The increasingly change in worldwide competitiveness in commercial behaviors has improved the volume of bank in the world. It has produced additional banking knowledge and also improved customer demand of services given by banks. This revolution has set a motion in the banking sector for the provision of a payment system that is compatible with the demands of the electronic market (Balachandher, 2001). On the behalf of increased competition, many banks and organization did not only reduce their costs but they have also increased their products. Technology has changed the preconditions for service delivery, dramatically in recent years (Fredriksson, 2003).

Electronic banking provides the facility to the customers to access their accounts and execute transactions electronically in a very easier way by visiting the bank websites at any time i.e. 24 hours a day, 7 days a week. By using this facility individual and companies are saving a lot of their time and money. Some banks are providing this facility free of cost while some banks have lower the costs for online transactions as compared to real life banking transactions (Karjaluoto et al.,2002, p.261).

All the banking power is provided into the hands of customers and allow to self service them by fulfilling the different banking needs, so with the online services customers can facilitate themselves by a number of ways: like they can view their account details, re-viewing of their account histories, payment and transfer funds, order and re-order cheques, pay utility bills, get loans by filling the loan application form online, activate or replacement of credit card and get in touch with the customer care department of the banks (Amor, 1999).

Online services, especially banking services, are becoming more attractive and alternative to visiting service outlets or phone call centers for increasing their customers (HR- Focus, 2000). Therefore it become easy for the customers to prefer online services (Szymanski & Hise, 2000), feel more in control of the service process (Bateson, 2000) to avoid from human contact with time saving (Meuter M.L. 2000).

Although, banking administration has delayed to execute computer technology in banking exercises. A number of studies have concluded that IT has positive effects on bank services delivery to customers, bank productivity, cashier’s work, banking transaction and banking investment. So, these have positive effects on the growth of banking system (Balachandher, 2001).

In addition, delivery the high quality services is a way for the banking to improve their relationships with their customers. By the Delivering high quality services, banks can achieve customer satisfaction and through customer satisfaction banks can gain loyal customers (Grönroos, 2000). Because of the highly undifferentiated services and products, financial organizations specifically banks become main tool for competing in this marketplace (Kim J.K, Han, Choi & Kim S.H. 1998).

Much research has been done about the quality of services and customer requirements in the traditional banking environment, where personal interaction between the customers and the bank employees takes place (Oppewal & Vriens, 2000). Therefore, this is very important for the online banking services providers to become more capable about the customer’s perceptions of the online banking services quality. On the other hand the customers also have more expectations and demand when they are using e-banking services either the services are satisfactory or not. Because it is quite easier for customers to evaluate and compare the benefits of competing services (Santos, 2003).

Benefits of Electronic Banking in Pakistan

Online banking provides benefits to users and also to the banks. Users can use online services dependent on convenience which is independent of time and place constraints. Online banking helps banks to reduce transaction costs and cost of operation in the form of reducing staff and physical branches. In developing countries like Pakistan, e-banking initiatives are taken to utilize the technological benefits that can be harvest along with many other e-readiness measures being taken. Pakistan has been among the late entrants into e-banking. The first ATM switch was setup in 1999 and in 2000 Internet Banking was introduced (Ahmed, 2006).

The major benefits of e-banking are

The e- banking services open seven days a week and 24 hours a day.

Decrease in the cost-line and no need of physical bank branches.

Better catering to the needs of customers and their expectations.

Terms of services to customers for their personal choices.

Easy access for all.

With the e-banking money can easily be transact in no time from ATM machine.

In current time E-banking has open out rapidly all over the world. Almost all Banks are making much use of E-banking amenities to offer good services. The extension of E-banking has also significantly advantaged the normal customer in all purpose.

E-Banking is now a part of every bank in Pakistan. But there is still need to create awareness among the customers about their false perceptions about e-banking tools and lack of knowledge.

Government of Pakistan has already taken steps for the working towards the formation of information society and to create awareness among the people but the pace of this process is very slow.Technology helps to catalyze efficiency in the provision of financial services and ultimately in determining the winners in the intensely competitive financial markets of the future.

Customer Service

To prosper in today’s competitive business environment, companies must understand that the customer holds the key to success (Goetsch & Davis 2004). The customer must be at the very heart of the company’s decision making. The customers want many things from the companies, they work with. In the language of customer service, these wants are often referred as needs. Most customers need quality products, quality service and friendly interaction with knowledgeable people who care about them, (ibid).

Information technology, can and is being used to improve customer services, though the use of IT is dependent on the understanding of customer services, marketing and the information orientation of the firm in question (Oasis, 1989). Customer service is being influenced and revitalized by information technology. Regardless of how one visualizes customer service, either from a logistics or marketing perspective, information technology now assumes an important role in customer service.

Information technology is now viewed as a business tool, with the ability to award competitive advantages if correctly harnessed.

The extensive use of information technology in electronic banking with popular tools like ATMs, Internet banking, Telephone banking and mobile banking is growing at a very rapid rate. Customer service and customer satisfaction is indeed the most important objective of the banking services. With the fast addition of new banking services, in the electronic banking tools, banks are enhancing the banking services thus adding to its customer base and to their satisfaction level.

Customer Satisfaction

Early concepts of satisfaction research have typically defined satisfaction as a post choice

evaluative judgment concerning a specific purchase decision (Churchill and Sauprenant 1992;Oliver 1980). Most researchers agree that satisfaction is an attitude or evaluation that is formed by the customer comparing their pre-purchase expectations of what they would receive from the product to their subjective perceptions of the performance they actually did receive (Oliver,1980).

“Satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations” ( Kotler (2000).

Customer expectation can be defined as customer’s pretrial beliefs about a product (Mckinney,Yoon and Zahedi 2002). Expectations are viewed as predictions made by consumers about what is likely to happen during impending transaction or exchange (Zethaml and Berry 1988). Perceived performance is defined as customer’s perception of how product performance fulfills their needs, wants and desire (Cadotte et al.1987). Perceived quality is the consumer’s judgment about an entity’s overall excellence or superiority (Zeithaml 1988).

Service Quality and Satisfaction

Service quality has been the subject of considerable interest by both practitioners and researchers in recent years (Parasuraman et al 1985). An important reason for the interest in service quality by practitioners results from the belief that this has a beneficial effect on bottom- line performance for the firm. However, practitioners often tend to use the terms service quality and customer satisfaction inter changeably. Among academics the satisfaction construct is recognized as being distinct and has developed along fairly independent lines from service quality (Oliver, 1980). Most experts agree that customer satisfaction is a short-term, transaction specific measure, whereas Service quality is an attitude formed by a long-term, overall evaluation of a performance (Hoffman & Bateson 1997).

As a process in time, service quality takes place before, and leads to overall customer

satisfaction. Service quality has been found to be an important input to customer satisfaction

(Caruana & Malta 2002).

Lassar et al. (2000) compared and contrasted empirically the SERVQUAL and the technical or

functional quality model. They tried to compare the various dimensions of the two service

quality models and their effects on satisfaction.

In the following research also, SERVQUAL has been used to determine the most influential dimensions of electronic banking service quality under different tools like ATM, mobile banking, internet banking, telephone banking and then their resultant impact on customer satisfaction. Customer satisfaction is both a short term and post decision element whereas service quality is a long term factor. Customer satisfaction has increased over the time period with the constant advancements in technology and exponentially increased when we compare traditional banking services to electronic banking services.

Traditional Service Quality Dimensions

Service quality has been the subject of considerable interest by both practitioners and researchers in recent years. Definitions of service quality hold that this is the result of the comparison that customers make between their expectations about a service and their perception of the way the service has been performed (Caruana & Malta 2002; Grönroos, 1984; Parasuraman et al.,1985,1988, 1994).

Online customers still demand many services available through traditional channels even if they choose pure internet-based suppliers with basic customer services (Yang and Fang 2004).

Several studies have been conducted to identify traditional service quality dimensions that

contribute most significantly to relevant quality assessments in the traditional service

environment (e.g Parasuraman et al., 1985, 1988; Johnston 1995; Pitt et al., 1999; Berry et al.,

1985). Identification of the determinants of service quality is necessary in order to be able to

specify measure, control and improve customer perceived service quality (Johnston 1995).

Parasuraman et al.’s (1985) identified ten detailed determinant of service quality through focus

group studies: tangibles, reliability, responsiveness, communication, access, competence,

courtesy, credibility, security, understanding / knowledge of customer. Later these ten

dimensions were further purified and developed five dimensions- tangibles, reliability,

responsiveness, assurance and empathy to measure service quality, SERVQUAL (Parasuraman

et al. 1988).

Walker (1990) suggested that the key determinants are product reliability, a quality environment and delivery systems that work together with good personal service – staff attitude, knowledge and skills. Grönroos (1990) postulated six criteria of perceived good service quality: professionalism and skills; attitudes and behaviour; accessibility and flexibility; reliability and trustworthiness; recovery; reputation and credibility.

From the focus group interviews, Berry et al. (1985) identified ten determinant of service quality. Virtually all comments consumers made in these interviews about service expectations, priorities and experiences fall into one of these ten categories. These are reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding and tangibles.

Vriens (2000) developed an application for measuring retail banking service quality, which

consists of 28 attributes including four service quality dimensions such as: accessibility;

competence; accuracy and friendliness; and tangibles. The accuracy and friendliness dimension

turned out to be the most important factor out of four determining banking preference, followed by competence, tangibles, and accessibility. Nantel (2000) proposed an alternative measure of perceived service quality in retail banking that comprises 31 items with six underlying key dimensions. These dimensions are: effectiveness and assurance, access, price, tangibles, service portfolio and reliability.

Online Service Quality Dimensions

The SERVQUAL scales (Parasuraman et al. 1991) can evidently not be applied as such to eservices, but dimensions that closely resemble them can be constructed. Nonetheless, additional dimensions may be needed to fully capture the construct of e-service quality (Zeithaml et al.2002). Kaynama and Black (2000) and Zeithaml et al. (2000) have recently proposed a number of e-quality dimensions.

Zeithaml et al. (2000) have developed e-SERVQUAL for measuring e-service quality. Through the focus group interview they have identified seven dimensions of online service quality:efficiency, reliability, fulfillment, privacy, responsiveness, compensation and contact.

Efficiency refers to the capability of the customers to get to the website, find their required product and information linked with it, and check out with least effort. Fulfillment incorporates precision of service promises, having product in reserve, and delivering the product in the promised time. Reliability is related with the technical functioning of the website, mainly the degree to which it is accessible and functioning properly. The privacy dimension includes reassurance that shopping behavior data are not shared and that credit card information is secure. (Zethaml et al.2002)

Yang & Fang (2004) identified online service quality dimension and then relationship with

satisfaction. These service quality dimensions are Reliability, responsiveness, ease of use,

competence. Yang and Jun (2002) have uncovered six prominent factors to evaluate e-tailer’s

service quality – reliability, access, ease of use, personalization, security and credibility. Liu &

Arnett (2000) identified Measurement of web site success in the context of electronic commerce Quick responsiveness, assurance, reliability, empathy, and follow-up service. First, quality of information consists of relevant, accuracy, timely, customized and complete information presentation. Second important factor is the service includes fast reply, assurance, empathy, and follow-up. Third, system use includes security, correct transaction, and customer control on transaction, order-tracking facilities and privacy.

Yang, peterson and Huang (2001) identified and measured six dimensions of consumer

perceptions of service quality:

– Ease of use means user friendliness, loading/transaction speed, search capability, and

easy navigation.

– Content contained on the website

– Accuracy of content

– Timeliness of response

– privacy.