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2.0 Introduction

This chapter reviews and examines the related studies on customer satisfaction towards online banking system. Firstly, this chapter is divided into two main subtopics, namely theories and concepts of customer satisfaction and variables affecting customer satisfaction towards online banking. The research gaps also have been addressed. Next, to clearly illustrate the stated hypotheses, an adopted and proposed theoretical framework is developed.

2.1 Review of the Literature

2.1.1 Theories and Concepts of Customer Satisfaction

Customer’s satisfaction or dissatisfaction refers to people’s ability of learning from their past purchasing experiences. According to Isac and Rusu (2014), these experiences not only lead to evaluation of the degree of satisfaction, it also can influence the perceptions and attitudes of customer towards a certain product or service. The following part is the critical review of several theories related to customer satisfaction which is significant for the development of this research. Dissonance Theory

Dissonance Theory mentions that a customer who seeked for a high quality product but received a low quality product would compare the performance and experience a cognitive dissonance (Cardozzo, 1965). In other words, customers may make some cognitive comparison between their expectation on the product and the

product’s actual performance. When a customer psychologically invested in a product or service and experienced lower performance than expected, he or she would minimize the discrepancy mentally (Cardozzo, 1965). The dissonance always appears if there is a discrepancy between the customer’s expectations and the product’s performance (Isac & Rusu, 2014). Consumers try to avoid dissonance by lowering their expectations or positively increase their perception on the product or service’s performance in the case of subjective disconfirmation (Anderson, 1973). Therefore, this theory suggests that customer can reduce tension or dissatisfaction arises from their experience with the service or product provided by adjusting their expectations to minimize the relative importance of their experience’s disconfirmation in order to increase satisfaction level (Olson &

Dover, 1979). By applying the concept of Cognitive dissonance theory to affirmation and disconfirmation of expectation, customers may try to increase their satisfaction level by removing the dissonance experiences after they used or consume a product or service. When expectation on a product or service performance are close to the initial expectation or norm, customer satisfaction may arise. However, when the performance is vary greatly from this norm, customer’s dissatisfaction may arise (Yuksel & Yuksel, 2008). Equity Theory

Equity theory is built based on the argument that “one’s rewards in exchange with others should be proportional to his or her investments” (Swan & Oliver, 1989).

Equity commonly defined as perceived “fairness” as this theory suggests that customer’s satisfaction arises if customer experience fair output or input ratio (Swan

& Oliver, 1989). This theory also focuses on the exchange because it proposes that

after the exchange, customer will begin evaluation on the equity of the exchange (Oliver & Desarbo, 1988). This evaluation will result in certain degree of customer’s satisfaction or dissatisfaction (Oliver & Desarbo, 1988). In other words, the equity theory conceptualized that the outcomes to inputs ratios in a trade should be constant among the participants in order for the exchange parties to be satisfied (Oliver & Desarbo, 1988). Equity model of customer satisfaction is different from others as it evaluates satisfaction relative to other parties in an exchange and taken into consideration the outcome of all parties sharing the same experience (Yuksel

& Yuksel, 2008). By applying this concept to the research of customer satisfaction, customers are satisfied if they believed that their ratio of outcomes to inputs is proportionate to that of the other exchange person. Equity theory is important in the study of satisfaction although it did not generate the same level of interest in the research of customer satisfaction (Oliver, 1993).

Based on the above discussion, Equity Theory is adopted to explain the variables which are security & privacy, customer loyalty, service quality and convenience.

Firstly, security & privacy. Au, Ngai, and Cheng (2008) constructed an effort / benefit ratio which is originated from the input / outcome ratio of equity theory.

This ratio focuses at exploring psychological processes that produce different types of satisfaction and dissatisfaction (Au et al., 2008). Besides, it was found that users will not recognize information security practices as restrictions when using information system (Albrechtsen, 2007). Albrechtsen (2007) also mentioned that the awareness of the importance of information security is growing among the users from time to time. It is suggested by Aytes and Connolly (2004) that when it concerns information security, the way the user perceives the benefits of safe

behavior and the consequences of not engaging it affects the user's behavior.

Montesdioca and Macada (2015) also believed that the benefit of information security is known by the users although some of them do not adopt security practices. Internet users tend to go for high security authentication than low security authentication as users will compare the qualities and benefit obtained from the purchases or services (Lee, Rao, Nass, Forssell, & John, 2012).

Secondly, customer loyalty can be examined by using equity theory. According to Messick and Cook (1983), equity theory stated that the creating relationships with customers able to enhance customer loyalty. Through this theory, retaining customer loyalty can create a result on long-term financial performance. The customer should feel satisfy and favorable to the service and quality offered in order to build customer loyalty, however, the relationship will dissolve if mutual benefits between the customer and bank are not met. According to Cahill (2007), equity theory also useful in conceptualizing fairness which is consider as a determinant of customer loyalty. Furthermore, equity theory can be used for better understanding on how to create customer loyalty by building relationship. However, there are marketing literature that has overlooked the role of equity in developing customer loyalty.

Apart from studying customer expectations, equity theory also proposed that there are other bases of comparison in determining customer satisfaction (Hussein, 2016).

In service context, the output or input ratio may compared to the benefit gain by others who experience the same service (Meyer & Westerbarkey, 1996). This theory compared the qualities and benefit obtained from the purchases or services. Fisk

and Coney (1982) also stated that customer is less satisfied if they realized that other consumers get a more favourable price or service. Customers may incur certain price or costs in exchange for a service with certain level of quality. Customer feel satisfied if they knew that the performance or quality of the service is worth the price that he or she paid (Hussein, 2016). In this situation, the customers feel that they are equitably treated as the price paid for the service is proportionate to the service quality. According to Hussein (2016), the consumer may further compare the input-output ratio of the service offered by one company to the input-output ratio of another company. The company also should take a look at other firms’

input-output ratio because it is only reasonable for a company with superior quality service to charge higher. This concept indicates that bank should provide online banking service with superior and better quality than other banks in order to remain competitive and enhance customer satisfaction.

According to Olsen and Johnson (2003), equity theory has been widely used in services marketing literature to investigate the service fairness which is related to convenience. Since the service fairness is important to mediate the relationship between service convenience and customer satisfaction, thus it can be said that service convenience has a significant positive relationship with service fairness (Roy, Lassar, & Shekhar, 2016). Anderson and Srinivasan (2003) noted that different customers have different views towards their convenience orientation. For example, some of the customers are driven by information gathering and money, whereas the rest are driven by convenience. Lapierre (2000) argued that customers value convenience, namely saving time and effort costs, are not only when they making purchase, but it also while accessing, accepting and completing a service.

According to equity theory, this means that customers will compare the convenience and outcome which provided by the product or service. The customer will be satisfied if they think that the ratio of their outcomes to input is fair (DeSarbo

& Oliver, 1988). Fisk and Coney (1982) also mentioned that customer will be less satisfied if they found that other customers get a better service than them. Value-Percept Theory

Value-Percept Theory which is proposed by Westbrook and Reilly (1983) suggests that the expectation of a product may not be in correspondence with what is valued and desired in the product. Therefore, as opposed to Expectancy-Disconfirmation paradigm (EDP) which uses expectations to analyze consumer satisfaction, Westbrook and Reilly (1983) argue that Value-Percept Theory provides a better framework which uses values as the comparative standards. EDP might not be the perfect model to describe satisfaction of a customer because the level of customer satisfaction tends to be affected by comparative standards apart from expectations (Westbrook & Reilly, 1983). This theory states that satisfaction is an emotional reaction that is caused by cognitive evaluative process in which the perceptions of an offer are compared to one's values, needs, wants or desires (Westbrook & Reilly, 1983). Yüksel and Yüksel (2008) stated that when discrepancy between one’s perceptions and one’s values is increasing, the level of dissatisfaction will be increased. A comparison between the value-percept disparity model and expectation-confirmation model was also done by Westbrook and Reilly (1983).

The value-disparity refers to the discrepancies of the actual features and performance characteristics of the product with its needs and desires with an assessment scale ranging from “less than my needs” to “exactly my needs”.

Westbrook and Reilly (1983) observed that the customers’ satisfaction is greatly affected by the deviation in expectations as compared to values, which opposes the hypothesis they put forward previously. However, it is suggested that both parameters are crucial in determining customers’ satisfaction as neither of them is sufficient to support the findings. This suggestion was also supported by recent studies which found that integrating expectations and desires into one framework would generate better results as they are strongly related to customers’ satisfaction (Spreng, Mackenzie, & Olshavsky, 1996). Assimilation Theory

According to Anderson (1973), assimilation theory mentioned that there is some kind of cognitive comparison can be made by the customers in between their expectations about the product and the performance of perceived product. As mentioned by Isac and Rusu (2014), this assimilation theory can be supported and related to the theory of dissonance because dissonance theory form basis for the theory of assimilation. If there is existing of discrepancy between expectations and perceived product performance then dissonance or negative disconfirmation arises (Clinton, Aigbavboa, & Thwala, 2013). The assimilation theory arises after discovering the evaluations of products after the customer using them. If a customer is able to adjust his or her perceptions towards a given product, the customer able to reduce the dissonance. Thus, the product will become more and more matching with their expectations and requirements (Anderson, 1973). Based on this theory, customers can reduce the tension resulting from poor product performance (Anderson, 1973). They may distort their perceptions towards the product so that their expectations able to accord with actual performance of perceived product.

Olson and Dover (1979) said that the customers can also raising the satisfaction’s level by minimizing the relative importance of the disconfirmation experienced.

Further criticism based on the assimilation theory’s stated that customers have sufficient motivation to adjust their perceptions towards the performance of a product (Peyton, Pitts, & Kamery, 2003). Besides, the dissatisfaction among the customer could never appear unless the customers have begun with negative customer expectations in evaluation process. In order to achieving higher level of customer satisfaction, customers are suggested to change their perceptions towards actual performance of a product so that can match nearer to their expectations (Isac

& Rusu, 2014). This means that a product still can satisfied the customers if they willing to make changes in their perceptions towards the product. Although the actual performance of a product still has yet to reach their requirements but the level of customer’s satisfaction is gaining nearer to be fulfilled. The statement above had supported by Peyton et al. (2003), they stated that there is a connection between expectations and customers’ satisfaction. Contrast Theory

According to Danijela, Jasminka, and Srecko (2015), customer satisfaction can be explained by using contrast theory. Contrast theory indicated that the contrast among the expectation and outcome will cause the customer to exaggerate the disparity when actual product or service performance unable to meet the customer’s expectations and requirements (Danijela, Jasminka, & Srecko, 2015). In order words, this theory of customer satisfaction predicts customer reaction instead of reducing dissonance. Contrast theory stated that customers who receive a product or service less valuable than what they actually expected, will magnify the

difference between the product received and the product expected (Yi, 1990;

DeSarbo & Oliver, 1988). This theory predicts that product performance which is lower than expectations will be rated under than its actual level. Once customers are dissatisfied with the service of a bank, the probability to retain potential customers is low (Spreng et al., 1996). In order to achieve the higher level of customer satisfaction, Oliver (1997) maintains that all service encounters offer an opportunity to provide superior service quality and distinguish the firm from its competitors. Oliver (1997) also stated that the poor performance would be rated worse than simply poor; while good performance would be better than a rating of good would suggest. This circumstance may cause the dropping of the level of customers’ satisfaction in long run because customers think that they only can acquire the poor product which was not match with their expectations. On the other hand, the product performance exceeds customer’s expectation or satisfaction will be rated higher than its actual rate (DeSarbo & Oliver, 1988). This circumstance may cause the increasing of customer satisfaction’s level because customers think that they may obtain a product which able to meet further with their needs and requirements. Expectation Disconfirmation Theory

Expectation Disconfirmation Theory relates the negative relationship between trusting expectations and disconfirmation. Lankton, McKnight, and Thatcher (2014) mentioned that it is not easy for performance to accommodate the high expectations. Thus, higher expectation will often lead to negative disconfirmation when performance perceived is lower than expected. Oliver (1980) assumed satisfaction as a direct function of disconfirmation, specified that as the discrepancy

between customer’s perceived performance and pre-adoption expectations.

According to Kemunto (2015), the researcher had explained the customer satisfaction process by using disconfirmation theory. Disconfirmation theory was championed by Oliver (1980). Disconfirmation theory is the most popular theory among the other customer satisfaction theories (Mattila & O’Neill, 2003).

Disconfirmation theory stated that customer satisfaction is formed as a result of the discrepancy between the perceived performance of a product or service and the customers’ expectation (Mattila & O’Neill, 2003; Kemunto, 2015). Mattila and O’Neill (2003) showed that the method delivered by the service is more important than the outcome of the service process. This is because customers seek service with some expectation and compared their expectation with the perceived performance of the service. If the outcome generated is better than the expectation, positive confirmation will occur. In contrast, if there is a difference between the expectation and the outcome, negative confirmation will occur. If the expectation is equal to the outcome, the assessment is neutral or zero disconfirmation. Therefore, positive disconfirmation will lead to customer satisfaction; negative disconfirmation will lead to customer dissatisfaction; zero disconfirmation will lead to no effect on satisfaction (Aigbavboa & Thwala, 2013). According to Oliver (1980), results of customer expectations are formed based on the past experience, statements made by friends and associates. Nowadays, customers are becoming value-sensitive (Munusamy, Annamalah, & Chelliah, 2012). If customers are satisfied, they will share their positive purchase experiences to few people, however dissatisfied customers will discourage more persons to deal with the banks or organization (Waligora & Waligora, 2007). Hence, banks not only need to constantly innovate and improve their services to match customers’ expectation but also need to provide

convenient, reliable, and expedient services to retain customers’ satisfaction (Munusamy, Annamalah, & Chelliah, 2012).

Based on the above discussion, Expectation Disconfirmation Theory is adopted to explain the variables which are customer loyalty and service quality. Several researches (Oliver, 1980; Bakri & Elkhani, 2012) proposed that Expectancy Disconfirmation Theory (EDT) is an important theory to measure customer satisfaction from perceived quality of services or products in e-commerce.

According to Bakri and Elkhani (2012), positive disconfirmation will arise when customer perceived the product or service quality is higher than their expectation.

However, when customer perceives that the performance or quality of the product or service is worse than their expectation, negative disconfirmation may arise. This positive and negative disconfirmation will lead to customer’s satisfaction and dissatisfaction respectively as negative disconfirmation means that the perceived quality of products or services unable to attract the customer satisfaction (Yi, 1990).

In addition, Oliver (1980); Bakri and Elkhani (2012) describe that EDT has the capacity to fulfill the responsibility of measuring and evaluating customer’s satisfaction from the website’s quality, product and services quality. If customer realized that perceived quality of product or service can satisfy their initial expectations, the positive disconfirmation leads to their satisfaction. On the contrary, the perceived quality of products or services does not fit with their initial expectation, negative disconfirmation may arise and lead to customer’s dissatisfaction (Alkhani & Bakri, 2012).

According to Lin, Tsai, and Chiu (2009), the expectation disconfirmation theory can be used to relate customer loyalty and customer satisfaction. Expectation disconfirmation theory can predict customer loyalty through the customer satisfaction (Taylor & Baker, 1994). This theory shows that the level of customer satisfaction is determined by customer expectations and disagreement based on initial expectation (Thong, 2006). Anic and Radas (2006) stated that customer satisfaction due to past purchase experience outcome in terms of rewards and costs, which to indicate the degree of meets or exceeds customer expectations. A positive customer perception of bank attributes will increase satisfaction and lead to positive loyalty intentions (Anic & Radas, 2006). Opponent Process Theory

Opponent process theory was a theory of motivation reformulated by Solomon and Corbit (1974). This theory has been adapted from the basic physiological phenomena known as homeostasis (Solomon & Corbit, 1974). Homeostasis is to know how a person under conflicting stresses and motivations can maintain a stable psychological condition (Cannon, 1930). A good example to describe homeostasis is the law of supply and demand (Cannon, 1930). This is because the interaction between supply and demand can either maintain or affect the stability of market prices. Besides that, the opponent process is an internal drive which can make adjustment to the satisfaction or dissatisfaction towards online banking to an original or new level (Solomon & Corbit, 1974). In addition, according to Rust and Oliver (2000) research showed that satisfied or dissatisfied emotion is temporary.

If the satisfied or dissatisfied emotion maintains for a long period of time will lead to stress (Solomon, 1980). This means that when the customers have felt satisfied

on online banking for a long period of time, they actually depend on their memory (Levine, 1997). However, these memories are fallible because difficult to measure the memory will remain how long in customer memory (Souca, 2014). In order to retain the customers and their memory, a strong online banking services is an important driver for bank’s performance and customer service delivery (Thulani, Njanike, Manomano, & Chiriseri, 2011). The quality of online banking services has become a major area of attention among researchers and bank managers due to its

on online banking for a long period of time, they actually depend on their memory (Levine, 1997). However, these memories are fallible because difficult to measure the memory will remain how long in customer memory (Souca, 2014). In order to retain the customers and their memory, a strong online banking services is an important driver for bank’s performance and customer service delivery (Thulani, Njanike, Manomano, & Chiriseri, 2011). The quality of online banking services has become a major area of attention among researchers and bank managers due to its