An empirical investigation of consumers’ choice of banking channels

Abstract

Banks, within the financial service sector, have to respond to constant changes in the marketplace by adopting different types of channel strategies. These changes include; customer preferences and needs, increasing competition from non-banks, shifting demographic and social trends, government deregulations of the financial service sector, and the technological revolution.

The Automatic Teller Machine (ATM), telephone banking, cable television banking, and internet banking are examples of the types of information technology-enabled banking channels. The emerging trend of electronic banking raises important issues in the area of consumer banking behaviour. This New Zealand based research identifies the variables that affect consumers' choice of banking channels. It also identifies the most and least important variables that consumers use when they choose a banking channel. In addition, it examines how consumers choose electronic banking and non-electronic banking, using the consumer decision-making process as a frame of reference.

Survey data from 529 respondents revealed that the service quality dimensions, the perceived risk factors, the user input factors, and consumers' segmentation characteristics have an impact on the decision when consumers choose between electronic banking and non-electronic banking. The consumers' segmentation characteristics include age groups, occupational status, educational qualifications, income levels and areas of residence.

Output from the sensitivity analysis indicate the perceived risk factors, user input factors and age between 56-65 years are the three dominant variables that influence consumers' choice of electronic banking and non-electronic banking channels. These three variables are sequentially followed by; consumers in white-collar occupations, consumers with a postgraduate degree, consumers with a bachelors degree, unemployed consumers, consumers with a diploma degree, the service quality dimensions, consumers that reside in a rural or farm area, consumers in blue-collar occupations, and consumers with an annual income of $19,999 or less.

Results from the one-way ANOVA and independent sample t-test indicate that when consumers select between electronic banking and non-electronic banking, there are differences in the importance of the variables in relation to consumers' age group, gender, occupational status, annual income, and area of residence.

This study expects to make several contributions to the marketing literature in both the academic and managerial sectors of the banking industry. The most notable contribution will be a better understanding of the consumer decision-making process toward electronic and non-electronic banking, specifically in a New Zealand context. The second contribution is the development of a logit model for improved understanding of how consumers' choose banking channels. This research also identifies new relationships, and provides findings that further support, confirm, or contradict previous studies. Lastly, this research provides insights into the links between electronic banking and consumer decision making, to help provide strategies, recommendations and guidelines for the banking industry.