CHAPTER TWO
LITERATURE REVIEW
2.1 concepts, options and ideals from different authors of E banking.
There is pressure to create and use alternate delivery channels as a result of the financial services
market's growing level of competition. Online banking is the most recent delivery channel to be
developed. Electronic banking is another name for online banking, and e-banking is another term
for electronic banking. Financial inclusion is promoted by the ease with which anyone can access
banking activities through online or electronic banking systems. Electronic money transfers,
account history retrieval, and account balance retrieval are a few examples of these banking
operations.
Over time, electronic banking, or "E-banking," has evolved into a necessary component of
contemporary banking services. One of the sectors of the global economy that has embraced
technology to provide customers with higher-quality services is banking. Technological
advancements are employed to improve the quality of services. Technological advancements
have kept banks' transaction speeds and service delivery times fast, which has improved client
convenience and satisfaction. (Ololade & Ogbeide, 2017).
Improving operational effectiveness and efficiency to handle transactions more quickly and
conveniently is one of the main benefits of e-banking products and services. As a result,
improvements in customer service, efficient distribution, enhanced operations, quicker
information availability, and enhanced internal processes are anticipated.
This suggests that the benefits to customers extend beyond handling currency to fewer trips to
the banking rooms. Even though e-banking appears to be important, closer inspection reveals
that some banking halls still have long lines and customers still handle excessive amounts of
cash.
Additionally, there is a problem with frequent network outages and insufficient knowledge of the
available e-banking products and services, despite empirical evidence showing that a product's
level of understanding and its corresponding benefits impact consumers' perceptions of it and
level of loyalty (Balanchandler, 2011).
2.1.1 efficiency and customer satisfaction
The primary driver of e-banking usage may be the degree of trust that an organization maintains.
It is asserted that strict security measures and trust are essential for effective electronic banking.
Consequently, using electronic financial services could be motivated by this—a trust in the
organization. Organizational culture and leadership both have an impact on an organization's
effectiveness.
Customers' capacity to locate the most sought-after products is a measure of its effectiveness. To
achieve the highest degree of success, an organizational structure must make use of the adaptable
and elastic subsystems of technology, environment, and culture. The degree to which a decision-
making unit can raise outputs without raising inputs or decrease inputs without lowering outputs
is known as efficiency. The literature on banking efficiency can be broadly divided into two
categories: studies that look at scope efficiency alone and scale. (SALIHU, 2017).
E-banking has become a vital tool for customers as well as companies in the current digital era.
While accessibility and convenience are unquestionable advantages, the real success of
electronic banking rests in its capacity to provide top-notch service.
Efficiency is a crucial aspect in determining customer satisfaction and trust in e-banking
platforms, among other dimensions of service quality. In the context of electronic banking,
efficiency is the seamless, timely, and easy way in which services and transactions are carried
out. This includes a number of things, such as A responsive mechanism that connects to for a
seamless user experience, quick loading times, no downtime, and rapid transaction processing
are essential.
User-friendly interfaces that are intuitive—that exists, have straightforward menus, clear
instructions, and few steps—make it simple for users to conduct business effectively. The final
one is Quick Transactions: Quick transactions are handled quickly by efficient e-banking
systems, which helps consumers save time and feel less frustrated. This covers quick transfers,
paying bills, updating accounts, and making inquiries.
Effective e-banking services have a direct impact on customer satisfaction in a number of ways,
including better user experience, more productivity, increased confidence and trust, and a
decrease in customer churn—the likelihood that happy customers would move to rival e-banking
services. (Abdifatah Ibrahin Yousuf, 2021)
2.1.2 Reliability and customer satisfaction
Consistently meeting required standards, effectively resolving customer service issues,
performing tasks accurately from the outset, adhering to schedules, and maintaining error-free
records all exemplify reliability within the context of e-banking services (Iberahim et al., 2016).
Understanding the comprehensive impact of service quality on customers within the realm of e-
banking necessitates an examination of the relationship between reliability and customer
satisfaction.
Given that reliability encompasses the dependable and consistent performance of the e-banking
platform, it holds significant importance. Ultimately, user satisfaction with e-banking services is
influenced by the confidence and positive perceptions fostered by robust data security, prompt
processing, transaction accuracy, and uninterrupted system availability (Rehman & Elahi, 2021).
2.1.3 privacy & security and customer satisfaction
Making sure that every E-banking application has all the features that customers can easily
evaluate is what is known as giving excellent customer satisfaction. The tranquil mental state
that online consumers can get through the use of any E-banking application E-banking
applications' layout and content can also influence whether or not users are satisfied digitally.
Additionally, banks are able to provide a wide range of possible advantages of electronic
banking, including round-the-clock service availability, sufficient privacy safeguards, easy
accessibility, and lower operating expenses for branches. Subsequent studies have demonstrated
the benefits of offering e-consumer’s sufficient privacy safeguards in order to increase their
degree of long-term happiness and loyalty. Consumers who indulge in may have security issues
Customers using e-banking applications may encounter security issues, such as storage
problems, unauthorized location disclosure, unauthorized collection of personal information, etc.
However, it can be said that if financial institutions assume to address customers' privacy and
security concerns in e-banking applications, customer satisfaction levels will eventually rise.
Therefore, providing customers with appropriate privacy safeguards can also increase their level
of satisfaction. (Rehman & Elahi 2021).
2.1.4 Responsiveness and customer satisfaction
The capacity to react quickly and effectively to the needs of the customer is known as
responsiveness. According to Mariappan (2006), the information technology revolution has
drastically changed the corporate environment, with the banking and financial institutions being
the industry most affected by technological advancements.
An efficient response to client questions, concerns, or technical issues is a sign of a responsive E-
banking platform, which improves the entire customer experience. empirical research by Shariq
and Tondon (2012) highlights the significance of responsiveness in electronic banking by
demonstrating a positive association between prompt customer care and increased customer
satisfaction. According to the survey, users who had their problems resolved quickly and
effectively were more likely to stick with the E banking platform, which raised their level of
satisfaction. (Iberahim et al., 2016)
2.2 Customer satisfaction
Customer satisfaction is a vague and unclear term. The way that the feeling of satisfaction
actually manifests itself will differ from person to person, product to product, and service to
service.
A multitude of components that come together as psychological, economic, and physical factors
determine one's level of contentment. One of the main factors influencing a customer's decision
is the quality of the service. Several scholars and professionals have noted that the use of
advanced information and communication technology can improve service quality (ICT).
(Nupur, 2010).
Various authors have defined customer satisfaction in different contexts. The following are some
definitions:
Customer satisfaction encompasses the psychological sense of contentment and well-being
derived from receiving desired and anticipated outcomes from a desirable product or service
(WTO, 1985).
It represents an evaluative attitude formed after a customer interacts with a product or completes
a purchase (Lovelock and Wirtz, 2007).
According to Oliver (1992), customer satisfaction involves the affective reaction and post-
purchase evaluation of the entire product or service encounter, reflecting the alignment of
consumer expectations and actual experiences. (Marete Muthuri et al. 2014) suggest that
satisfaction occurs when consumer needs and desires are met according to plan.
In the banking sector and academic discourse, considerable emphasis has been placed on the
significance of customer satisfaction in electronic banking. Various studies have delved into the
factors influencing customer satisfaction within the realm of electronic banking services,
shedding light on essential components and the overall customer journey The ease of use and
accessibility of digital platforms is a significant determinant of client satisfaction in electronic
banking. When online and mobile banking interfaces are user-friendly, intuitive, and provide a
seamless experience, customers tend to be delighted. In the world of digital banking, research
continually shows how important a user-friendly design is to drawing in new business and
keeping existing ones (Hamid et al., 2018).
2.3 Customer satisfaction and E-banking
research exploring the relationship between e-banking service quality and customer satisfaction
has consistently highlighted the importance of various service quality dimensions. The consensus
among recent studies is that there is a generally positive relationship between high-quality e-
banking services and customer satisfaction. This section synthesizes findings from multiple
studies conducted in the last four years, emphasizing both global and regional contexts, including
Mogadishu, Somalia. Numerous studies confirm that high-quality e-banking services lead to
increased customer satisfaction. For instance, Ali (2020) found a strong positive correlation
between the reliability of e-banking systems and customer satisfaction in Somalia. Customers
reported higher satisfaction levels when they experienced consistent and uninterrupted service,
highlighting the critical role of system reliability. Similarly, research by Hassan and Abdikarim
(2022) emphasized that the perceived security of e-banking services significantly enhances
customer satisfaction. Customers who felt their transactions were secure expressed higher
satisfaction levels, underlining the importance of robust security measures in e-banking
platforms.
Abdifatah et al. (2021) also demonstrated a positive relationship between the ease of use of e-
banking services and customer satisfaction in the Somali banking sector. User-friendly interfaces
and easy navigation were crucial factors contributing to a positive customer experience, aligning
with broader findings that simplicity and accessibility in service design are pivotal for customer
satisfaction.
In the United Kingdom, a study by Ayo, Oni, Adewoye, and Eweoya (2016) examined the
effects of e-banking service quality on customer satisfaction and loyalty. The researchers found
that service quality dimensions such as efficiency, security, and reliability were significant
predictors of customer satisfaction.
Additionally, the study highlighted that satisfied customer were more likely to exhibit loyalty,
suggesting that high-quality e-banking services can enhance both satisfaction and customer
retention. Finally, Research by Ariff, Yun, Zakuan, and Ismail (2019) in Malaysia explored the
relationship between specific e-banking service quality dimensions and customer satisfaction.
They identified key factors such as system efficiency, reliability, security, and user-friendliness
as major determinants of customer satisfaction. Their study concluded that improvements in
these areas lead to higher customer satisfaction levels, emphasizing the importance of a holistic
approach to service quality in e-banking.
2.4 Theoretical framework
SERVQUAL Model
The SERVQUAL model, developed by Parasuraman, Zeithaml, and Berry, is a widely
recognized framework for assessing service quality across various industries, including banking.
This model evaluates service quality based on five key dimensions: tangibles, reliability,
responsiveness, assurance, and empathy.
In the context of e-banking in Mogadishu, these dimensions can be interpreted as follows:
tangibles refer to the physical appearance and usability of e-banking interfaces; reliability
pertains to the consistency and dependability of e-banking services; responsiveness is concerned
with the promptness and helpfulness of customer support; assurance involves the security
measures and confidence provided by the e-banking system; and empathy reflects the degree of
personalized attention and care offered by the bank through its e-banking services. By employing
the SERVQUAL model, this study aims to comprehensively evaluate how these dimensions of e-
banking service quality impact customer satisfaction in Mogadishu.
Technology Acceptance Model (TAM)
The Technology Acceptance Model (TAM), developed by Davis, is instrumental in
understanding how users come to accept and utilize technology. TAM focuses on two primary
factors: perceived ease of use and perceived usefulness. In the context of e-banking in
Mogadishu, perceived ease of use pertains to how user-friendly and accessible the e-banking
platform is for customers, while perceived usefulness refers to the extent to which customers
believe that using e-banking services enhances their banking efficiency and convenience.
This model helps in identifying the key determinants of technology adoption, which is crucial for
assessing customer satisfaction with e-banking services. By integrating TAM into this study, we
aim to explore how the ease of use and perceived benefits of e-banking influence customer
satisfaction in Mogadishu.
DeLone and McLean Information Systems Success Model
The DeLone and McLean Information Systems Success Model provides a comprehensive
framework for evaluating the success of information systems through six dimensions: system
quality, information quality, service quality, use, user satisfaction, and net benefits. In the
context of e-banking in Mogadishu, system quality encompasses the technical performance and
reliability of the e-banking system; information quality refers to the accuracy, relevance, and
timeliness of the information provided; service quality measures the effectiveness of support
services available to users; use indicates the extent and frequency of e-banking usage; user
satisfaction assesses overall customer contentment with e-banking services; and net benefits
evaluate the overall impact of e-banking on customer satisfaction and the bank's performance. By
applying the DeLone and McLean model, this study aims to provide a holistic understanding of
the factors that contribute to the success of e-banking services and their influence on customer
satisfaction in Mogadishu.
2.4 Empirical review
In their study, Hammoud et al. (2018) aimed to determine the key factor influencing customer
satisfaction by investigating the Impact of E-Banking Service Quality on Customer Satisfaction
in the Lebanese Banking Sector. They employed a survey instrument to gather data from
customers of various banks in Lebanon.
Through statistical analysis using Amos (20) and SPSS for structural equation modeling, they
examined the collected data. The findings revealed that customer satisfaction is significantly
influenced by several factors, including responsiveness and communication, efficiency and
convenience of use, security and privacy, and reliability, with reliability being the most
impactful. E-banking stands out as one of the pivotal banking services today, capable of
enhancing client happiness and providing banks with a competitive advantage when executed
effectively. Understanding the relative importance of different dimensions of service quality can
aid the banking industry in prioritizing efforts to satisfy customers effectively.
In their study, Muthuri Marete et al. (2014) aimed to assess customer satisfaction with e-banking,
employing the disconfirmation theory of customer satisfaction to achieve their objectives.
They adopted a descriptive research design to ensure reliable and sufficient data analysis. Both
primary and secondary source data were utilized in the study. Prior to data collection, the
researchers conducted face and content validity assessments, along with reliability tests for the
questionnaires used.
The collected data underwent in-depth analysis using SPSS version 20.0, which facilitated the
examination of frequencies, means, standard deviation, multiple regression, and standard error
mean to measure the factors influencing customer satisfaction. The researcher ensured ethical
considerations when engaging with both the institution and respondents throughout the study.
The findings were presented systematically in tables and illustrated in figures, with
interpretations provided in sections dedicated to each aspect of the research.
The primary aim of the study was to assist the bank in formulating strategies to adapt to rapidly
changing technology and remain competitive in the market. The study revealed that a significant
number of customers expressed satisfaction with various dimensions of e-banking services
offered by NBK (National Bank of Kenya). Among these dimensions, assurance emerged as the
highest priority for customers engaging in online transactions via e-banking. Additionally, the
study found that collectively, the e-banking factors investigated by the researcher predicted
overall customer satisfaction with e-banking services.