CHAPTER I: INTRODUCTION

1.1 Background

The Internet is considered an effective instrument used by the banking sector in

providing e-services for banking customers. Along with the development of

Information and Technology, Internet Banking services have become ideal

alternatives among banking customers, compared to other services such as phone

banking or over-the-counter transactions at banks (Kenova and Jonasson, 2006).

Banks, with the utilization of Internet banking can maintain a tight relationship with

their clients, quickly respond to the market demand and reduce operating costs

thanks to online applications on their website (DeYoung et al., 2007). Using Internet

Banking services, banking customers can reduce the time and cost of doing

transactions, update account information more frequently and increase their privacy

(Scullion and Nicholas, 2000). The usefulness of Internet Banking has led to the high

competition among banks; and they have tried to improve the quality of Internet

Banking services to satisfy their customer needs. Internet Banking Service Quality,

thus, becomes an important part of studies on the banking sector.

Internet Banking services in Vietnam have been provided by some banks; however,

Internet Banking remains immature and has not been utilized effectively in

Vietnam. This study thus evaluates the factors affecting Internet Banking Service

Quality from bank customer perspectives in Vietnam. Therefore, this study is

conducted based on bank customer perspectives to answer the research question.

Numerous research has been done in the banking industry; however, most those

studies emphasized on traditional banking services rather than on Internet Banking

services (Yavas & Benkenstein, 2001). Moreover, among studies on Internet

Banking services, not many studies were conducted in developing countries, such as

Vietnam. As a result, this research is to examine the determinants of Internet

Banking Service Quality in Vietnam.

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1.1.1 Overview of the Banking Industry in Vietnam

Vietnam’s banking sector is ranked among countries, whose banking sector have

the highest growth rates in Asia thanks to their continuous economic expansion,

rise in household income and low penetration of banking services. Since the mid-

1980, the banking sector in this country has undergone a series of reforms, with the

aim to modernize the industry and move towards the market-oriented economy

(World Bank, 1995). These reforms prompt the country to participate in

international agreements and ongoing efforts; in which Basel capital framework

is one of the main standards adopted by Vietnamese banks. Some of the key reforms

can be cited are restructuring of the banking system, the partial privatization of state-

owned banking institutions or measures to boost the capitalization of Vietnamese

banks.

In Vietnam, there are over 80 credit institutions consisting of 5 stated-owned banks,

37 joint stock banks, 35 branch offices of foreign banks, 4 joint venture banks, 1

policy banks, 1 central credit fund and 14 non-banking credit institutions (The State

Bank of Vietnam, 2013). Figure 1-1 shows the changes in the Vietnamese banking

system in 2011 and 2012.

Table 1-1: The Vietnamese banking system in 2011 and 2012

Source: (The State Bank of Vietnam, 2013)

The growth rate of the banking system in developing countries like Vietnam is

typically measured by the GDP growth (around 15%); and this industry plays a vital

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role in the economy. It is indicated that there will be high demand for banking

services in Vietnam, with a population exceeding 80 million (Wang & Pho, 2009).

There are only 2% of the total population taking out a bank loan; only 5 million

citizens have a personal bank account; and the number of credit card holders in

Vietnam has risen to 300% since 2004 (till the end of 2013, 2 million people in

Vietnam use credit card (HS Global INC, 2013). It can be said that the Vietnamese

banking industry is still at the beginning step of development, with low GDP per

capita (more than 1,000 USD per year) and low bank assets per capita (HS Global

INC 2013). This brings many opportunities for bankers, especially in the Internet

Banking area.

1.1.2 The development of Internet Usage in Vietnam

Vietnamese banks have only applied the Internet to their banking activities for more

than 15 years since mid-1998 (Vietnam Internet Network Information Center, 2012)

and show the upward trend from year to year. Figure 1-2 shows that at the end of

2012, there was approximately 32 million Internet users (Vietnam Internet Network

Information Center, 2012) and the trend is upward.

Figure 1-1: Increase in The Number Of Internet Users in Vietnam

From 2003 – 2012

Source: (Vietnam Internet Network Information Center, 2012)

Figure 1-1 shows that the Internet is developing drastically in Vietnam, and this

development brings a lot of benefits to the spread of Internet banking services to

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more and more areas in Vietnam. It might also affect the customer’s behavior and

change their attitude towards traditional banking services.

Figure 1-2 shows that the vast majority of business in Vietnam use ADSL to connect

their Internet, and only 8% of them use other forms of Internet Connection. This

proportion implies that there is a synchronization between businesses in Vietnam in

applying Internet Connection to their operations.

Figure 1-2: Forms of Internet Connection used in Businesses in Vietnam

2012

Source: (Ministry of Industry and Trade of the Socialist Republic of Vietnam, 2013)

1.1.3 Internet Banking Services in Vietnam

The Internet was only applied in Banking services not long ago. The ”Modernizing

the banking and payment systems” project, which was funded by the World Bank,

has helped the Vietnamese banking sector reach some achievements. The whole

banking system has been put into a modernized system of extensive information and

technology. The project creates a connection to over 50 credit institutions and their

220 branches in 5 big cities (Hanoi, Haiphong, Danang, Ho Chi Minh, Can Tho)

and handles 5,625 banking transactions per day nationwide, with each value at

approximately 10,05 billion VND (International Business Publications, 2008).

4

Figure 1-3 shows that Internet banking in Vietnam is on a drastic rise. From 2010 to

2011, the number of visitors to Internet banking websites increased by 35%

(Nguyen, 2011), which is a very fast growth compared to other countries in

Southeast Asia. However, there is no standard for Internet banking in Vietnam, each

bank has its own system for banking purposes.

Figure 1-3: Online Banking On The Rise in Southeast Asia in 2011

Source: (Nguyen, 2011)

Foreign and joint-venture banks are the leading banks to operate Internet banking in

Vietnam, and their systems are computerized to attract consumers and create a

linkage between banks in the whole banking system (Wang & Pho, 2009).

In general, Internet banking Usage in Vietnam is unequal to the technological

infrastructure and the banking system in this country (Wang & Pho, 2009). When a

service or product is launched, there will be competition between banks in the

industry. Therefore, in order to attract more customers and remain in the same

position in the industry, banks have to improve the product and service quality.

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1.2 Problem Statement

With the appearance of the Internet, the Vietnamese banking industry has been

experiencing an aggressive competition. These competitions have created

motivations for banks to adopt new technologies such as mobile banking, phone

banking and especially Internet Banking (Leung, 2009). The main purpose of banks

is to increase the speed of banking transactions and satisfy the increasing demand of

bank customers. The problem is that most of the services offered by Internet Banking

have not met customer’s expectations. The reason for this mismatch is presented as

three problem statements below:

Firstly, Low Responsiveness is the most common problem of Internet banking

service quality in Vietnam. The limited quality of Information and Technology (IT)

Infrastructure on Vietnamese banking system makes it harder for banks to run their

Internet banking system smoothly. Therefore, the speed of delivery information to

Internet banking customers is only at a low level, which reduces the willingness of

Banking customers to use Internet banking services (english.vov.vn, 2012).

Secondly, Low Security is another problem of Internet banking service quality in

Vietnam. The low quality of IT system and limited ability of bank staff affect the

safety of bank accounts, for example, hackers take advantages of the confirming

process on the system to steal the information of banking customers. In fact, some

incidents related to bank hackers has affected banking customers’ reliability on

Internet banking and made them avoid to use this service (Nga, 2012).

Thirdly, Low Efficiency is a problem that many banks in Vietnam face when

providing Internet banking service to their customers. Banking websites of

Vietnamese banks are considered poor styles and not easy to use. Due to the low

knowledge of Vietnamese customers of the Internet (especially old people and

people living in rural areas), the ability to deliver accurate and specific information

on bank Websites is really low. Some bank websites are usually on the status of

maintenance, which creates an unfavorable feeling for users and affect their needs

and wants.

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Although there are some challenges, Vietnamese banks are increasing their adoption

of Internet banking services. Internet Banking has been used in Vietnamese banks for

more than 15 years (Vietnam Internet Network Information Center, 2012), however,

very little research has been conducted in this area. This research, therefore, tries to

fill this empirical gap by ientifying the determinants of Service Quality in Internet

Banking in Vietnam.

1.3 Research Scope

The research focused on customers of Internet Banking in the 5 centrally controlled

municipalities in Vietnam, namely: Hanoi, Ho Chi Minh City, Danang, Haiphong,

Cantho. These cities are managed and controlled directly by the government;

therefore, they have sufficient infrastructure to develop the Internet network widely.

According to (Internet World Stats, 2010), these 5 cities have the highest percentage

of people using the Internet and the highest Internet penetration.

Internet banking customers of 3 Banks were chosen to be the Internet Banking

providers of the research, which are Vietcombank, Asia Commercial Bank, DongA

Bank. Figure 1-4 showed that these three banks are leading online banks in Vietnam.

Figure 1-4: Top 3 Internet banking sites by unique visitors for individual

markets January 2011

Source: (Nguyen, 2011)

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1.4 Research Objectives

In order to deal with the stated problems, this study is thus undertaken with the focus

on the determinants affecting the quality of Internet banking services in Vietnam.

Vietnam is an appropriate environment for the study as it is one of the fastest

growing economies in Asia; and household incomes are getting higher as a result of

the growth in the economy (World Bank, 2006). The banking sector is one of the

most important parts of the Vietnamese economy as it facilitates Business

transactions and makes way for foreign capital flowing into the economy. The

development of the banking sector depends mainly on the application of Internet

Banking Services.

In order to improve Internet Banking service quality, this research is conducted to

achieve three main objectives below:

To identify the problems of Internet banking service quality in Vietnam.

To identify the major dimensions that affect internet banking service quality

in Vietnam.

To suggest ways to improve the quality of Internet banking Services in

Vietnam.

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1.5 Research Structure

The research will be divided in 5 sections as shown in figure 1-5:

Figure 1-5: Research Structure

Chapter one: Introduction

The first chapter gives a comprehensive look at the background of the study, in

which the environment of the study is described in details. Some basic concepts of

the research, such as Service Quality, Internet Banking and its benefits, are

introduced. On the basis of the environment, where the study is undertaken, the

problem statement and research scope are presented in this part. Finally, the

objectives of the study are identified to deal with the stated research problem.

Chapter 2: Literature Review

This chapter presents related theories and literature on Internet Banking and Service

Quality. In this part, some concepts and models related to Service Quality such as the

SERVQUAL and E-SERVQUAL model, are reviewed for the evaluation of Service

Quality. The chapter also discusses the characteristics of literature on Internet

Banking and Service Quality through the time.

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Chapter 3: Research Methodology

This chapter describes the methodology used in this study and following by the

rationale behind each choice. The main focus of the chapter is on the description of

the research population, the sample size of the research, the sampling techniques to

be applied. Besides, the chapter also describes the data collection and the analysis of

the research instruments, including validity and reliability.

Chapter 4: Research Findings and Analysis

This chapter provides the results of the research based on the data collection process.

The main findings are analyzed, interpreted and linked to the chapter two, the

literature review.

Chapter 5: Conclusions and Recommendations

In the last chapter of this research, the research questions and findings are revisited

and summarized. The recommendations for further studies will also be mentioned in

this chapter. The final part of this chapter is to give the limitations of the research

and further study in the future.

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CHAPTER II: LITERATURE REVIEW

The main objective of the literature review is to discuss the conceptual framework

and to review previous literature related to Service Quality of Internet Banking. This

chapter will be divided into 4 parts. The first part discusses the overview of Internet

Banking (definition and its benefits). The second part discusses the quality of

Internet Banking services (about its characteristics and the model to measure it, the

SERVQUAL). The third part presents the research models, relevant elements and the

research hypotheses. And the final part is a critical discussion about the specific

research on the quality of Internet Banking Services.

Chapter Structure

2.1 Overview Of Internet Banking

- Definition Of Internet Banking

- Benefits Of Internet Banking

2.2 Service Quality of Internet Banking

- Definition of Service Quality

- Service Quality Model

- E-SERVQUAL –Measuring Service Quality of Internet Banking

2.3 Research Model

- Research Questions And Hypotheses

- Security

- Reliability

- Efficiency

- Responsiveness

- Fulfillment

2.4 Critical Analysis of Previous Studies on the Quality of Internet Banking

Services

- The Previous Research on Internet Banking Service Quality from 2000 to 2009

- The Previous Research on Internet Banking Service Quality from 2010 until Now

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2.1 Overview Of Internet Banking

2.1.1 Definition Of Internet Banking

“Internet banking can be understood as the provision of information about the bank

and its products via a page on the World Wide Web” (Elizabeth, 2000). In other

words, Internet Banking is used to describe the case, where a bank customer does

his/her banking transactions on the Internet (Sayar & Wolfe, 2007). In general,

Internet Banking transactions are conducted using computers; however, other

possible devices, such as mobile phones or digital TV, can be used to conduct these

transactions as well (Sayar & Wolfe, 2007).

Internet banking can also be seen as an electronic connection between the service

provider (the bank) and its customers with the aim of preparing and managing a

large number of financial transactions (Jun & Cai, 2001). This type of service

provides banks’ customers with many applications such as checking the balances in

their accounts, withdrawing money, transferring money to other accounts or making

payments. Figure 2-1 shows that Internet banking is the most convenient method to

conduct transactions as it has the most functions and features compared to other

kinds of electronic banking.

Table 2-1: Features and Functions offered by the electronic banking

Source: (FNB Brochure, 2001)

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The first Internet Bank was established in the US named Atlanta Internet Bank in

1996 (Gefen & Straub 2000). After that, many other banks had come up with Internet

banking services and become well established such as Citibank and Wells Fargo.

Currently, Internet banking has gone through an explosive development and has

changed traditional banks dramatically (Gonzalez, Dentiste & Rhonda, 2008).

Internet banking is the latest delivery channel of banks in developed nations and is

predicted to have a strong effect on the banking industry (Jayawardhena & Foley,

2000). The implementation of Internet banking in banks and other non-financial

institutions will bring with them opportunities to lower operating costs and improve

their service quality. However, along with opportunities, new challenges will also

come up with the use of Internet banking because some competitive advantages

generated by traditional banking networks will not be useful anymore (Nehmzow,

1997).

Internet banking is foreseen to be established more and this trend might threaten

the survival of traditional banks (Pham, 2012). It is difficult to say that traditional

banks will disappear in the future, however, it can be said that traditional banks will

go to a higher level of banking services with the assistance of modernized

distribution channel technologies. Moreover, in order to keep customers using

services, traditional banks should take advantages of Internet banking systems. The

benefits of Internet banking are crucial for the development of banks and e-

banking and traditional banking can coexist thanks to Internet banking (Wah,

1999).

2.1.2 Benefits Of Internet Banking

2.1.2.1 Benefits For Banks

Internet banking brings a number of advantages to the banks themselves in terms of

cost savings, improving reputation and gaining new segments of customers

(Jayawardhena & Foley, 2000). Some survey indicated that setting up the Internet

banking system in a bank only costs 1-2 million USD, which is much cheaper than

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establishing a new brick and mortar branch, which makes up to 50-60% of the bank’s

revenue (Baraghani, 2008; Robinson, 2000).

Internet banking is found to be a good tool for building up customer loyalty. Once

consumers are familiar with a bank’s Internet banking service, they will rarely come

to other financial institutions as the switching cost is considered very expensive

(Sheshunoff, 2000). In a highly competitive banking environment, an effective

internet banking system will bring to banks many competitive advantages.

The implementation of Internet banking can also increase cross-selling and price

differentiation (Mols, 1998). Internet banking can provide services to customers 24

hours a day on all days of the year, therefore, it is an important factor to increase

customer satisfaction. Customer therefore will be less price sensitive and continue to

purchase services, resulting in higher customer loyalty and the banks will therefore

increase their reputation (Pham et al. 2012).

2.1.2.2 Benefits for Customers

Internet banking also offers many advantages to Banks’ customers. The appearance

of Internet banking has made the term Time and Geography no longer barriers to

conducting banking transactions. Banking customers all over the world can make

their own transactions 24 hours a day and 365 days a year. Some Internet banking

services are only available on the Internet; therefore, customers do not have to go to

the branch to deal with their problems. One of the biggest advantages of Internet

banking is that it has served customers with a cheap price or even for free (Sathye,

1999).

Internet banking saves time and money for banks’ customers as people tend to avoid

travel from and to a bank branch to conduct transactions. By offering services via the

Internet, banks provide their customers with convenience, accessibility and increase

customer satisfaction as well as loyalty (Karjaluoto, Mattila & Pento, 2002). Using

Internet banking, customer will have more privacy interacting with the bank and

customize their affairs when necessary (Mols, 1998).

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In general, Internet banking is beneficial for banks’ customers as it can save time

and money for customers. Besides, Internet banking also responses to customers’

complaints quickly as it conveys messages to the banks in a faster way than other

physical methods (Turban, 2000).

2.2 Service Quality of Internet Banking

2.2.1 Definition of Service Quality

The definition of Service Quality has been developed by many researchers during the

past two decades; and it is considered an important factor that firms use to gain

competitive advantages (Zeithaml et al., 1996; Ennew, Reed & Binks, 1993). The

following table (figure 2-2) presents the definition of the service quality defined by

different authors:

Table 2-2: Definition of Service Quality by Different Authors

Different researchers defined Service Quality in different ways; however, they have

similar perspectives towards Service Quality. In summary, “Service Quality is the

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difference between what customers expect in a service and what the company

actually offers them”. In other words, the term “Service Quality” refers strongly to

the comparison between how customers expect in a service and how they evaluate

the service after they experienced it.

The term Service Quality has been applied for the evaluation of the service

performance in many kinds of Organizations, including banks (Cowlling & Newman,

1995).

2.2.2 Service Quality Model

Service Quality is mainly assessed based on the original research of Parasuraman et

al. (1985) about the determinants of Service Quality. In this research, Parasuraman

listed ten service quality dimensions; and among these dimensions, reliability was

considered the most important. 5 years later, in another research about Service

Quality, Parasuraman et al (1988) cut down the number of determinants to only 5

ones; namely: responsibility, tangibles, reliability, assurance and empathy. These

five dimensions constitute a measurement device for Sevice Quality called the

SERVQUAL model.

Table 2-3: Definition of the 5 Dimensions in the SERVQUAL

Source: (Parasuraman et al., 1988)

The SERVQUAL model can be used in different ways. For example, Service and

Retailing Organizations can use the SERVQUAL to measure the expectations of

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customers and their Service Quality perceptions. The usage of the SERVQUAL

helps managers focus on the core areas to improve Service Quality (Parasuraman et

al., 1988).

2.2.2.1 Criticism of the SERVQUAL

The SERVQUAL model, however, cannot cover all the unique characteristics of

online service quality, including Internet banking services (or customer-to-Website

interactions), as it is built mainly on customer-to-employee interactions (Jun &

Cai, 2001). Although the SERVQUAL has been applied widely to deal with the main

attributes of Service Quality, it needs to be customized to suit specific service areas

(Han & Beak, 2004).

Carman (1990) blamed that the five dimensions of the SERVQUAL are inconsistent

in cross sectional analysis, more specifically, some items contained different

components when it came to different service providers. In the original model

(Parasuraman et al., 1988), Understanding & Access component were converted into

Empathy dimension; however, Carman (1990) did not find out any appropriate

combinations. In addition, the two terms Expectations and Perceptions are

considered difficult to follow; therefore, in order to improve te SERVQUAL model,

expectations and perception should be analysed individually in the future research.

Babakus (1992) is one of suppoters of Carman (1990); he criticized that the

SERVQUAL model contains dimensions that are dependent on the type of services,

and that the Expectations and Perceptions gap analysis (the different score) shows

serveral operational problems.

In terms of Dimensionality, the SERVQUAL model is considered not universal,

more specifically, several dimensions of the SERVQUAL are found to have a high

degree of intercorrelation (Gilmore, 2003)

2.2.2.2 Service Quality in Banking

The term “Service Quality” has been used to evaluate the service performance of

many types of organizations, including banks and financial institutions (Alan &

Karin, 1995). Service quality in Banking can be divided in to 18 attributes:

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Commitment, Communication, Assess, Flexibility, Competence, Aesthetics,

Comfort, Tidiness, Security, Responsiveness, Intergrity, Functionality,

Reliability, Courtesy, Friendliness, Care, Availability, Communication

(Johnston, 1995). Of these 18 attributes, Security and Reliability were found to be

the most important to customers, meanwhile Aesthetics and Comfort were not worth

much attention (Johnston, 1995).

In terms of Internet Banking, Internet was found to have an influence on the delivery

of Banking services (Joseph et al., 1999). 6 dimensions of Internet Banking Service

Quality was identified, including: Feedback And Complaint Management,

Efficiency, Assessibility, Convinience And Accuracy, Queue Management and

Customizations (Joseph et al., 1999). Jun & Cai (2001) also did a research about

Internet Banking and 17 Service Quality Dimensions of Service Quality were

identified. The researchers recommended that Internet banking service providers

should focus more on some important dimensions such as access, reliability and

responsiveness to improve the service quality.

2.2.3 E-SERVQUAL –Measuring Service Quality of Internet

Banking

E-SERVQUAL was developed by Parasuraman et al. (2000) based on the traditional

scale of the SERVQUAL for the measurement of e-service quality, including Internet

Banking services. The E-SERVQUAL consists of 22 items on four dimensions:

efficiency, fulfillment, system availability, and privacy. At the same time,the three

dimesions compensation, real time access and responsiveness are found to be the

core dimensions of service recovery for online services. Moreover, empathy was

found to be less important to the online services unless there was problems with

services (Parasuraman et al., 2000). The E-SERVQUAL has been used and tested in

many research to measure online Service Quality, including Inernet banking services

(Lee & Lin, 2005; Herington & Weaven, 2007).

A number of E-Service Quality Dimensions were identified in previous studies. As

the traditional SERVQUAL model shows some limitations in measuring online

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Service Quality, E-SQ has an important role in improving the performance of online

Intitutions and companies companies (Yang, Peterson & Cai 2003). The dimensions

of e-SQ are normally developed from either the service provider’s perception or

the customer’s perception (Heim & Field, 2007)

Zeithaml et al. (2002) built up 5 sets of criteria of e-SQ based on the review of

articles on e-SQ. 5 sets of criteria are included: (a) information availability and

content, (b) ease of use or usability, (c) privacy/security, (d) graphic style, and

(e) reliability/fulfillment.

Kaynama & Black (2000) developed seven dimensions of Service Quality based on

the traditional SERVQUAL model, namely content, access, navigation, design,

response, background, and personalization.

Other researchers such as Fassnacht & Koese (2006) said that the first-order sub-

dimensions of Service Quality, including attractiveness of selection, information

quality, ease-of-use, and technical quality, in fact, reflected the delivery of Quality.

Collier & Bienstock (2006) found that e-SQ did not lead to ease-of-use or

information accuracy. By contrast, ease-of-use or information accuracy is the

evaluation for customer to judge the Service Quality.

Zeithaml (2002) with an independent research, built up a set of e-SQ dimensions,

which can be used to evaluate the delivery of e-service quality. The set is comprised

of 11 dimensions.

Internet Banking is a type of e-services, therefore, the use of e-SQ model can be

more appropriate for the evaluation of Internet Banking Service Quality.

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2.3 Research Model

2.3.1 Research Questions And Hypotheses

Service Quality has an important meaning in the banking sector in the modern world.

In order to increase the service quality of Internet Banking, it is important for banks

to do research on the determinants of service quality (Johnston, 1997). Based on the

available literature and previous studies, 5 service quality dimensions were selected

to be in the model of this study (Zethaml et al., 2002). 5 determinants used for this

study are Efficiency, Reliability, Responsiveness, Security And Fulfillment. To

identify the relationship between these dimensions and the total Service Quality, this

research was conducted to test the 5 following hypotheses:

H1: Security has a positive impact on service quality of Internet Banking.

H2: Reliability has a positive impact on service quality of Internet Banking.

H3: Efficiency has a positive impact on service quality of Internet Banking.

H4: Responsiveness has a positive impact on service quality of Internet Banking.

H5: Fulfillment has a positive impact on service quality of Internet Banking.

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The researcher used a model that shows the relationship between Security,

Reliability, Efficiency, Responsiveness, Fulfillment and Service Quality. On the

basis of the previous study of Zeithaml, Parasuraman & Malhotra (2002), the

SERVQUAL model (Parasuraman et al., 1988); and the model modified by Saha &

Zhao (2005), the research would like to use as the framework for for evaluating the

effect of variable factors on Quality of Internet Banking Services. The model

suggests five dimensions of Internet Banking service quality, including Reliability,

Efficiency, Responsiveness, Fulfillment and Security.

Figure 2-1: The extended SERVQUAL model

Source: (Zeithaml, Parasuraman & Malhotra, 2002; Saha & Zhao, 2005)

2.3.2 Security

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Security is defined as the freedom from danger , risk or doubt (Parasuraman et al.,

1985), and it is related to physical safety, confidentiality and financial security. Jun

& Cai (2001) defined security as online transaction safety and customer privacy. In

terms of Internet Banking, Security is known as the personal and possession safety of

the Internet banking customers (Johnston, 1997). In other words, Security in Internet

Banking refers to low risks associated with Internet banking transactions, in which

banking customers’ personal information is free from sharing (Yang et al., 2004).

Security also refers to banking staff, who create the sense of safety for their

customers in doing trnsations, and they have good knowledge about Internet banking

to respond to their customers as soos as possible (Parasuraman et al., 1985).

Security reflects the guarantee that cstomers’ banking activities and their account

information are not shared (Yang & Fang, 2004; Saha & Zhao, 2005), and with this

characteristic, Security is an important determinant that affects consumers’ usage of

Internet Banking (Sathye, 1999; Hamlet & Strube, 2000; Tan & Teo, 2000)

Concerns about Security can slow down the development of Internet Banking as

banking customers are unwilling to do that (Madu & Madu, 2002). O’Connel (1996)

showed that Security concerns caused banking customers to use Internet Banking

less in Australia, meanwhile, risks caused by financial, physical and social

characteristics were found to be the major cause of the decrease in internet banking

usage (Polatoglu & Ekin, 2001). Roboff & Charles (1998) indicated that though

banking customers know about risks related to Internet Banking security; however,

they do not have clear knowledge of these problems. Security issues are considered

the major factor preventing banking customers from conducting their financial

transactions through the Internet (Trout, 1999).

One of the most common problems related to Security in Internet Banking is that

banking customers feel worried about the misuse of their personal information, and

many of them complained about the unsafety of Internet banking services (Jun &

Cai, 2001). However, a previous study showed that Banking customers believe that

their privacy in Banking Transactions is guaranteed by the bank, and they show

22

confidence about their bank, although they do not show much confidence in

Technology (Howcroft et al., 2002).

Security has been mentioned in many studies as a determinant of Service Quality in

Internet Banking (Sathye, 1999; Hamlet & Strube, 2000; Tan & Teo, 2000; Polatoglu

& Ekin, 2001; Black et al., 2002; Giglio, 2002; Howcroft et al., 2002). In a study about

measuring service quality of online banking in China, Zhang (2013) found that

Security is the most important service quality attributes. Zhang (2013) also

suggested that in order to enhance the quality of Internet banking services, banks

should focus on improving the Security of Internet Banking transactions. Hassan et

al., 2012) showed that among 13 dimensions of the Quality of Internet Banking

Services, Security of Internet banking Services shows a possitive relationship with

the Service Quality of Internet Banking. The study also indicated that security in

Internet Banking is based on branchless locations, privacy, timely performance and

individual transactions. It is said that Security is the key determinant of Service

Quality in Internet Banking. Figure 2-3 shows that of 9 research from 2001 to 2013,

Security was mentioned in 6 research as the core determinant of the Quality of

Internet Banking Services.

Figure 2-4: Core Dimensions of the Quality of Internet Banking Services

in Previous Studies

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Since Security has been the most frequently mentioned by a number of authors

(Parasuraman et al., 1985; O’Connel, 1996; Johnston, 1997; Roboff & Charles, 1998;

Trout, 1999; Sathye, 1999; Hamlet & Strube, 2000; Tan & Teo, 2000; Polatoglu &

Ekin, 2001; Jun & Cai, 2001; Polatoglu & Ekin, 2001; Howcroft et al., 2002; Black

et al., 2002; Giglio, 2002; Madu & Madu, 2002; Yang & Fang, 2004; Saha & Zhao,

2005; Hassan et al., 2012; Wu, Tao & Yang, 2012; Zhang ,2013;), the first research

question of this study is:

2.3.3 Reliability

Reliability is defined as “the correct technical functioning of a self-services

technology and the accuracy of service delivery” (Weijters et al., 2006, p. 9), in other

words, Reliability is the Dependability and Uniformity in Performance. Saha &

Zhao (2005) defined Reliability in Banking Services as the guarantee of the

commitments in several areas such as delivering service in time, billing accuracy of

keeping record correctly.

Reliability has been mentioned in many studies about Servce Quality, for instance,

Reliability was found to be an important determinant of Sevice Quality in the

researcher of Parasuraman et al. (1988). In some other research, Reliability was

found to be the most crucial determinant of service quality (Van Gorder, 1990; Yang

& Jun, 2008). Dabholkar (1996) found that Reliability is an appropriate measure for

services, which are involved with technology.

Many research emphasized that Reliability has significant impacts on the Quality of

Banking services (Bagozzi, 1990; Davis et al., 1992; Parasuraman et al., 1988;

Zeithaml & Bitner, 2000). Along with Security, Reliability has been the topic of

discussions in many studies; and it was mentioned as the core category of Internet

Banking Service Quality (Khan & Mahapatra, 2009; Jun & Cai, 2001; Wu, Tao &

Yang, 2012)

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Since Reliability has been frequently mentioned by a number of authors

(Parasuraman et al., 1988; Bagozzi, 1990; Davis et al., 1992; Zeithaml & Bitner,

2000; Jun & Cai, 2001; Saha & Zhao, 2005; Weijters et al., 2006; Khan &

Mahapatra, 2009; Wu, Tao & Yang, 2012), the second research question of this study

is:

2.3.4 Efficiency

Efficiency is defined as “the ability of the users to access the Web site, search for

their desired services/products and any information related to them, and also the

ability to sign out with little efforts”.

Efficiency has been a topic of many research about Banking Service Quality.

Zeithaml, Parasuraman & Malhotra (2002) mentioned Efficiency in a research about

Service Quality as one of the 7 Service Quality dimensions. Along with Reliability,

Fulfillment and Privacy, Efficiency was found to concern the core online service.

Similarly, Efficiency also appeared in the research of (Joseph, McClure & Joseph,

1999) as a dimension of online Service Quality.

In the research of Parasuraman, Malhotra & Zeithaml (2005), Efficiency and

Fulfillment were found to be the most important factor of the service quality of a

Website. This result is consistent with the study of Siu & Mou (2005)as it found out

that Efficiency showed the most significant correlation to overall Service Quality of

Internet banking. Also, Molapo (2008) explored that Efficiency has influence on the

service quality of Internet Banking.

Santos (2003)mentioned Efficiency as a part of the active group, which have an

influence on the customer retention.

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Since Efficiency has been frequently mentioned by a number of authors (Joseph,

McClure & Joseph, 1999; Zeithaml, Parasuraman & Malhotra, 2002; Santos; 2003,

Molapo, 2008), the third research question of this study is:

2.3.5 Responsiveness

Responsiveness refers to “flexibility, prompt delivery, consistency and accuracy of

service delivered”. In other words, Responsivess relates to the speed of a service,

which is offered or delivered by the provider (Bateson, 1985; Silpakit and Fisk,

1985). In terms of Internet Banking, Responsiveness reflect the ability of Banks to

provide suitable information to their customers when a problem occurs, have

solutions for dealing with it and offer Internet service guarantees (Zeithaml et al.,

2002). Molapo (2008) also mentioned Responsiveness in the research about Internet

Banking Services. The findings said that among 5 dimensions of Service Quality.

Responsiveness is the only one that received a neutral opinion from the

respondents.

Respondents were mentioned in Swaid & Wigand (2009) as the only one factor that

significantly affects customers’ complaining behavior. This improves that Internet

banking Customers evaluate the Service Quality of Internet Banking based on the

Responsiveness level of the bank. If the bank does not show a high Responsiveness

level, customers will complain about the bank’s Service Quality.

Since Responsiveness has been frequently mentioned by a number of authors

(Bateson, 1985; Silpakit & Fisk, 1985; Zeithaml et al., 2002; Swaid & Wigand,

2009; Molapo, 2008) the fourth research question of this study is:

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2.3.6 Fulfillment

Fulfillment is defined as “the accuracy of service promises, having products in stock

and the delivery of the product at the promised time” (Zeithaml et al., 2002).

Fulfillment is a new dimension of Service Quality that only have been added to some

recent research for the measurement of Internet banking services (Zeithaml et al.,

2002 ; Saha & Zhao, 2005; Yang & Fang, 2004; S. Fatemeh, Ahmad & Ezzatollah,

2013). Fulfillment was found to have a positive relationship with the Service

Quality of Internet banking (S. Fatemeh et al., 2013). However, Fulfillment had the

weakest relationship with Service quality as it showed the smallest coefficient

correlation value with the Service Quality of Internet Banking (S. Fatemeh et al.,

2013).

Fulfillment was mentioned in Akinci et al. (2010) as the factor that

reflects the infrastructure of a website; and it also helps the firm to

enhance the Service quality through allocating its resources.

Since Fulfillment has been frequently mentioned by a number of authors (Zeithaml et

al., 2002; Akinci et al., 2010; S. Fatemeh et al., 2013; Saha & Zhao, 2005; Yang &

Fang, 2004) the fifth research question of this study is:

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A summary of 5 dimensions is presented in figure 2-3 followed by supporting

literatures

Table 2-5: Internet Banking Service Quality Criteria

Dimensions Supporting literaturesSecurity Parasuraman et al., 1985

O’Connel, 1996 Johnston, 1997 Roboff & Charles, 1998 Trout, 1999 Sathye, 1999 Hamlet & Strube, 2000 Tan & Teo, 2000 Polatoglu & Ekin, 2001 Jun & Cai, 2001 Polatoglu & Ekin, 2001 Howcroft et al., 2002 Black et al., 2002 Giglio, 2002 Madu & Madu, 2002 Yang & Fang, 2004 Saha & Zhao, 2005 Hassan et al., 2012 Wu, Tao & Yang, 2012 Zhang ,2013

Reliability Parasuraman et al., 1988 Bagozzi, 1990 Davis et al., 1992 Zeithaml & Bitner, 2000 Jun & Cai, 2001 Saha & Zhao, 2005 Weijters et al., 2006 Khan & Mahapatra, 2009 Wu, Tao & Yang, 2012

Efficiency Joseph, McClure & Joseph, 1999 Zeithaml et al., 2002 Santos, 2003 Molapo, 2008

Responsiveness Bateson, 1985 Silpakit & Fisk, 1985 Zeithaml et al., 2002

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Swaid & Wigand, 2009 Molapo, 2008

Fulfillment Saha & Zhao, 2005 Zeithaml et al., 2002 S. Fatemeh et al., 2013 Akinci et al., 2010 Yang & Fang, 2004

Table 2-5 shows that Security is an important determinant of Internet banking

Services as many researchers have been mentioned it in their study. Security has

been a topic of Internet Banking Services since 1985, and it plays an important role

in both traditional and Internet banking services. The 4 remaining factors show less

frequency than that of Security and appeared later in the studies about Internet

Banking services.

However, this results might not say anything about which factor is the most

important to the Quality of Internet Banking services.

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2.4 Critical Analysis of Previous Studies on the Quality of Internet

Banking Services

The role of the Internet is getting more important to the delivery of banking

services in modern life; and this issue has resulted in the increasing interest of

researchers in Service Quality of Internet Banking (Jayawardhena, 2004). Internet

banking services only became a topic of studies since the first years of the 21st

century, when the Internet started to be applied in banks for the delivery of banking

services to customers. Some particular Service quality dimensions of Internet

Banking were considered in different studies. However, most of these studies were

conducted in the international context, while there is no one based on the

Vietnamese banking sector. As the findings from these studies might not be easily

applied to Vietnamese banks, it is important to identify the determinants of the

Service Quality of Internet Banking through the experience of Vietnamese bank

customers.

This part will give a glance at previous studies in the Quality of Internet Banking

Services and critically analyze the strengths as well as weaknesses of them. The

findings from previous studies will be good references for the researcher in choosing

an appropriate research model and avoiding weaknesses. The study will focus on the

two main periods: from 2000 to 2009 and from 2010 till the present.

2.4.1 The Previous Research on Internet Banking Service

Quality from 2000 to 2009

Overall, many studies from 2000 to 2009, which measured customers' perceptions of

Internet Banking Service Quality, (Jun & Cai, 2001; Broderick et al., 2002;

Jayawardhena, 2004; Siu and Mou, 2005; Bauer et al., 2005; Sohail & Shaikh, 200;

Khan & Mahapatra, 2009) have been undertaken to identify factors affecting service

quality of Internet Banking all over the world. Most of these studies based on the

SERVQUAL or SERVPERP model; however, these instruments are only suitable for

the measurement of service quality in the off-line environment. In the context of

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Internet Banking, the SERVQUAL model might not show much value, because

Internet services contain some specific activities that offline services do not have.

2.4.1.1 The United Kingdom

Broderick & Vachirapornpuk (2002) came up with a qualitative research about

Service quality in Internet Banking in the UK, and in this research the role of

banking customers was considered very important. The research was conducted

through the observation of the usage pattern of Internet banking customers of some

Bristish banks. In addition, to identify the elements of the research model, the

researchers conducted a narrative analysis of a UK Internet banking Web site

community to see how customers of Internet banks perceive Service quality. Finally,

5 important dimensions were found out, namely Reliability, Efficiency,

Responsiveness, Assurance, Ease of Use and Information. However, this research

was not able to produce a logical and a testable measurement of Service Quality

in Internet Banking.

Jayawardhena (2004), conducted a study on the service quality in Internet banking

using a version of the SERVQUAL model, which had been developed by the earlier

research (Churchill, 1979; Parasuramanet al., 1988a). The research data was

collected from 1000 Internet bank customers in the UK, and it resulted in 21 items,

however, they were later reduced to 5 main quality dimensions, namely: Access,

Website Interface, Trust, Attention & Credibility. The advantage of this research

is that it collected data directly from Internet Banking customers and the sample

size is relatively large. However, the model that was used in the research is still based

on the traditional SERVQUAL model. As has been mentioned earlier, this model

cannot cover all the unique characteristics of online service quality, including

Internet banking services (or customer-to-Website interactions). Therefore, the study

of Jayawardhena (2004) might not be applicable in the new environment of

banking services.

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2.4.1.2 The United States

Jun & Cai (2001) were among the first researchers carrying out studies on the

determinants of the Service Quality of Internet Banking. Although being the initiator

in this area, the research has become a background of many other research on

Internet Banking. The critical incidents method was used in this research to divide 17

dimensions of Internet Banking Service Quality into 3 main quality categories,

including the customer service quality, online systems quality and banking service

product quality. The research showed that in reference to 17 dimensions, Internet-

only banks and traditional banks perform similarly in offering Internet Banking

services. The dimensions that were mentioned the most frequently were Reliability,

Responsiveness, Access, and Accuracy. Based on the results, the research also

suggested banks to enhance the quality Internet banking services in order to increase

customer satisfaction.

However, the research did not apply formal procedures, which had been developed

in detail by Parasuraman, Zeithaml & Malhotra (2005), to build up sustainable

service quality measurement scales for Internet banking services. Additionally, its

data collection method, in which customers' comments were collected from a

bulletin board system. This method might not lead to reliable results because the

respondents might not be Internet-banking customers, or they might answer more

than one questionnaire form with different answers. In order to avoid this problem,

the Data should have been collected directly from Internet-banking Customers

through interviews or questionnaire forms ii paper. Finally, in terms of dimensions,

the research might not be able to cover all aspects of service quality since it did not

cover some important dimensions such as customer compliments and complaints.

2.4.1.3 Germany

With the initial dimensions based on the SERVPERF model developed by (Cronin

& Taylor, 1992), Bauer et al. (2005) found out that all three service categories in

their research model are the main determinants of consumer's quality perception in

the Internet banking providers. This result shows the similar points with the previous

study of Cronin et al., (1992).

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2.4.1.4 Asia

Sohail & Shaikh (2007) analyzed service quality in internet banking in Saudi

Arabia using empirical research. 27 items used in the survey were categorized into 3

dimensions that affect customers’ evaluation of service quality in internet banking,

namely: efficiency & security, fulfillment and responsiveness. “Efficiency &

security” is found to be the most influencing dimension for the measurement of

quality in Internet banking services.

Khan & Mahapatra (2009), carried out a research on service quality dimensions in

internet banking in India from the customer’s perspective, and this is the first

research conducted in the context of India. 26 items in the research were categorized

into 7 dimensions of service quality: Reliability, Accessibility, User Friendliness,

Privacy/Security, Efficiency, Responsiveness & Fulfillment. All these 7

dimensions were found to have impacts on the Overall Internet Banking Service

Quality. However, User Friendliness and Fulfillment were considered not statistically

significant. The 7-factor model was not confirmed by a confirmatory factor

analysis. Furthermore, the selection of all scale items in the research did not follow

prescribed procedures of qualitative research; therefore, the value of this research

is relatively weak in terms of the scientific procedures used in scale development.

The providers (bankers) should be included to gain a deeper understanding of the

Internet banking services they provide. It is important to know Bankers’ opinions

about their service because it reflects how their services are provided.

With the adoption of the e-SERVQUAL model to Internet Banking services in Hong

Kong, Siu & Mou (2005) concluded that Efficiency showed the most significant

correlation to overall Service Quality of Internet banking. This result is consistent

with that of the previous study (Zeithaml et al., 2001). However, Security was not

found to be a good indicator for the quality of Internet Banking Services.

Generally, this study only tested in Hong Kong and the sample size is vey small (195

respondents); therefore, the result might not fully reflect the usage pattern of

Internet banking customers in Hong Kong.

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2.4.2 The Previous Research on Internet Banking Service

Quality from 2010 until Now

2.4.2.1 China

Zhang (2013) conducted a research to measure service quality of online banking in

China. The study finally found out 3 dimensions of Internet Banking in China,

namely: customer service, privacy & preferential and reliable treatment.

Through the findings of the research, the researcher suggested that Banks should pay

more attention to the Quality of Internet banking services through the

improvement of customer service, privacy & preferential and reliable treatment. The

research found that Internet Banking Customers considered Security as the most

important attribute of Internet Banking Services.

Although giving the same results of many previous studies, the research still showed

some limitations. Firstly, the sample size of the result is too small (180), compared

to the large population of the whole China. Therefore, the result should not represent

the general population of China. Secondly, the research only targeted to respondents

from 19 to 39, who are the most frequent customers of banks. However, the

population structure may change in the future, it is said that the result might only

valid in a short time, and in the future, it should be rejected by many changes.

Another limitation of Zhang (2013) is that the factor analysis in this study did not

show any comparison part of the scale, which is actually measuring.

Finally, the model used in the research was only based on E-SERVQUAL, therefore,

it lacks of comprehensive academic e-service quality scales for the measurement

of online Banking.

Despite of some limitations, the research of Zhang (2013) should be considered a

good reference for studies in the context of Vietnam, because China shows many

similar points to Vietnam in terms of Banking systems.

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2.4.2.2 Taiwan

Ho & Lin (2010) conducted a research to evaluate the Quality of Internet Banking

Services. The targeted respondents of this research are Taiwanese Internet banking

customers; and an online Survey was conducted to collect the data from the

customers through Online Questionnaire. The researchers selected 500 Internet

banking customers randomly to build up the research sample, however, only 135

customers became the respondents and 130 of them gave valid questionnaire

forms, which accounted for 26% of the total population. 5 service quality

dimensions were identified in the research based on the measurement scale of 17

items. 5 identified Service Quality Dimensions are Customer Service, Web Design,

Assurance, Preferential Treatment, and Information Provision. In general, the

research model was based on the traditional service quality model.

However, the research was only conducted in a small scale with a sample size of 130

respondents in Hongkong, and all of the questionnaire forms were distributed

through the Internet, therefore, the results might be biased and difficult to be

applied in other countries. In addition, Taiwan is a developing area, which shows

different characteristics to Vietnam, thus, this research does not show much

applicability to the research about Banking services in Vietnam.

2.4.2.3 India

Vinayek, Jindal & Preeti (2011) conducted a research about the service quality of

internet banking in India. The research also made use of the E-SERVQUAL model

of Parasuraman et al. (2005). 4 Dimensions of Service Quality in Internet Banking

were identified in the research are Customer Care Quality, Service performance,

Information Quality and Efficiency. The results showed that Customer Care

Quality is the most important factor of Service Quality in Internet Banking, it means

that Internet Banking customers give foremost importance to customer care quality.

The advantage of this research is that it adopted the new model of Parasuraman et al.

(2005) and modified it to suit the Indian context. This point is significantly different

from a large number of previous studies on Internet Banking Services, which only

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used the traditional SERVQUAL model. The three factors Customer Care Quality,

Service performance and Information Quality rarely appeared in previous studies.

Despites of good points, Vinayek, Jindal & Preeti (2011) still has some limitations.

Firstly, it collected data directly from the respondents, therefore, the accuracy of the

data is dependent on the authenticity of respondents’ answers. Secondly, the

research did not mention corporate customers, whose voice is really important to

the evaluation of Internet banking Service Quality.

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