Effects of Perceived Value and Trust on Customer Loyalty towards Foreign Banks in Sabah, Malaysia

Abstract

Liberalization of the Malaysian banking industry has attracted a number of foreign banks to set up branches in Malaysia providing competition to the local banking industry. Foreign banks such as Standard Chartered, HSBC, OCBC, and Bangkok Bank have been here for decades and despite facing various restrictions, they have survived and remained competitive until today. Newer banks such as Al-Rajhi Bank and Kuwait Finance House have also joined in this increasingly competitive landscape. This study focused on factors influencing customer loyalty in foreign banks at Kota Kinabalu, Sabah. Previous studies have shown that customer loyalty played an important role in determining the competitive advantage of banks. This study examined the level of customer loyalty towards foreign banks in Malaysia and investigated whether factors such as perceived value and trust influenced loyalty. Data were obtained from 239 customers of foreign banks located in Kota Kinabalu, Sabah who responded to a self-administered survey questionnaire. The analyses showed that customer loyalty is relatively above average, at a mean of 4.86 (based on a seven-point Likert scale) and that both perceived value and trust showed positive and significant effects on customer loyalty. Implications of the study are discussed and suggestions for future research are

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