Factors affecting customers choice of banks to deposit

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business PHẠM THỊ MINH HẰNG FACTORS AFFECTING CUSTOMERS’ CHOICE OF BANKS TO DEPOSIT ID 22120010 MASTER OF BUSINESS (Honours) SUPERVISOR: DINH THAI HOANG, Ph.D Ho Chi Minh City – Year 2014 ACKNOWLEDGEMENT I would not have been able to complete my thesis without the advice, assistance, understanding and encouragement of my supervisors, my family and my friends I would like to gratefully and sincerely acknowledge their assistance and support First of all, the most important person I would like to thank is my supervisor, Dr Dinh Thai Hoang Thanks to his valuable advice and generous guidance throughout the process of completing this thesis Secondly, I would like to express my gratefulness to Dr Nguyen Dinh Tho and Dr Nguyen Thi Mai Trang for their kindness in supporting me to deal with issues in Research Design problem Also, I would like to send my kindest gratefulness to my family, my mom, my dad and my sister in supporting me, encouraging me throughout the hard time of completing my thesis Furthermore, I would like to thank all of the staff at International School of Business – University of Economics Ho Chi Minh City who are always enthusiastic and give me a lot of administrative support, assistance and understanding Finally, I would like to give my gratefulness to all my classmates who have been sharing with me all their knowledge and experience as well as joys and hardship during MBA course I would not complete my thesis without their support In brief, it has been a long journey and I have grown in so many ways I would like to say “thank you” again for the involvement of everyone who has helped me to complete this thesis ABSTRACT The priority task of not only bankers but also the economists in Vietnam is to attract more surplus capital into the bank channel to provide for the whole economy Accomplishing this task can help pushing enterprises into investing more, and expending business more, which attributes into boosting the whole national economy, especially in the context when interest rate of deposit is less attractive Based on the literature reviewed in the bank selection criteria, this study empirically investigates the main factors influencing customers’ choice of banks to deposit in Vietnam A quantitative method via questionnaire survey was used to obtain the views of approximately 250 customers who are having or used to have deposit in banks in Ho Chi Minh City regarding their decision whether to choose this bank to deposit or not Logistic Regression analysis was used to test the proposed hypothese to investigate the relationship between customer’s choice and the influencing factors derived According to the findings of this research, Comfortable and Financial benefits make a positive impact on Customers’ choice of banks to deposit The results of this research are important for bankers in managerial implications to enhance and improve their competitiveness, in other words, to allure and retain more deposit, which will ultimately result in more profitability to Banks and boosting more capital to the Economy Keywords: Deposit, Customers’ choice, Bank selection criteria Table of Content CHAPTER INTRODUCTION 1.1 Research Background 1.2 Research Problem and Research Objective 1.2.1 Research problem 1.2.2 Research objective 1.3 Scope of Research 1.4 Significance of Research 1.5 Research Structure CHAPTER LITERATURE REVIEW 2.1 Review on Customer choice of banks 2.2 Hypothesis development 2.2.1 Security 2.2.2 Financial benefits 2.2.3 Service quality 2.2.4 Convenience 2.2.5 Bank image 10 2.2.6 Demography 11 2.3 Research Model 12 CHAPTER RESEARCH METHODOLOGY 13 3.1 Data Sources 13 3.2 Research process 13 3.3 Sample Size 16 3.4 Measurement Scale 17 3.5 Data Analysis Method 19 3.5.1 Reliability measure 20 i 3.5.2 Validity measure by EFA (Exploratory Factor Analysis) 20 3.5.3 Logistic regression analysis 21 CHAPTER DATA ANALYSIS AND RESULTS 23 4.1 Descriptive stastistics survey results 23 4.1.2 Preparation data 23 4.1.3 Characteristics of the sample population 26 4.2 Reliability of measurement instruments 27 4.3 Validity of measurement instruments 30 4.3.1 Suitability of data 32 4.3.2 Factor extraction 32 4.3.3 Factor rotation 33 4.4 Logistic Regression analysis 39 4.4.1 Introduction 39 4.4.2 Computing variables 40 4.4.3 Assumption for Logistic Regression 40 4.4.4 Testing hypotheses 40 4.4.5 Controlling variables 44 4.5 Conclusion 45 CHAPTER CONCLUSIONS AND IMPLICATIONS 47 5.1 Research Overview 47 5.2 Research Findings 47 5.3 Managerial Implications 49 5.4 Research Limitations and Directions for Future Research 49 APPENDIX OPEN QUESTIONS FOR DRAFT SURVEY 59 APPENDIX QUESTIONNAIRE 60 APPENDIX EFA RESULT OF VARIABLES…………………………………….65 ii List of Figures Figure 2.1 Conceptual framework………………………………………………… .12 Figure 3.1 Research process………………………………………………….…… …15 Figure 4.1 Re-constructed Conceptual framework…………………………………… 39 iii List of Tables Table 3.1 Main factors affecting customers’ choice of banks to deposit………………17 Table 4.1 Coded factors……………………………………………………………… 24 Table 4.2 Sample summary……………………………………………….……… ….26 Table 4.3 Cronbach’s Alpha test results………………………………………….…….28 Table 4.4 KMO and Bartlett’s test…………………………………… …………….…32 Table 4.5 EFA Rotated Factor Matrix………………………………………………….33 Table 4.6 Re-run EFA KMO and Bartlett’s Test……………………………….………35 Table 4.7 Re-run EFA Rotated Factor Matrix………………………… …… ………35 Table 4.8 Re-run Cronbach’s Alpha test result………………… ……………………37 Table 4.9 Classification……………………………………………………… …… 41 Table 4.10 Variables not in the Equation……………………………………….…… 41 Table 4.11 Omnibus Test of Model Coefficients……………………………… …….41 Table 4.12 Model Summary………………………………………………………… 42 Table 4.13 Variables in the Equation…………………………………………….……43 Table 4.14 Control Variables in the Equation…………………………………… … 44 iv CHAPTER INTRODUCTION 1.1 Research Background In the modern time, the important role of bank deposits in economy is undeniable since without bank deposits businesses would not be able to access funds from individual (Ritter, Silber & Udell; 2008) Banks are a channel to collect savings from surplus sectors in the form of deposits and bump this money into the economy in the form of loans If the people not interact and deal with banks, a great portion of the economic capital would remain idle (Rosly, 2005) In the present context of Vietnam, while gold, stock market, or real estate investments are not likely suited for amateur investors (Vietnam News, 2014), bank deposit is still popular and favourable, regardless of the considerably low interest rates by the end of February, which was supposed to discourage deposits (The State Bank of Viet Nam, 2014) On February 2014, according to the municipal Statistic Office (2014), in Ho Chi Minh City, total capital mobilization reached VND1.16 trillion (US$55.18 million), constituting a 15.1 per cent year-on-year increase Of that, commercial banks accounted for 56.8 per cent of the total city's deposits, up 18.4 per cent year on year (Ho Chi Minh City Statistic Office, 2014) Consequently, raising capital via deposits in commercial banks plays an important role not only in spurring economic growth and salvaging dying businesses in the present regression time of the economy but also creating profit for commercial banks themselves and depositors by interest rates (Ritter, Silber & Udell; 2008) In line with that, alluring customers to deposit is the requisite to any commercial banks, which needs to research for both theoretical and managerial purposes The study of bank selection criteria has received attention from many bank marketing researchers since few decades ago (Abduh, 2012) However, most of the studies researched on bank selection criteria for a whole financial service aspect including deposits, credits, online banking… Plenty of these studies applied T-test, Probit or Multiple Linear Regression model to explore the factors affecting the customers’ choice of banks to deposit Moreover, in Vietnam, a few recent studies on customers’ decision to deposit in banks have only limited in one specific branch of bank In 2012, Hue conducted a research on factors affecting retail customers’ intention of depositing in BIDV Hue Branch In 2013, Ha, in her study in Vietnam obtained information about the factors determining the decision of retail customers in depositing in An Binh Bank Hue Branch This study tries to explore more specifically the factors affecting bank selection criteria to deposit in banks in a region of Vietnam applying Logistic Regression From the above reasons, the study sees the essentiality in doing the research on “Factors affecting customers’ choice of banks to deposit” This study has attempted to discover the important factors that influence retail consumers’ behavioral decision to choose banks to deposit by investigating customers depositing in banks in a region of Vietnam 1.2 Research Problem and Research Objective 1.2.1 Research problem According to State Bank of Vietnam (2014), recently, there is a quite severe credit shortage since credit growth has been fallen from 51.4% in 2007 to 10% in the Fall of 2014 Contrast to developed economies where capital source comes from both equity and fixed income markets, enterprises in Vietnam and other developing countries rely substantially on bank credit for financial needs (VinaCapital, 2014) While domestic enterprises have been hobbled by a lack of access to low cost credit or any credit at all, the priority task of not only bankers but also the economists in Vietnam is to attract more surplus capital into the bank channel to provide for the whole economy Accomplishing this task can help pushing enterprises into investing more, and expending business more, which attributes into boosting the whole national economy Besides, the fact that the Government control ceiling interest deposits by cutting the dong deposit rate to 5.5% from 6% from October 29, 2014 makes deposits less attractive (State Bank of Vietnam, 2014) As to the bankers, the main problem raised is how to identify and measure the main factors influencing depositing customers’ choice of banks to have right strategies in their business especially in the current context By solving that problem, banks could allure more deposits, providing more opportunities for enterprises to approach capital, helping the economy in struggling for regression 1.2.2 Research objective The objective of the present study is to identify and measure the main factors influencing customers’ choice of banks to deposit Consequently, the research questions of the thesis are raised as two following questions: - What are factors affecting customers’ choice of banks to deposit? - How these factors affect customers’ choice of banks to deposit? 1.3 Scope of Research For limited conditions, the research is conducted in Ho Chi Minh City with the respondents who have deposits in banks with various careers The timeframe of research intentionally lasts from the middle of June to the end of August in 2014 1.4 Significance of Research Depositing is the main channel to raise capital for the economy in Vietnam Besides, our economy is in the phase of regression due to the lacking of capital Findings of main factors influencing customers’ choice of banks to deposit in order to improve capital raising activities have the practical and essential value in the contemporary context 1.5 Research Structure The research is divided into five chapters The first chapter introduces about background, research problems, research objectives, research questions, scope of research and research structures The second chapter covers literature review of the previous research and shows hypotheses, as well as the conceptual framework of the research The third chapter presents the research process, sampling size, measurement scale, main survey, and data analysis method The fourth chapter 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Explain 59 APPENDIX QUESTIONNAIRE NHÂN TỐ ẢNH HƯỞNG ĐẾN QUYẾT ĐỊNH LỰA CHỌN NGÂN HÀNG GỬI TIỀN FACTORS AFFECTING DEPOSITORS IN BANKS ASSESSMENT Tôi tên Phạm Thị Minh Hằng Hiện nghiên cứu đề tài “Nhân tố ảnh hưởng đến định lựa chọn ngân hàng gửi tiền" Tôi mong nhận hỗ trợ Anh/Chị cách trả lời bảng câu hỏi khảo sát bên Các câu trả lời khách quan Anh/Chị có ý nghĩa giá trị lớn đề tài nghiên cứu Chân thành cám ơn Anh/Chị, My name is Pham Thi Minh Hang I have selected the topic “Factors Affecting Depositors in Banks Assessment” as my Capstone Project at the University of Economics It shall be my great honour if you could please take a moment to help me to complete the survey below Thank you for your participation Hiện anh/chị có gửi tiền ngân hàng: (Nếu câu trả lời “Khơng”, Anh/chị vui lòng ngừng Bảng khảo sát) Do you currently have any bank deposits accounts? (If the answer is “No”, please stop the survey)  Có Yes  Khơng No Thời gian anh/chị bắt đầu gửi tiền ngân hàng: On average, the term of your bank deposit account is:  Dưới năm Less than years  Trên năm Over years 60 I/ CÂU HỎI SAU ĐÂY LIÊN QUAN ĐẾN NGÂN HÀNG ANH/CHỊ ĐÃ CHỌN TRÊN: Hướng dẫn trả lời Instruction Hãy chọn ngân hàng mà anh chị gửi tiền Từ ngân hàng chọn trên, xin cho biết mức độ đồng ý anh/ chị tiêu chí cách chọn vào ô tương ứng theo quy ước từ thấp đến cao sau với Hoàn toàn không đồng ý Không đồng ý Phân vân Đồng ý Hoàn toàn đồng ý Select ONE bank among the banks which you are currently having/used to have bank deposit accounts For each of statement identified below, choose the number from to that best fits your judgment of quality of the bank you select: (1) Extremely Disagree, (2) Disagree, (3) Neutral, (4) Agree, (5) Extremely Agree Hồn tồn khơng đồng ý Hồn tồn đồng ý Tiêu chí Statements 1/ Thương hiệu ngân hàng tạo cảm giác an toàn Banks with reputable brand names stimulates trust and confidence 2/ Ngân hàng người thân quen giới thiệu nên tạo cảm giác an toàn Positive word-of-mouth communication stimulates trust and confidence 3/ Ngân hàng có người quen làm nên tạo cảm giác an toàn Relationship with banks’ employees stimulates trust and confidence 4/ Ngân hàng bảo mật thông tin tốt tạo cảm giác an toàn Banks with high reputation of information security stimulates trust and confidence 61 5/Ngân hàng có biểu lãi suất cạnh tranh Banks offer competitive deposit rates 6/ Ngân hàng có phương thức trả lãi phù hợp Banks offer flexible choices of loan installments 7/ Lãi suất ngân hàng công bố rõ ràng Banks offer high transparency in deposit/loan rates 8/ Ngân hàng có lãi suất cao với kỳ hạn ngắn Banks offer high interest rates in short period 9/ Các chi phí liên quan đến dịch vụ tiền gửi thấp so với ngân hàng khác Banks offer lower processing fees compared to their peers 10/ Các địa điểm giao dịch ngân hàng thuận tiện cho việc lại Banks are located in busy and popular areas Hoàn toàn khơng đồng ý Tiêu chí Hoàn toàn đồng ý Statements 11/ Giờ làm việc Ngân hàng thuận tiện cho khách hàng Bank provides extended operating hours 12/ Ngân hàng có dịch vụ phục vụ tận nhà cần thiết Bank offers at-home service 13/ Thủ tục giấy tờ đơn giản/ quy trình đơn giản, dễ dàng nhanh chóng Bank’s procedures are quick and simple 62 14/ Ngân hàng có dịch vụ gửi tiền thơng qua ngân hàng điện tử tiện lợi hoạt động 24/24 Bank offers online banking services 24/7 15/ Nhân viên niềm nở, thân thiện Bank’s employees are always hospitable 16/ Nhân viên phục vụ nhanh chóng, hiệu Bank’s employees provide prompt services 17/ Các thủ tục nhân viên hỗ trợ nhiệt tình (ví dụ: ghi bảng kê…) Depositing procedure is fully supported by Bank’s employees (e.g: filling in sheets…) 18/ Nhân viên hiểu rõ nhu cầu khách hàng đưa giải pháp tốt tư vấn Employees have good knowledge to render the services promised dependably and accurately 19/ Ngân hàng có nhiều hình thức khuyến mãi, quà tặng hấp dẫn Bank has attractive promotions and offers 20/ Trang thiết bị ngân hàng đại Bank with modern physical facilities and equipment 21/ Các mẫu, biểu trình bày rõ ràng, chuyên nghiệp Brochures are demonstrated professionally and clearly 22/ Không gian giao dịch tạo cho khách hàng cảm giác thoải mái The appearance of the banks creates comfortable atmosphere 23/ Thiết kế nội/ngoại thất thu hút Bank with attractive interior/exterior design Anh/chị có định tiếp tục lựa chọn ngân hàng đánh giá để gửi tiền không? 63 Will you choose this bank to stay deposting or not?  Có  Khơng Yes No II/ THƠNG TIN CÁ NHÂN: PERSONAL INFORMATION Giới tính: Gender  Nam Male  Nữ Female Thu nhập: Income  Dưới 10 triệu đồng Less than 10 million  Trên 10 triệu đồng Over 10 million 64 APPENDIX EFA RESULT OF VARIABLES Table EFA Correlations Choice Pearson Correlation Choice security 381 456 505 454 332 000 000 000 000 000 Sig (2-tailed) Security Financial Convenience Service bank image ** Financial ** Convenience ** Service ** bank Image ** N 254 254 254 254 254 254 Pearson Correlation 381** 549** 555** 558** 505** Sig (2-tailed) 000 000 000 000 000 N 254 254 254 254 254 254 Pearson Correlation 456** 549** 661** 640** 543** Sig (2-tailed) 000 000 000 000 000 N 254 254 254 254 254 254 Pearson Correlation 505** 555** 661** 686** 597** Sig (2-tailed) 000 000 000 000 000 N 254 254 254 254 254 254 Pearson Correlation 454** 558** 640** 686** 608** Sig (2-tailed) 000 000 000 000 N 254 254 254 254 254 254 Pearson Correlation 332** 505** 543** 597** 608** Sig (2-tailed) 000 000 000 000 000 N 254 254 254 254 254 ** Correlation is significant at the 0.01 level (2-tailed) 65 000 254 Table EFA Total Variance explained Initial Eigenvalues Rotation Sums of Squared Loadings Factor Total % of Variance Cumulative % Total % of Variance Cumulative % 10.851 47.178 47.178 3.453 15.011 15.011 1.531 6.658 53.836 3.139 13.649 28.660 1.506 6.546 60.382 2.974 12.929 41.589 1.257 5.464 65.846 2.640 11.479 53.068 1.087 4.725 70.571 2.292 9.963 63.031 873 3.798 74.369 781 3.396 77.765 549 2.386 80.151 492 2.138 82.288 10 480 2.088 84.377 11 426 1.854 86.231 12 384 1.672 87.902 13 367 1.596 89.498 14 353 1.533 91.031 15 304 1.323 92.354 16 289 1.256 93.610 17 264 1.146 94.756 18 251 1.092 95.848 19 236 1.027 96.875 20 196 854 97.729 21 193 839 98.568 66 22 171 742 99.311 23 159 689 100.000 Extraction Method: Principal Axis Factoring Table EFA Communalities Initial security1 637 security2 511 security3 580 security4 585 financial benefits1 704 financial benefits2 694 financial benefits3 674 financial benefits4 602 financial benefits5 594 convenience1 639 convenience2 617 convenience3 484 convenience4 700 convenience5 594 service quality1 660 service quality2 753 service quality3 702 service quality4 676 service quality5 261 67 image1 614 image2 640 image3 669 image4 616 Extraction Method: Principal Axis Factoring Table Re-run Total Variance Explained Initial Eigenvalues Rotation Sums of Squared Loadings Factor Total % of Variance Cumulative % Total % of Variance Cumulative % 9.760 48.800 48.800 4.882 24.410 24.410 1.490 7.449 56.249 2.813 14.063 38.473 1.466 7.329 63.577 2.675 13.377 51.850 1.246 6.229 69.806 2.158 10.788 62.639 964 4.821 74.627 633 3.166 77.794 546 2.728 80.522 464 2.321 82.843 445 2.226 85.068 10 401 2.006 87.074 11 370 1.851 88.925 12 346 1.731 90.656 13 298 1.490 92.146 14 276 1.378 93.524 15 258 1.291 94.815 16 255 1.273 96.088 68 17 237 1.183 97.271 18 205 1.027 98.297 19 173 867 99.164 20 167 836 100.000 Extraction Method: Principal Axis Factoring Table Re-run EFA Correlations Choice Pearson Correlation Choice security bank image comfortable Financial 381** 332** 526** 429** 000 000 000 000 Sig (2-tailed) Security bank image Comfortable Financial N 254 254 254 254 254 Pearson Correlation 381** 505** 616** 516** Sig (2-tailed) 000 000 000 000 N 254 254 254 254 254 Pearson Correlation 332** 505** 656** 513** Sig (2-tailed) 000 000 000 000 N 254 254 254 254 Pearson Correlation 526 616 656 652 Sig (2-tailed) 000 000 000 N 254 254 254 Pearson Correlation 429 516 513 652 Sig (2-tailed) 000 000 000 000 N 254 254 254 254 ** ** 254 ** ** ** Correlation is significant at the 0.01 level (2-tailed) 69 ** ** 000 254 ** 254 ** 254 Figure Re-run EFA Scree Plot 70 ... customers choice of banks to deposit Consequently, the research questions of the thesis are raised as two following questions: - What are factors affecting customers choice of banks to deposit? ... Experience of depositing as Less than years and Above years A summary table of main factors affecting customers choice of banks to deposit is presented as following Table 3.1 Table 3.1: Main factors affecting. .. rank of attributes affecting customers choice of banks The paper, therefore, hypothesizes that: H1: There is a positive relationship between banks security and customers choice of banks to deposit