Islamic Emirate of Afghanistan

Ministry of Higher Education

Herat University
Economics Faculty

THE EFFECT OF ELECTRONIC-BANKING SERVICE

QUALITY ON CUSTOMER SATISFACTION IN BANKING
SECTOR IN AFGHANISTAN (CASE STUDY AZIZI BANK, HERAT)

Master Thesis

Submitted to
Master of Business Administration (MBA) Program
Faculty of Economics & Management
Herat University

Prepared By
Reza Rezai

Supervised by
Prof. Mohammad Naser Moain

Autumn, 2023

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Table of contents

1.1. Background of the Study ...................................................................... 4

1.2. Statement of the problem .................................................................... 6
1.3. Objective of the study ......................................................................... 6
1.3.1. General Objective ............................................................................ 6
1.3.2. Specific objective of the study ......................................................... 6
1.4. Hypothesis ............................................................................................ 7
1.5. Significance of the study ....................................................................... 7
1.6. Scope of the study .................................................................................7
CHAPTER TWO ............................................................................................. 8
REVIEW RELATED LITRATURE........................................................................8
2.1 THEORETICAL REVIEW............................................................................ 8
2.1.1 Forms of E-Banking........................................................................... 9
2.1.2. Benefits of Electronic Banking......................................................... 11
2.1.3. Customers and internet banking..................................................... 13
2.1.4. Impact of electronic banking........................................................... 13
2.1.5. Service Quality................................................................................. 14
2.1.6. Customer Satisfaction...................................................................... 15
2.1.7. Customer Satisfaction in Banking.................................................... 15
2.1.8. The Relationship between Service Quality and Customer
Satisfaction................................................................................................... 16
2.1.9. Measuring Customer Satisfaction.................................................... 16
2.1.10. Definition of independent Variables.............................................. 17
2.1.11. Demographic characteristics of internet banking adopters........... 17
2.2. Empirical Review................................................................................... 20
2.2.1 CONCEPTUAL FRAMEWORK............................................................. 23
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2.2.2 Research Hypothesis..........................................................................24

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INTRODUCTION
1.1. Background of the Study

Technology played vital role in the today’s world. Internet has made this world a global village and
the same has revolutionized the banking industry. Conversion from the manual based ledger system
to systemized process and the overture to internet-based facility has given a new facet to the banking
sectors. The completion in the banking sector augmented over the last few years and to stay
competitive, banks are espousing novel tools and techniques to attain customer retention and
satisfaction and E-banking is one tool towards it (Karjaluoto, Mattila, & Pento, 2002). The banking
industry and its environment in the 21st century are highly complex and competitive and therefore
the need for information and communication technology to take Centre stage in the operations of
banks (Stevens, 2002).
E-banking plays a crucial role in the banking industry by creating value for banks and customers. E-
banking has enabled banking institutions to compete more effectively in the global environment by
extending their and services beyond the restriction of time and space (Turban, 2008). E-banking is
one of the most recent channels of distribution used in the financial services organizations. This
method was established in the mid-1990s, thereafter becoming more important (Allen L. & Rai A.,
1996). It has been widely used in developed countries. However, in developing economies, the
spread is much limited. As suggested by Classens, Glaessner, & Klingebiet (2002), developing
countries in general have an advantage as they can learn from the experience of advanced economies.
E-banking is critical in the transformation drive of banks in areas such as products and services and
how they are delivered to customers. Thus, it is seen as a valuable and powerful tool in the
development, growth, promotion of innovation and enhancing competitiveness of banks (Gupta,
2008; Kamel, 2005). Given the significant role of e-banking in the developmental drive of banks,
information technology has been found to lead to improvement in business efficiency and service
quality and hence attract customers as well as retain those (Kannabiran & Narayan, 2005).To realize
the contributions of internet-banking to the growth of a country, Nupur (2010) noted that there was
the need for the increase in internet access, development of new online banking features, growth of
household internet usage, and the development of a good legal and regulatory framework. The advert
of electronic banking in general and internet banking in particular has led to the development of
service quality (SERVQUAL) dimensions to measure the extent of customers’ satisfaction. Service
quality developed by Zeithaml (1988) is one of the more widely used instruments for assessing
customer satisfaction. The extensive use of the SERVQUAL instrument since the rise in the usage of
internet according to Mols (2000) is because internet based home banking might bring a radical
change in the way banks maintain their relationships with their customers.

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The rise in the information communication Technology has significant impact on services in most of
the organization adopting information system (wisdom, 2012). New information technology and
emerging business forces have triggered a new wave of financial innovation, electronic banking (wu
et al 2006). Electronic banking has benefited banks as competitive advantage for achieving higher
efficiency, control of operation and reduction of cost by replacing paper based and labor intensive
methods with automated process, which will lead to higher productivity and profitability. The term
electronic banking refers to the users of computer and telecommunication to enable banking
transaction to be done by computer or telephone instead of human interaction (Okoro, 2014).
Khrawish and Al-Sadi (2012) also defined electronic banking as the adaption of electronic means in
the delivery of banking product and services. Such product and services include deposit taking,
lending and payment products and provision of other electronic payment product and services such
as electronic money. From the definition we understand that electronic banking is delivery of
banking products services to the customers and general electronically through the use of electronic
banking instruments or products like Automated Teller Machine (ATM), Mobile, internet and point
of Sale (POS) terminal among others. Sumrat et al (2011) argued that transformation from traditional
to electronic means has not affected banks in the negative way in fact, profit trends to increase as
number of transaction increases. E- Banking appeal as well its product development is rapidly
growing and the global acceptance has strongly encouraged its penetration (Abaenew et al, 2013).
Electronic banking contributes significantly to the distribution channels of banks such as automated
teller machine (ATM), Phone –banking, Tele-banking, PC-banking and now internet banking
(Chang, 2003). In addition, transfer of funds, viewing and checking savings account balances, paying
mortgages, paying bills and purchasing financial instruments and certificates of deposits processes
have improved significantly as a result of internet banking (Mohammed et al., 2009). This implies
that, e-banking has resulted in efficiency in service delivery in the banking sector because customers
can transact business from one side of the country to another and from both long and short distance.
According to Robinson (2000), online banking ensures customer satisfaction as it extends financial
services to customers outside the banking hall. Similarly, e-banking has provided banks with a large
customer base as it has resulted in increased customer loyalty and satisfaction (Oumlil & Williams,
2000). Customer satisfaction plays great role in the success of business strategies (Gil and Cervera,
2008), customer satisfaction helps keep customer from request services or product from competitors.
Customer satisfaction helps organization and business to increase their return and achieve
competitive advantage (lewin, 2009). In addition, customers’ satisfaction leads to long term profit by
making the customer loyal to organization (Joch, 2003), so customer satisfaction stems, from
recognition companies that they have to interact with changing environment consistent with the
behavior of customer to maintain the survival and continuity of firms in competitive markets (Smith,
1996). In this digital age, interest has increased in the financial services over past the past year that
require development and modernization, which become a major challenge for marketers and
academicians unlike promoting banks to seek improve their electronic services offered to customers
in order to maintain current customers, and trying to attract new customers, and even to make banks
able to distinguished in providing its services, they must keep pace with technology.
In Afghanistan, online banking is infant stage. Even though, the concept of online banking
implemented in Afghanistan with a single services of SMS message during late 2006. It does not
show that much improvement as its age. Now a day some banks are adopting e-banking system
which is the state of the art. In addition, many banks are making what seem like huge investments in

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technology to maintain and upgrade their infrastructure, in order not only provide new electronic
information based services, but also to manage their risk position and pricing. The earliest forms of
electronic and communication technology used mainly in Afghanistan banking offices were
automation.

1.2. Statement of the problem

In a relatively short period of time, the internet has moved from an occasional tool to one of the
principal ways we communicate, entertain ourselves, and do work. And all that time we spend online
has to come at the expense of something else. One main advancement technology has brought to us is
the introduction of online banking or e-banking, Traditional banking is characterized by physical
decentralization, with branches scattered around populated areas to give customers easy geographical
access (Ainin et al, 2005). E-banking does away with the need for most visit to the bank. However,
according to the Locket and Littler (1997), physical banks assure customers that their banks has
substantial resources and guarantee the security of their savings. A study indicated the electronic
banking has been available in the UK since the early 1980s. It is not clear whether all customers want
or are comfortable with electronic banking (Daniel &Storey, 1997). Technology is changing at rapid
pace making it difficult for both the customer and the bank to determine the best approach. Particular
problems arise with trying to integrate new channels with legacy channels. It is for this reason that
academic research is needed in this news emerging delivery channel (Daniel& Storey, 1997).
Similarly, in Afghanistan, most banks practicing online banking are facing challenges such as
customer as customer preferences of the online banking facility, very poor connection, and trust of
the people in the modern tools, convenience of clients to utilize and adopt online banking facility.
While numerous study have been undertaken to examine issues in the wider context of Afghanistan
particularly Azizi Bank has been rather limited. This study attempted to identify the effect of e-
banking service quality on the customer satisfaction, in case of Azizi Commercial bank of
Afghanistan Herat city.

1.3. Objective of the study

1.3.1. General Objective

The main objective of this study is to identifying the effect of e-banking service quality on customer
satisfaction in case of Azizi commercial bank of Afghanistan Herat city.

1.3.2. Specific objective of the study

To analysis the effect of e-banking reliability service on customer satisfaction

To analysis the effect of e-banking transaction efficiency service on customer satisfaction
To analysis the effect of e-banking customer support service on customer satisfaction
To analysis the effect of e-banking easy use service on customer satisfaction
To analysis the effect of e-banking services security service on customer satisfaction
To analysis the effect of e-banking performance service on customer satisfaction
To analysis the effect of e-banking service content service on customer satisfaction

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1.4.Hypothesis

H1: To e-banking reliability service has positive impact on customer satisfaction

H2: To e-banking transaction efficiency service has positive impact on customer satisfaction
H3: To e-banking customer support service has positive impact on customer satisfaction
H4: To e-banking easy use service has positive impact on customer satisfaction
H5: To e-banking service security service has positive impact on customer satisfaction
H6: To e-banking performance service has positive impact on customer satisfaction
H7: To e-banking service content service has positive impact on customer satisfaction

1.5. Significance of the study

The findings of this study are considered important to provide insight into the relationships between
electronic banking services and customer satisfaction. Particularly, the study is significant because,
provide crucial facts about the impact of electronic banking services on customer satisfaction and
understand the impact of variable of electronic banking on customer satisfaction and how the banks
overcome the impacts. The study would be used as sources of reference material besides suggesting
areas where future research may be conducted. The last but not least the researcher would be benefit
to the existing knowledge related to electronic banking and customer satisfaction in financial
institution.

1.6. Scope of the study

The scope of the study concentrates on two major areas. This comprises of the contextual and
geographical scope of the study. Contextually, the research would emphasize on effect of electronic
banking service quality on customer satisfaction. There are numerous and emerging types electronic
banking such as ATM (Automated Teller Machine), Internet banking, Mobile banking and POS
(point of sale). There are many banks that offer electronic banking in Herat city. Azizi commercial
bank of Afghanistan is selected among the banks because banks have been operating long enough to
give academic insight on what the study seek to offer. On top of Azizi commercial bank of
Afghanistan the first public bank to adopt electronic banking.
Geographical scope of this study is situated within the Azizi commercial bank of Afghanistan in
Herat city. However, banks of Afghanistan are many and it’s practically impossible for the researcher
to study the entire customer in banks. For this reason, the scope encompasses on Azizi commercial
bank of Afghanistan in Herat city.

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CHAPTER TWO

REVIEW RELATED LITRATURE

2.1 THEORETICAL REVIEW

A form of banking service where funds are transferred through an exchange of electronic signal
between financial institutions, rather than exchange of cash, checks, or other negotiable instruments
(Kamrul, 2009). E-banking also known as electronic funds transfer (EFT). It is simply the use of
electronic means to transfer funds directly from one account to another rather than by check or cash
(Malak, 2007).
The term e-banking often refers to online or internet banking which is the use of the internet as a
remote delivery channel for banking services (Furst & Nolle, 2002, p.5). E-banking is the use of a
computer to retrieve and process banking data (statements, transaction details, etc.) And to initiate
transaction (payments, transfer, requests for services, etc.) directly with a bank or with other financial
services provider remotely via a telecommunication network (Yang, 1997). It should be noted that
electronic banking is a bigger is a platform than just banking via the internet. E-banking could be
defined as variety of platform such as internet banking or (online banking, TV-based banking, mobile
banking, and PC (personal computer) banking whereby customers access these services using an
intelligent electronic devices, like PC, personal digital assistant(PDA), Automated Teller Machine
(ATM), Point of sale(POS),Kiosk, or touch tone telephone (Alagheband,2006). The bank uses online
banking system, as it is one of the cheapest delivery channels for banking products (pikkarainen et al,
2004). such a services also saves the time and money of the bank with an added benefit of
minimizing the likelihood of committing errors by bank tellers (Jayawardhena, 2000). The supply of
electronic banking services enables banks to establish and extent their relationship with the
customers (Robinson, 2000). There are other numerous advantages to banks that offered by online
banking. Such as mass customization to suit the likes of each user, innovation of new products and
services, more effective marketing and communication at lower cost (Tuchilla, 2000), development
of non- core products such as insurance and stock brokerage as an expansion strategy, improved
marketing image, better and quicker response to market evaluation (Jayewardene and Foley, 2000).

2.1.1 Forms of E-Banking

There are many electronic banking delivery channels to provide banking service to customers.
Among them ATM, POS, Mobile banking, internet banking, Debit card and Credit card are the most
widely used and discussed below.

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2.1.1.1 Automated Teller Machine
Automated Teller Machine (ATM) is an electronic machine in a public place, connected to a data
system and related equipment and activated by a bank customer to obtain banking services without
going in to the banking hall. It allows customers to access banking services such as withdrawals,
transfers, inquiries about account balances, requests for cheque books, account statements, direct
deposits, foreign Currency exchange etc. (Fenuga, 2010). Using an ATM requires an ATM card and
a pass code, often referred to as a PIN (Personal Identification Number). The ATM is also called 24-
hour teller are electronic terminal which gives consumers the opportunity to bank at almost any time
and one of the easiest and widely adopted retail electronic banking (Nyangosi et al .2009). it is
described as combination of computer terminal, record keeping system and cash vault in one unit,
permitting customers to enter the banks book keeping system with plastic card containing a personal
identification number or purchasing a special code number into the terminal linked to the banks
computerized record 24 hours a day (Rose, 1999). To withdrawal cash, making deposit or transfer
funds between accounts a consumers need automated teller machine card and personal identification
number. Once the customer login, access to transaction are displayed on the screen. It offers several
retail banking services to customers. They also located outside of banks, and are also found airport,
malls, and places far away from the home bank of customers. They were introduced first to functions
as cash dispersing machine (Abor, 2004). Some ATM charge a usage fee for this services, with a
higher free for consumers who do not have an account at their institution. If a fee is charged, it must
be revealed on the terminal screen or on a sign next to the screen Rose (1999). ATM services have a
lot of advantages. They include increase in productivity during banking hours if the services are
available in addition to the human tellers. They are cost –effective way of achieving higher
productivity per period of time. According to Rose (1999), an ATM transaction is an average of
about 6,400 per month compared to 4,300 for human tellers. Furthermore, it saves customers time in
services delivery as alternative to queuing in bank halls, customers can invest such time saved into
other productive activity (Abor, 2004). In addition, ATM continue to serve customers while human
tellers stopped work, thereby increasing productivity of banks.

2.1.1.2. INTERNET BANKING

Internet banking is conducted by completing bank transactions by directly accessing the bank
through the internet. Nowadays, internet banking customers can access many different services
online, which makes physical banks open even after office hours. Internet banking allows customers
of a financial institution to conduct financial transactions on a secure website operated by the
institution. Internet banking can be conducted either by accessing the internet with a computer or by
using a phone that has internet features (Alabar &Timothy, 2012).
Broadly, the level of banking services offered through internet can be categorized in to three types:
First, basic level are services is the banks website which disseminate information on different
products and services offered to customers and members of public in general. It may receive and
replay to customers queries through email. Second, simple transaction Websites which allows
customers to submit their instructions, application for different services, queries on their account
balance, etc. but do not permit any fund based transaction on accounts. Third, level of internet

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banking services is offered by fully transactional websites which allows the customers to operate on
their accounts for transfer of funds, payments different bills, subscribing to other products of the
bank and to transact purchase and sale of securities. The above form of internet banking services is
offered by traditional banks as an additional method of serving the customer. There are also banks
that delivery channels. Some of these banks are known as virtual banks or internet banking and may
not have any physical presence in a country despite offering different banking services (Adriana,
2006).

2.1.1.3. POINT OF SALE (POS)

An electronic fund transfer at the POS is an on-line system that allows customers to transfer funds
instantaneously from their bank account to merchant account when making purchases. POS uses
debit card to activate an electronic fund transfer process. A point of sale transfer allows customers to
pay for retail purchase with a check card, a new name for debit card Chorafas, (1988). Increased
banking productivity results from the use of point of sale to services customers shopping payment
requirements instead of clerical duties in handling cheques and cash withdrawal for shopping.
Furthermore, the system continues after banking hours, hence continual productivity for the bank
even after banking hours. It also saves customers time and energy in getting to bank branch or
Automated Teller Machine for cash withdrawals which can be harnessed into other productive
activity (Abor, 2004). Some banks issued international card (such as Visa card, Master card, etc.) to
their customers. Such cards can be used wherever accepted, and payment on the cards can only be
done through an ordinary domiciliary account of the card holder, or any other account that may be
permitted. Some these cards are credit or debit cards.

2.1.1.4. Mobile banking

Mobile banking (also known as M-banking) is a term used for performing balance checks, Account
transaction, payments, credit application and banking transaction through a mobile device such as a
mobile phone or personal Digital Assistant (PDA). The easiest mobile banking services were offered
over SMS, a service known as SMS banking. Mobile banking is used in many parts of the world with
little or no infrastructure, especially remote and rural areas. This aspect of mobile commerce is also
popular in countries where banks can only be found in big cities, and customers have to travel several
miles to the nearest bank. The scope of offered services may include facility to conduct bank and
stock market transaction, to administer account and to access customized information (Tiwari &
Buse, 2007).

2.1.1.5. Debit Cards

A debit card (also known as a bank or cheque card) is a plastic card that provides alternative
payments methods to cash when making purchase. Functionally, it can be called electronic cheques,
as the funds are withdrawn directly from either the bank account or from the remaining balance on

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the card. In some cases, the cards are designed exclusively for use on the internet, and so no physical
card (Mavri and Ioannou, 2006). In many countries the use of debit card has become so widespread
that their volume of use has overtaken or entirely replaced the cheque and, in some instance
transaction. Like credit cards debit cards are used widely for telephone and internet purchase and
unlike credit cards, the funds are transferred immediately from the bearer’s bank account instead of
having the bearer pay back the money at a later date. Debit cards may also allow for internet
withdrawal of cash, acting as the ATM cards for withdrawing cash and as a check guarantee card.

2.1.1.6. Credit Cards

Credit cards are small plastic card issued to users as a system of payment. It allows its holder to buy
goods and services based on the holder’s promises to pay for those good and services. The issuer of
the card creates a revolving account and grants a line of credit to the consumer (or the user) from
which the user can borrow money for payment to a merchant or as cash advance to the users (Mavri
&Ioannou, 2006). A credit card is different from a debit cards in that it does not withdraw money
from the users account after transaction. The issuer lends money to customer to be paid to the
merchant. Holders of the valid credit card have the authorization to purchase goods and services up
to a predetermined amount, called credit limit. The vendor receives essential credit card information
from the cardholder, the bank issuing the card actually reimburses the vendor, and eventually the
cardholder repays the bank through regular monthly payments. If the entire balances are not paid in
full, the credit card issuer legally charge interest fees on the unpaid portion.

2.1.2. Benefits of Electronic Banking

The technological innovation has brought about several gains to the banking industry. Some of these
can be identified as convenience to banking, enhanced customer access and awareness, speedy or
faster process and transmission of information, reduction of fraud levels and improved risk
management. Other benefits are global compliance that is, adopting trends to provide seamless and
standardized services worldwide and easier marketing of banking services among others. Howcroft et
al., (2002) in a study, found that the most important factors encouraging consumers to use online
banking are lower fees followed by reducing paper work and human error, which subsequently
minimize disputes (Kiang et al., 2000). Byers and Lederer, (2001) concluded that it was changing
consumer attitudes rather than bank cost structures that determines 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. Convenience
of conducting banking outside the branch official opening hours has been found significant in cases
of adoption of e-banking. Banks provide customers convenient, inexpensive access to the bank 24
hours a day and seven days a week. Moutinho et al., (1997) pointed out that each ATM could carry
out the same, essentially routine, transactions as do human tellers in branch offices, but at half the
cost and with a four-to-one advantage in productivity. Given that the ICT is now creeping into the
banking industry in Afghanistan, its functions could not be completely regarded as substitute for
teller in the banking hall. There are a number of times where the ATMs fail to function thus making
the customer unable to access the service. Gerrard and Cunningham (2003) found a positive

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correlation between convenience and online banking and remarked that a primary benefit for the
bank is cost saving and for the consumers a primary benefit is convenience.
Multi-functionality of an IT based services may be another feature that satisfies customer needs
(Gerson, 1998). A reduction in the percentage of customers visiting banks with an increase in
alternative channels of distribution will also minimize the queues in the branches (Thornton and
White, 2001). Increased availability and accessibility of more self-service distribution channels help
bank administration in reducing the expensive branch network and its associate staff overheads. Bank
employees and office space that are released in this way may be used for some other profitable
ventures (Birch & Young, 1997). This ultimately leads towards improved customer satisfaction
(Thornton and White, 2001). A reduction in the percentage of customers visiting banks with an
increase in alternative channels of distribution will also minimize the queues in the branches
(Thornton and White, 2001). Increased availability and accessibility of more self-service distribution
channels help bank administration in reducing the expensive branch network and its associate staff
overheads. Bank employees and office space that are released in this way may be used for some other
profitable ventures (Birch & Young, 1997).
The Internet increases the power of the customer to make price comparisons across suppliers quickly
and easily. As a consequence, this pushes prices and margins downward (Devlin, 1995). Institutional
encouragement of the use of IT-based services and IT service fees are another important dimension
(Zhu at al., 2002). Cantrell (1997) conducted a banking survey in the US and found that increases in
service fees were one of the main driving forces behind the move of some large bank customers to
smaller community banks.
Yakhlef (2001) pointed out that banks are responding to the Internet differently, and that those which
see the Internet as a complement and substitute to traditional channels achieved better
communication and interactivity with customers. Robinson (2000) argued that the online banking
extends the relationship with the customers through providing financial services right into the home
or office of customers. The banks may also enjoy the benefits in terms of increased customers’
loyalty and satisfaction (Williams, 2000), Nancy et al. (2001) viewed the same situation differently
and argued that customers like to interact with humans rather than machines. They found more
possibilities for asking questions and believe that bank clerks are less prone to errors. It is thus
essential that any face-to-face transactions are carried out efficiently and courteously. This increases
the possibility of selling the customer another service that they need and also promotes a good image
and enhances customer loyalty. The findings obtained by Nancy et al. (2001) suggest that, attitude is
an important variable which influence the usage of e-banking services such as telephone banking and
ATM services. Therefore, customers who have negative attitude towards e-banking services
especially individuals who cannot read and write, are less likely to use such services than those with
positive attitude.
Polatoglu and Ekin (2001) found that low levels of email usage and a preference for doing over-the-
counter transactions at bank branches are the main reasons for not using e-banking in Turkey. The
opportunity to conduct a trial may help to convince reluctant customers (Black et al., 2001). Boon
and Ming (2003) concluded that banks in Malaysia should concentrate on enhancing their operation
and product management through a mixture of branch banking and e-channels, like ATMs, phone
banking and PC banking.

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2.1.3. Customers and internet banking
Lamb, et al. (2000, p.142) customer behavior as the acts of decision –making units (families as well
as individuals) directly involved in obtaining and using need satisfying products and services, this
also includes the decision –making process that precedes and determines these acts. These acts refer
to activities like traveling to and from the stores, evaluation of both goods and services available in
the market and the actual purchasing of goods. When referring to customers, Rice (1997), p.78)
explains that customers are people who use services and products, and pay for those things. Customer
behavior is about learning customers and their buying behavior. Schiff man and kanuk (2000, P.8)
explain that a customer is used to describe two kinds of customers, i.e. personal and business or
organizational customers. Personnel customers are customers, who buy goods and services for their
own use, and business customers are those buying products, equipment’s and services in order to run
a business. Block and Roaring (1979, P132) define customer behavior as the acts of individual
directly involved in obtaining and using economic goods and services. This includes the decision
making process that consumers go through when buying goods with a better understanding of
consumers’ behavior banks will be able to identify customer profiles. Beckett, et al. (2000, p.20)
suggest that the types of financial product being purchased influences customer purchased behavior.
Secondly, the emphasis on trust and having a relationship is also highly pertinent to the strategies of
banks and other financial providers. Thirdly, the ability to retain customers and increasing customers’
profitability is very important (karialuoto, et al.2002, p.263). According to Wang (2002, p.3) the
emergency of internet banking has created highly competitive market condition, which have critical
impact upon customer behavior. Internet banking provides must therefore attempts to better
understand the factors affecting customer acceptance of internet banking. If they succeed, banks will
be able to influence and even determine customer behavior which will become a major issue in
creating competitive advantage in the future.

2.1.4. Impact of electronic banking

According to M.M.Rahman (2008) in Bangladesh despite huge demand from the business
community as well the retail customers particularly the urban customers, electronic banking is still at
a building state due to many number of constraints such as unavailability of a backbone network
connecting the whole country, in adequacy of reliable and secure information infrastructure
especially Telecommunication infrastructure, sluggish ICT penetration in banking sector, insufficient
legal and regulatory support for adopting banking and so on. The concept of electronic banking
includes all types of banking activity performed through electronic networks. It is the most recent
channel of banking services which used for both business to business and business to customers’
transactions. However, in true sense, e-banking includes activity like payment of bills and invoices
transfer of funds between account, applying for loan, payment of loan installments, sending funds to
third parties via email or internet connection regardless of where the client is located.
Leow, Hock Bee (1999) state that the term PC banking, online banking, internet banking, telephone
banking or mobile banking refers to a number of ways in which customer can access their banks
without having to be physically present at the bank branch. Therefore, e-banking covers all these
ways of banking business electronically. Since e-banking offers some smart services benefiting both
banks and customers compared with traditional banking system, it has become imperative to make
necessary room for banks to flourish e-banking. Among others, attractiveness of electronic banking

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includes it lowers transactional cost, provide 24hours services, ensure increased security and control
17 over transaction, reduces fraud risk, perform higher volume transaction with less time, increase
number and volume of value payment through banks, allows remote transaction facilities that replace
physical presence of customer in a bank branch and increases transaction speed and accuracy. On
other hand, traditional banking is time consuming and more costly and therefore, electronic is
replacing traditional banking all over the world.
Liao and Cheung (2002) found that individual expectations regarding accuracy, security, transaction
speed, user friendliness, user involvement and convenience are the most important attributes in the
perceived usefulness of Internet-based e-retail banking Confidentiality of consumer data is another
important concern in the adoption of online banking (Gerrard & Cunningham, 2003). Customers fear
that someone will have unlimited access to their personal financial information. White and Nteli
(2004) conducted a study that focused on why the increase in Internet users in the UK had not been
paralleled by increases in Internet usage for banking purposes. Their results showed that customers
still have concerns with the security and the safety aspects of the Internet. 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. Larpsiri et al., (2002) argued that it is not clear whether electronic documents and records
are acceptable as sufficient evidence of transactions. They also pointed out that the jurisdiction of the
courts and dispute resolution procedures in the case of using the Internet for commercial purposes are
important concern.

2.1.5. Service Quality

Research on “quality” in the goods sector has been in existence long before it started in the service
sector (Gummesson, 1991). All the same, the meaning of quality in the goods sector is inadequate for
it application into the service sector due to the fundamental difference between the two terms
(Parasuraman, Zeithaml, and Berry, 1985). Parasuraman, Zeithaml, and Berry (1985, pp. 42) posit
that service quality is performance based‟ rather than object oriented, therefore “precise
manufacturing specifications concerning uniform quality can rarely be set”. Tapiero (1996) also
indicates that the definition of the term quality differs from author to author and it is usually based on
the person making the definition, the measures applied and the context within which it is considered.
Service quality is an important contemporary issue in service management and marketing (Clottey
and Collier, 2008). Banking is seen as a service that captures all the characteristics of service
(Chakrabarty, 2006).
Notwithstanding this, literatures sampled from the 1980’s and 1990’s have examined service quality
from two points of view. Researchers like Carman (1990), Garvin (1983), Parasuraman et al. (1985,
1988) have defined and measured service quality by looking at its attributes contrary to Bitner and
Hubbert (1994), Iacobucci, Grayson, and Ostrom (1994), Oliver (1993), and Parasuraman, Zeithaml,
and Berry (1994) who examined the application of services to conceptualize the relationship between
service quality and customer satisfaction. Donnelly et al (1995) also defines service quality as the
degree of excellence or superiority that an organization's product possesses and further argues that it
is influenced by three service quality dimensions. These three dimensions are customer service,
service knowledge and service infrastructure and technology. Just like customer satisfaction, service
quality is equally difficult to measure elusive and an abstract construct (Carman 1990). In support of

14
the above statements, while Shostack (1977) looked at the intangibility of service that is rendered or
experienced, Parasuraman et al. (1985) argues that service quality goes beyond outcomes and
involves the delivery process. Based upon available literatures sampled, service quality shares some
similarities with customer satisfaction, although the two are not the same (Cronin and Taylor, 1992;
Parasuraman et al., 1985). This according to Clemes et al has led to the combination of service
quality and customer satisfaction literature as the basis service quality theory (Clemes et al., 2007.

2.1.6. Customer Satisfaction

Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectation. Customer satisfaction is also defined as the number of customers
whose reported experience with a firm exceeds specified satisfaction goals (Farris, Paul et al., 2010).
Another definition of customer satisfaction refers to the extent to which customers are happy with the
products and/or services provided by a business. Further definition of customer satisfaction states
that it is a term generally used to measure a customer’s perception of a company’s products and/or
services (Ahmed, 2005). Customer satisfaction will vary from person to person, depending on a
whole host of variables which may be both psychological and physical.
According to Saha & Zhao (2005), customer satisfaction is defined as a collection of outcome of
perception, evaluation and psychological reactions to the consumption experience with a
product/service. In other words, Saha and Zhao further defined customer satisfaction as a result of a
cognitive and affective evaluation where some comparison standard is compared to the actually
perceived performance. If the performance perceived is less than expected, customers will be
dissatisfied. On the other hand, if the perceived performance exceeds expectations, customer will be
satisfied. In a competitive market place where businesses compete for customers, customer
satisfaction is seen as a key differentiator and increasingly has become a key element of business
strategy (Carl & McDaniel, 2005). It is seen as a key performance indicator within business and is
often part of a Balanced Scorecard. Therefore, it is essential for organizations to effectively manage
customer satisfaction. To be able do this, organizations need reliable and representative measures of
satisfaction. In researching satisfaction, firms generally ask customers whether their product or
service has met or exceeded expectations. Thus, expectations are a key factor behind satisfaction.
When customers have high expectations and the reality falls short, they will be disappointed and will
likely rate their experience as less than satisfying (John & Joby, 2003).

2.1.7. Customer Satisfaction in Banking

Customer satisfaction is a key determining factor why customers leave or stay with a bank. Fornell
(1992) cited in Thakur (2011) noted that although customer satisfaction and quality appear to be
important for all firms, satisfaction is more important for loyalty in services industry like bank.
Because even if the customer appears to be satisfied, they may look for other bankers if they believe
they might receive better elsewhere (Reichaheld, 1996) cited in Thakur (2011). Thus the banking
organization needs to know how to keep their customers. However, keeping customers is also
dependent on a number of other factors. These include a wider range of service choices, greater
convenience, better prices, and enhanced income (Thakur, 2011). Ioanna (2002) cited in Thakur
(20011) further proposed that differentiation is nearly impossible in a competitive environment like

15
the banking industry. Banks everywhere are delivering nearly same services. Thus, bank
management tends to differentiate their firm from competitors through services quality is a crucial
element which impact customer’s satisfaction in the banking industry. Generally, in banking quality
is multivariable concept, which includes differentiate their firms from competitors through services
quality. Services quality deferring types of convenience, reliability, services portfolio and critically
the staff delivering the service storbacka et, (1994) Cited in Thakur (2011). Minimum price with
maximum usage and profit always breeds higher level of satisfaction (Jamal & Kamal, 2004) cited in
Afsar (2010). When pricing is not suited to the needs of the customers, Dissatisfaction usually
occurs. In banking industry also, the interest rates on loans and charges of the usage of on line
services such as ATM machine and the processing fee is a major source of conflict between the bank
and its customers. If thinks that the charges are more than it should become paring to their needs,
they switch. Competition is now in banking industry as it has become too easy to open an account in
any others bank that results. Switching cost to be very minimal. But if a customer is satisfied, the
loyalty injects automatically and the customer remains with the current bankers for a longer period of
time (Fox & Poje, 2002) cited in Afsar (2010).

2.1.8. The Relationship between Service Quality and Customer Satisfaction

The status or prestige of an organization is determined by the quality of the provide services
achieving a high level of services meet the need of customer’s. Studies confirmed that service quality
and customer satisfaction have strong relationship (Alagheban, 2006, Bedi, 2010; Keiningham, 2005)
when the customer receive high quality services his behavior attitude towards the organization will
be positive and that would strengthen the relationship with the organization and vice versa. Customer
satisfaction is the most important criteria that enable organizations to ensure the quality of their
goods or services (Parasuraman et al., 1985). In case of the banking sector, recognized standard
scales to measure the perceived quality of a bank service is not available. Thus providing high quality
service is being taken as an important weapon to survive and to gain and maintain competitive
advantage (Bateson, 1985) cited in Thakur (2011).
For commodity like products, quality can be measured easily by its features. But quality of service
depends heavily on the quality of the personnel of service provider or the provider himself. Studies
on customers’ switching from banks have found that they do so because they considered to be poorly
serviced. Quality service improved customer satisfaction and reduced customer erosion (Thakur,
2011). service quality is the key to measure e-banking user satisfaction. Researchers have paid much
attention to the close relationship between service quality and customer satisfaction (Parasuraman et
al., 1985).

2.1.9. Measuring Customer Satisfaction

The term “e-customers” refers to the online purchase/users whether it is individual or corporate. It
can be defining as e-customer is an individual or corporate one who are using e-portal to purchase,
ordering, receiving information and paying price or charges through various types of e-channels i.e.
internet banking, mobile banking, ATM, POS, Credit card, debit card and other electronic deiced.
Traditionally the level of customer satisfaction was determined by the quality of services, price and
purchase proses. Consequently, the level of e-satisfaction is also determined by the quality of e-
services the price level and e-purchasing process (Ming, 2003). Literature on customer satisfaction

16
realizes that there are different factors of e-customers’ satisfaction than formal customer, e-
satisfaction are modeled as the consequence of attitude towards the e-portals (Chen and Chen, 2009).
Customer satisfaction is measured at the individual level, but it is almost always reported at an
aggregate level. The state of satisfaction depends on a number of both psychological and physical
variables which correlate with satisfaction behaviors such as return and recommend rate. The level of
satisfaction can also vary depending on other options the customer may have and other products
against which the customer can compare the organization’s products (David, 2010). The main
characteristics of services in general and banking services in particular are: It’s intangible, services
are not material and cannot be touched, the production and consumption of service happens at the
same time, which means that it is produced upon request and Service cannot be stored (Parasuraman,
Zeithmal, & Berry, 1988). Most researchers found that service quality is the antecedent of customer
satisfaction (Bedi, 2010; Kumar et al., 2010; Kumar et al., 2009; and Parasuraman et al., 1988).
Quality customer service and satisfaction are recognized as the most important factors for bank
customer acquisition and retention (Jamal, 2004; Armstrong and Seng, 2000; Lassar et al., 2000). To
encourage internet banking adoption, banks need to develop strategies that improve the customer’s
trust in the underlying technology. The other factors include quick response, assurance, follow-up
and empathy. Security, correct transaction, customer control on transaction (personalization), order
tracking facilities and privacy are other important factors in the online service that affect the
customer satisfaction. Joseph, McClure, & Joseph (1999) investigated the influence of internet on the
delivery of banking services.

2.1.10. Definition of independent Variables

2.1.10.1. Reliability
Reliability refers to the ability to perform the promised service accurately and consistently. It
involves accuracy in billing, keeping records correctly, and performing the service at the designated
time. Reliability consists of providing services as promised, dependability in handling customers’
service problems, prompt reply to customer enquiries, provide services at the promised time and
maintaining error-free record. Reliability is the most important factor in conventional service
(Parasuraman, Zeithaml, & Berry 1988). It involves two concepts, dependability and uniformity in
performance. Reliability also means honoring the commitments in areas such as billing accuracy,
proper record maintenance and delivering the service within acceptable time limit (Saha and Zhao,
2005). It also “refers to the correct technical functioning of a self-services technology and the
accuracy of service delivery. Many authors have detected that reliability is significant in the
determination of service quality (Zeithaml & Bitner, 2000).
In addition, Van Gorder (1990) posited that reliability is the most crucial characteristics for
customers in the evaluation of service quality. Zeithaml and Bitner (2000) advised that customers
should be specifically influenced by the reliability of new technology because they might be
associated with risks such as the technology malfunctioning (Sham Dasani et al., 2008). Parasuraman
et al. (1988) also considered reliability of the service as important factor of service quality.
Furthermore, Van Gorder also discovered that reliability is the most crucial determinant of service

17
quality (Van Gorder, 1990). Research on the use of computers or technologies which share similar
characteristics also affect performance (or dependability) as it is an important attribute (Davis et al.,
1989; Davis et al., 1992). Finally, Dabholkar (1996) in his study revealed that reliability and
accuracy are appropriate measure for assessing service that has to do with technology.

2.1.10.2. Transaction efficiency

Transaction efficiency is the ability of the customers to get any of e-banking service, find the desire
product and information associated with it, and check out with minimal of effort. Transaction
efficiency also can understand as performance of e-banking base on some elements: up to date
information, response time, download time, complete product information, tutorial/demonstration,
and help function (Leelapong prasut et al, 2005).

2.1.10.3. Customer support

Customer support includes before sell and after sell support. Before customer make decisions, the
company should give some support to attract them, let customers feel they are at home. The
relationship is like a good friend not like a business. After customers buy the services or products,
company should solve the problem that customers met or respond to customers ‘questions
immediately and according to the problems, company can ameliorate them. In the e-banking
industries, support is also important. Not everyone is good at different technology so they need guide
on how to use the service. Sometimes, after services on the e-banking, customers might have
questions waiting to answer, so he or she also needs support. So, support is very important for
customers (Rangsan & Titida, 2013).

2.1.10.4. Service security

Security is defined as the freedom from danger risk, or doubt it involves physical safety, financial
security and confidentiality. It consists of employees who are consistently customers, making
customers feel safe in their transactions, employees who are consistently courteous and employees
who have the knowledge to answer customer question (Parasuraman, Zeithaml & Berry, 1985).
Moreover, security is defined as personal and possessions safety of the customers. It also includes
confidentiality maintained by services providers (Jon stone, 1997). Security is another essential
determinant in the decision of consumers to use Internet banking. Strong issues on security are a
common concern to individuals hence their unwillingness to use internet banking (Madu, 2002).
Finally, Cunningham (2003) indicated that one of the most important future challenges facing
individuals or customers of a bank is the fear of higher risks associated with using the Web for
banking and financial transaction.

2.1.10.5. Ease of Use

Ease of use is important in using e-banking, which related to customer apprehension about the efforts
required to learn to use e-banking (David, 2010). It is considered as the factor influencing the
adoption of e-banking and related to an easy-to-remember pin codes and URL address, well-
organized and usable software, easy of site navigability, concise and understandable contents, terms

18
and conditions (Alagheband, 2006).Additionally, Gurting (2006) examined the determinant to use
internet banking “the perceived ease of use and perceived usefulness factors are considered to
fundamental in determining the acceptance and use of various information technologies”.

2.1.10.6 Performance

Performance is the operating quality of each e-banking service and feature offered by banks. It
includes whether e-banking services provide in multi-language or not, e-banking provide 24 houres-7
days’ service, allow to transfer funds between banks (Garvin, 1987).

2.1.10.7 Service content

Service content is all information that is provided to customers. For electronic banking service, it
means the content that banks provide to customers through their website, ATM & POS terminal and
Mobile. High value added content is essential. The dimension covers the design of content includes
like web content layout, content upgrading navigability and user friendliness. These are consistent
with findings of prevision studies Aladwania and Palvia (2002) agree that for the service content of
respective software used in provision of e-banking services to achieve customer satisfaction it should
have some comma features. The features or items included sought to answer some key question to
the customer which are will completion of online transaction be done easily will logging into the
portal done easily, will easy to understand which button to be clicked for the next step.

2.1.9. Demographic characteristics of internet banking adopters

Demography is the study of human population statics, including age, sex race, location, occupation,
income, education, and other characteristics. Each of these characteristics influences the nature of
customer needs and wants, ability to buy products the perceived importance of various attributes or
choices criteria used to evaluate alternative brands, and attitudes towards and preference for different
products (Loudon and DellaBitta, 1993, p.35). marketers often segment market on the basis of
demographics information because it is widely available and often relates to consumers buying and
consuming behavior. Only with a clear understanding of major consumers’ characteristic can the
implication of environmental and individual determinants of consumer behavior begin to be
appreciated (Duplessis and Rousseau, 1999, p274). Age, educational level, income and occupation
are the most influential demographic variables affecting internet usage.
Typically, internet banking users tends to be well educated, relatively young and are high income
earners .it has been widely recognized that demographic factors have a great impact on consumer
attitudes and behavior towards internet banking (Karjaluoto,2002, p.360) the consumer demographics
factors relevant to this study are therefore age, education level and occupation. These are discussed in
the following sections.

2.1.9.1. Age

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The goods and services peoples’ buy varies during the different stages of their lives. For example, the
kind of food that appeals to youths is unlikely to be the choices of adults. Furthermore, peoples taste
in clothes, furniture and recreation are also age related (Kotler, 2000, p.180). Peoples in deferent age
groups often share distinctive values, meanings and behaviors. Markets must be cautious, however,
about segmenting consumers on the basis of actual age. Many adult American consumers think of
themselves as ten to fifteen years younger than they really are. Their behavior and cognition is more
closely related to their psychological age than their chronological age (Peter and Son, 1994, p363)
According to stone man (2001, p.4) the greatest concentration of computer owners who have banked
online in the USA are in the 18 to 34 years’ age group and represents 30 percent of the market. By
way of contrast only 15 percent of the population in 55 to 64-year age group owns a computer and
only 9 percent of this group banks online. Karjaluoto, et al (2002, p271) shows that age has an impact
on the use of internet banking. The results imply that the typical users are between 35 and 49.
Therefore, this study undertaken to determine whether age has an impact on customer satisfaction of
e- banking.

2.1.9.2. Education Level

Educated level is defined as means by which access to a particular occupation is granted (kotler and
Armstrong, 2000, p.75). There is strong relationship between income and education level. More
educated consumers have more money available to spend, due to better education and this affects
their life styles. As people attain higher education, it affects which types of products they buy, what
kind of stores to buy them in, and what price they are willing to pay (Wilkie, 1990, p.78). A person
level of education can impact strongly on their ability to generate income and their consumer
spending potential. In short, better educated consumers tend to have better paying occupation than
those who are not well educated (schiffiman and Kanuk, 2000, p.4).

2.1.9.3. Occupation

A personal occupational also influences his or her consumption pattern. Marketers try to identify the
occupational groups that have above –average interest in their products and services. A company
specialize their product for certain occupational groups (kotler, 2000, p.181). Demographical
variables are often used as basis to describe different types of consumers. High-level occupations that
are rewarded with high incomes usually require advanced educational training. Individual with little
education rarely qualify for high –level occupation (Schiffiman and Kanuk, 2000, p.42). Karjaluoto
(2002, p359) relates this to internet banking where those currently using online services are well-
educated and have better occupations than non-users. In conclusion, occupation has an impact on
internet banking and current users tend to be employed in better position than non-users.

2.2. Empirical Review

Some related studies are conducted by different researchers in different parts of the world. However,
there are limited numbers of studies conducted in Afghanistan on e-banking technology. Specifically,
(Abdul matin Karimi, 2016) conducted a research on the opportunities and challenges of e-banking in
Afghanistan. The study was focused on analyzing the status of electronic banking in Afghanistan and

20
investigates the main challenges and opportunities of implementing e-banking system. The author
concluded a survey on the existing operating style of banks and identifies some challenges of using
e-banking system, such as lack of suitable legal and regulatory frame works for e-commerce and e-
payments, political instability in neighboring countries, high rate of illiteracy and absence of
financial network that different banks.
Anosha SOBAT (2020) also studied the challenges and opportunities of m-banking in Afghanistan;
his objective was studying of m-banking practices in developing countries. The authors employed
interview and on site observation to investigate challenges to m-banking in Afghanistan and found
that, the main obstacles to the development of m-banking is, in economic and technology
infrastructure, and organization parts, respectively for m-banking, lack of skilled manpower and
frequent power disruption. According to (Anosha SOBAT, 2020), an adequate legal structure and
security framework could foster the use of m-banking, which is contradicting with the finding of the
previous study.
The study of (Ahmad Shaker Ansari, 2020) aims to identify factors that affect adoption of e-banking
in the Afghanistan banking industry. The study was conducted based on the data gathered from
Afghanistan International Bank (AIB) in Afghanistan
A mixed research approach was used to answer the research question that emerges through the
review of literature and experience of the researcher in respect of the e-banking system in
Afghanistan. The study statically analyzes data obtained from the survey questionnaire. A research
frame work developed based on technology-organization environment model (TOE) developed by
Tornatzky and Fleischer. The result of the study indicated that, the major barriers Afghanistan
banking industry faces in the adoption of electronic banking are: security risk, lack of trust, lack of
legal and regulatory frame work, lack of ICT infrastructure and absence of competition between local
and foreign banks. The study suggests a series of measures which could be taken by the banking
industries and by government to address varies challenges identified. These measures include
establishing a clear set of legal frame work on the use of technology in banking industry, supporting
banking industries by investing on ICT infrastructure and banks need to be focused on technological
innovation competition rather than traditional bases of retail bank competition. Furthermore (Assefa,
2013) conducted a study on the impact of e-banking on customer satisfaction in two privet banks in
Gondar city. The researcher employed descriptive and inferential statics in analyzing this study and it
was limited to customers of two private banks only.
The result of the study implied that majority of users of e-banking are the young, the educated,
salaried and students ,business person are not actively using the services of e- banking , e-banking
currently provided for saving and current account holders only, e-banking reduced frequently of bank
hall for banking services, reduced waiting time for customers these are customers who don’t know
the fee charged for being e-banking users, the bank customers satisfaction increased after being e-
banking users, enabled customers to control their account movements and there is high opportunity to
expand e-banking services in the city . The study of (AlaEddin & Hasan, 2011) on e-banking
functionality and outcomes of customer satisfaction in Jordanian commercial banks, it aims to
explore the adoption of e-banking functionality and investigates the impact of e-banking on the
outcomes of customer satisfaction. A purposive sampling technique was employed to recruit 179
customers representing the desired range of demographic characteristics (e.g. gender, age, and
computer use), previous internet experience levels and product-related knowledge.

21
The research showed that adoption of e-banking (accessibility, convenience, security, privacy,
content, design, speed, fees and charges) had a positive effect on Jordanian Commercial Bank
customers ‘satisfaction. Gerrard et al (2006) in their study in Singapore identify risk to be an
important factor for Internet Banking adoption. All respondents who did not use internet banking
services had a negative perception of the security in Internet Banking. The respondents perceived that
there were many security risks when using the internet. They felt the privacy was a concern, feeling
all their financial information could be in jeopardy. Risk was one of the two most frequently
mentioned factors in their study; concern about risk was mentioned by all respondents.
An empirical investigation conducted by Sathye (1999) on the adoption of internet banking by
Australian customers also identified, security concern among banks and customers are keeping both
away from internet banking (Sathye,1999). The study of kerem (2003) on adaption of electronic
banking underlying consumer behavior and critical success factors conducted in Estonia, was
intended to study the further understanding of how consumers perceive electronic banking in the
days of interactive channels in Estonia, as Estonia is internationally renewed for being a pioneer in
the acceptance of new technology. The adaption of internet banking better prices, recommendation,
better services, marketing effort, better access and higher privacy.
The most important factor of in starting to use internet banking are first and foremost better access to
the services (convenience), better prices and higher privacy. Better service (i.e. preferring self-
service over office service) was also of above average importance. Two factors that the respondents
did not consider relevant to their adoption decision were banks'' marketing activities and personal
recommendations from friends and colleagues. Also the survey conducted six main obstacles
(computers are difficult, no access to internet, internet banking is expensive, low security, have had
no chance to try and I prefer personal contact) in adopting Internet banking (results of a preliminary
study, 100 respondents), the most important factors discouraging the use of Internet banking are lack
of Internet access and not having a chance to try out Internet banking in a safe environment.
Finally, the research indicates that banking activities alone may not be sufficient in achieving growth
if general infrastructure, economic environment and government initiatives are not supportive. The
aim of the study was to collect South African data in order to test out the hypotheses regarding the
factors, which affect adoption of Internet banking and compare these results with those collected in
other countries. On line questionnaire was used to collect empirical data and the result of the study
shows that intention to adopt internet banking can be predicted by attitudinal factor, perceived
behavior control factors to a lesser degree, and not by subjective norms. All attitudinal factors except
banking needs are found to be significant, with complexity and risk showing a negative relationship.
Jannatul (2009) in his study of e-banking and customer satisfaction which focuses on understanding
the impact of variables of e-banking, on customer satisfaction in Bangladesh, five services quality
dimension namely reliability, responsiveness, assurance, empathy, and tangibles are established
based on the SERVQUAL model and the literature review. These variables are tested in e-banking to
explore the relationship between service quality and the customer satisfaction. Data were gathered
through survey interview by a structured questionnaire with 250 customers. The study shows that
these factors are the core service quality dimensions for customer satisfaction in e-banking. It also
explores that reliability, responsiveness, and assurance have more contribution to satisfy the
customers of e-banking in Bangladesh. In general, most of e-banking related studies are too remote
for our cases and even the study of Assefa (2013) which is found to be similar to the present topic

22
were done in qualitative approach also ignores state owned e-banking customers. Thus to address the
current gap in the literature, empirical and question of representativeness this study is designed to
examine the effect of e-banking on the satisfaction of customers Azizi Commercial Bank in Herat
city.

2.2.1 CONCEPTUAL FRAMEWORK

The basic objective of this study is to investigate the impact of E-banking service on customer
satisfaction. The research model for this research is given in Figure 1. The independent variables
taken into account in the explanation of service quality are the seven identified characteristics. I
hypothesize that all those attributes have a positive impact. The service quality dimension transaction
efficiency, customer support, service security, easy use, performance, services content and
Reliability. Santos (2003) explained that e-banking service quality consists of active dimension and
each dimension composed by seven determinants as illustrate below. The models can assist the
companies to understand e-service quality and customer satisfaction. Before launching website, the
dimension considered and insures that, the website is easy to use, search and navigates, there is
attractive presentation of factual contents and links are set up and maintained and broken links are
avoided.

Figure 1: conceptual framework

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2.2.2 Research Hypothesis

H1: To e-banking reliability service has positive impact on customer satisfaction

H2: To e-banking transaction efficiency service has positive impact on customer satisfaction
H3: To e-banking customer support service has positive impact on customer satisfaction
H4: To e-banking easy use service has positive impact on customer satisfaction
H5: To e-banking service security service has positive impact on customer satisfaction
H6: To e-banking performance service has positive impact on customer satisfaction
H7: To e-banking service content service has positive impact on customer satisfaction
CHAPTER THREE
RESEARCH METHODS

Research Design and Research approach

The researcher was used Explanatory research design, because, it is suitable to explain the
relationship between variables as quoted in Mark, Philip & Adrian (2009). Explanatory research
helps to establish the relationship between independent and dependents variables. The researcher also
used descriptive studies to describe the characteristics of the sample by using mean, percentages and
frequency. There are two basic approaches, these are qualitative and quantitative. The quantitative
research approach makes use of statistics and numbers which are mostly would present in figures
whiles qualitative approach relies on describing an event with the use of words. According to Yin
(1994), a research approach chosen shall be doing according to the research questions in the
particular situation since each approach has its own advantage and dis advantage and how empirical
data is would be collecting and analyzing. In conducting study researcher used quantitative research
approaches were used.

Source and Types of Data

The source of data is primary and secondary data. Primary sources of data included, questionnaire
and interview. Structured questionnaire would be used to gather data from respondents of the study.
Active users of e-banking customers of Azizi Commercial bank of Afghanistan Herat city branch
were used for the study. The questionnaires were distributed for respondent at working hour and
distributed after researcher sight permit from branch manager and gave brief explanation for
customers how to filled questionnaire. The questionnaire would be designed based on previous
empirical literature and its consistency is pre-tested using Cranach Alpha. And structured interview
also asked the branch manager of Azizi commercial bank of Afghanistan-Herat city.

24
And secondary data would be using for supporting the studies and to get the findings of others
research in the area (empirical study) the source of secondary data would be library books and annual
report of Azizi commercial bank of Afghanistan).

Target Population

The target population of this study was active user of e-banking customers of Azizi commercial bank
of Afghanistan who have been using the service from introduction to December 31, 2022 years.
According to annual report of Azizi Commercial Bank of Afghanistan of Herat city office the total
population was 14,291 as of December 31, 2022 in the main branch which found in Herat city.

Sample Techniques and sample size

Probability sampling techniques used to select a reasonable number of subject, objects or cases that
represent population and where every subjects equal chance of being selected. It provides an efficient
system of capturing in small groups, the variation or heterogeneity that exists in target population.
The study adapted probability techniques. Therefore, simple random method was used to consciously
select customers who meet the criteria of having used e-banking and interview branch managers for
cross check. According to annual report of Azizi Commercial Bank of Afghanistan of Herat city
office the total population was 14,291 as of December 31, 2022 in the main branch which found in
Herat city. To calculate sample size, simplified formula provided by Taro Yamane (1967) is used

Where, n = number of sample size,

N = Total number of study population,
e = level of confidence to have in the data or degree of freedom which is 95% for this study.

Branch Total Active No. Distributed Returned

of E-Banking questionnaires questionnaires
Users

Herat main 14,291 387 368

Total 14,291 387 368

Source: Annual Reports December 31, 2022 of Herat main Branch

The above table indicates that 368 out of the 387 questionnaires were successfully completed and
returned. This means that 95.09% of the respondents successfully completed and returned the

25
questionnaire. This percentage was deemed adequate for the analysis to continue. The total Sample
size of determined would be distributed to branches according to total population of active e-
banking users.

3.5. Data collection tools

A self-administered, structured questionnaire (Appendix A) was used to gather data from
respondents to the study (Cooper and Schindler 2006; Malhotra and Birks, 2007). The researcher
first sought permission from the Branch Manager of Azizi bank Herat main branch used for the
study. The permission was to allow their premises to be used for this study. Each respondent to the
study was made to fill a questionnaire after a brief introduction and objective of the study has been
explained. The components of e-banking and outcomes of customer satisfaction items are would be
measure on 5-point Likert- scale ranging from 1 (strongly disagree) to 5 (strongly agree).

3.6. Data analyses Techniques

The data gathered from the field through the questionnaires is record and coded into Statistical
Package for Social Science (SPSS) software version 21. In analyzing the data gather from the field
(questionnaire), frequencies, means, and reliability, Linearity test, Chi-square test are primarily
calculate using SPSS, and content reliability of the questionnaire are establishing by reviewing
existing literature. The data analyses using statistical techniques, these techniques are multiple
regression analysis such as Multicolinearity, linearity, Normality and analysis of variance.

3.7. Research Model

The aim of this study is to identify the impact of seven e-banking quality dimensions on customer
satisfaction in the Azizi Commercial Bank of Afghanistan. The researcher employed the Multi linear
regression model to study the relationship between e-banking services and customer satisfaction.
The research deemed regression method to be useful for ability to test the nature of the influence
of the independent variables on dependent variables, which best predicted the value of dependent
variables.
Customer satisfaction in e-banking = f (electronic banking service quality)
Basically, CSEB = α+ β1X1+ β2X2+ β3X3+ β4X4+ β5X5+ β6X6+ β7X7 + ε
Where, CSEB = Customer Satisfaction in E-Banking, α= constant alpha
X1= Reliability, X2= transaction efficiency, X3= Customer support, X4= service security
X5 = Ease of Use, X6= performance and X7= service content.
Here α is constant and βi is coefficient of estimate and ε is the error term. Customer satisfaction in
e-banking is dependent variable and X1 to X7 are independent variables.

3.8 Cronbach’s Alpha Test of Reliability

To ensure that there is internal reliability of the data used, the Cronbach’s Alpha Test of Reliability
was performed. The various dimensions of services quality used for this study were tested. The
results of the test show that each dimension was internally consistent.

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Table 3.2. Cranach’s Alpha Test of Reliability for each variable

Variables Cronbach Alpha score No. items

Reliability 0.76 3

Transaction efficiency 0.64 2

Customer support 0.74 5

Service security 0.71 6

Ease of use 0.77 5

Performance 0.73 2
Service content 0.79 3

Source: SPSS survey/2023

One of the most commonly used indicators of internal consistency is Cronbach Alpha coefficient.
Ideally, Cronbach’s Alpha coefficient scale should be above 0.7 (De Vellis 2003). The Cronbach Alpha
score ranges from 0 to 1 (Nunnally and Bernstein, 1994). In the current study the Cronbach alpha
coefficient of all constructs are greater than 0.7 except Transaction efficiency 0.64 which exceed the
0.60 minimum threshold and acceptable. This shows almost all constructs of current studies have
good the internal consistency (inter-correlations) scale with the exception of few Transaction
efficiencies are acceptable for hypothesis testing.

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