midst of increasing standardization of financial products and services, demand can be expected to react favorably to innovation designed to anticipate the changing needs of customers in technologically diverse market segments (such as online asset trading).

For a quantitative comparison of efficiency along different strategic directions in market development, we follow [ 1] and calculate marginal rates of substitution (MRS) from the empirical results in Table 2. Assuming that a linear approximation of the consumer satisfaction function is valid, we can apply the standard formula estimating MRS_ij=b_j/bi to obtain the data in Table 3, determining in particular MRS_USE,EOU=b_EOU/b_USE=0.138/0.100= 1.380 and MRS_USE,REL=b_REL/b_USE=0.146/0.100= 1.460. Should a cost-benefit analysis be required to establish priorities in market development under the core framework, these calculations would supply data for one side of the decision. For example, if the difference between MRS_USE,EOU= 1.380 and the (given) relative cost of enhancing service quality in the direction of USE and EOU is greater than the difference between MRS_USE,REL= 1.460 and the (given) relative cost of enhancing quality in the direction of USE and REL, it would be more efficient for the bank to incrementally expand online services by exploiting the first opportunity as against the second. (In economic theory, MRS comparisons of this type can be introduced independently from output price.)

 

CONCLUSION

The potential exists for Internet banking to become significantly more important in the increasingly tech-nology- and information-basedglobal economy. Financial institutions must therefore deliver ever-bet-ter service quality in their online operations and products. Given that a large number of service-quality attributes can potentially affect consumer attitudes toward Internet banking, the theory of bounded rationality suggests that the high decision cost entailed in the pursuit of service-quality enhancement in each and every direction would be reduced if the opportunity set is rationally made smaller. To this end, we have proposed a framework under which service-quality attributes are reduced to a core subset on the basis of both analytical and empirical considerations. The resulting core framework can then be applied to decision-cost-effective and empirically prioritized management in Internet banking, especially with regard to market development.

Significant analytical and statistical grounds exist to justify the introduction of perceived usefulness, ease of use, reliability, responsiveness, security, and continuous improvement into the core subset. The idea of empirically testing bounded-rational model construction can also be extended to evaluate re-specification of the core subset in response to shifts in the business and/or technological environment. If bank-user perceptions and preferences are found to change with regard to certain core attributes, empirical results obtained in this exercise can be exploited by marketing managers to attract more customers to online banking. ^c

 

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ZIQI LIAO ( [e-mail]) is an associate professor in the
Department of Finance and Decision Sciences at Hong Kong Baptist
University, Hong Kong, China.
MICHAEL TOW CHEUNG ( [e-mail]) is an associate
professor in the School of Economics and Finance at the University of
Hong Kong, Hong Kong, China.

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