On the Factors Influencing Banking Satisfaction and Loyalty: Evidence from Denmark

This paper critically examines the antecedents of customer satisfaction and loyalty within the Danish retail banking sector, emphasizing the impact of competent personnel, bank ethics and reputation, and switching barriers. Utilizing a robust conceptual model and empirical data from 1,132 Danish bank customers, the study elucidates how intangible factors and psychological barriers shape customer retention and satisfaction in a highly digitalized and concentrated market. The findings highlight the primacy of personnel competence and ethical reputation as drivers of satisfaction and loyalty, while digital touchpoints and price factors are relegated to hygiene status, reflecting the sector’s maturity and consumer expectations.

The Danish retail banking sector has undergone profound transformation, characterized by rapid digitalization, market consolidation, and declining customer satisfaction and loyalty. Nearly all Danish bank customers now utilize digital banking channels, with 98% engaging through mobile or online platforms in 2024. The number of banks has plummeted by approximately 70% from 1990 to 2019, resulting in heightened market concentration and diminished customer loyalty. External shocks—including the 2008 financial crisis, the 2018 Danske Bank money laundering scandal, and the COVID-19 pandemic—have further eroded trust and satisfaction. Despite these challenges, scant research has explored the shifting drivers of customer loyalty in this context, particularly the interplay between digitalization, ethics, and service quality.

Drawing on SERVPERF and service management literature, this study posits a model where customer satisfaction and loyalty are influenced by seven antecedents: competent personnel, bank ethics and reputation, website functionality, perceived security, convenient location, interest rates, and switching barriers. Hypotheses are grounded in the premise that personnel competence and ethical behavior are central to building trust and satisfaction, while digital touchpoints serve as hygiene factors in a market where security and usability are universally high. The model also integrates cognitive dissonance and two-factor theories, proposing that switching barriers and tangible factors (e.g., location, interest rates) exert nuanced effects on satisfaction and loyalty.

Data were collected via a convenience sample of 1,132 Danish bank customers, leveraging online surveys distributed by business students to enhance demographic diversity. The sample skews toward younger, female, and lower-income respondents, reflecting the recruitment strategy. Structural equation modeling was employed to test the proposed relationships, with model fit indices (CFI, GFI, NFI > 0.90; RMSEA < 0.06) confirming robust psychometric properties. Eight measurement items with factor loadings below 0.7 were retained to preserve construct validity, as recommended by contemporary methodological standards.

Competent personnel emerged as the most influential driver of customer satisfaction (β = 0.25, p < 0.001), underscoring the enduring importance of human interaction even in a digital-first environment. Bank ethics and reputation also significantly predicted satisfaction (β = 0.10, p < 0.05), with these factors strongly intercorrelated (r = 0.42, p < 0.001), suggesting that personal contact shapes perceptions of institutional integrity. Switching barriers exerted a substantial positive effect on both satisfaction (β = 0.42, p < 0.001) and loyalty (β = 0.16, p < 0.001), supporting the notion that psychological and practical costs deter churn and foster cognitive alignment. Conversely, website functionality and security did not significantly influence satisfaction, reflecting their status as hygiene factors in a market with uniformly high standards. Convenient location and interest rates were negatively associated with satisfaction and loyalty, indicating that price sensitivity and physical access are less salient in a digital, parity-driven market.

The study advances theory by refining Herzberg’s two-factor model for digital services, demonstrating that digital touchpoints and security act as hygiene factors rather than motivators in advanced markets. The dual impact of switching barriers—on both satisfaction and loyalty—extends cognitive dissonance theory, revealing how locked-in customers rationalize their satisfaction to align with behavioral inertia. Managerially, the findings suggest that Danish banks should prioritize employee training and ethical branding, as these intangible factors are key differentiators in a homogeneous, digital market. Tangible factors such as location and interest rates should be managed to prevent dissatisfaction, but are unlikely to drive loyalty. The absence of gender or generational differences implies that marketing strategies can be broadly targeted, while the limitations of convenience sampling call for future research with stratified samples to enhance generalizability.

This study provides a nuanced understanding of customer satisfaction and loyalty in the Danish retail banking sector, highlighting the centrality of competent personnel and ethical reputation as drivers of retention. Digitalization has transformed customer expectations, rendering digital touchpoints and security as baseline requirements rather than sources of competitive advantage. Future research should explore the role of service failures and cultural variations in shaping ethical perceptions and loyalty, while managers must focus on fostering an ethical climate and investing in human capital to sustain customer relationships in an increasingly digital and concentrated market.

WORDS TO BE NOTED -                                                                                                                          

1. 
   Conditions, events, or factors that precede or influence a particular outcome or situation.

2. 
   Makes clear or explains something in detail.

3. 
   The process of converting information into digital format, or the adoption of digital technologies by businesses and society.

4. 
   The act of combining or merging things into a single, more effective or coherent whole, such as companies in a market.

5. 
   Present, appearing, or found everywhere.

6. 
   Gradually worn away or diminished, often referring to trust, satisfaction, or value.

7. 
   The way in which two or more things have an effect on each other; interaction.

8. 
   Proposed explanations made on the basis of limited evidence as a starting point for further investigation.

9. 
   Elements in a work or service environment that, if absent, cause dissatisfaction, but if present, do not necessarily motivate or increase satisfaction.

10. 
    Psychological discomfort experienced when holding two or more conflicting beliefs, attitudes, or behaviors.

11. 
    Characteristics of a measurement tool (such as a questionnaire) that relate to its reliability, validity, and overall quality.

12. 
    The extent to which a test or measurement tool accurately measures the theoretical construct it is intended to measure.

13. 
    Characterized by subtle differences in meaning, expression, or sound; not obvious or simple.

14. 
    The extent to which findings from a study can be applied to other situations, groups, or contexts.

15. 
    Of the same kind or nature; uniform in composition or character.

PARA SUMMARY-                                                                                                                                

This study critically examines factors influencing customer satisfaction and loyalty in the Danish retail banking sector, emphasizing the primacy of competent personnel and bank ethics. Utilizing a robust conceptual model and data from 1,132 customers, the research elucidates how intangible elements and psychological switching barriers shape retention in a highly digitalized and concentrated market. The findings reveal that competent staff and ethical reputation are the most influential drivers of satisfaction, while digital touchpoints and price factors serve as mere hygiene factors—expected rather than valued. Switching barriers significantly bolster both satisfaction and loyalty, reflecting cognitive dissonance in locked-in customers. The research employs structural equation modeling, confirming strong psychometric properties and construct validity. Managerially, the results suggest banks should focus on employee training and ethical branding, as tangible factors like location and interest rates are less salient. The study’s nuanced findings underscore the need for future research to address service failures, cultural variations, and improve generalizability through stratified sampling.