Factors affecting retention of customers who are users of computerized applications on the Internet: The case of online banking

The proliferation of web-based electronic commerce has provided consumers with an additional role as end users of computerized applications. This change undermines the ability of businesses to retain their customers (Kalakota and Whinston, 1996) since certain characteristics of the Internet cause a reduction in customers' search costs, reduce barrier of entry, and diminish distinctiveness of firms.; Effective customer retention is critical to success on the Internet. First, retention of online users will let firms operating on the Internet grow in size and popularity by taking advantage of network externalities (Katz and Shapiro, 1992). More importantly, retention of customers leads to profitability (Anderson and Sullivan 1990; Fomell and Wemerfelt 1987, 1988) and cost-effective expansion (Page, et al., 1996).; Despite the rapid adoption of the Internet, little understanding of customer retention in the web-based electronic commerce context has been documented in the literature. Therefore, the objectives of this research are (1) to develop a model of determinants of retention of customers who are users of online web-based applications, and (2) to examine the effects of these determinants on customer retention.; This study modifies the commitment-trust theory (Morgan and Hunt, 1994) of relationship marketing by adding unique aspects of MIS (i.e., user empowerment and perceived security) to predict customer retention. A large financial institution with an established online banking operation participated in this study, and a field survey of its online banking customers was conducted. Results from statistical analyses of this survey show that relationship commitment and trust are central to retention. These analyses also indicate that relationship termination cost and user empowerment are precursors of commitment, while shared value, communication, and perceived security are precursors of trust.; Research findings suggest that there is no fundamental difference between retention factors in traditional business settings and retention factors in e-commerce settings. Trust is found to be a stronger predictor of retention than commitment. For IS professionals, these findings can be used in the design of web-based applications that strengthen customer retention. For IS researchers, this study extends beyond the mainstream adoption-use research and calls for research emphasizing the management of end-user relationships in the web-based electronic commerce context. Finally, this study also enriches the understanding of two IS constructs: user empowerment and perceived security.