in context of HDFC bank.

5. Reliability affects Customer retention in context of HDFC bank.

1.10 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.

1.11 Sampling Method:

The sampling methods that have been adopted for the research is as follows:

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 HDFC

Bank. So the sample size is 30.

1.12 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 co-relation

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


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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

HDFC Bank, Joggers Park, Jamnagar.

Frequency Table:

The sample size of the research consists of 20 male and 10 female respondents. 66.7%

of male and 33.3% of female customers participates in this survey which is shown at

below.

Among the responding 10 customers age was between 15-25 years, 11 customers age

was between 26-35 years, 6 customers age was between 36-45 years and 3 customers

age was between 46 and above which is shown below.

There are three occupation ranges in the survey. There were 19 respondents, who are

service holders which is 63.3%, 4 are businessman which is 13.3% and 7 who are

student with 23.3%.

Statistics

Age

Gender

Occupation

Valid

missing

30

0

30

0

30

0

Age

Frequency Percent Valid Percent Cumulative

Percent

valid 15-25

26-35

36-45

46 to

above

Total

10

11

6

3

30

33.3

36.7

20.0

10.0

100.0

33.3

36.7

20.0

10.0

100.0

33.3

70.0

90.0

100.0


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Gender

Frequency Percent Valid Percent Cumulative

Percent

Valid Male

Female

Total

20

10

30

66.7

33.3

100.0

66.7

33.3

100.0

66.7

100.0

Occupation

Frequency Percent Valid Percent

Cumulative

Percent

Valid Service

Business

Student

Total

19

4

7

30

63.3

13.3

23.3

100.0

63.3

13.3

23.3

100.0

63.3

76.7

100.0

Reliability Analysis: Scale: All Variable

Case Processing summary

N %

Case valid

Excuded

Total

30

0

30

100

0

100

Service Quality and Customer Retention:

Reliablity Statistic

Cronbach’s

Alpha

N of Item

.896 2

Interpretation: Here the alpha value is 0.896, which is more then 0.5. So, the question is clear to

the audience.


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Responsiveness and Customer Retention:

Cronbach’s

Alpha

N of Item

.883 2


the audience.

Security & Privacy and Customer Retention:

Cronbach’s

Alpha

N of Item

.839 2


the audience.

Assurance and Customer Retention:

Cronbach’s

Alpha

N of Item

.825 2


the audience.

Reliability and Customer Retention:

Cronbach’s

Alpha

N of Item

.825 2


the audience.


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Regression Analysis:

Service Quality and Customer Retention:

Variables Entered/Removed

Model

Variables Entered

Variable

Removed

Method

1 Service

Qualitya

. Enter

a. All requested variables entered.

b. Dependent Variable:Customer Retention

Model Summary

Model

R

R Square

Adjusted

R Square

Std.Error

of the

estimate

1 .826a

.682 .671 .23345

a. Predictors:(Constants).Service Quality

ANOVAb

Model

Sum of

Squares

df

Mean

Square

F Sig.

1 Regression

Residual

Total

3.272

1.526

4.798

1

28

29

3.272

.054

60.045 .000a

a. Predictors:(Constants).Service Quality


Coefficientsa

Model

Unstandardized

Coefficents

Standardized

Coefficents

t Sig.

B Std.Error Beta

1 (Constant)

Service Quality

1.294

.683

.358

.088

.826 3.613

7.749

.001

.000

a. Dependent Variable:Customer Retention


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Interpretation: Here the value of 2 is .682 means 68.2%. That mean the effect of

service quality on customer retention is 68.2%.

Responsiveness and Customer Retention:

Variables Entered/Removedb

Model

Variables Entered

Variable

Removed

Method

1 Reponsivenessa . Enter


b. Dependent Variable: Customer Retention

Model Summary

Model

R

R Square

Adjusted

R Square

Std.Error

of the

estimate

1 .821a

.675 .663 .23617

a. Predictors:(Constants).Responsiveness

ANOVAb

Model

Sum of

Squares

df

Mean

Square

F Sig.

1 Regression

Residual

Total

3.236

1.562

4.798

1

28

29

3.236

.056

58.024 .000a

a. Predictors:(Constants). Responsiveness

b. Dependent Variable: Customer Retention


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Coefficientsa

Model

Unstandardized

Coefficents

Standardized

Coefficents

t Sig.

B Std.Error Beta

1 (Constant)

Responsiveness

1.521

.622

.335

.002

.021 4.544

7.617

.000

.000


Interpretation: Here the effect of responsiveness on customer retention is 67.5%.

Security & Privacy and Customer Retention:


Model

Variables Entered

Variable

Removed

Method

1 Privacy and

Securitya

. Enter



Model Summary

Model

R

R Square

Adjusted

R Square

Std.Error

of the

estimate

1 .749a

.560 .545 .27445

a.Predictors:(Constants).Privacy and Security


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ANOVAb

Model

Sum of

Squares

df

Mean

Square

F Sig.

1 Regression

Residual

Total

2.689

2.109

4.798

1

28

29

2.689

.075

35.701 .000a

a. Predictors:(Constants). Privacy and Security


Coefficientsa

Model

Unstandardized

Coefficents

Standardized

Coefficents

t Sig.

B Std.Error Beta

1 (Constant)

Privacy and

Security

1.583

.575

.416

.096

.749 3.806

5.975

.001

.000

a. Dependent Variable: Customer Retention

Interpretation: Here the value of 2 is .560. That‟s mean the effect of privacy and security on customer retention is 56%.

Assurance and Customer Retention:


Model

Variables Entered

Variable

Removed

Method

1 Assurancea . Enter




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Model Summary

Model

R

R Square

Adjusted

R Square

Std.Error

of the

estimate

1 .707a

.500 .483 .29261

a. Predictors:(Constants). Assurance

ANOVAb

Model

Sum of

Squares

df

Mean

Square

F Sig.

1 Regression

Residual

Total

2.401

2.397

4.798

1

28

29

2.401

.086

28.040 .000a

a. Predictors:(Constants). Assurance


Coefficientsa

Model

Unstandardized

Coefficents

Standardized

Coefficents

t Sig.

B Std.Error Beta

1 (Constant)

Assurance

1.582

.630

.469

.119

.707 3.370

5.295

.002

.000


Interpretation: Here the value of 2 is .500. That means the effect of assurance on customer

retention is 50%.


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Reliability and Customer Retention:


Model

Variables Entered

Variable

Removed

Method

1 Reliability a . Enter



Model Summary

Model

R

R Square

Adjusted

R Square

Std.Error

of the

estimate

1 .762a

.581 .566 .26805

a. Predictors: (Constants). Reliability

ANOVAb

Model

Sum of

Squares

df

Mean

Square

F Sig.

1 Regression

Residual

Total

2.786

2.012

4.798

1

28

29

2.786

.072

38.778 .000a

a. Predictors: (Constants). Reliability

b.Dependent Variable: Customer Retention

Coefficientsa

Model

Unstandardized

Coefficents

Standardized

Coefficents

T Sig.

B Std.Error Beta

1 (Constant)

Reliability

2.057

.505

.324

.081

.762 6.351

6.227

.000

.000

a.Dependent Variable:Customer Retention


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Interpretation: The effect of reliability on customer retention is 58.1%.

Correlation analysis:

Correlation analysis was conducted on all variables to explore the relationship between

variables. The bivariate correlation procedure was subject to a two tailed of statistical

significance at two different levels highly significant (p<.01) and significant (p<.05).

0.0 to 0.2 Very weak,negligible

0.2 to 0.4 Weak,low

0.4 to 0.7 Moderate

0.7 to 0.9 Strong,high,marked

0.9 to 1.0 Very strong, very high

Hypothesis testing: Ho: null hypothesis = no relationship Ha: alternative hypothesis =

relationship

Relationship between Service Quality and Customer Retention:

Correlations

Customer

Retention

Service Quality

Customer Retention Pearson Corelation

Sig.(2/tailed)

N

1

30

.826**

.000

30

Service Quality Pearson Corelation

Sig.(2/tailed)

N

.826**

.000

30

1

30

**. Correlation is significant at the 0.01 level (2-tailed).

Interpretation: At 5% level of significance we cannot accept the null hypothesis as T value don„t

falls in (-2.021 to +2.021) and accept alternative hypothesis. So, according to the Pearson

correlation test there is a relationship between service quality and customer retention, which is

moderately significant.


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Relationship between Responsiveness and Customer Retention:

Correlations

Customer

Retention

Responsiveness


Sig.(2/tailed)

N

1

30

.821**

.000

30

Responsiveness Pearson Corelation

Sig.(2/tailed)

N

.821**

.000

30

1

30

**. Correlation is significant at the 0.01 level (2-tailed)

Interpretation: There is a moderately significant relationship between responsiveness and

customer retention.

Relationship between Security & Privacy with Customer Retention:

Correlations

Customer

Retention

Privacy and Security


Sig.(2/tailed)

N

1

30

.749**

.000

30

Privacy and Security Pearson Corelation

Sig.(2/tailed)

N

.749**

.000

30

1

30


Interpretation: According to the Pearson correlation test there is a relationship between security

& privacy with customer retention, which is moderately significant.


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Relationship between Assurance and Customer Retention:

Correlations

Customer

Retention

Assurance


Sig.(2/tailed)

N

1

30

.707**

.000

30

Assurance Pearson Corelation

Sig.(2/tailed)

N

.707**

.000

30

1

30


Interpretation: At 5% level of significance we cannot accept the null hypothesis as T value don„t

falls in (-2.021 to +2.021) and accept alternative hypothesis. So, there is a relationship between

assurance and customer retention.

Relationship between Reliability and Customer Retention:

Correlations

Customer

Retention

Reliability


Sig.(2/tailed)

N

1

30

.762**

.000

30

Reliability Pearson Corelation

Sig.(2/tailed)

N

.762**

.000

30

1

30


Interpretation: According to the test there is a moderately significant relationship between

reliability and customer retention as the T value don„t falls in (-2.021 to +2.021) and accept

alternative hypothesis.

1.13 Conclusion:

The research clearly indicates that internet banking features of HDFC Bank Ltd. Helps to retain

customers. If the bank plans to expand the customer base of internet banking they should focus


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more on service quality, responsiveness, privacy & security, assurance and reliability factors of

internet banking. Proper web-hosting is required for this. Customers should also be made aware

of unethical practices like sniffing, spoofing, phishing and other malicious software which can be

used by hackers. Attention should also be given in the encryption of the information which is

exchanged between the users and the bank. More ever the bank should be more aware to make

their internet banking service more quality full for their customers.

1.14 REFERENCES

[1] Guangying Hua, (April 2009), “Internet Banking and Commerce”, Journal of internet

banking, vol. 14, no.1

[2] Asli Yuksel Mermod, (April 2011), “Internet Banking and Commerce”, Journal of

internet banking, vol. 16, no.1

[3] Chun Wang and Zheng Wang, (2006:07), “The Impact of Internet on Service Quality in

the Banking Sector”

[4] Pandachi K, Seetanah B „and‟ Appadu A, “A STUDY ON THE USE OF INTERNET

BANKING AMONG SMEs IN MAURITIUS”

[5] Anesh Maniraj Singh, (2004), “Trends in South African Internet Banking”, Aslib

Proceedings, Vol.56, Iss: 3 pp. 187-196.

[6] Blanca Hernández-Ortega, (December 2007), “Internet Banking and Commerce”, Journal

of internet banking, vol. 12, no.3

[7] http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1761937/

[8] Annual Report 2012 of HDFC Bank Ltd.

[9] HDFC Bank Ltd. website

[10] http://www.ukessays.com/essays/information-systems/the-literature-review.php

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