Behavioural intentions in the Malaysian retail banking industry: an empirical analysis

Abstract

Financial deregulation and rapid technological advancement have lead the world banking industry to a more highly competitive and complex environment. In Malaysia, the competition is not only among the local banks, but also from foreign banks and non-financial institutions. The situation has worsened because banking products and services are identical and homogenous. Given the current conditions, local commercial banks in Malaysia are exposed to customer-switching risk because customers have a variety of financial suppliers to choose from. Therefore, to stay competitive and resilient, bank customer retention is crucial. Many studies show that an increase in customer retention results in increased profitability. The main purpose of this current study is to develop a behavioural intentions model of the Malaysian retail banking industry. Behavioural intentions can act as an indicator for customer retention.

Constructs such as service quality, customer satisfaction, perceived value, corporate image and switching costs are found to be important antecedents of behavioural intentions based on past literature. A hierarchical model is used as a framework to synthesize the effects of service quality, customer satisfaction, perceived value, corporate image and switching costs on the behavioural intentions of retail bank customers. To date, no published empirical research has identified using a hierarchical model, the primary and subdimensions of retail bank service quality and linked these dimensions to behavioural intentions. This research seeks to fill this conceptual gap by examining the relationships between all five important marketing constructs (service quality, customer satisfaction, perceived value, corporate image, switching costs) and favourable behavioural intentions. All relationships are tested simultaneously in a single model.

Data sets were collected from the bank customers of two commercial banks in the Klang Valley area, Malaysia, during October, 2011. The sample frame included Malaysians who were 18 years and above. Two techniques were used to analyse the data: exploratory factor analysis and structural equation modelling. The results of this study support using a hierarchical and multidimensional approach for conceptualising and measuring customers’ perceptions of service quality in the retail banking industry. In addition, the findings illustrate that customer satisfaction is an important determinant of behavioural intentions followed by switching costs, corporate image, and perceived value. The findings also indicate that there is no direct relationship between service quality and behavioural intentions. However, customer satisfaction mediates the relationship between service quality and behavioural intentions. Service quality, perceived value, corporate image are three important antecedents of customer satisfaction, with the strongest being service quality. Service quality is also an antecedent of perceived value, corporate image, and switching costs.

The findings contribute to the services marketing theory by providing additional insights into behavioural intentions, customer satisfaction, perceived value, corporate image, switching costs, service quality, and the dimensions of service quality. Also, the findings will provide Malaysian bankers with empirically-based insights into service quality and holistic ideas for assessing and improving service quality, in order to induce greater customer satisfaction, increased perceived value and improved corporate image, all of which will help to create positive behavioural intentions. Finally, the hierarchical model used to evaluate service quality will help bank managers to assess bank service quality at the overall, primary and subdimensional levels.