The determinants of customer satisfaction on banking services the case of commercial banks in ho chi minh city

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE DETERMINANTS OF CUSTOMER SATISFACTION ON BANKING SERVICES: THE CASE OF COMMERCIAL BANKS IN HO CHI MINH CITY By NGUYEN THANH NIEN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, MAY 2011 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS V I E T N A M N E T H E R L A N D S PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE DETERMINANTS OF CUSTOMER SATISFACTION ON BANKING SERVICES: THE CASE OF COMMERCIAL BANKS IN HO CHI MINH CITY u p e r v i s o r : A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN DEVELOP.MENT D r ECONOMICS C A O B y N G U Y E N H A O T H I T H A N H N I E N H O A c a d e m i c M I N H S C H I C I T Y , M A Y 1 CERTIFICATION “I certify that the substance of this thesis has not already been submitted for any degree and has not been currently submitted for any other degree And to the best of • my knowledge and belief it does not contain any material previously published or written by another person except where due reference is made in this thesis” Ho Chi Minh City, May 2011 NGUYEN THANH NIEN ACKNOWLEDGEMENT I would like to express my gratitude to all people who gave me the support to complete this thesis First, I would like to show my sincere and deep gratitude to my supervisor, Dr Cao Hao Thi who gave me valuable guidance, comments, advice for the success of my thesis Second, I would like to thank to all lecturers and staffs of the Vietnam Netherlands Programme Third, I also send my gratefulness to my colleagues in the Department of Individual Customer Relationship, Bank for Investment and Development of Vietnam - Transaction Center Branch for their supports during my study Especially, many thanks are respectfully sent to my parents for motivating me to complete the thesis Finally, I give my special thanks to my wife who is always supporting me to finish this research ABSTRACT Nowadays as globalization and liberalization of financial institutions accelerate, competition among banks becomes more intense Therefore, in order to face with ‘, that fi9rce competition, commercial banks in Vietnam in general and Ho Chi Minh City in particular always strive to improve access through expansion of Automatic Teller Machines (ATMs) and branch network; introduce new features for both deposlt and loan products at attractive rate; and develop new electronic banking facilities like telephone banking, home banking, SMS banking and Internet banking However, in reality, there are so many complaints of customers related to the products and services of banks Those show the dissatisfaction of customers, lead to losing customers and cause negative effect on the market share and the profitability of commercial banks The purposes of this research are to determine the main factors affecting customer satisfaction on banking services including basic facilities, convenience, employee competence, the environment of bank, transaction cost; and the relationship between these factors and customer satisfaction The research is carried out by using questionnaires, designed according to five-point Likert scale It is based on a survey of 245 customers in Ho Chi Minh City Data obtained from the customers were used for conducting reliability, factor and regression analysis through SPSS software Research findings show that the most important factors influencing customer satisfaction on banking services are the environment of bank and employee competence, convenience and transaction cost However, this research still has some limitations First of all, data collection is - restricted within a few commercial banks in Ho Chi Minh City only Secondly, " according to the result of survey, majority of respondents are only from 30 to 50 |q years old, may be fail to represent for total the actual situation Finally, this reseaich detem ined the basic factors affecting customer satisfaction on banking services, but there are still lacked of other factors not be identified TABLE OF CONTENTS CHAPTER 1: INTRODUCTION .1 1.1 Problem statement I 1.2 Research objectives .2 1.3 Research questions 1.4 Research scope 1.5 Research structure .2 CHAPTER 2: LITERATURE REVIEW Conceps 2.2 Literature review of customer satisfaction 2.3 Overview of commercial banks in Ho Chi Minh City and the present main banking services 11 2.4 Summary 14 CHAPTER 3: ANALYTICAL FRAMEWORK AND METHODOLOGY .15 • - 3.1 Analytical framework .15 3.2 Research methodology 18 3.2 Research approach .18 3.2.2 Research process .19 3.2.2 Step l : Generation of items 19 3.2.2.2 Step 2: Pilot survey 19 3.2.2.3 Step 3: Survey 20 3.2.3 Measurement scales of the questionnaire 20 3.2.4 The components of questionnaire 22 3.2.4 Open l‘etter .23 3.2.4.2 Specific questions 23 3.2.4.3 Demographic questions 23 3.3 Sampling 24 3.4 Data collection 24 3.5 Statistical methods .24 3.6 The scale testing 25 3.7 Assessment of scale’s uni-dimensionality, discriminant validity and convergent validity .25 3.8 Multiple regression analysis .26 3.9 One-way ANOVA .26 3.10 Summary 27 CHAPTER 4: DATA ANALYSIS AND RESEARCH RESULTS 28 4.l General information of respondents .26 l Type of contact with the bank 28 4.1.2 Age group of customers 29 4.1.3 Gender of customer 30 l Type of ownership of the bank .31 The determinants of customer satisfaction on banking sem³ic rhe case of commercial banks in He Chi Minh City APPENDICES APPENDIX 1: BANKING SERVICES Personal banking serr/ces include main services as follows: - Current and savings accounts consist of: + Current account in VND + Current account in foreign currencies + Savings account in VND + Savings account in foreign currencies Time deposits consist of: + Time deposit in VND + J’ime deposit in foreign currencies + Time deposit in gold ' + Floating rate deposit - Card products consist of: + Credit card + Debit card + Prepaid card - Loans consist of secured loans and unsecured loans Secured loans + Installment loans for house, house-foundation purchase + Installment loans for house construction and renovation + Consumption installment loan - 60 - The determinants of customer satisfaction on banking serv’ices.’ The case of commercial banks in Ho Chi Minh City + Installment loans for business, production and services + Overseas study loan + Automobile loan + Loans secured by certificate of deposit, valued papers + Issuance of domestic letter of guarantee Unsecured loans + Consumption loans for company's staff + Overdraft facility - Treasury services consist of + Currency options + Ciold options • + Foreign Exchange g + Gold custody + Gold trading - Remittance servicc.s consist of: + Outward remittance to domestic banks + Outward remittance to ov'erseas + Inward remittance from domestic banks + Inward remittance from overseas _ + Send and receive money with Western Union + Outward remittance through Western Union - Other services consist of: - 61 - The determinants of customer satisfaction on banking sem•ices The case of commerciol banks in Ho Chi Minh City + Payment service for real estate trading + Electricity bill payment + Mobile phone bill payment + Personal finance consultant Business bank:ing services include main services as follows: - Account services consist of deposits and cash management Deposits + Flexible deposit + Current account + Current account with bonus rates + Upstair savings + Time deposit + Time deposit with flexible rates + Margin deposit Ccish management + Cash collection + Bill collection + Cash payment + Bill payment , + Payroll/Commission services + Centralized account management + Domestic remittance - 62 - The determinants of customer satisfaction on banking services 1’he case of commercial banks in He Chi Minh City + Overseas remittance + Check service - Credit products consist of working capital finance, export finance, import finance, term loan for fixed assets/projects, guarantees, etc Working capital finance + Domestic trade finance + Installment loan for enterprises Export finance + Loans for procurement, reserve + Secured loans by receivables from export documentary by D/A, D/P, L/C Import finance + Import finance + Import finance with import collateral Term loan for fixed assets/projects + Term loan for fixed assets/projects + Automobile loan Guarantees + Domestic guarantees + Civerseas guarantees - Trade services consist of: • + Outward telegraphic transfer (T/T) + Inward remittance + Import collection - 63 - The determinanls of customer satisfaction on banking services.’ I"he case of commercial banks in Ho Chi Minh City + Export collection + Export L/C + Import CAD + Export CAD - Treasury services consist of: + Currency options + Gold options - Other services consist of: + Derivative products - + Domestic letter of credit + Insurance - 64 - The determinants of customer satisfaction on banking services The case of commercial banks in Ho Chi Minh City + Export collection + Import L/C + Export L/C + Import CAD + Export CAD - Treasury services consist of: + Currency options + Gold options - Other services consist of: + Derivative products + Domestic letter of credit ,- + Insurance - 64 - The determinants of customer satisfaction on banking services.’ I’he case of commercial banks in He Chi Minh Cily APPENDIX 2: THE QUESTIONNAIRE OF IN-DEPTH INTERVIEW Dear Sir/Madam, I am Nguyen Thanh Nien, a student of Vietnam - Netherlands Program for MA in Development Economics I ant doing a research on the determinants of customer satisfaction on banking services: the case of commercial banks in Ho Chi Minh City The result of this study is only used for scientific purpose Please feel free to provide your opinions This will significantly contribute in improving customer satisfaction on banking services Your answers and your information will be kept in secret, and presented in general report form Please answer the following questions Thank you very much for your participation To answer this questionnaire, please think of one bank (called bank A) you did transactions Based on the characteristics of this bank A, please answer the following questions: The name of bank A (no need to mention if you feel unfavorable) - For ov•nership, bank A belongs to: O Joint-stock O State-owned O Wholly foreignowned D Joint venture The number of bank A’s operation year from the foundation day: K Under years O From - 10 years O From 10 - 15 years O From 15 20 years O Gver 20 years The determinants of customer satisfaction on banking services.’ I’he case of commercial banks in He Chi Minh Cily - 65 - The determinants of customer satisfaction on banking services The case of commercial banks in Ho Chi Minh Cify APPENDIX 3: THE QUESTIONNAIRE Part 1: According to your level of agreeableness, please tick in the appropriate box for each of the statements below from “1” to “5” (1 = strongly disagree; — disagree; = neutral; — agree; = strongly agree) Please check (X) in only one chosen box Information The factors affect customer satisfaction on banking services as follows Basic facilities l Demand draft facility of bank A is very good Fixed deposits schemes of bank A are very good Money transfer of bank A is very good Locker facility of bank A is very good ATM of bank A is very good Convenience - Debit card of bank A is very good Credit card of bank A is very good Tele-banking of bank A is very good Employee competence Attitude of bank A’s staff is very good 10 P-ofessionality of bank A’s staff is vei y high 11 12 13 The environment of bank Service scape of bank A is very good Parking space of Bank A is very good Dissemination of information of bank A is very good 14 Query handling of bank A is very prompt 15 Networking of branches of bank A is very wide - 66 - O O O O O The determinants of customer satisfaction on banking sem²ices.‘ The case of commercial banks in He Chi Minh City Transaction cost " 16 Loan rate of bank A is very low 17 Deposit rate of bank A is very high 18 Cost of service of bank A is very low 19 Waiting time is the least 20 Time for procedure is fastest Please give your level of satisfaction to bank A 21 I totally satisfy with general services of bank A 22 I totally satisfy with transaction of services, loans facility provided by bank A 23 I totally satisfy with quality of services of bank A O Part 2: Please give us the following information: - Personal information (to be convenient for sending the result of this research to - Full name: Addrcss: Telephone number: Email: Do you come to bank A for individually or business contact? Individual Business Please tell your age group O Under 30 D Over 50 From 30 to 50 Please tell your gender O Male - Female Would you please tell us what can be done to improve customer satisfaction of bank A? Thank you very much for your cooperation! Nguyen Thanh Nien Email: nauyen.thanh.nien@vnp.edu.vn or nienbidv@pmail.com The determinants of customer satisfaction on banking sem²ices.‘ The case of commercial banks in He Chi Minh City - 67 - The determinants of customer satisfaction on banking services The case of commercial banks in He C.hi Minh Cify APPENDIX 4: RESULTS OF PILOT SURVEY 3.1 Reliability analysis of measurement scales Reliability analysis of basic facilities scale Reliability Statistics Cronbach’s Alpha N of Items 758 Item-Total Statistics Scale Mean Scale Variance if Corrected ltem- if Item - Item Deleted Total Correlation Cronbach's Alpha if Item Deleted BF1 Deleted 14.52 4.744 652 670 BF2 14.24 5.125 485 729 BF3 13.88 5.047 489 728 BF4 13.70 4.867 523 716 BFW 14.62 5.261 487 728, Reliability analysis of convenience scale Reliability Statistics Cronbach’s Alpha N of Items 768 Item-Total Statistics Scale Mean if Item Deleted Scale Variance if Corrected ltemItem Deleted Total Correlation Cronbach’s Alpha if Item Deleted - CONI 6.32 1.161 621 678 • CON2 6.00 980 576 727 CON3 6.56 1.027 623 665 ” The determinants of customer satisfaction on banking services.’ The case of commercial banks in Ho Chi Minh City Reliability analysis ofemployee competence scale Reliability Statistics Cronbach's Alpha N of Items 858 Item-Total Statistics Scale Mean if Item Deleted Scale Variance if Corrected ItemItem Deleted Total Correlation Cronbach's Alpha if Item Deleted EC1 3.26 523 763 a EC2 3.58 371 763 a a The value is negative du= to a negative average covariance among items This violates reliat›ility model assumptions You may want to check item codings Reliability analysis of the environment of bank scale " Reliability Statistics Cronbach's Alpha ' N of Items Item-Total Statistics Scale Mean if Item Deleted Scale Variance if Corrected ltemItem Deleted Total Correlation Cronbach's Alpha if Item Deleted EB1 12.56 5.109 728 799 EB2 13.16 5.239 647 817 EB3 12.62 4.322 802 768 EB4 12.78 4.257 782 774 EB 12.24 5.411 381 889 - 69 - The determinants of customer satisfaction on banking sem•ices The case of coiiiiriercial banks in IIo Chi lvlinli Cily Reliability analy'sis of transaction cost scale Reliability Statistics Cronbach’s Alpha N of Items 837 Item-Total Statistics Scale Mean if Scale Variance if Corrected Item- Cronbach's Alpha Item Deleted Item Deleted Total Correlation if Item Deleted TC1 10.74 3.951 662 799 TC2 10.62 5.016 353 878 TC3 10.84 4.096 755 771 TC4 10.62 4.322 738 780 TC5 10.70 4.214 740 777 Reliability analysis of customer satisfaction scale Reliability Statistics • Cronbach's Alpha N of Items 813 • Item-Total Statistics Scale Mean Scale Variance if Corrected ltem- Cronbach’s Alpha if Item Deleted Item Deleted Total Correlation 5.76 1.656 611 807 CS2 5.72 1.144 746 656 CS3 5.64 1.256 670 741 CS1 3.2 Factor analysis of independent items KMO and Bartlett’s Test " if Item Deleted 692 Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx Chi-Square 550.618 190 df 000 Sig -70- rh determinants of customer satisfaction on banking services The case ofcommercial banks in Ho Chi Minh City Rotated Component Matrix’ Component EB3 EB4 EB1 EC2 871 851 799 746 EC1 EB2 TC3 TC1 TC5 TC4 743 651 855 795 789 770 CON3 CON2 CONI BF4 BF3 BF1 810 809 799 • 836 736 ' 706 EBS 820 860 TC2 Extraction Method: Principal Component Analysis BF5 Rotation Method: Varimax with Kaiser Normalization BF2 a Rotation converged in iterations -71 484 441 ... determinants of customer satisfaction on banking services. ‘ The case ofcommerc rat banks in Ho Chi Minh City -2- The determinants of customer satisfaction on banking services. ‘ The case of commercial. .. on customer satisfaction However, they also indicated that The determinants of customer satisfaction on banking services The case of commercial banks in Ho Chi Minh City -7- The determinants of. .. paper of Jham and The dcterminants of customer satisfaction on banking services rhe case of commercial banks in He Chi Minh The determinants of customer satisfaction on banking services. ’ The case