Determinants of customer satisfaction on internet banking in Vietnam

This research is to find key determinants of customer satisfaction of Internet banking in Vietnam and to propose strategic recommendations for banks to increase customer satisfaction lev

TRƯỜNG ĐẠI HỌC MỞ TP HCM UNIVERSITEÙ LIBRE DE BRUXELLES

MBAVB4

HO MINH TUAN

DETERMINANTS OF CUSTOMER SATISFACTION

OF INTERNET BANKING IN VIETNAM

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Tutor’s Name: Dr NGUYEN VAN PHUC

Student’s Name: HO MINH TUAN

Ho Chi Minh City

(2011)

COMMITMENT

I hereby committed that the thesis content was prepared and written by myself with

information obtained from reliable sources for the partial fulfillment of the requirement for the degree of Master in Business Administration program

HoChiMinh City, December, 2011

HO MINH TUAN

thinking and professional working methods

Thirdly, I would like to appreciate all Vietnamese professors from Ho Chi Minh City Open University who transfer me knowledge, experiences and spirit which guided me during this program

Fourthly, I would like to thank Mr Serge Bywalski, Ms Hien and Ms Ha – program coordinators - for their support on schedule planning, academic procedure and extra-

courses tutoring

Next, I would like to thank my team members and classmates who studied together during two years, contributed innovative ideas, shared experiences and developed close

friendship

Finally, I would like to express love to my parents and younger sister who have

encouraged and motivated me during the program

ABSTRACT

Internet banking is a new channel of banking services which have a lot of benefits against other traditional channels It allows customers to perform a wide range of banking services electronically via banks’ websites It helps customers to enjoy their financial services not only anywhere, anytime but also faster and more efficient

Internet banking becomes a key and strategic component of every bank nowadays but its customers remain very modest Both customer development and customer retention are much focused Customer development takes considerably more time and cost because other potential Vietnamese customers have low level of income, less knowledge to use Internet and long time habit of cash transaction Therefore, customer retention strategy is more preferable by improving level of customer satisfaction This research is to find key determinants of customer satisfaction of Internet banking in Vietnam and to propose strategic recommendations for banks to increase customer satisfaction level and then to succeed in their customer retention

About findings of the study, the three most important determinants of customer satisfaction

of Internet banking are convenience, image, security and website content (security and website content have the same important level) In turn, key determinants of convenience are enabling customers to make their transaction at anytime and anywhere Key

determinants of security are certification from a famous international institution and

available 24/24 hot-line for any queries Key determinants of website content are

accessible at anytime, each transaction performs fast and having confirmation notice Key determinants of customer support are fast, free hot-line available for any queries, collection

of regular feedback from customers and consulting the reason and solution for future experiences Key determinants of promotion are higher saving interest rate and discounts for eating, shopping, tourism at some specific partnership stores Key determinants of image are modern and dynamic

Keywords: Vietnam, Internet banking, customer satisfaction, determinants

TABLE OF CONTENT

COMMITMENT ii

ACKNOWLEDGEMENT iii

TUTOR’S COMMENT iv

ABSTRACT v

TABLE OF CONTENT vi

ABBREVIATION ix

LIST OF FIGURES x

LIST OF TABLES xi

CHAPTER 1: INTRODUCTION TO THE STUDY 1

1.1 Rationale of the study 1

1.2 Problem statement 2

1.3 Research objectives and questions 2

1.4 Significance and scope of the study 2

1.5 Research methodology 2

1.6 Structure of the study 3

CHAPTER 2: LITERATURE REVIEW 4

2.1 Customer satisfaction 4

2.2 Service quality and Website quality 6

2.3 Research model 8

2.4 Internet banking 10

2.4.1 History of Internet banking 10

2.4.2 Definition of Internet banking 11

2.4.3 Security method 11

2.4.4 The architecture of Internet banking 12

2.4.5 The advantages and disadvantages of Internet banking 14

2.4.6 The current situation of Internet banking in the World 15

2.4.7 The development of Internet banking in Vietnam 17

CHAPTER 3: RESEARCH METHODOLOGY 20

3.1 Type of research 20

3.2 Research design 21

3.3 Target population 24

3.4 Sample size 24

3.5 Questionnaire design 24

3.6 Data collection 25

CHAPTER 4: DATA ANALYSIS AND FINDINGS 26

4.1 Profile information of respondents 26

4.2 Usage volume of current and potential products 28

4.3 Determinants of customer satisfaction 29

4.4 Determinants of each customer satisfaction factor 32

4.4.1 Determinants of convenience 32

4.4.2 Determinants of security 33

4.4.3 Determinants of website content 35

4.4.4 Determinants of customer support 36

4.4.5 Determinants of promotion 38

4.4.6 Determinants of image 39

CHAPTER 5: CONCLUSION AND RECOMMENDATION 41

5.1 Conclusion 41

5.2 Recommendation for banks to improve their customer satisfaction 42

Image building 42

Product development 42

5.3 Limitation of the study and future suggestion 43

REFERENCES 44

APPENDICES 46

ABBREVIATION

LIST OF FIGURES

Figure 1.6: The structure of the study 3

Figure 2.1.1: American Customer Satisfaction Index 5

Figure 2.1.2: Diagram of customer satisfaction factors 5

Figure 2.3: Variables development 8

Figure 2.4.4: The architecture of Internet banking 12

Figure 2.4.7.1: Internet users in Vietnam 2004 - 2010 16

Figure 2.4.7.2: Online business development 2007 - 2010 17

Figure 3.2.1: Research design 2

Figure 4.1.1: Gender distribution 25

Figure 4.1.2: Age group distribution 25

Figure 4.1.3: Distribution of educational level 26

Figure 4.1.4: Distribution of Internet banking usage frequency 26

Figure 4.2.1: Usage volume of current products 27

Figure 4.2.2: Usage volume of potential products 28

Figure 4.3: Customer satisfaction determinants 29

Figure 4.4.1: Determinants of convenience 31

Figure 4.4.2: Determinants of security 32

Figure 4.4.3: Determinants of website content 33

Figure 4.4.4: Determinants of customer support 34

Figure 4.4.5: Determinants of promotion 35

Figure 4.4.6: Determinants of image 36

LIST OF TABLES

Table 2.2.1: Service quality dimensions 7

Table 2.2.2: Website quality dimensions 8

Table 3.1: Comparison between traditional and Internet survey method 20

Table 3.2.1: Variables coding 22

Table 4.3.1: T-test for customer satisfaction determinants 29

Table 4.3.2: T-test for Likert scale 29

Table 4.4.1: T-test for determinants of convenience 31

Table 4.4.2: T-test for determinants of security 32

Table 4.4.3: T-test for determinants of website content 33

Table 4.4.4: T-test for determinants of customer support 34

Table 4.4.5: T-test for determinants of promotion 35

Table 4.4.6: T-test for determinants of image 36

CHAPTER 1: INTRODUCTION TO THE STUDY

This chapter mentions the rationale of the study, problem statement, research objectives and questions, significance and scope of the study, research methodology and structure of the study

1.1 Rationale of the study

Vietnamese Government has been investing heavily in Information Technology

infrastructure and Internet network for the country from the year 1997.With the advantage

of huge and young population (87 million people in which over 60% of them under the age

of 30) and high Internet penetration comparing to other ASEAN countries (26.8 millions of Internet users representing for 31% of the population in 2010), Vietnam is very potential to all kinds of Internet-based business and activities such as e-shopping, e-banking, e-

communication, e-entertainment, e-education, e-marketing, e-advertising, social

networks…

Banks have always been among the first to apply new technologies into their products, services and management Now, with many considerable developments in technology, banks have more and more opportunities to serve customers beyond their satisfaction Beside traditional banking channels such as bank counter, phone, fax, mobile, ATM, Internet is now used more widely all over the world as an amazing way to conduct banking services at anytime, anywhere Internet banking does help customers enjoy financial

services not only faster, more convenient, efficient but also security

Many banks operating in Vietnam have recently launched new Internet banking service which exploits the strength of Internet technology to bring more convenience and benefits

to customers Unfortunately, the number of customers using this service is very modest despite the high Internet penetration in Vietnam Banks focus not only on getting new customers but also on retaining their current customers Getting new customers always cost several times more than retaining them Hence, customer retention is very important to banks nowadays This research is to find the most important satisfaction factors of Internet banking and to propose some strategic recommendations for banks to help improve level of customer satisfaction

1.2 Problem statement

It is very important to satisfy and retain customers in Internet banking services because not

so many people used it in Vietnam Higher customer satisfaction leads to higher customer loyalty and retention In turn, it ensures long-term profitability and growth Therefore, this research aims to propose recommendation for banks to improve customer satisfaction level

by finding the most important satisfaction factors of Internet banking in Vietnam

1.3 Research objectives and questions

1.4 Significance and scope of the study

Besides attracting new customers for Internet banking, banks are trying to keep their current customers by improving their level of satisfaction This study is to find the most important satisfaction factors of Internet banking customers and to propose strategic recommendation for banks However, the study is limited to banks operating in Vietnam and sample size is around 100 – 200 due to time and resource constraint

1.5 Research methodology

The quantitative research is applied to measure customer satisfaction level of Internet banking in Vietnam In quantitative method, online survey is chosen because of its

convenience, flexibility and efficiency Respondents of the survey are customers of

Internet banking who are currently use Internet banking channel at a bank, age from 18 –

50 and are living at big cities in Vietnam For collected data from the survey, descriptive analysis and T-test are used to identify the most important satisfaction factors which are statistically significant of Internet banking in Vietnam

The secondary data are also collected in form of figures and statistics from Government’s General Office of Statistics, financial institutions and some market research agencies

1.6 Structure of the study

This research is structured into five chapters Chapter 1 introduces the research including rationale of the study, research problem, research objectives, research questions and methodology Chapter 2 provides a literature review of Internet banking and customer satisfaction factors Chapter 3 discusses the methodology and design of the research Chapter 4 analyzes the collected data and presents findings of the research Chapter 5 makes recommendations and conclusion

Figure 1.6: The structure of the study

Chapter 2: Literature Review Chapter 1: Introduction to the study

Chapter 3: Research Methodology

Chapter 4: Data Analysis and Findings

Chapter 5: Conclusion and Recommendation

CHAPTER 2: LITERATURE REVIEW

In this chapter, literature about customer satisfaction, service quality, website quality and Internet banking are reviewed

2.1 Customer satisfaction

Customer satisfaction of products or services is often seen as key factor to the long-term success of a company because it influences on customer loyalty, retention and new

customers development as well

Customer satisfaction with a purchase depends upon the product’s performance relative to

a buyer’s expectations; a customer might experience various degrees of satisfaction If the product’s performance falls short of expectations, the customer is dissatisfied If the

performance matches the expectations, the customer is satisfied If the performance

exceeds the expectations, the customer is highly satisfied or delighted (Kotler P,

Amstrong G, Saunders J, Won V, 2001)

There is variety of definitions of customer satisfaction Hunt (1977) described satisfaction

as “an evaluation of an emotion”, suggesting that it reflects the degree to which a consumer believes that the possession and/or use of a service evokes positive feelings (Rust and Oliver, 1994) Customer satisfaction can be defined as an evaluative response or outcome

of the product purchase and consumption experience resulting from a comparison of what was expected and what was received (Patterson, 1993)

Some customer satisfaction factors have been developed in the American Customer

Satisfaction Index (ACSI) model by the University of Michigan’s Ross School of

Business The ACSI is cause and effect model with indices for factors of satisfaction (customer expectations, perceived quality and perceived value), satisfaction itself and outcomes of satisfaction (customer complaint, customer loyalty)

Figure 2.1.1: American Customer Satisfaction Index

Source: Michigan’s Ross School of Business (http://www.bus.umich.edu/)

In addition to perceived quality and customer expectation factors, other satisfaction factors have also been developed:

Figure 2.1.2: Diagram of customer satisfaction factors

Source: www.articlefolder.net

2.2 Service quality and Website quality

Many researchers have used service quality as a factor impacting on customer satisfaction (Parasuraman et al., 1988) Parasuraman (1985) proposed ten dimensions to measure the quality of services: reliability, responsiveness, competence, access, courtesy,

communication, credibility, security, understanding the customers and tangibles

1 Reliability means that the firm performs the service right in the first time and honors its promises: accuracy in billing, keeping records correctly, performing the service at promised quality on time…

provide service: giving quick answer, prompt service…

service

4 Access involves approachability and ease of contact to the service

5 Courtesy involves politeness, respect, consideration and friendliness of contact personnel (receptionists, telephone operators, sales forces)

understand and listen to them For example, the firm should increase level of sophistication with a well-educated customer and speaking plainly with a less-educated people

7 Credibility concerns trustworthiness, believability and honesty

8 Security is the freedom from danger, risk or doubt: physical safety, financial security and information confidentiality

needs: understanding customers’ demand, recognizing regular customers, offering customized options…

10.Tangibles include the physical evidence of the service: physical facilities,

appearance of personnel, physical representation of the service, tools or

equipment…

After that in 1988, he reduced these ten dimensions to five attributes by using factor analysis: tangible, reliability, responsiveness, assurance and empathy Based on the five

dimensions, 22-item survey instruments called SERVQUAL was used to measure service quality and was applied widely MinJoon J and Shaohan C(2009) proposed ten

dimensions to assess Internet banking service quality: reliability, responsiveness,

competence, courtesy, credibility, access, communication, understanding customers,

collaboration and continuous improvement The first eight dimensions were previously uncovered by Parasuraman et al (1985), the remaining two dimensions were uniquely

developed by Minjoon J and Shaohan C (2009)

Table 2.2.1: Service quality dimensions

Liu and Arnett (2000) mentioned four factors to evaluate website quality: system use,

system design quality and playfulness Barnes and Vidgen (2000) proposed other four

factors: functionality, content, service and attractor Jayawardhena and Foley (2000)

suggested that to enhance customer satisfaction from Internet banking, the speed of

download, content, design, interactivity, navigation and security are critical to assess

Internet banking website Minjoon J and Shaohan C(2009) proposed six dimensions to assess Internet quality as following:

Table 2.2.2: Website quality dimensions

2.3 Research model

The research framework of this study is adapted mainly from studies of Parasuraman

(1985) about service quality and Minjoon J and Shaohan C(2009) about website quality Moreover, 2 variables (promotion and image) are added to reflect the emotional

satisfaction and promotion power in the Vietnamese Internet banking context

Figure 2.3: Variables development

Convenience

Customer satisfaction

- Convenience: with Internet banking, customers can make their transactions at any time, at

any where, at great speed It is no doubt that convenience is one of the key benefits

outstanding from many other traditional banking channels It was also researched by

Parasuraman (1985) under the variable named “Access” in the study of service quality Therefore, it would be convincing to put convenience in set of key satisfaction factors and

be measured by this study

- Security: although convenience is the most influential factor, it becomes dangerous if

security is not ensured People might not use Internet banking service without security in spite of great convenience They tend to be concerned about losing their private and

sensitive data They are also uncertain about hackers, frauds This factor was measured by Parasuraman (1985) and became popular in online business world It would be necessary to add security to key satisfaction factors of Internet banking service in Vietnam

- Website content: is very important because it is the direct mean to make online tractions

with Internet banking This factor was also investigated by Minjoon J and Shaohan C (2009) It would be necessary to ask whether website content is one of Vietnamese

customer satisfaction factor and the importance level of it comparing to other variables

- Customer support: customer support plays a vital role in Internet banking service because

it is the only human contact of the service package And human “touches” human in a natural but deepest way Customer support involves in two variables “communication” and

“responsiveness” in the study of Parasuraman (1985) about service quality It would be interesting to know how much customer support contributes to the level of customer

satisfaction of Vietnamese Internet banking

- Promotion: price is one of key components in buying a product or service People tend to

buy at cheaper price with the same quality of products Promotion is one way of

discounting price It is no doubt that higher promotion is among satisfaction factor of Internet banking customers Hence, it would be interesting to know how important it is when comparing to the other satisfaction factors Promotion was mentioned by Philip Kotler (2001) and in many other researches

- Image: besides functional values of a product or service, many people pay attention to

psychological values such as reputation of product’s brand, the lifestyle and image in which a product represents…They tend to choose products or services which have the image that is similar to their own image or the one they are following When using Internet banking services, many people feel that they are more modern, dynamic and professional Consequently, it would be more interesting to check whether the variable of image plays

an important part in satisfaction factors of Internet banking customers The concept of image was mentioned by Philip Kolter (2001) and in many other researches as well

2.4 Internet banking

2.4.1 History of Internet banking

The previous version of today’s online banking services was the distance banking services over electronic media from the early 1980s Online banking services started in New York

in 1981 when four of the city’s major banks (Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home banking services Because of lack of commercial success, these banking services never became popular Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members

in October 1994 The revolution then spread to the world and brought huge benefit for banks and customers When first introduced, Internet banking was used mainly as an information presentation mean where banks marketed their products and services on their websites With the development of asynchronous technologies and secured electronic transaction technologies, more banks have come forward to use Internet banking both as a transactional and an informational mean As a result, registered Internet banking users can now perform common banking transactions such as writing checks, paying bills,

transferring funds, printing statements, and inquiring account balances Internet banking has evolved into a “one stop service and information unit” that promises great benefits to both banks and consumers

2.4.2 Definition of Internet banking

Internet banking is the use of the Internet as a delivery channel for banking services, allowing customers to perform a wide range of banking transactions electronically via the bank’s website Internet banking can be categorized broadly into three levels:

- The Basic Level: presenting information on different products and services offered to customers It may receive and reply to customers’ queries through email

- Simple Transactional: allowing customers to submit their instructions, applications for different services, queries on their account balances etc, but do not permit any fund-based transactions on their accounts

- Fully Transactional: allowing the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc Some of these banks are known as “virtual” banks or

“Internet only” banks as not have any physical presence but offering different banking services

2.4.3 Security method

The popular security methods for Internet banking is the PIN/TAN (Personal Identification Number/Transaction Identification Number) system where the PIN represents a password, used for the login and TANs representing one-time passwords to authenticate transactions TANs can be distributed in different ways The most popular one is to send a list of TANs

to Internet banking customers by postal letter The most secure way of using TANs is to offer customers a security token to generate passwords These token generated TANs depend on the time and a unique secret stored in the security token Usually online banking with PIN/TAN is done via a web browser using SSL secured connections, so that there is

no additional encryption needed Another way to provide TANs to an Internet banking user

is to send the TAN of the current bank transaction to the user's mobile phone via SMS The SMS text usually quotes the transaction amount, transaction details and the TAN which is only valid for a short period of time

2.4.4 The architecture of Internet banking

Most banks use core banking applications to support their operations where CORE stands for "centralized online real-time exchange" This basically means that all branches of the bank access applications from centralized datacenters The deposits made are reflected immediately on the bank's main servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world Normal core banking

functions will include deposit accounts, loans, mortgages and payments across multiple channels like ATMs, Internet banking, and bank counters

Core banking system is a back-end system that processes daily banking transactions, and posts updates to accounts and other financial records Core banking systems typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools Strategic spending on these systems is based on a combination

of service-oriented architecture and supporting technologies that create extensible, agile architectures

Figure 2.4.4: The architecture of Internet banking

Source: Artifactory Open Source (www.jfrog.com)

A computer application is typically separated into three main tasks: interaction with the

user, processing of transactions according to business rules and storage of business data

The three tasks can be viewed as three layers, which may run on the same system or may

be separated on to multiple computers leading to three-tier architecture These layers can

be briefly described as follows:

(1) Presentation Layer: This layer is responsible for managing the front-end devices, which include browsers on personal computers, Personal Digital Assistants (PDAs), mobile

phones, Internet kiosks, Web TV etc The presentation layer takes care of user interface

issues like displaying format, color, layout, image etc It also has important responsibilities

in user authentication and session management activity

(2) Application layer: It contains the business logic for processing of data and transactions and necessary interfaces to the data layer It processes requests from the presentation layer, connects to the data layer, receives and processes the information and passes results back

to the presentation layer It is responsible for ensuring that all the business rules are

incorporated in the software The issues of scalability, reliability and performance of the services to a great extent depend upon the application layer architecture

(3) Data Layer: The data layer uses database to store, retrieve and update application data The database may be maintained on one or multiple servers The database also supports back-up and recovery of data as well as logging of all transactions

2.4.5 The advantages and disadvantages of Internet banking

A - The advantages of Internet banking

days a week, not limited to working hours They can even instruct a transaction which will happen at a specific time later

café shop or anywhere as long as they can access to the Internet Nowadays, with the support of 3G wave technology, Internet banking is available everywhere for customers

the people from every corner of the globe are now potential customers The market

is now worldwide for banks

• Transactional speed: electronic information can travel from place to place in a matter of seconds or less Waiting time for administrative process can be eliminated remarkably by the use of Internet

website instead of slower traditional methods like mail, telephone

the same time in the same branch With the strength of Internet, banks can serve thousands of customers at the same time

• More customers understanding: banks can extract valuable knowledge from

analyzing automatically-collected customer behaviors when they conduct

transactions With this business intelligence, banks understanding customers more

perspective according to many researches

B - The disadvantages of Internet banking

get annoying advertising messages

transactional security from hackers

transactional website if they have little experience on website usage Banks

understand and support their customers by giving visual aid, guideline, frequently asked questions and live support

• Big investment: a lot of time, effort and capital have been invested for Internet banking system But it is the critical success factor for banks in the long-term and worth implemented

2.4.6 The current situation of Internet banking in the World

In the United State, approximately 78% of all commercial banks with more than $5 billion

in assets have transactional websites, while 43% of banks with $500 million to $5 billion in assets and 10% of banks under $500 million in assets have transactional websites Many new business process and technological advances such as Electronic Bill Presentment and Payment, handheld access devices such as Personal Digital Assistants, Internet Telephone and Wireless Communication channels are used in the United State banking sector

Over two thirds of United Kingdom consumers conducting the majority of their banking activities on the internet in 2006, compared to one in five in 2005, according to Lloyds TSB In addition, 57% of the people surveyed said that they banked via the internet more often recently

Swedish and Finnish markets lead the world in terms of Internet penetration and the range and quality of their online banking services Merita Nordbanken (now Nordic Bank

Holding, a merger between Finland’s Merita and Nordbanker of Sweden) leads in “log-ins per month” with 1.2 million Internet customers, and its penetration rate in Finland (around 45%) is among the highest in the world for a bank of ‘brick and mortar’ origin

Standinaviska Easkilda Banken was Sweden’s first Internet bank, having gone on-line in December 1996 It has 1,000 corporate clients for its Trading Station – an Internet based trading mechanism for forex dealing, stock-index futures and Swedish treasury bills and government bonds

Banks in Japan are increasingly focusing on e-banking transactions with customers

Internet banking is an important part of their strategy While some banks provide services such as inquiry, settlement, purchase of financial products and loan application, others are looking at setting up big financial portals with non-finance business corporations Most banks use outside vendors in addition to in-house services Protection of private

information, however, is becoming a burning issue in Japan Japanese banks are currently requested to place disclosure publications in their offices by law

In summary, most banks consider Internet banking services as the crucial factor for term success in the world of electronic commerce Penetration of Internet banking is increasing in most countries and the market for Internet banking is forecast to grow sharply thanks to the evolving communication technology In spite of huge benefits, Internet banking generates a lot of risk for bankers and customers such as security risk, legal risk, Internet fraud, sensitive information exposure and cross-border issues Regulators all over the world are trying their best to complete the legal system for Internet banking

long-2.4.7 The development of Internet banking in Vietnam

According to VNNIC (Vietnam Internet Network Information Center), 26.8 people in

Vietnam were using the Internet by the end of 2010, representing 31% of Vietnamese

population The higher social economic classes (SEC) use Internet more often Penetration

at SEC A is over 70%, while it is below 10% for SEC E In the middle economic classes

(CD), Internet penetration is approximately 30-50%

Figure 1.4.7.1: Internet users in Vietnam 2004 - 2010

Online shopping has increased dramatically in the last few years Online shopping has

nearly doubled since 2007 Also e-banking has become more popular in this period of time, increasing from 7 to 12%

Figure 2.4.7.2: Online business development 2007 - 2010

There are currently four state owned commercial banks, 37 joint stock commercial banks,

5 joint-venture banks, 28 foreign owned banks, 982 cooperatives, two policy lending

banks, 55 non-bank financial institutions operating in Vietnam There is no doubt that the

number of banks has been expanding since Vietnam’s entry into the World Trade

Organization dated 7 January 2007 Since 1992, Vietnam has transformed its banking

system into a diversified system in which commercial banks of all kinds provided services

to a broader customer base However, the state owned commercial banks account for

approximately 70% of all lending activities In 2005, foreign banks and joint ventures

accounted for around 14% of lending activities Giant foreign banks such as HSBC, City

bank, Mizuho, Deutsche Bank and ANZ have all established their image and branches, and some have purchased shares in domestic commercial banks

Most of the banks have been implementing e-banking services besides the traditional ones The Bank for Foreign Trade of Vietnam (Vietcombank) started introducing its e-banking

services in 2001 Its e-banking services allow customers to transfer money electronically;

to get access to information such as account balance, exchange rates, and consultative

information In addition, Vietcombank’s Connect 24Card allows customers to withdraw

money from private accounts and international credit cards, check their account balance, make statement enquiry and transfer funds

The Industrial and Commercial Bank of Vietnam started introducing its e-banking services

in 2000 This kind of service has allowed customers to get access to information such as their account balance, their recorded transactions, interest rates, exchange rates, and so on via its website The bank is now co-operating with some multi-national companies, such as Fujitsu, Intel and HP to develop more complete services relating to e-banking

The Bank for Investment and Development of Vietnam (BIDV) started introducing its banking service in 1998 Customers can check their account balance, transfer money and pay bills BIDV’s traditional customers are enterprises operating in the fields of

e-information technology, telecommunication, building and construction Because BIDV is primarily operating in large cities and towns, BIDV’s e-banking focuses mainly on high income and enterprise customers

The Bank for Agriculture and Rural Development (Agribank) started launching its banking services in 2003 With a strong network of 1,650 branches and a number of

e-transaction offices nationwide, Agribank has co-operated with Western Union in offering remittance services to Vietnamese overseas and migration labors in 2,800 spots throughout Vietnam

Most of foreign banks operating in Vietnam have been offering e-banking services Their systems are more modern and professional than Vietnamese because they inherit

experiences from many previous years

Although most of banks offer Internet banking, very few customers used their service Customers concern about security more than benefits they can get They have less

information about this new service Some people even do not have enough knowledge to use Internet banking

CHAPTER 3: RESEARCH METHODOLOGY

In this chapter, type of research and questionnaire design is described Then, the sampling and data collection are explained respectively

3.1 Type of research

This research is designed to find the most important customer satisfaction factors of

Internet banking which are adopted from previous researches and considered with

Vietnamese context and to give recommendation for banks

There are four types of research: survey, experiments, observation and secondary data

(Zikmund 1997) Selection of research design is based on the advantages and

disadvantages of each kind of research designs and circumstances in which the research

problem is defined Internet surveys are cheaper, faster, more flexible and convenient than traditional surveys

Table 3.1: Comparison between traditional and Internet survey method

forces, inputting data into computer

Cheaper: domain name, hosting

questionnaire because interviewer team

go outside for respondents’ opinions

Can adjust the content of questionnaire while on progress of collecting data (to correct a

mistake…) Sampling frame Can reach out to the general public that

received the questionnaire

Restricted to people with access to the Internet

communication

Lower but acceptable if having methods to screen out cheating respondents