FACTORS INFLUENCING CUSTOMER SATISFACTION IN BANKING SERVICES

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FACTORS INFLUENCING CUSTOMER SATISFACTION IN BANKING SERVICES

Dr. M. JEEVARATHINAM,

ASSISTANT PROFESSOR, DEPARTMENT OF COMMERCE SRM INSTITUTE OF SCIENCE AND TECHNOLOGY

Abstract

In the early days the main banking role of the goldsmiths was to keep in custody other people’s money and lending a part of it. Gradually, these functions were extended, and others were added. As a effect, the essential of commerce upon banking has become so great that in the modern money economy, the cessation, even for a day or two, of the banker’s activities would completely paralyze the economic life of a nation. Now-a-days, the bankers have to deal with many matters. They serve as custodians of stocks and shares and other valuables. Imports into and exports out of a country are financed by banks and documents relating to the goods so imported and exported, at one time or another, pass through the hands of the bankers. They have to deal not only with bills of exchange, but also with bill of lading, railway receipts, warehouse warrants and receipts, marine insurance policies and various other documents. As bankers, they advance money on securities, and issue letters of credit, travelers’ cheque, credit cards and circular notes to customers wishing to travel abroad, as also to effect purchases and shipment of goods.The overall aim of this research work was to examine backgroundsas well as extend the body of knowledge and understanding regarding customer satisfaction on primary and technology service offered by public sector banks.

Keywords:Backgrounds, customer satisfaction, banking service 1. Introduction

Indian Banks has to revisit their products and the strategy for cuisine customer service keeping in view the tastes and requirements of their customers of all type in the competitive environment. The more highly developed a country is, the greater is the instrumentality of the banker utilized to carry through commercial transactions (Ramesh Chander Jindal 2010).

The development of new technologies has intensely changed the way in which customers interact with service providers. Indian banking sector has to face the most crucial challenge, customer satisfaction. It is an important issue for all marketers. Customer satisfaction is considered the essence of success in today’s highly competitive world of business. A number of studies, clearly, point out that the new generation banks focus on the customer understanding his needs, pre-empting him and consequently delighting him with various configurations of benefit and a wide portfolio of products and services (Gani and Mustaq, 2003).

A good customer service in banks should have three basic tenets – courtesy, accuracy and speed (Ganesh, C and Varghese, M.E., 2003).

2. Review of literature

AndraBrige (2006) studied the bank/customer relationship experience in the Latvian banking system and the impact of developing technology in banking. The author found that satisfaction with services provided is not the only factor that influences customer loyalty and a great impact on loyalty level is made by other factors, such as: image, prestige, word of mouth also.

Raj Kumar (2008) said that the findings of his study coincide with the observations of earlier researchers in the area of customer satisfaction. In his study the author has identified the customer satisfaction

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variables and its impact on customer satisfaction and established the relationship between customer relationship management and customer satisfaction.

A customer satisfaction is strongly linked to impressions of performance, satisfaction and switching barriers are assumed to be the most important antecedents of repurchase behaviour, or the intension to repurchase a good or service (Sharma, 2008).

Hence through this study an attempt is made to fill the gap by studying the factors or antecedents influencing customer satisfaction inbanking service.

3. Justification of the research

Extensive work has been done on customer satisfaction in banking industry in India and abroad. A thorough review of literature on customer satisfaction in banking industry shows that there is hardly any study which could analyse the extent to which the geographical locations of the customers influence their perception of banking services in banks. Further, no study was found in the literature which could compare the satisfaction level of the customers of public sector bank branches in Tamil Nadu. Secondly, no study was found in the existing literature which could identify the gaps in geographical coverage of banking services across different locations. Therefore, the present study seeks to fill these gaps.

4. Research Aim

The fundamental background and problem statement of the study, the goal of this paper is threefold.

First, the research tries to develop a model to understand customer satisfaction through the antecedents of banking service. Second, the research intends to empirically test the model. Finally, the final aim of the study is to record the contributions made through this study.

5. Objectivesof the research

The objectives of the study are listed as follows:

1. To examine the conceptual model concerning the relationships between the antecedents of primary and technology service of public sectors banking.

2. To find out the dimensions affecting the customer satisfaction in service provided by banking sectors.

3. To make comparative analysis of customer satisfaction in primary and technology service of public sectors banking.

6. Proposed Model

Figure 1: Proposed Conceptual Modal

Source: Developed for the study

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The research model proposed by this researcher, as presented in Figure 1, extends primary banking service based on prior research on customer satisfaction. The model posits that customer satisfaction on primary service offered by public sectors banks is jointly determined by deposits and loans service (DLA). Diagram upon other researchers’ recommendations to include factors in the model to examine their effects on core beliefs of primary banking, the proposed model incorporates the backgrounds of deposits and loan service based on previous studies that have extended the primary banking. External variables incorporated in the model include technology banking service such as Mobile banking service (MBA), automatic teller machine (ATM) and net banking service (IBS).

Among these factors, deposit and loan service (DLA) is proposed to have a direct influence on customer satisfaction (CS) while other factors such as Mobile banking service (MBA), automatic teller machine (ATMA) and net banking service (IBS) are proposed to have direct effect on CS and DLA. The model also proposes that the beliefs constructs i.e. bank personnel and system administrator (BPSA) and problem faced by customer (PFBC) are mediate and moderate variable of the effects of the antecedents of beliefs on customer satisfaction on primary and technology banking services.

7. Research Hypotheses

Based on the relationship between the six constructs namely, deposit and loan service, mobile banking service, automatic teller machine, Bank personnel and system administrator service, problem faced by customer and customer satisfaction five research hypotheses were established. The research hypotheses are presented in Table 1.

Table 1

Construct Code Name Hypotheses Hypothesized

relationships

Deposit and loans Service DLA H1 DLA → BPA

Mobile Banking Service MBA H2 MBA → BPA

Automatic Teller Machine Service ATMA H3 ATM A→ BPA

Internet Banking service IBA H4 IBA → BPA

Bank personnel and system

administrator service BPSA

H5a H5b

DLS → PFBC DLS → CS

Problem faced by customer PFBC Moderate variable

Customer Satisfaction CS Dependent variable

8. Research Methodology

This researcher engaged a quantitative data collection method using the survey approach to collect data concerning the usage of banking services by proposed customers. The survey questionnaire was created on the basis of previously validated scales and survey instruments. This study used both primary and secondary data for data collection. Second-hand information is obtained through journals, books, magazines, internet sources and various libraries to develop the conceptual model of the study and first- hand information is obtained through questionnaire to test the research model. Questionnaire is pilot tested among 50 respondents. Negligible blemishes were recognized and resolved. The sample size is determined by using sample size calculator. According to the sample size calculator, the sample size for the study is determined as 413, however it was fixed at 415. The sampling method to collect the primary data is proportionate stratified random sampling method.The data were collected from Chennai City. Data analysis for the final conceptual model was performed by Structured Equation Modelling (SEM) using the Analysis of Moment Structures (AMOS) software. The primary intent of this statistical approach is that it allows a researcher to model and predict relationships between constructs in the hypothesized manner.

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9. Structural Model Evaluation and Hypotheses Testing

This section presents results of hypotheses testing. Table 1 shows six hypotheses represented by causal paths (H1, H2, H3, H4, H5a and H5b) that were used to test the relationships between the latent constructs. The latent constructs used in the proposed theoretical model were classified in two main categories: exogenous and endogenous constructs. Exogenous constructs were the deposit and loan, mobile banking, automatic teller machine and internet banking while endogenous constructs were banking personal and system administrator, problem faced by customer and customer satisfaction.

Goodness of fit indices and other parameters estimates were examined to evaluate the hypothesized structural model. Assessment of parameter estimates results suggested that five out of six hypothesized paths were significant. Thus, indicating support for the five hypotheses. These results are presented in detail as follows.

Table 2

Regression estimates of latent constructs

Estimate S.E. C.R. P

Bank personnel <--- Deposit loan .410 .061 6.667 ***

Bank personnel <--- Mobile banking .169 .046 3.702 ***

Bank personnel <--- Automatic teller Machine

.178 .044 4.007 ***

Bank personnel <--- Internet banking .026 .031 .846 .398

Customer satisfaction <--- Bank personnel 1.042 .103 10.152 ***

Problem faced by customer

<--- Bank personnel .193 .084 2.296 .022

Note: Estimate = regression weight; S.E = standard error; C.R = critical ratio, P

=significance value

Results presented in Table 2 indicate that the five out of six hypothesized paths between independent and dependent variables were significant. For instance, the hypothesized path between bank personnel and deposit and loan service with CR value 6.667 (>1.96) was statistically significant (p=0.000). Similarly other hypothesized paths were statistically significant at p =< .05. The hypothesized paths between the bank personnel and internet banking indicated that their t-values did not exceed the cut-off point required for statistical significance. Thus, these paths were not statistically significant.

10. Modifying Structural Model by Removing Non-significant Paths

As discussed in the above, one hypothesis (i.e. H4) out of six hypotheses were statistically not significant and thereby they were rejected. Consequently, the structural model was re-specified by removing one not significant path. This process would possibly provide a better fit to the data. The model was revised in order to achieve parsimonious model that fits the date well. Not significant hypothetical paths i.e. IBA BPA were deleted to get the parsimonious model that adequately fits the data. Revised structural model is shown in Figure 1 and results are presented in Table 3 and 4

Table 3

Results of revised structural model Construct Code

Name

Hypo theses

Relationships (positive)

Standardized Regression

Weight (β) CR Supported Deposit and loans

Service DLS H1 DLS → BPSA .570 7.068 YES***

Mobile Banking

Service MBS H2 MBS → BPSA .284 3.679 YES***

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Automatic Teller

Machine Service ATM H3 ATM → BPSA .247 3.967 YES**

Bank personnel and system administrator

service

BPSA

H5a H5b

BPSA → cs BPSA → PFBC

.856 .120

10.141 2.312

YES***

YES**

Problem faced by

customer PFBC Moderate variable

Customer

Satisfaction CS Dependent variable Table 4

Goodness of fit indices revised structural model

Absolute fit measures Incremental fit

measures

Parsimony fit measure

χ² Df χ²/ df GFI RMSEA NFI CFI AGFI

Criteria 1< χ2/df< 3 ≥0.90 <0.05 ≥0.90 ≥0.90 ≥0.90

Obtained 305.540

116 1.898 0.931 0.047 0.952 0.977 0.910

Note: χ2 = Chi-square; df = degree of freedom; GFI = Goodness of fit index; RMSEA = Root mean square error of approximation; NFI = Normated fit index; CFI = Comparative fit index; AGFI

– Adjusted goodness of fit index

In testing the revised structural model, results shown in Table 3 indicated that all of the hypotheses i.e.

H1, H2, H3, H5a, and H5b were statistically significant. The results suggested that standardized estimates and critical ratio values for these hypotheses (β = 0.507, CR = 7.068; β = 0.284, CR = 3.679; β = 0.247, CR = 3.967; β = 0.856, CR = 10.141; β = 0.120, CR = 2.312; respectively) indicated statistical significance and thereby showing support for these hypotheses.

Furthermore, the fit indices presented in Table 4 indicated that the hypothesized structural model provided the better fit to the data after deletion of not significant paths (n=1). Although the likelihood ratio chi-square (χ2 = 305.540; df = 116; p = .000) was still significant; however, other fit measures showed that the model was adequately fit to the observed data. The absolute fit measures i.e. GFI and RMSEA were 0.931 and 0.047 respectively indicating good fit of model, incremental fit measures i.e. NFI and CFI were 0.952 and 0.977 respectively, which were above the minimum requirement hence showed adequate fit and the parsimony fit measure of AGFI was 0.910, which also was above the cut-off point (i.e., > 0.9). In addition to these indices, the χ2 / df = 1.898 was within the threshold level (i.e., 1.0 < x2 / df< 3.0), which supported these findings. In summary, the results suggested that after removing one not significant paths i.e. H4, a best parsimonious model was achieved. Besides, the revised model adequately fit the observed data. The final revised model is shown in figure 2

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Figure 2

Confirmed Conceptual Framework

Source: Developed for the study 11. Research contributions

This research study has made a number of contributions to the body of knowledge. The contributions of this study are explained as follows.

First, primary banking and technology banking service literature shows the scarcity of empirical research of the determinants of individuals’ satisfaction on banking services. This study examined the viability of the which was established in developed economy settings, in explaining a similar behaviour in developing economy settings. Thus, the results of present research contribute by filling this important gap by taking on a theory-based empirical investigation of the determinants of customer satisfaction on primary and technology service offered by public sector banks individuals in the context of developing economies.

Second, this study investigated the effect of primary service (i.e. DL), technology service (i.e. mobile banking, automatic teller machine, internet banking) on towards satisfaction on banking service model.

The validated model contributes better and more systematic understanding of banking service offered by public sector banks.

Third, previous research mostly focused on students or office workers; however, this study examined the model in real world settings with sufficient sample of common internet banking users, who involved businesspersons, government sector employees, common citizens and private sector employees.

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Fourth, this study applied sophisticated statistical techniques, i.e., structural equation modelling (SEM) using AMOS v.20. SEM allows simultaneous evaluation of the adequacy of the measurement model and the causal model that was proposed to investigate the customer satisfaction. The measurement model validated the primary and technology constructs measures as developed by their authors. In addition, structural model showing empirical support for the interrelationships between the important constructs, contributed to the knowledge in technology banking service and primary banking service satisfaction in particular.

Finally, another contribution to the research on satisfaction is the identification of some important determinants of primary and technology service. The results demonstrated that customer satisfaction is determined in order of importance by primary and technology service. Whereas customer satisfaction is determined in order of importance by by ATM, Internet banking, Mobile banking.

12. Conclusion

This research explored customer satisfaction in banking services. By developing a conceptual model, this study contributed to the theoretical advancement of the concept.In order to improve accessibility, banks management together with bank professionals should provide adequate support to help potential customer satisfaction effectively. Such efforts will assist potential customer to satisfy the banking service more easily, and consequently, will increase their willingness to use the primary and technology service offered by banking sector.

References

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4. Gani A and Mushtaq A Bhat, “Service Quality in Commercial Banks: A Comparative study”, Paradigm, Volume 7, No.1, Jan – June 2003, pp. 24 – 33

5. Ganesh C. and Varghese M E, “Customer service in banks: An empirical study”, Vinimaya, Volume 24, No.2, pp.14-26, 2003

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