What factors impact on the customers satisfaction via the quality of service at bidv

-  RESEARCH PROJECT (BMBR5103) WHAT FACTORS IMPACT ON THE CUSTOMERS’ SATISFACTION VIA THE QUALITY OF SERVICE AT BIDV? STUDENT’S FULL NAME : NGUYEN HUU HAI STUDENT ID : CGS00019870 INTAKE : SEPTEMBER, 2015 ADVISOR’S NAME & TITLE : Dr BUI PHI HUNG (DBA) Ho Chi Minh City, December 2016 - Abstract Like any bank in the world, the customers’ satisfaction in banking service is very good for Joint Stock Commercial Bank for Investment and Development of Vietnam (“BIDV”) to make profits But, it is difficult to measure the BIDV’s satisfaction of customers in banking service due to the invisibility of banking service This study focuses on analyzing the factors affecting the satisfaction of incorporate customers through the use of bank services The data supported to measure and analyze in the study are obtained by surveying 250 customers who doing business at BIDV We used the questionnaire was developed based on SERVQUAL tool indicating five components of service quality in the survey The analytical methods used in this study are the methods of exploratory factor analysis and the verification of Cronbach coefficients for building and testing scales In addition, multiple regression models are used to assess the specific impact of these factors on the level of customer satisfaction The results of this study have showed that the Reliability level, Responsiveness, level of Empathy, Tangibles could impacts significantly on the overall satisfaction of customers - TABLE OF CONTENT CHAPTER 1: GENERAL OVERVIEW 1.1 The overview of Vietnam banking industry in two recent years 1.2 The overview of BIDV 1.3 Research objectives 10 1.4 Research contributions 11 1.5 Timescale and research ethics 11 CHAPTER 2: LITERATURE REVIEW 12 2.1 Commercial bank overview 12 2.2 Service overview 13 2.4 Service quality overview 15 2.5 Customer satisfaction overview 16 2.6 The connection between service quality and customer satisfaction 18 2.7 SERVQUAL model 19 CHAPTER 3: RESEARCH METHODOLOGY 23 3.1 Research philosophies 23 3.1.1 Positivism 24 3.1.2 Realism 25 3.1.3 Interpretivism 25 3.2 Research process 26 3.3 Research approach 26 3.4 Research methodologies 28 CHAPTER 4: DATA COLLECTION AND ANALYSIS 31 4.1 Scale 31 4.2 Sample 33 4.3 Data collection and analysis 34 4.3.1 Testing scale with Cronbach Alpha reliable coefficient 34 4.3.1.1 model The consistency coefficient Cronbach Alpha – Independent variables in the 35 4.3.1.2 model: The consistency coefficient Cronbach Alpha – Dependent variables in the 38 - 4.3.2 Exploratory factor analysis: 38 4.3.2.1 EFA - the independent variables in the model 39 4.3.2.2 EFA - the dependent variable in the model 42 4.3.3 Multiple regression analysis 42 4.3.3.1 Multiple regression model 42 4.3.3.2 Testing the hypothesis 44 CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 50 5.1 Conclusion 48 5.2 Recommendations 48 5.2.1 Recommendations related to sympathy 48 5.2.1.1 Improve transaction process 49 5.2.1.2 Regulation of upgrading customers’ information 49 5.2.1.3 Facilitate customers to comment 50 5.2.1.4 Allow customers to choose the service staff 50 5.2.1.5 Advance qualifications and soft skills training for employees 50 5.2.1.6 Thoughtful customer care programs 51 5.2.2 Recommendations related to customers’ reliability 51 5.2.2.1 Improve services’ quality 52 5.2.2.2 Improve the resolution of customer complaints 52 5.2.2.3 Confidentiality of customer information 52 5.2.3 Recommendations related to enhancing tangibles 53 BIBLIOGRAPHY 54 - CHAPTER 1: GENERAL OVERVIEW 1.1 The overview of Vietnam banking industry in two recent years Vietnam, like other Asian countries, is in the slow stages of growth Except Manufacturing and Agriculture sectors, other sectors are negatively affected by slow growth and banking sector is not an exception With low credit growth and high non-performing loan ratio, obviously Vietnam banks are struggling to operate in an environment full with difficulties and challenges (KPMG, 2015; Nguyen, 2015) However, the picture is not entirely gloomy, as many positive signs have appeared ahead The banking industry is constantly attracting more and more strategic attentions from the largest banks in the region and around the world to penetrating to the Vietnam's market as the economic prospects are considered more positively than the previous year (KPMG, 2015) The credit growth of the banking system in 2014 was recorded at 8.91% (Vu, 2015) and this was reflected in the proportion of loans and advances for customers increasing from fifty-three percent to fifty-seven percent of total assets As comparing the asset component of Vietnam's banks with those of other countries in the region, several remarkable issues can be observed as follows: Table 1: Asset Components of Banks in Asia-Pacific region Australia China Singapore Thailand Vietnam 75% 50% 61% 64% 57% 2% 3% 10% 8% 14% Investment securities 6% 19% 11% 15% 14% Other assets 17% 28% 18% 13% 15% 100% 100% 100% 100% 100% Loans and advances to customers Deposits and loans to other credit institutions Source: KPMG (2015) - Based on the above table, except China has a lower rate due to large balance of Chinese banks at the central bank able to influences on the lending capacity, the percentage of loans and advances to customers in Vietnam is among the lowest in the Asia Pacific region On the other hand, the inter-bank market of Vietnam is the most vibrant market in the region, despite a significant decrease compared with the last year On the liabilities, the most notable issue of Vietnam's Banks in 2014 was the growth of customers' deposits The issue of currency liquidity experienced in Vietnam's banks in late 2013 has been resolved thanks to the high interest rates of VND, and it also helped control inflation which was above twenty percent during that time Investors could not ignore the interest rates up to forty percent of VND and have transferred from USD to VND and this has solved in short term the problem of liquidity (Pham et al., 2015) Concurrently, it also helps to stabilize the VND/USD exchange rate because the increase of demand for VND is lower than the demand for USD With the interest rates of USD at two percent or lower, a large amount of savings of families have been transferred to VND As expected, the liabilities on the inter-bank market fell from nineteen percent in late 2013 to fifteen percent in late 2014 The rate of issuing valuable papers also decreased from seven percent to five percent of the total liabilities This reflects the difficulties of the economy as well as the banking industry as most of valuable papers issued by the banks are often sold to other banks Table 2: Asset Components of Banks in Asia-Pacific region Australia China Singapore Thailand Vietnam Deposits of customers 65% 83% 78% 85% 70% Deposits and loans from 3% 9% 11% 6% 15% 32% 8% 11% 9% 15% 100% 100% 100% 100% 100% other credit institutions Other liabilities Source: KPMG (2015) - Compared with other countries in Asia Pacific region, the Asian investors have seemed relatively focusing on the deposited money in the banks and considering it as an investment option The Australian banks traditionally tend to borrow from abroad to compensate for the shortfall between the the deposit and lending amounts and have great deals of properties in derivative products and in other loans According to KPMG (2015), the profit of the banking industry in 2014 was generally decreased, except for a few exclusions After-tax profit of the banking sector has fallen of twenty-three percent to thirty-one trillion VND compared with that in 2013 Profits dropped significantly mainly due to the increases of credit risk and operational costs and the reduction of net incomes Due to the difficult economic situation in 2013-2014, the businesses continued to face difficulties in 2014 Enterprises already in trouble in 2013 continued to experience more difficulties in 2014, while the effectively operated companies in 2013 also faced many challenges in 2014 Therefore, the banks must create more provisions as the quality of loan portfolios has reduced In addition, while most businesses have tried not to borrow and only maintained the operations, the banks are more reluctant to lend due to increased non-performing loan ratio (Nguyen, 2015) Average ROA and ROE of the domestic banking system in 2014 has decreased compared with 2013 ROA fell more than twenty-seven percent in 2013 compared with that in 2014 and ROE also decreased nearly thirty-three percent Marginal profit rate has slightly increased in the whole industry Although it is a good index to determine the performance, the marginal profit rate could not fully reflect the profitability of the banking sector As a bank's profitability can be affected by the separate model of itself, which are its specific activities, customer compositions and fund raising strategies No two banks are identical, especially in Vietnam's banking system At one end, the highest marginal profit rates are usually observed at the bank with traditional fund raising and lending models At the other end, a number of state banks can still operate efficiently at lower marginal profit rates because of their large-scale operations (KPMG, 2015) Marginal profit rate does not include the service charge as well as other non-interest incomes and operating expenses, such as personnel and asset costs or credit risk costs, thus could not reflect the overall profitability of the entire banking industry - The non-interest net income is accounted for fourteen percent of the total operating incomes Compared with other Asia Pacific countries, Vietnam has a quite low proportion of net non-interest incomes One of the main reasons is due to the retail segment in Vietnam is estimated only about fifteen percent In developed countries, banking segment has been developing more professionally For example, in Australia, the banks are actively monitoring rates of "Customers with four Products" and even "Customers with eight products" The income form retail accounts is one of the main sources of service revenues such as mortgaged home Loans, Credit cards and daily Accounts, but these products are not popular in Vietnam compared with other countries (KPMG, 2015) Moreover, the domestic stock market has experienced lots of difficulties in 2014 and the VND/USD exchange rate has been strictly managed and limited as well as other foreign exchange transactions (Doan, 2015) Despite the lower rates compared with other countries in the region, the non-interest net income in 2014 of Vietnam has increased by seven percent compared with that in 2013 and KPMG (2015) has stated that the non-interest net income will continue to rise in 2015 Operating expenses generally increased in 2014 even though the banks had intended to cut costs Compared with the banking operations of other Asia Pacific countries, Vietnam has the highest ratio between the operating expense and income, and therefore, the banks need to seek for more methods to cut off these costs Table 3: Ratio between the operating expense and income Operating expense Australia China Singapore Thailand Vietnam 42% 40% 38% 44% 49% Source:KPMG (2015) Salary expense and other costs related to the staff have accounted for over fifty percent of total operating expense, so it is the largest component of the operating cost This is - contrary to the global trend, whereby the percentage of personnel costs in operating expense falls below forty percent Total banking staff is constantly increasing Retail customers always require banks to provide more products, better service quality with more promotions and incentives Moreover, as the economic situation is recovering gradually, incorporate customers are beginning to borrow to expand their operations Therefore, the local banks are under pressure to expand the operating scope and improve their customer services In addition, foreign banks are also gaining more market shares in the banking and financial markets which are inherently competitive The domestic banks have to find a way to increase market shares as quickly as possible by increasing the number of branches and transaction offices, thus leading to the increase of the number of employees In brief, although there are still inadequacies, but with clear policies and drastic measures, in the period of 2013-2015, the State Bank has made significant efforts in governing monetary policy and innovation, restructuring the banking system in an appropriate manner, which has been highly appreciated nationally and internationally The inflation rate had decreased significantly from twenty-three percent in August 2013 to 6.9% in June 2014, and the inflation rate of the first nine months of 2015 increased by only 4.63% compared with the end of 2014 In August 2013, the interest rates went up to 20-25% per year, the State Bank set up the schedule for gradually reducing operating and deposit interests of crefit organizations, which is consistent with the reduction trend of inflation to ensure the principle of positive real interest rates The lending interest rates of VND had fallen significantly from 17-19% per year by the end of 2013 to 12-15% per year in 2014 Currently, the VND lending interest rates are fluctuating around 7-9% per year Given the situation of commodity backlog and that, many companies have been into difficult situations, the State Bank has steered the credit organization to restructure the repayment period, reduce or exempt loan interests, consider new loans for effective loan demands ensuring the repayment ability The solutions in operating monetary policy have contributed to the reduction of inflation in the last two years; the trade balance is surplus due to the fast growth in export, stable exchange rates, the exchange cover increased from 1.6 months of imports at end of 2013 to 2.8 months in the first quarter of 2015 Vietnam's - stock market also increased nearly eighteen percent in 2014 and about nineteen percent in first seven months of 2015 the decrease in two consecutive years of 2010 and 2013 (Nguyen, 2015) With clear policies and drastic measures, the State Bank has made significant efforts in governing monetary policy and innovation, restructuring the banking system in an appropriate manner, which has been highly appreciated nationally and internationally (Nguyen, 2015) 1.2 The overview of BIDV BIDV was established on 26 April 1957 as the Bank for Construction of Vietnam, under which name it operated until 24 June 1981, at which point it changed its name to the Bank for Investment and Construction of Vietnam It adopted its present name on 14 November 1990 In January 2007, the government announced that it would sell a minority stake in the BIDV and three other banks In March of that same year, they sought the government's permission to invest in highway projects In September, they announced that they would form Vietnam's first aircraft finance group in Hanoi in a joint venture with Vietnam Airlines, Petro Vietnam, and Vietnam Post and Telecommunication BIDV is a large state-owned bank in Vietnam It is the nation's number one bank in net income ($70 million USD) and the second biggest bank in asset($18.8 billion USD) (2014) behind Agribank According to the United Nations Development Programme report on the 100 largest enterprises in Vietnam, BIDV came in at the 4th position after Agribank, VNPT and EVN BIDV received Asia Risk Magazine's House of the Year Award for being at the forefront of the country's economic development by modernising its risk management and developing new financial products such as energy derivatives hedges The year 2014 witnessed difficulties facing the economy in general and the enterprises in particular In such circumstances, BIDV proactively weathered the market movements, - 48 CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 5.1 Conclusion This research is to examine and estimate factors that impact on customer satisfaction by using services of BIDV The data of research is explored from 200 customers who have transactions with BIDV The questionnaire is made based on SERVQUAL model which indicates five components within the quality of services After testing and analyzing, the results of research expresses three factors have significantly impacted on customer satisfaction comprising Reliability, Empathy, Tangibles The study results contribute information for measures to improve the quality of services for BIDV However, the scope of this research is conducted within customers that having transactions with BIDV, resulting in the findings is therefore subsequently governed by some specific nature and characteristic of BIDV In subsequent researches, the more customer feedbacks are strongly recommended in order to obtain a more perfect and comprehensive conclusions 5.2 Recommendations Based on the results of actual survey of Chapter 3, the customer’s satisfaction depends on three factors As a result, it is necessary to improve customer satisfaction by the following specific recommendations: 5.2.1 Recommendations related to sympathy Sympathy is much influential to the customer's satisfaction with the regression coefficient of 0.701 Increasing sympathy will help to improve customers’ satisfaction - 49 The study’s results show that customers assess the average level of sympathy According to the study’s results, the factors creating sympathy between BIDV and customers include Customers is easy to feedback, Staff is consciousness of overcoming their faults, Staff is willingness of listening, and answering all customers’ questions satisfactorily, BIDVhas programs of customer care The sympathy with customers mainly relates to the human mission, expressing in thoughtful and whole – hearted customer care As a result, it is necessary to improve sympathy of customers using services by the following specific measures: 5.2.1.1 Improve transaction process The process and transaction documents need to be improved in order to serve customers as quickly as possible: simplifying required forms and documents, removing unnecessary items Ensure documents to be legal, short, easy to understand and use Many forms should be designed so that customers not spend too much time to fill Regulate that the staff must serve the customers at first and then solve the other internal work in order to complete customers’ transactions quickly and customers feel concerned Employees who violate the regulation, it is able to apply forms of reminding, reducing emulation BIDVcan install security cameras to monitor transactions and check time employees perform transactions 5.2.1.2 Regulation of upgrading customers’ information It is necessary to regularly updating customers’ information in the current management system Among them, it is able to note customers’ summary such as banking transactions’ frequency, customers’ requirements, high or low customer services’ requirements, products and services customers use, etc Regulate that employees must refer to the above information when serving customers and take more notes if necessary after performing transactions - 50 5.2.1.3 Facilitate customers to comment During the transaction process, that BIDV’s employees make errors or delays in serving customers’ service is unavoidable However, in order to make customers feel satisfied, BIDV should create favourable conditions for customers to contribute their opinions This not only helps customers to feel well cared but also is the basis for BIDV to adjust, improve the most convenient methods of transaction for customers Customers comment by book suggestion, comment sheets and small gifts sent to acknowledge the valuable contributions from customers It is not essential for value of gifts to be high but have emotional meaning for customers In addition, it is a way to promote BIDV’s image when BIDV’s logo is printed on the gifts 5.2.1.4 Allow customers to choose the service staff As for Vietnamese, after being familiar with transacting with a bank employee, they will trust, sympathize In addition, customers will feel comfortable if familiar bank officers serve However, in order to avoid the risks of BIDV, avoiding the negative, it is necessary to arrange service staff by a certain group having more than two people working by turns In case of job rotation or any other reason, changing service staff needs to be notified to the customers doing transactions so that they can know and be familiar with the new staff Former employees need to make handover minutes to specify notes for customers so that new employees can understand the characteristics of customers and serve customers better and better 5.2.1.5 Advance qualifications and soft skills training for employees It is necessary to rase awareness of officials and employees of the service and customer care to people actively doing their part well Each employees must fully aware of the importance of customers for the existence and development of the firm, quick grasp of the - 51 customer care operations of the firm, to understand explicitly know about the policy as well as customer related policies for their business Each employee needs to improve customer serving attitude with a wholehearted, civilized and polite way Terminate the negative attitude that does not really facilitate customers customer to discuss their demands as well as desire; not enthusiastic to guide, bad service attitude, even argue with customers, private job during working hours It is necessary to train the skills, enhance profession, and improve level of communication skills and handling situations Moreover, all bank tellers must understand the marketing activities of its affiliates and have marketing knowledge Thus, when contacting with customers, each teller can become marketer and advertising the firm From then on, BIDV can get customers’ belief 5.2.1.6 Thoughtful customer care programs When performing customer care, the staffs need to understand the demands and liking of each customer group to choose gifts, methods of presenting gifts suiting each customer’s psychology It is necessary to guide and train employees direct customer care skills including behavior, gestures, words, greetings, and communication Staff should be trained skills to adapt to each customer’s personality, solutions of the diverse situations, which may occur in the gift giving process The final purpose is that customers experience and feel the special care From then on, BIDV can make customers be happy and satisfied with the received services 5.2.2 Recommendations related to customers’ reliability Customers’ reliability is based on the following factors: customers’ trust, providing the appropriate service as commitment, timely providing service as commitment, paying much attention to solve customer complaints, resolving the complaints satisfactorily In addition, in the process of serving, BIDV’s employees not make any error; customer information is kept to be confidential - 52 5.2.2.1 Improve services’ quality It is not the fact that only BIDV having full set of services are considered modern The problem is that depending on the each BIDV’s operation characteristics and business strategy, BIDV develops the suitable services However, the quality of services plays more important role If the service quality is not guaranteed, services’ diversity and development will not be significant because customers not use these services Simplifying procedures and automating operation manipulation reduce the time of customers’ transaction performance Ensuring the accuracy and timeliness of transactions builds customers’ trust Building consistent and transparent business processes among departments shorten customers’ waiting time 5.2.2.2 Improve the resolution of customer complaints Improving the quality of bidirectional information between BIDV and customers helps customers to feel to be interested and always the first priority of the branch As for the branch, this solution will make the process of resolving customers’ questions faster and faster, use it as information and basis to improve and enhance the quality of services and customer care 5.2.2.3 Confidentiality of customer information Improve the professional qualifications associated with enhancing awareness and business responsibility of each banker From then on, each employee can thoroughly understand their jobs’ role and the importance of customers Consciously protect customer information, avoid revealing information to the third party or unrelated people Absolutely not provide customer information to discuss inside or outside BIDV Strictly prohibit and punish all action of providing customer information to the third parties or competitors as information on loans, deposit balances, financial situation, etc - 53 Strengthen education and training, frequently testing, reminding staff of the security’s importance as well as the measures and regulations of bank security When each banker in any certain department, any step of service process understand the importance of customer information security and the required measures to achieve the goals, the service quality will be improved and help customers to feel more satisfied and assured From then on, it is able to make a competitive advantage for BIDV 5.2.3 Recommendations related to enhancing tangibles Tangibles are the face of the bank when dealing with customers Upgrading facilities helps customers to realize the sound financial situation, safety, and comfort in the transaction, the professionalism, and reputation of BIDV's activities Customers perceive tangibles through factors such as good information security system, stable automated teller machine system, airy counter, spacious and convenient parking for customers, quick and efficient electronic banking systems Speed up the process of banking modernization by promoting the most modern banking services such as Internet Banking to provide information for customers as quickly as possible Customers can perform their transactions even at the workplace At the same time, focus on data quality and safe security of technological system, strict handle any case of delays in providing services to customers, especially pay attention to transmission errors, traffic congestion due to overload Innovating banking technology by enhancing the utilization of modern technology features that the branch currently owns and regularly upgrade the technology system according to the trends of continuous information science and technology Modernize communication systems for customers easily to contact with BIDV As for automatic services through automated teller machine, ensuring to provide services full day as commitment with customers is very important and much influent to customer satisfaction - 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59 Appendix 1: Interview question Dear Madam/Sir, I am MBA research student from Open University of Malaysia I am making a research on the matter “WHAT IS THE FACTORS IMPACT ON THE CUSTOMERS’ SATISFACTION VIA THE QUALITY OF SERVICE AT BIDV?” Interviewees are the enterprises who have used services of BIDV You are one of these representants Your objective answers contribute to determine the success of this research Please take a little of time to give us your opinion about the below statements and please note that your opinions are neither right nor wrong, but all of them are useful for our research I undertake that your comments are kept confidentially and only served to this matter research What concepts, factors, or statements you think of when discussing about reliability of BIDV? What concepts, factors, or statements you think of when discussing about responsiveness of BIDV? What concepts, factors, or statements you think of when discussing about assurance of BIDV? What concepts, factors, or statements you think of when discussing about empathy of BIDV? What concepts, factors, or statements you think of when discussing about tangibles of BIDV? - 60 Appendix 2: Official questionnaire Dear Madam/Sir, I am MBA research student from Open University of Malaysia I am making a research on the matter “WHAT FACTORS IMPACT ON THE CUSTOMERS’ SATISFACTION VIA THE QUALITY OF SERVICE AT BIDV?” Interviewees are the enterprises who have used services of BIDV You are one of these representants Your objective answers contribute to determine the success of this research Please take a little of time to give us your opinion about the below statements and please note that your opinions are neither right nor wrong, but all of them are useful for our research I undertake that your comments are kept confidentially and only served to this matter research Please indicate how much you agree with below statements and under below convention: Please indicate how much you agree with statements in below tables (marking “x” in the appropriate box, please not let BIDV) 1: Strongly disagree 2: Disagree 3: Can’t choose 4: Agree 5: Strongly agree Note: please mark “X” in the appropriate box, in case you mark by error, please black the wrong mark (■) then mark the correct one - 61 Reliability: Agreement level Code R1 BIDV has good repute R2 BIDV provides services as engaged R3 BIDV provides services on time as engaged BIDV really cares to handle customer 5 During service, employees always pay attention 5 Employees process transaction accurately and 5 5 5 BIDV’s employees would like to make good R4 R5 R6 R7 complaints Customer complaints are solved adequately to avoid mistake Customer information is kept confidentially Responsiveness Code RS1 RS2 RS3 RS4 RS5 quickly Products/services are diversified and meet customer needs Products/services of BIDV can be connected with many other banks BIDV’s employees are able to answer to all questions of customers BIDV’s employees guide to complete documents and procedures wholeheartedly Empathy Code E1 E2 E3 BIDV’s employees advise the services in accordance with customer needs It is easy for customers to give comments - 62 their shortcomings (be willing to accept customer suggestions) BIDV’s employees are willing to listen and E4 answer adequately to all questions 5 5 of customers E5 BIDV has the thoughtful customer care programs Assurance Code It is easy for customers to know and use A1 electronic banking services (ex: mobile banking, internet banking, etc.) A2 BIDV’s branch network is wide and convenient A3 Waiting time for transaction is short A4 Lending procedures of BIDV are simple Duration from documentary submission until A5 getting loans is short A6 BIDV has competitive interest rates A7 BIDV has reasonable fees Information security system is good Automated teller machine system has stable Counter, waiting room is wide and comfortable Parking space is wide and convenient for 5 Tangibles Code T1 T2 T3 T4 T5 operation customer Electronic banking system works quickly and efficiently