International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 The Development and Measurement of a Customer Satisfaction Index (E-CSI) in Electronic Banking: An Application to the Central Vietnam Region Le Van Huy, Department of Marketing, University of Economics - The University of Danang, Danang, Vietnam Pham Long, School of Management, College of Business & Social Sciences, University of Louisiana at Monroe, USA Aidan O’Connor, ESCEM, Poitiers, France &Universität Osnabrück, Osnabrück, Germany Pham Dinh Tuyen, University of Westminster, London, UK ABSTRACT In the current technological age, once traditional means of delivering services to customers are losing its dominant position, the application of the Internet has evolved as an innovatively supporting alternative for attracting customers, especially in banking service In that aspect, customers’ perception of online banking service through the delivery of website quality (Webqual) remains the main concern for bank’s managers in Vietnamese banking system because customers are easily inclined to another banking service provider due to their poor website-operated experience Based on the evaluation of factors influencing on banking website quality, its relationship to customer satisfaction and retention, this article suggests the measurement of electronic Customer Satisfaction Index (e-CSI) of perceived banking website quality by three most developed banks of Vietinbank, Vietcombank and BIDV in central Vietnam, from which provides insights that may be useful for improving the quality of online banking service KEywoRDS Customer Satisfaction, e-CSI, Online Banking Service, Retention, Webqual INTRoDUCTIoN The availability and quality of the Internet and web applications have been significantly improved over the last few years, which creates opportunities for commercial banks to extend their customer and geographic base and acquire closer banker-customer networking relationships In that respect, Internet banking delivered via a website is prominent in promoting a customer relationship Cao et al., (2005) state that competitive advantages and other benefits due to the implementation of web technology are obtained provided there is a quality and efficacious website Based on that premise, superior website service quality and efficacity serves as a connecting factor for gaining and sustaining customers through experiencing the services provided and gradually forming a sustainable relationship (Richardson & Thompson, 1997) Customer satisfaction indexes (CSI) from many countries are analyzed because they prove to be an indicator of business operational efficiency and market value (Anderson, Fornell & Rust, 1997) DOI: 10.4018/IJSDS.2017070102 Copyright © 2017, IGI Global Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited 45 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 The Vietnamese banking system has experienced a significant switch to electronic service distribution channels and three of the most developed and pioneering banks of this type of service channel are Vietcombank, Vietinbank and Bank for Investment and Development of Vietnam (BIDV) The development of an electronic Customer Satisfaction Index (e-CSI) to measure the perception of electronic service quality is the core issue for these banks and others in this segment of the Vietnamese banking sector Customers are easily displeased by the quality of specific services, especially services through an electronic channel, and tend to switch to a competitor bank effortlessly, which requires banks management to deal with the following issues: (1) identifying which factors affect customers’ perception of website quality service; (2) comparing their own CSI with those of competitors and (3) prioritizing factors to improve customers’ commitment In the context of the reform of the banking sector, prior to and following, accession of Vietnam to the WTO, the consequent direct entry of foreign banks, and the widespread introduction electronic banking services this research proposes an innovative electronic Customer Satisfaction Index (e-CSI) to be used as a reference for identifying the mode of customers’ behavior in the field of online banking services By comparing the set of three indexes of services offered by the leading banks through an Internet -based service channel, this study recommends some recommendations for service improvement and management initiatives THE RECENT DEVELoPMENT oF THE BANKING SECToR IN VIETNAM The past ten years have seen the introduction of products, techniques and systems that have transformed the banking sector To analyse the customer satisfaction rating of Vietnamese banks’ electronic banking services, it is necessary to put in context the evolution in the banking sector The transformation of the Vietnamese economy to a market economy commenced with reforms in the mid-1980s The ‘Doi Moi’ reforms produced economic growth in the late 1980s and early 1990s However, the banking reforms were limited, merely separating commercial banking from central banking, and as state-owned commercial banks emerged, they continued to be state managed The Government later considered that the banking sector should be completely reformed through the equitization of domestic banks and through direct investment by foreign banks It considered that reforming the banking sector and allowing foreign banks to incorporate would lead to competition and thereby development of the banking sector The opportunity was WTO accession Besides allowing some foreign banks that had been operating in Vietnam prior to WTO accession to incorporate there, following accession, the Government allocated five licenses to foreign banks to incorporate in Vietnam The five foreign banks that were granted licenses are HSBC - United Kingdom, Standard Chartered Bank - United Kingdom, ANZ Bank - Australia, Shinhan Bank - South Korea, and Hong Leong Bank - Malaysia These banks were obliged to modernise the banking sector, through products, technological processes and management development Therefore, the recent development of the banking sector in Vietnam is partly due to the reforms implemented prior to Vietnam’s accession in 2007to the WTO However, the institutional reforms implemented on accession to the WTO were the catalysts for banking sector development and for an increase in the levels of monetization and financial deepening.1 THE RECENT DEVELoPMENT oF ELECTRoNIC BANKING IN VIETNAM Jun and Cai (2001) define electronic banking (E-banking) as an electronic interconnection between financial service providers and customers through ranges of distribution channels including POS/ ATM; online banking; mobile banking; and bank cards Essentially, the banking sector in Vietnam was relatively underdeveloped In 2007, Vietnam had a population of 85 million and less than 10% of the population had a bank account and of the eight 46 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 million accounts, five million were individual accounts According to the Asian Development Bank (2007), there were only three branches of commercial banks per 100,000 adults and also per 1,000 km2, in which full electronic banking services were only available from the few foreign banks operating there The technology index of Vietnam’s banking system was much lower than other Asian countries As of 2015, the number of Internet users was 46 million, which accounted for more than 50% of population Specifically, there were 9.34 million cards in use 2007 By 2015, the number of bank card issued increased significantly to nearly 100 million cards Correspondingly, there was an increase in investment in technological infrastructure for card transactions with the average increase in the number of POS/EFTPOS/EDC of 41% and in the number of ATMs investment of 22% during 2007-2015 The three domestic banks, Vietinbank, Vietcombank and BIDV, consider themselves to have been to the forefront in developing the Vietnamese banking sector Despite increasing competition from foreign banks, these three banks dominated the banking market as of 2015 They continue to invest in technological innovation and in customer-oriented electronic banking services THEoRETICAL BACKGRoUND AND E-CSI MoDEL Reichheld & Schefter (2000) claims that customer satisfaction with service quality is closely related to the success of an e-commerce business entity To be more specific, S.-H (2008) showed that customers are ready to pay premium price to service providers that they conduct transaction previously, which proved service quality rather than price really impacts customers’ purchasing decision Likewise, once customers perceived of bad service experience, they immediately withdraw their transaction and by word of mouth, disseminating negative information to potential customers In that aspect, Customer Satisfaction index (CSI) is studied by many researchers and these models all suggest the improvement of CSI through balancing the perceived quality factors (see Table 1) To the same extent, the provision of superior website quality to customers with an aim to advance customers’ online banking experiences remains the core competitive strategy that many banks are focusing on in this current information technology age Richardson & Thompson (1999) points out that high class website quality is a major step towards satisfied customers, from which creates the repetition of customers to come back for service transaction to a certain service provider According to Reichheld and Schefter (2000), retaining customers on the Internet is costly, and without customer’s repeated transactions, business competitive advantages will reduce significantly Therefore, creating satisfied customer base remains imperative for online service providers Once the online consumers are satisfied with their online transaction experience, they are inclined to return to the website and gradually form intimate relationship with the service providers (Reibstein 2002) In order to identify the extent of satisfaction that customers experience regarding online banking service via the website and determine its connection to the level of customer retention, this research Table Sources of Research in CSI Researched by CSI model Research dimensions Le Van Huy, Ton Duc Sau (2014) CSI model in Vietnamese mobile services Transaction convenience, service price Value added service, call quality, customer service, brand image, trust, customer satisfaction Turel and Serenko (2006) CSI model in Canadian mobile services Perceived quality, customer expectation, perceived value, customer satisfaction, customer complaint, price tolerance, repurchase likelihood O’Loughlin and Coenders (2004) ECSI model in portal service Image, customer expectation, product hardware quality, customer service quality, perceived value, customer satisfaction, customer loyalty 47 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 examine six antecedents of website quality (information quality, navigation, response time, visual appeal, interactivity and security) and proposed e-CSI model as Figure The e-CSI model is adapted from the research model suggested by Shilpa and Sheelan (2013) in which e-CSI is recognized as a main factor in e-Commerce and closely related to customer in online services Information Quality Information quality remain the core concern for customers to go online, which decide whether they are eager to continue their transaction or not Therefore, Kim and Lee (2004) claims that providing dated and accurate information is the basic goal of a website because it customizes customers’ transaction to serve them better (Kim, Ma and Kim 2006) Furthermore, the updated information also influences customers on their purchasing decision (Surjadjaja, Ghosh and Antony 2003) Once perceiving that the information provided is reliable and responsive to their request, customers tend to be satisfied with transactions, return to the website and recommend their superior experience to others, which serves as a good promotion channel for banking service Thus, H1: Information quality is positively correlated with customer satisfaction Navigation Without navigation tools, website-based services seem to be too complicated for customers to access and move around It is a matter of fact that once consumers perceive a website too time-consuming to navigate to where they want, they may detect and never return (Luo and Seyedian, 2004) Lohse and Spiller (1998) shows that 61% of sales conducted on website was completely fulfilled by product list navigation, which can be explained by customers’ easy access to discover related items and useful information Thus, Eagly and Chaiken (1993) believes that websites navigation positively influences customers’ level of expertise in web-based transaction experiences and their perception towards not only the website but also service providers also Thus, H2: Navigation is positively correlated with customer satisfaction Figure The e-CSI model 48 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 Response Time In terms of online banking service provision, customers’ demand is evidently high due to their expectation for service to be conducted instantly Any delay in transaction or request dealing can frustrate online customers and keep them from shopping again, which may lead to the word of mouth of negative experience to potential customer Therefore, Kim and Stoel (2003) firmly believes that fast response time imposes significantly positive influence on consumer satisfaction with online shopping Regarding the waiting time on the Internet, Weinberg (2000) believes that once the homepage loads fast enough and customers’ request are thoroughly dealt, the efforts toward acquiring customer satisfaction will be rewarded Thus, H3: Response time is positively correlated with customer satisfaction Visual Appeal Customer experience with the Website based service is firstly considered by customers in terms of visual distribution of information and ease of visual attraction Website contains texts, graphics, multimedia and other points to call for customers’ curiosity and the demand for a professional website is paramount (Iwarrden et al., 2004) Chen, Zhang and Huang (2010) identifies a well-established website as fitted-organized, demonstrative with clear guidance and enhancing visitors’ expertise by focusing contents as well as building up long term relationship with customers In contrast, poor website design leads to the loss of potential customers due to the impossibility for them to find what they want and the loss of potential repeated visits due to a repetitively negative transaction experience (Miranda, Cortés and Barriuso, 2006) Thus, H4: Visual appeal is positively correlated with customer satisfaction Interactivity Website interactivity involves the two main features of website response and users’ customization to deliver fitted online experience to customers According to Srinivasan, Anderson and Ponnavolu (2002), users’ customization feature is considered as the expertise of the website to identify customers’ behavior, usual transaction and ultimately, recommending some services and promotion products that fit individual customers’ demand Zhao and Dholakia (2009) also identifies the components of website interactivity as keyword seeking tools, personalization and customer feedback as good support for customers’ online behavior To that extent, M Chae et al (2002) believe that the quality of interaction between Internet -based content system and transactional customers imposes verified positive relationship with customer satisfaction Thus, H5: Interactivity is positively correlated with customer satisfaction Security In order for online transaction to be conducted, website data bases usually store a large amount of individual information The lack of face-to-face interaction for online service sets higher demand for customers to be assured of the privacy and security of their transaction Therefore, S.-H Hsu (2008) claims that online security is customers’ major concern over whether to engage in electronic transactions or not To the same extent, Madu and Madu (2002) added that the provision of web-based services should be secure and reliable enough to build a sense of credibility and confidence from 49 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 customers Based on that, Jarvenpaa and Todd (1997) considers security as an imperative feature in establishing e-trust in terms of reducing customers’ concerns about the leakage of personal transaction information Thus, on perceiving that online privacy is reliable enough that corresponds to customer’s expectations, they may be willing to submit individual data and conduct transaction online confidently Thus, H6: Security is positively correlated with customer satisfaction Customer Satisfaction and Customer Retention According to Alba & Hutchinson (1987), once customers get accustomed to conduct transactions at a specific site and are satisfied with the service provider, their purchasing decision would be a habitual process, which is similar to the finding made by Richardson & Thompson (1999) that superior website service quality serves as an antecedent of acquiring and maintaining satisfied customers which leads to customer retention to a certain service provider Besides the merit points, web-based service delivery also poses a concern for bank’s managers that the popularity of the Internet enables customers to switch to another service provider any time and at low cost on perceiving bad transactional online experience, which threatens level of customer retention Thus, building customers’ trust, maintaining high level of satisfaction would lead to customers’ high commitment, which is acknowledged as intention to maintain a valuable relationship with the site (Park and Kim, 2003) Thus, H7: Customer satisfaction is positively correlated with customer retention RESEARCH METHoDoLoGy Sample Selection and Data Collection Method Variables considered for this research model were based on the prior research of “The influence of mobile website quality on consumer satisfaction and behavior” by Gao (2013), in which measured valuable was appropriately modified to identify the research purpose Data for the analysis was collected via the delivery of questionnaires to customers of three commercial banks of Vietinbank, Vietcombank and BIDV in Danang, Hue and Quang Nam province via direct interview and accessing respondents via email All the items in the questionnaires apart from descriptive information were measured using a 5-point scale (1: Strongly disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly agree) The sample applied for this study analysis was those who have experienced banking services via the website Process of Conducting Research This research consists of two main steps: pilot research and official research Pilot study is implemented to evaluate the research instruments and concepts before conducting official research while the latter aims to test the theoretical model as well as hypothesis quoted in the study through the application of statistical methods of SPSS version 16 and AMOS version 20 Analysis of Structural Equation Model and Measurement of e-CSI The Structural Equation Modeling was applied to test the validation of e-CSI model in website-based banking services and the suggested hypotheses by the estimation of path coefficients and R2 value, in which the former identifies the level of relationship between independent and dependent variables while the later illustrates the extent of variance clarified by independent variables 50 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 Besides, based on the previously studied formula applied by O’Loughlin & Coenders (2004) in the research paper of Estimating European Customer satisfaction index in Postal service, the author calculates the overall e-CSI (as in Figure 2) of the website quality for Vietnamese web-based banking services and then, compare the specific e-CSI perceived by customers of the three researched banks The formula to calculate e-CSI is as follow: n n ∑w x i Banking webqual CSI = i − ∑ wi i =1 i =1 n × 100 9∑ w i i =1 In which: x i : the average value of measurement item i wi: the weight of measurement item i n: the number of measurement items In the proposed research model, there are measurement items of customer satisfaction (e-CSI) and customer retention, then n=2 Strategic Management Map based on Evaluation of webqual Indicator According to W Skok, A Kophamel and I Richardson (2001) on their research paper of the Importance-Performance Maps in Health Club Industry, the strategic management map (as in Figure 3) is considered to examine the extent of importance of Website quality attributes regarding e-CSI of specific provider The purpose of this strategic management map is to make an analysis of the variables attribute to the formation of e-CSI in website based banking services, from which identifies which quality factors needs to be focused to generate higher outcome for improvement of customer online behaviors This map consists of four quadrants of different evaluation and consideration points: “Keep up”, “Possible overkill”, “Low priority” and “High priority” which is based on the estimated weight and score of each website quality attribute Figure Strategic Management Map 51 International Journal of Strategic Decision Sciences Volume • Issue • July-September 2017 RESULTS Descriptive Statistics Out of the 285 questionnaires collected from customers experiencing website based banking services offered by three commercial banks of Vietinbank, Vietcombank and BIDV during the period from Oct 2016 to Nov 2016, 272 feasible answers were processed and analyzed by applying SPSS 16.0 statistical software The research sample of customers’ experiencing website based banking services offered by banks of Vietinbank, Vietcombank and BIDV is relatively compatible with 87 (32%), 94 (35%) and 91 (33%) users respectively, which ensures the compatibility of compared banks for better analysis and generalization Among 272 responses, male respondents make up 36% while the rate for females is 64% Besides, website based banking service is mostly accessed by users of 18 and 30-year-old group with 76%, followed by 30 to 42-year-old groups In terms of user by location, Danang boosts the highest rate of online users with 49% while Quang Nam and Hue province experience comparatively same rate of 29% and 22% respectively (see Table 2) Furthermore, customers’ online transaction behavior is clearly clarified by the frequency of their access to banks’ websites Out of the sample, the percentage of customers conducting online transaction via the website at the frequency of 1-3 times/months is the highest with 54% while this figure for 4-6 times/month is 32% Exploratory Factor Analysis, Reliability and Validity of the Constructs Exploratory factor analysis for dimensions of Website quality, Customer satisfaction and Customer retention is considered to validate the items for analysis The value of KMO= 0.843 >0.5, KMO= 0.795, KMO = 0.868 and p = 0.000