Effects of customers’ personal characteristics on their online banking use in New Zealand
Keywords: personal characteristics, customer behaviours, online banking, New Zealand
Stage-setting
The term ‘online banking’ has become a part of everyday life using which, people are able to make payments, transfers and deposits and receive updates on their personal financial status. Online banking use has become pervasive due to its provision of complete control over personal banking accounts.
The relevance and importance of customer-focussed online banking has been studied extensively (Adapa & Roy, 2017; Berenguer et al., 2016; Hanafizadeh, Keating, & Khedmatgozar, 2014; Komulainen & Saraniemi, 2019; Lee, Chang, Lin, &
Cheng, 2014; Shaikh & Karjaluoto, 2015; Veríssimo, 2016). While customer behaviours in the online banking environment is seen as a top priority for banks, such information is not always easy to capture. It is often a complex task to understand bank customers and leverage this understanding to harness customer satisfaction and loyalty.
New Zealand stepped into the world of online banking in 1996. The ten main New Zealand banks offering online banking are ANZ Bank NZ, ASB, BNZ, Co-operative Bank, Heartland Bank, HSBC, Kiwibank, SBS, TSB and Westpac. Since this time, online banking has experienced year-on-year growth in the country, and around 89%
of the New Zealanders were active users of the Internet in 2018, a share that includes accessing online bank accounts.
The need for long-term digitisation in the banking sector has increased manifold during the current climate of the global pandemic. This article provides few key lessons to help banks understand how customers choose, compare, make or break relationships with their banks. Without the implementation of customer-focused marketing strategies based on informed decision-making about customers’
behaviours, usage patterns and perceptions, banks cannot successfully avail themselves of the benefits of the online banking channel (Sarel & Marmorstein, 2007).
The contactless banking environment requires banks to form stronger relationships with who they serve in order to understand their needs and respond to changing customer behaviours .
This article reports the findings from a cross-sectional market research survey that commenced between March and June 2018. Using the online survey, we examined how personal characteristics shape customers’ usage of online banking, and banks may use this information for positive banking experiences and greater customer satisfaction. Six specific customer characteristics i.e. age, gender, marital status, education, employment and marital status were studied in terms of recognizing their effects on customers’ thoughts, attitudes and perceptions of online banking.
Motivation
Uncovering customer psychology and behaviours has fast become the main instrument in serving them. The motivation behind the collection of customer analytics is to keep customers happy and satisfied with timely, relevant and well-anticipated products and services.
In an effort to make bank marketers and policymakers realize the importance of gaining customer insights and studying the thought processes and emotions behind consumer decisions, this study captures and interprets customers’ demographic effects on their perceptions. Using such knowledge and insights, marketers can effectively reach out to their target customers and improve their marketing strategies.
Methods and procedures
A total of 575 banking customers undertook the online survey and the response rate was 75%. The respondents for the online survey were recruited using snowball sampling method where we recruited participants from our personal, social and professional networks who then recruited future participants, like a rolling snowball.
Table 1 summarizes the demographic composition of online survey respondents and interview participants.
Table 1: Demographic composition (%) of online survey and interview respondents
Interview
respondents (%)
Online Survey respondents (%) AGE
15-19 years 19.2 4.0
20-29 years 3.8 22.5
30-39 years 26.9 25.1
40-64 years 26.9 38.7
65+ years 23.1 9.8
GENDER
Females 61.5 66.9
Males 38.5 31.2
EDUCATION
High school completion or equivalent 7.7 16.2
Certificate/trade qualification/diploma 15.4 19.3
Bachelor 11.5 27.8
Master 23.1 22.3
Doctorate 30.8 10.9
Others 11.5 3.5
EMPLOYMENT STATUS
Not currently in paid employment 3.8 8.1
Paid full-time 42.3 44.1
Paid part-time 26.9 10.9
Retired 3.8 6.3
Self-employed 15.4 10.6
Student 7.7 20.0
HOUSEHOLD INCOME
$40,000 or less 30.8 24.5
$40,001 - $70,000 15.4 20.0
$70,001-$100,000 15.4 17.2
$100,001 or more 38.5 25.0
MARITAL STATUS
Never Married 26.9 29.0
Married/partnered 61.5 60.6
Divorced / Separated 8.0 7.9
Widowed 3.8 2.6
N 26 575
Data were analysed using a range of analytical techniques and methods to test the hypotheses and understand data properties. Here, we discuss the main findings followed by discussion and conclusions.
Top three reasons of New Zealanders’ online banking use
Findings related to reasons for online banking use show the top three reasons were payments related i.e. transferring money between accounts, paying bills and paying other people. This means banks should focus its positioning strategies on reinforcing the convenience and accessibility of the online channel in enabling cashless payments.
People use branch banking for services not available online
The four most frequently cited reasons for visiting a branch were depositing cash, dealing with foreign currency, opening new accounts and ordering new debit/credit cards. It was noted the top two reasons were banking needs that cannot be fulfilled on-line.
COVID-19 has reinforced the need for banks and other financial institutions to focus on the migration towards online channels including touchless and cashless payment methods. With most branches being either temporarily closed or operating during limited hours, banks will have to encourage more customers towards digital platforms, thereby improving its online presence to decrease people’s reliance on in- branch services. Concerns for health and safety and the probability of virus transmission in the communities have compelled financial institutions to create room for innovative banking solutions using digital platforms to reduce person-to-person contact. The use of live web chat, SMS messaging, email and AI chatbots will result better digital customer experiences and customers’ need for personalized service can be fulfilled without the need for interacting with the branch staff.
18%
17%
17% 17%
11%
9%
6%5%
Common reasons why people use online banking
Transfer money between my accounts Make bill payments Pay other people Get an account balance
View or print electronic statements Manage my credit and debit cards
Open new accounts Make tax payments
Figure 1: Why bank customers use branch banking?
Branches build relationships: importance of human contact
To most of the survey respondents, human aspect of branch banking was critical.
This was a common viewpoint irrespective of demographic composition, which indicates users’ appreciation of the interactional role of branches in building and maintaining bank-customer relationships. From the interviews, we find branch-based interactions reinforce customer trust and gives them social interactional opportunities more than other assurances. Having a real person managing their accounts and supplying information and advice makes many customers feel valued and satisfied with their banks.
22%
18%
15%
12%
11%
11%
11%
Reasons for branch banking
Deposit cash
Deal with foreign currency Open new account(s) Order new debit/credit card(s) Withdraw cash
Others
Obtain home loan advice, information or application
Figure 2: Importance of human contact (personal interactions) for bank-customer relationships
Men are likely to be more interested than women in learning more about online banking features
Our analysis shows most respondents were generally interested to learn more about online banking however, the inclination of male users was found to be greater than the female users.
Most interview participants reasoned men and women have now become integral parts of the country’s workforce, and their reasons for using the online banking channel will become similar due to equal employment responsibilities and other economic opportunities.
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
180.00%
200.00%
Very imp Imp Neutral Unimp Very unimp
How important is human contact for banking relationships?
15-19 years 20-29 years 30-39 years 40 to 64 years 65+ years
Figure 3: Gender and interest in learning new things
Education may impact experience of using the online channel not its actual use While education, as a socio-economic characteristic, combines with age in affecting the experience (in years) of online banking use, it does not have any other significant effects. This moderating relationship between age and education shows users become more experienced with the channel use with increasing age however, less educated older people are likely to be more experienced than highly educated older people. On average, the results show people with a Bachelor’s degree as their highest qualification at any age group report being more experienced with digital banking platforms than people with other educational qualifications. Similarly, the effects of age and gender on learning interest is moderated by how educated a person is.
Education does not appear to be powerful in affecting online banking use as a standalone variable but its role in moderating the relationship between online banking and the other characteristics with respect to customers’ learning propensity and their experience with the channel, is noteworthy.
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Definitely Very Probably
Probably Possibly Probably Not
Definitely Not
Not Sure Are you interested in learning about new apps or features for better
services?
Male Female
Figure 4: Age and education on experience (in years) with online banking use
Marital status and domestic money management practices
An inclination towards joint decision-making practices in married or cohabiting households did not surprise us. Couples tend to pool in financial resources for greater financial satisfaction and thus, joint accounts are exceedingly seen as a system of domestic resource allocation. Banks need to take this information into account and ascertain how financial autonomy and separateness work in New Zealand households and how banks can act proactively in offering the right solutions to these households at the time they need it. In studying marital status effects, we obtain the interviewees’
personal experiences where they talked about gender differences but also acknowledged such differences may be less pronounced in single households as compared to married households.
Personal characteristics affect customer perceptions
We find the personal characteristics do not only affect behaviours in the online banking environment, but they also shape how customers perceive its use. Overall, the findings indicate customer perceptions of online banking revolved around the channel’s convenience and accessibility, and its comparability with the branch-based
0 5 10 15 20 25 30 35 40
How long have you been using online banking?
Not more than 2 years More than 2 years but less than 10 years
More than 10 years Do not remember
banking model. At different levels of age, household income and marital status, users tend to have different banking needs and the level of support they expect in making financial transactions.
Issues of security and trust in online banking systems remained important areas where customers expect improvements. The interviewees indicate their perceptions of spending money were influenced by the funds available to them in their online banking account. In exploring attitudinal tendencies, we observe a strong predictive power of age in determining how the younger and the older people
perceive things differently. Perceptions around personal interaction with bank staff exist because of two main reasons: need for socialising and ensuring secure transactions by dealing with a real person. The security of online banking channel remains a hugely debated topic regardless of users’ demographic composition. The insights suggest online banking may not be the reason why most customers would switch their banks; however, the need for better customer services was emphasized.
Discussion and future implications
An examination of the key findings reiterates how customers’ use of online banking tends to derive from shifts or changes in their age, gender, marital status, education, employment or household income. From the interviews, we ascertain interviewees’ connection with their banks intensifies at certain times of their lives, triggered by events such as marriage, new job, or retirement. At different life trajectories, customers want their banks to proactively plan and develop products sets that can appeal to customer needs. This shows banking cannot depend on a one‐size‐
fits‐all model due to different customer behaviours in different circumstances (He, Ho,
& Xu, 2020; Watson, 2016).
Decoding the processes behind customers’ actions and thoughts is an important task in today’s evolving marketplace. Banks need to avail the evolving customer insights to understand how customers want their experiences to look like and how banks and customers can engage the digital channels for mutually beneficial interactions (He et al., 2020; Liébana-Cabanillas, Muñoz-Leiva, & Sánchez- Fernández, 2018). Banks and other financial institutions will have to redesign their processes and simplify their products sets to reflect holistic understanding of their customers. In this way, this study serves as a reminder for banks to seek ways to foster bank-customer relationships and develop better marketing strategies.
Conclusion
Without an adequate understanding of how customers behave in the online banking environment and how they perceive its usefulness, banks and financial institutions will not be able to fully understand key market characteristics, let alone predicting the changes that occur within the markets over time. In an effort to attract more customers towards digital platforms, banks need to critically address issues of trust and security while taking care of the elderly and the vulnerable populations. For successful market segmentation in 2020 onwards, the uniqueness and distinctiveness of banking customers across the world must be acknowledged and investigated.
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