NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO.

1 (2019)

IMPACT OF ELECTRONIC BANKING ON ISLAMIC BANK

CUSTOMER SATISFACTION
Salmanulfarisi Abdulrahaman PhD
[email protected]
Dept of Business Administration
Yusuf Maitama Sule University, Kano

Ali Ibrahim Dasuki

Dept of Business Administration
Yusuf Maitama Sule University, Kano

Abstract

T he breakthrough in information and communication technology (ICT) marked the

beginning of computer age. The role played by ICT cannot be over emphasized, looking
at how difficult and complex tasks are simplified. Banking industry is in the forefront in
taking advantage of computer age considering how bank activities drastically change making it
easier for the bank employees to perform their duties with no pains at the same time providing
satisfaction to customers. The objective of the study is to examine the impact of electronic
banking on Islamic bank customers’ satisfaction. The study employed convenient sampling, 173
questionnaires are distributed among the customers of Jaiz bank, in Kano Metropolis. After
administering the returned questionnaires, the result using Partial Least Square (PLS) shows
positive and significant relationship between Automated Teller Machine (ATM), Electronic
Funds Transfer (ETF) and Islamic bank customers’ satisfaction. The result further indicated no
relationship between Smart Cards (SMC) and Islamic bank customer satisfaction. The study
recommends that for Islamic bank to meet customer satisfaction, emphasis should be on the
provision of more ATMs that can work 24/7.

Keywords: Electronic Banking, Customer Satisfaction, Automated Teller Machine, Smart Card,

1.0 Introduction
Prior to computer age, banking services were rendered in a manual form making it tedious,
difficult and stressing on the side of the employee, on the other side giving inaccurate and
unreliable information to the bank customers making them unhappy and dissatisfied with the
range of bank services offered (Osteen, 2011). With new development in technology, banks are
using information and communication technology to provide better bank services (Khumber,
2011). For instance, Khan (2010) opines that online banking (or internet banking or electronic
banking) allows customers of a financial institution to conduct financial transactions on a secure
website operated by the institution, which can be a retail or virtual bank, credit union or building
society.

A bank customer can perform non-transactional task through online banking, include viewing
account balances, viewing recent transactions, downloading bank statements. For the above-
mentioned reasons the significance of electronic payments in commercial, merchant and micro
finance banks cannot be over-emphasized. Nigeria banks at this computer age for example, take

200
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

the advantage of electronic banking (e banking), rendering similar services provided by their
counter parts in developing and third world countries to meet their customers demand (Chieruke,
Eviorekpafe and Chete, 2006). The point of contention is how e banking provides mix reaction
from the customers’ side. Many customers hail the services showing their satisfaction, while
substantial numbers are skeptical and denounce e banking.

Khan (2010) argues that unsatisfactory service affects customer loyalty and willingness to
recommend the same products or services to relatives, friends and spouse. Similarly, if customers
are satisfied with the services, they maintain loyalty and promote the services to others.
In Nigeria for instance, lack of 24/7 of e banking services due to power failure, poor networking
and insufficient cash in ATMs among other factors amounted to dissatisfaction as argued by
Agboola (2006). However, time saving, proximity and less costly are among advantages of e
banking (Amedu, 2005; Mohammed, 2009 & Ovia, 2010).

Despite there are numerous commercial, merchant and micro finance banks in Nigeria, Jaiz bank
is a non-conventional bank a non-interest shariah compliant bank (Jaiz Annual report and
Account, 2018) with 33 branches across the geopolitical zones as at 2017. The bank was
established in 2011 as a regional bank and later transform into national bank in 2016. To
compete favorably the bank engages into e banking to meet the aspirations of its teeming
customers, base on the principle that transformation does not come at a societal cost (Jaiz Annual
report and Account, 2018).

Meanwhile, with advent of electronic-banking, banks are able to serve customers outside the
banking hall, as computers help banks to reduce the cost of doing business. Although, the
effectiveness of the information technology deployment in banks is another matter, the fact
remains that information technology usage is now a reality looking at the huge amount of
information being handled by banks on a daily basis. On the customer's side, cash is withdrawn
or deposited, cheques are deposited or cleared, statement of accounts are produced, etc. At the
same time, banks need up-to-date information on accounts, credit facilities, interest, deposits,
charges, income, profitability indices and other financial control information.

Despite all these advantages of e-banking, stakeholders are contemplating if there are some
linkages between electronic baking and customer satisfaction in Islamic banks. Most of the
studies conducted on electronic banking are limited to bank financial performance, very few
studies pay attention to customer satisfaction in conventional banks. Similarly, plethora of
literatures and researches are limited in explaining the relationship between e-banking and
Islamic bank customer satisfaction in Nigeria. To bridge the gap and explore new knowledge the
study considers it necessary to examine the relationship between e-banking and Jaiz bank
customer satisfaction in Kano Metropolis.

201
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

1.1 Objective of the Study

General objective
To examine the impact of electronic banking on Islamic bank customer satisfaction.

1.2 Hypotheses of the Study

Ha1: Smart cards are positively correlated with Islamic bank customer satisfaction in Nigeria.
Banking sector:
Ha2: Electronic Funds Transfer is positively correlated with Islamic bank customer satisfaction in
Nigeria.
Ha3: Automated teller machines are positively correlated with Islamic bank customer
satisfaction in Nigeria.
1.3 Conceptual framework
This research is based on the assumption that electronic banking will lead to Islamic bank
customer satisfaction. The framework indicates that electronic banking expressed in form Smart
Card (SMC), Electronic Fund Transfer (EFT) and Automated Teller Machine (ATM) (Khan,
2010 and Osteen, 2011). On the other hand, customer satisfaction is expressed in a form of
service quality, information quality and price (Khubhar, 2011, Pine, Moholtra and Singh 2005)

Electronic Banking (IV)

SMC
Customer Satisfaction (DV)
EFT

ATM

2.0 Literature Review

2.1 Concept of e-banking
Ovia (2010) define e banking as a method of banking through which customers are able to
carry out their banking transactions electronically without visiting bank branches. Among
other benefits, e banking saves time, customers need not to visit the bank branch and banks
have the opportunity to enhance their customer base thereby experience improved profits
(Agboola, 2006).

Khan (2010), Khumbhar (2011), and Osteen (2011) include smart cart, Automated Teller
Machine, Internet and Mobile banking, Electronic Funds Transfer and Terminal Vsat among
others as components of electronic banking.

Smartcards, also known as electronic purses, were recently introduce in Nigeria. Unlike the
traditional payment cards, these cards are embedded with a computer chip and offer a variety of
service depending on the requirements of the issuer. A Smartcard could work as both a credit and

202
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

debit card. When used as an electronic purse, a money value is transfer to the card, which
diminishes, as the card is use at designated merchant terminals (Shy and Tarkka, 2009).

Electronic Funds Transfer (ETF) is a system of transferring money from one bank account
without money changing hand, the system is use for credit and debit transactions. New links are
being formed and Nigerian banks are not being the customers are the greatest beneficiaries in the
banks' jostle to attract new customers by reducing charges and offering other incentives.

Automated Teller Machine (ATM) - Worldwide, the use of paper cash still remains the most
widely used and acceptable means of settling financial transactions and obligations. However,
the proportion of cash transactions is increasingly on the decline, especially in advanced
economics (Amedu, 2005). In USA, where the use of cash is still prominent, compared with
European countries, it represents 50 percent or more of the total transactions. Of course, cash is a
non-electronic payment method. (Ovia, 2001).

2.2 Customer Satisfaction

Awan, Bukhari and Iqba (2011) look at satisfaction as the result of comparing the benefits and
costs in relation to the outcome of acquiring products or services by a customer. To this, regard
Osteen (2011) citing Cacioppo (2000) that customer satisfaction is the state of mind that
customers have about a company when their expectations have been met or exceed over the
lifetime of the products or services.

The importance attached to customer satisfaction (product/ service quality, information and
price) as integral theoretical and practical aspects of consumer researchers according to Jamal
and Nasser (2002) is a significant issue to most marketers in providing value to the customers.
Khan (2010), Khumbhar (2011), Osteen (2011) opines that Customer satisfaction is a measure of
how products and services supplied by a company meet or surpass customer expectation.
Similarly, Gomez, McLaughlin and Wittink (2004) look at Customer satisfaction as the number
of customers, or percentage of total customers, whose reported experience with a firm, its
products or its services (ratings) exceeds specified satisfaction goals.
2.3 Review of Related Studies
Various studies were conducted all over the world to explore the importance of electronic
banking to bank performance or to the bank’s customers’ satisfaction. For example, in a study
conducted by Osteen (2011) in Uganda, the study result indicated that ATM has significant
positive relationship with customer satisfaction. The study further argued that proximity and
uses of ATM provide greater satisfaction especially among rural dwellers. In a study conducted
by Harrison (2016), understanding the impact of information quality on customer relationships
management, the finding of the study suggests that higher quality information yield better
decision and in turn induces customer satisfaction.
In Sudan Hamid, Alabsy and Mukhtar (2018) conducted a survey on the impact of electronic
banking services on customer satisfaction in the Sudanese banking sector using questionnaire
method. The result of the study indicated that banking services over the internet has a positive
impact on customer satisfaction.
Toor, Hunain, Husnain, Ali and Shahid (2016) conducted their study in Pakistan, investigating
the impact of e-banking on customer satisfaction. The study result using SERVQUAL on 264 e-

203
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

banking customers indicated significant positive relationship between service quality

dimensions and customer satisfaction in Pakistan. This result supported the earlier finding of
the study conducted by Khan (2010)

In India Khubhar (2011) conducted a study examining the factors affecting customers
satisfaction on ATM service. Result from the study indicated that core service quality in ATM
service indicate that cost responsiveness influences customers and banks should concentrate their
efforts on quality service to satisfy their customers. In a similar fashion, study conducted by
Gupta (2008) on internet banking in India. The finding of the study indicated that technology has
brought a sea change in the functioning of the banks and this change positively affect bank
customers in India.

In Nigeria, John and Rotimi (2014) conducted survey research on analysis of electronic banking
and customer satisfaction in Nigeria. The result of the study indicated that there is a significant
positive relationship between electronic banking and customer satisfaction in Nigeria among the
conventional banks’ customers. The result is not in cognizance with the previous finding of
Agboola (2006), where the study pointed out that factors affecting electronic-banking such as,
insecurity, inadequate operational facilities and electricity supply, affected the level of customer
satisfaction.

Different literatures indicated electronic banking embraces payment cards (including credits
cards, cheques cards, charge cards, debit cards, cash cards, cheque guarantee cards, gold cards,
international cards and smartcards) provides satisfaction both to customers in conventional and
Islamic banks in Pakistan as found in Awan, Bukhari and Iqbal (2011). In Lebanon Hammed,
Bizni and El baba (2018) conducted a survey among the conventional bank’s customers in
Lebanon examining the impact of e-banking service quality on customer satisfaction. Using
questionnaire method the finding shows reliability, efficiency, responsiveness and
communication have significant impact on customer satisfaction.

Furthermore, in his study Kwarteng (2015) on the effect of electronic banking on customer
service delivery in Kumasi metropolis, using researcher made device, result from the study
indicated that customers are aware of the various e-banking platforms available at their
respective banks, but difficulty associated with the use of the e –banking products negatively
affect customers satisfaction.

Despite many researches were carried out is indicated in the study review at a different time
and places on e-banking and customer satisfaction, majority if not all were conducted on
conventional banks and their customers, this leave a wide gap and a challenge to
nonconventional banking system (Islamic bank) that need to be attended

3.0 Research Methodology

Research methodology defines the systematic and scientific procedures used to arrive at the
results and findings for a study against which claims for knowledge evaluated (Sekaran 2000).
This chapter deals with the general methodology employed in conducting this research. It states

204
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

the methods employed in the data collection process, population of the study, sample size and
sampling technique method of data collection as well as method of data analysis.
3.1 Research Design
The research design used in this study was descriptive and quantitative survey design, which
describes the nature and feature of the population or phenomenon that is being investigated
(Mubaraka, 2013).

3.2 Population, Sample size and Sampling Technique of the Study

According to Ahuja (2009), Ahmed (2010) and Mubaraka (2013) population is the collection of
objects or individuals having some characteristics that the researcher is interested in studying.
Therefore, the population for this study is made up of all the customers of Jaiz Bank. Sample is a
set of respondents (people) selected as representative individuals from a large population
(Ahmed, 2010). However, the researcher selected a sample size of one hundred and seventy-
three (173) customers of Jaiz Bank as the sample units using convenience sampling.

Sampling according to Ahuja (2009) involves a procedure of selecting an element from a larger
group (population), in order to infer something about the group. For the purpose of this study
since the sample frame cannot be determine, conveniance sampling technique is chosen this is in
line with the studies conducted by Hammed, Bizni and El baba (2018) and Kwarteng (2015). The
study use researcher made device (questionnaire), distributed to study respondents on 5 Likert
rating scale as suggested by Ahmed (2010).

4.0 Data Analysis

Data was analyze using Partial Least Square path modeling (PLS) to test the hypothesis. PLS
was used do to the fact that it is appropriate for relatively complex model with large number of
latent variables (Amin, 2006). Outer Loadings were examined in order to establish the composite
reliability. The result indicated that all the loading values surpassed the recommended threshold
value of 0.07 (Hair, et al 1998, 2006), as all loadings range from 0.724 to 0.896 this implies that
each construct in the model has captured items that have much in common and they are
statistically significance (Hair et al 1998, 2006). Similarly, the reliability of the items had been
assumed as shown in table 4.1 below. An assessment of convergent validity was conducted by
examining Average Variance Extracted (AVE) values, all the AVE values in the result surpassed
the threshold of 0.50 (Hair et al 1998, 2006) as shown in table 4.1

205
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

Table 4.1 Loading, Internal Consistency and AVE

Items Cronbach's
Loading AVE Composite Reliability
Alpha
ATM1 0.724 0.600 0.857 0.783
ATM2 0.786
ATM3 0.822
ATM4 0.762

EFT1 0.863 0.714 0.882 0.800

EFT2 0.866
EFT3 0.803

SAT1 0.875 0.783 0.935 0.908

SAT2 0.877
SAT3 0.892
SAT4 0.896

SMC1 0.849 0.753 0.938 0.918

SMC2 0.889
SMC3 0.852
SMC4 0.887
SMC5 0.860

To determine discriminate validity, the cross loading of the items was examined. The rule is that
an indicator’s outer loading on its construct should be greater than all of its outer loading on
other constructs (Hair et al 1998, 2006). This study found that the loading of each of the
indicator had been higher on its associate factors than its cross loading in other factors therefore,
discriminant validity is established as shown in table 4.2.

206
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

Table 4.2 Cross Loading

ATM EFT SAT SMC
ATM1 0.724
ATM2 0.786
ATM3 0.822
ATM4 0.762
EFT1 0.863
EFT2 0.866
EFT3 0.803
SAT1 0.875
SAT2 0.877
SAT3 0.892
SAT4 0.896
SMC1 0.849
SMC2 0.889
SMC3 0.852
SMC4 0.887
SMC5 0.860

4.3 Structural Model

The coefficient was estimated through bootstrapping procedure in the data set.

Table 4.3 Result of the Hypotheses Testing and Structural Relationship

Path Coefficients
Mean, STDEV, T-Values, P-Values
(O) (M) (STDEV) (|O/STDEV|) P Values Decision
ATM -> SAT 0.309 0.305 0.113 2.730 0.006* Supported
EFT -> SAT 0.251 0.244 0.092 2.719 0.007* Supported
SMC -> SAT 0.221 0.234 0.124 1.780 0.075* Not Supported
• At 95% confidence level

Where: O= the original sample, M =sample mean, STDEV =standard deviation and O/STDEV
=T statistics

The result in table 4.3 shows that a significant positive relationship (P value 0.006) exists
between ATM and SAT, this result is in line with the findings of Osteen (2011), Hammed, Bizni
and El Baba (2018) and John and Rotimi (2014) where the findings of the studies indicated
positive and significant relationship between e-banking and customer satisfaction in Uganda,
Lebanon and Nigeria respectively. Similarly, the finding also tally with the result of the study
conducted by Khumbhar (2011) indicating a significant relationship between ATM and customer
satisfaction in India.

207
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

Further, more the result from table 4.3 indicated significant relationships between ETF and SAT
(P value 0.007) the result conquered with the finding of Hamid, Alabsy and Mukhtar (2018) in
Sudan that e-banking has positive relationship with customer satisfaction.
However, the relationship between SMC and SAT is not significant as indicated in the table 4.3
(P value 0.075), this finding contradicts what is obtainable in Khan (2010), and Osteen (2011)
where the two studies believe smart cards influences customer satisfaction, and supported
Kwarteng (2015).

5.0 Conclusion and Recommendation

The general objective of the study is to determine if there is a causal relationship between
electronic banking and Islamic bank customer satisfaction. In achieving, the said objective
questionnaires are distributed to selected customers (173) of Jaiz bank using convenience-
sampling strategy. Using PLS At 95% percent confidence level, P value 0.006 and P value 0.007
the study concludes that Automated Teller Machine and Electronic Fund Transfer are positively
correlated with Islamic bank customer satisfaction in Nigerian. With this result, the alternate
hypotheses are therefore accepted. Similarly, at 95% percent confidence level, P value 0.076 the
study concludes that Smart Cards are not positively correlated with Islamic bank customer
satisfaction in Nigerian Banking sector. With this result, the alternate hypothesis is rejected.

The study recommended that Islamic bank should pay more attention in enhancing automated
teller machine service hence in have a positive and direct relationship with customer satisfaction.
The study suggest that more ATMs should be provided in shopping malls, petrol stations and
motor parks as the case in East African countries. Similarly, the study recommends that Jaiz
bank should enhance and pay more attention to electronic funds transfer as the second service
having influence on its customer satisfaction. This can be done by ensuring the service 24/7 and
quick responds to customers request in case of emergency.

Reference
Ahmed, J.A (2010) Research Methods in the Social Sciences Holway Speed Link Investment
LTD Kano, Nigeria
Agboola, A. A. (2006) Electronic Payment Systems and Tele-banking Services in Nigeria,
Journal of Internet Banking and Commerce, Vol. 11, (3)
Ahuja, R. (2009) Research Methods RAWAT PUBLICATIONS, New Delhi, India
Amin, E.M (2006) Social Research; Conception, Methodology and Analysis. Makerere
University Printery, Uganda.
Areeba Toor, A., Hunain, M., Hussain, T, Ali, S & Shahid, A (2016) The Impact of E-Banking
on Customer Satisfaction: Evidence from Banking Sector of Pakistan. Journal of Business
Administration Research Vol. 5, (2) 27- 40
Awan, H.M; Bukhari, K.S & Iqbal, A. (2011) Service Quality and Customer Satisfaction in the
Banking Sector. Journal of Islamic Marketting. Vol. 2 (3) 203-224
Beer, S. (2006) Customers Preference on Internet Banking, Survey (Retrieved from
http://www.itwire.eom/content/view/4
Chierneke, S. C., Evwiekpaefe, A. E., & Chete, F. 0. (2006). The Adoption of Internet Banking in
Nigeria: An Empirical Investigation. Journal of Internet Banking and Commerce, Vol. 11,
(3).

208
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

Gomez, M.I; McLaughlin & Wittink, D.R (2004) Customer Satisfaction and Retail Sales
Performance: An Empirical Investigation. Journal of Retailing. Vol. 80(1) 265-278
Gupta, P. K. (2008) Internet Banking in India: Consumer Concern and Bank Strategies, Global
Journal of Business Research, Vol. 2 (1) 43-51
Hair, F., Anderson, R., Tatham, R., & Black, W. (5th ed.) (1998). Multivariate Data Analysis
with readings. Prentice-Hall, Englewood Cliffs, NJ.
Hair, F., Anderson, R., Tatham, R., & Black, W. (6th ed.) (2006). Multivariate Data Analysis
with Readings. Prentice-Hall, Englewood Cliffs, NJ.
Hammoud, J.; Rima M. Bizri, R.M & El Baba, I. (2018) The Impact of E-Banking Service
Quality on Customer Satisfaction: Evidence from the Lebanese Banking Sector retrieved
from journals.sagepub.com/home/sgo. pp 1-12
Hamid, A.A.M, Alabsy, N.N.A & Mukhtar, M.A (2018) The Impact of Electronic Banking
Services on Customer Satisfaction in the Sudanese Banking Sector. International Business
Research; Vol. 11, (6) 102 - 109
Harrison, D.L.E (2016) Understanding the Impact of Information Quality on Customer
Relationship Management. Unpublished Dissertation Proposal Presented in Partial
Fulfillment for the Degree of Doctor of Business Administration in the Coles College of
Business Kennesaw State University.
Jaiz Bank (2018) Annual Statement of Account, 2018
Jamal, A. & Nasser, K (2002) customer Satisfaction and Retail Banking: An Assesment of Some
Key Antecedents of Customer Satisfaction in Retail Banking. International Journal of Bank
Marketting. Vol. 20 (4)146-160
John, O.A & Rotimi, O. (2014) Analysis of Electronic Banking and Customer Satisfaction in
Nigeria. European Journal of Business and Social Sciences, Vol.3, No.3, pp 14-27,
Karnel, S. (2005) The Use of Information Technology to Transform the Banking Sector in
Developing Nations. Information Technology for Development, Vol.ll, No. (4) 305-312.
Khan, M.K (2010) An Empirical Study of Automated Teller Machine Service Quality and
Customer Satisfaction I Pakistan Banks. European Journal of Social Sciences. Vol. 13 (3)
Khumbhar, V. (2011) Factors Affecting on Customers Satisfaction: An Empirical Investigation
of ATM Service. IJBEMR. Vol. 2 (3)1-14
KWARTENG, P.A (2015) The Effect of Electronic Banking on Customer Service Delivery in
Kumasi Metropolis. Unpublished Thesis submitted to the School of Business, Kwame
Nkrumah University of Science and Technology in partial fulfillment of the requirements
for the degree of Master of Business Administration (MBA).
Mohammed, S. K. (2009) Service Quality Evaluation in Internet Banking: An Empirical Study in
India, International Journal of Indian Culture and Business Management, Vol. 2,(1) 381-
398.
Mubaraka, C.M (2013) Research Made Easy TFK Luminary Publishers, Kampala, Uganda
Osteen, L.B (2011) The Effect of Automated Teller Machine Use on Customer Satisfaction in
Banking in Uganda. Unpublished Bachelor Degree Research Report Submitted to
Department of Distance Learning, Makerere University, Uganda.
Ovia, J. (2010). Internet Banking: practices and potentials in Nigeria, A paper presented at a
seminar organized by the Institute of Chartered Accountants of Nigeria (ICAN) Lagos
Sheraton Hotel & Towers, Ikeja.
Pine, A.S Maholtra, P. & Singh, B, (2005) Determinants of Internet Banking Adoption by Banks
in India, Emerald Internet Research Vol. 17

209
 NORTHWEST JOURNAL OF SOCIAL AND MANAGEMENT SCIENCES VOLUME 2 ISSUE NO. 1 (2019)

Sekaran, U. (2000). Research methods for Business: A skill building approach. 3rd Ed,
John Wiley and Sons Inc.,
Shy, Oz, & Tarkka, J. (2009), The Market for Electronic Cash Cards, Journal of Money, Credit
and Banking, Vol. 34, pp. 299-314.
Appendix 1
PLS Algorithm

Appendix 2
Bootstrapping

210