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

VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE DETERMINANTS OF CUSTOMER SATISFACTION ON BANKING SERVICES: THE CASE OF COMMERCIAL BANKS IN HO CHI MINH CITY By NGUYEN THANH NIEN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, MAY 2011 -1- VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE DETERMINANTS OF CUSTOMER SATISFACTION ON BANKING SERVICES: THE CASE OF COMMERCIAL BANKS IN HO CHI MINH CITY A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN THANH NIEN Academic Supervisor: Dr CAO HAO THI HO CHI MINH CITY, MAY 2011 - 11- CERTIFICATION "I certify that the substance of this thesis has not already been submitted for any degree and has not been currently submitted for any other degree And to the best of my knowledge and belief it does not contain any material previously published or written by another person except where due reference is made in this thesis" Ho Chi Minh City, May 2011 NGUYEN THANH NIEN - ·~- -111- ACKNOWLEDGEMENT I would like to express my gratitude to all people who gave me the support to complete this thesis First, I would like to show my sincere and deep gratitude to my supervisor, Dr Cao • Hao Thi who gave me valuable guidance, comments, advice for the success of my thesis Second, I would like to thank to all lecturers and staffs of the Vietnam- Netherlands Programme Third, I also send my gratefulness to my colleagues in the Department of Individual Customer Relationship, Bank for Investment and Development of Vietnam Transaction Center Branch for their supports during my study Especially, many thanks are respectfully sent to my parents for motivating me to I complete the thesis Finally, I give my special thanks to my wife who is always supporting me to finish this re~earch -IV- ABSTRACT Nowadays as globalization and liberalization of financial institutions accelerate, competition among banks becomes more intense Therefore, in order to face with , that fierce competition, commercial banks in Vietnam in general and Ho Chi Minh City in particular always strive to improve access through expansion of Automatic Teller Machines (ATMs) and branch network; introduce new features for both deposit and loan products at attractive rate; and develop new electronic banking facilities like telephone banking, home banking, SMS banking and Internet banking However, in reality, there are so many complaints of customers related to the products and services of banks Those show the dissatisfaction of customers, lead to losing customers and cause negative effect on the market share and the profitability of commercial banks The purposes of this research are to determine the main factors affecting customer satisfaction on banking services including basic facilities, convenience, employee competence, the environment of bank, transaction cost; and the relationship between these factors and customer satisfaction The research is carried out by using questionnaires, designed according to five-point Likert scale It is based on a survey of245 customers in Ho Chi Minh City Data obtained from the customers were used for conducting reliability, factor and regression analysis through SPSS software Research findings show that the most important factors influencing customer satisfaction on banking services are the environment of bank and employee competence, convenience and transaction cost However, this research still has some limitations First of all, data collection is restricted within a few commercial banks in Ho Chi Minh City only Secondly, according to the result of survey, majority of respondents are only from 30 to 50 years old, may be fail to represent for total the actual situation Finally, this research determined the basic factors affecting customer satisfaction on banking services, but there are still lacked of other factors not be identified -v- CHAPTER 1: INTRODUCTION , I 1.1 1.2 1.3 1.4 1.5 CHAPTER 2: LITERATURE REVIEW 2.1 2.2 2.3 Overview of commercial banks 2.4 CHAPTER 3: ANALYTICAL FRAMEWO 3.1 3.2 3.2.1 3.2.2 3.2.2.1 3.2.2.2 3.2.2.3 3.2.3 3.2.4 3.2.4.1 3.2.4.2 3.2.4.3 3.3 3.4 3.6 3.7 Assessment of scale's uni-dime 3.8 3.9 3.10 CHAPTER 4: DATA ANALYSIS AND RE 4.1 4.1.1 4.1.2 4.1.3 4.1.4 -VI- ~I 4.1.5 4.2 4.2.1 4.2.2 4.2.3 4.3 4.3.1 4.3.2 4.4 4.4.1 4.4.2 4.4.3 4.5 4.6 The number The results of pilot survey Descriptive sta Results ofthe sc Factor analysis 4.2.3.1 4.2.3.2 The results of main survey Reliability anal Factor analysis Hypothesis testing Adjusted measu Regression mod Hypotheses tes Hierarchical regression analysis Summary CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1 5.1.1 5.1.2 5.2 5.3 Conclusions Main findings Managerial i Recommendations Limitations REFERENCES APPENDICES LIST OF FIGURES Figure 2.1 Capital mobilization status of commercial banks from 2005 to 2009 12 Figure 2.2 Credit operation status of commercial banks from 2004 to 2009 13 Figure 3.1 Research model 18 Figure 3.2 Research process 19 Figure 4.1 Relative frequency of respondents' type of contact 29 Figure 4.2 Relative frequency of respondents' age group 30 Figure 4.3 Relative frequency of respondents' gender 31 Figure 4.4 Relative frequency of banks' type of ownership 32 Figure 4.5 Relative frequency of number of bank's operation year from the foundation day 33 - Vll- LIST OF TABLES Table 2.1 Literature review summary on custome Table 3.1 Measurement scales Table 4.1 Frequency of respondents' type of cont Table 4.2 Frequency of respondents' age group Table 4.3 Frequency of respondents' gender Table 4.4 Frequency ofbanks' type ofownership Table 4.5 Frequency of number of bank's operatio , Table 4.6 Descriptive statistics Table 4.7 Summary of the Cronbach's alpha result Table 4.8 Factor analysis of independent variables Table 4.9 Factor analysis of customer satisfaction o Table 4.10 Result of reliability analysis Table 4.11 Factor analysis of independent variable Table 4.12 Factor analysis of independent variable Table 4.13 Factor analysis of the customer satisfac Tabie 4.14 KMO and Bartlett's Test of independen .Table4.15KMOandBartlett'sTestofcustomers Table 4.16 Adjusted measurement scales Table 4.17 Model summary Table 4.18 ANOVA Table 4.19 Result of coefficients Table 4.20 Summary of hypotheses testing Table 4.21 Determinants of customer satisfaction o Table 4.22 Hierarchical regression analysis of cus Table 4.23 Coefficients of independent variables " - Vlll - ABBREVIATIONS I ._ Agribank : Vietnam Bank for Agriculture and Rural Development BIDV : Bank for Investment and Development of Vietnam MHB : Housing Bank of Mekong Delta VietinBank :Vietnam Joint Stock Commercial Bank for Industry and Trade Vietcombank :Joint Stock Commercial Bank for Foreign Trade of Vietnam Eximbank :Vietnam Export- Import Commercial Joint Stock Bank ACB :Asia Commercial Joint Stock Bank Sacombank : Sai Gon Thuong Tin Commercial Joint Stock Bank MB :Military Commercial Joint Stock Bank Techcombank :Vietnam Technological and Commercial Joint Stock Bank SeABank :Southeast Asia Commercial Joint Stock Bank Lien VietBank : LienViet Commercial Joint Stock Bank Ocean bank :Ocean Commercial Joint Stock Bank HSBC : HSBC Bank Vietnam Limited ANZ : Australia and Newzealand Bank Shinhan : Shinhan Vietnam Bank Limited Hong Leong : Hong Leong Bank Vietnam Limited IVB : Indovina Bank Limited VIDPB : VID Public Bank SVB : ShinhanVina Bank VSB : Vinasiam Bank VRB :Vietnam-Russia Joint Venture Bank I • I~ •• I~ i - lX- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City + Export collection + Import L/C + Export L/C + Import CAD + Export CAD - Treasury services consist of: + Currency options + Gold options - Oth~r services consist of: + Derivative products + Domestic letter of credit + Insurance • -64- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City + Export collection + Import L/C + Export L/C + Import CAD + ExportCAD - Treasury services consist of: + Currency options + Gold options - Oth~r services consist of: + Derivative products + Domestic letter of credit + Insurance • -64- The dete-rminants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City APPENDIX 2: THE QUESTIONNAIRE OF IN-DEPTH INTERVIEW Dear Sir/Madam, I am Nguyen Thanh Nien, a student of Vietnam- Netherlands Program forMA in Development Economics I am doing a research on the determinants of customer satisfaction on banking services: the case of commercial banks in Ho Chi Minh City The result of this study is only used for scientific purpose Please feel free to provide your opinions This will significantly contribute in improving customer satisfaction on banking services Your answers and your information will be kept in secret, and presented in general report form Please answer the following questions Thank you very much for your participation To answer this questionnaire, please think of one bank (called bank A) you did transactions Based on the characteristics of this bank A, please answer the following questions: - The name of bank A (no need to mention if you feel unfavorable) - For ownership, bank A belongs to: D Joint-stock D State-owned D Wholly foreign-owned D Joint venture - The number of bank A's operation year from the foundation day: D Under years D From 5- 10 years D From 10- 15 years D From 15 - 20 years D Over 20 years - 65- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City APPENDIX 3: THE QUESTIONNAIRE Part 1: According to your level of agreeableness, please tick in the appropriate box for each of the statements below from "1" to "5" (1 = strongly disagree; = disagree; = neutral; = agree; = strongly agree) Please check (X) in only one chosen box No The factors affect customer satisfaction on banking_ services as follows Bas Dem faci is ve Fixed deposits schemes of bank A are very good Money transfer of bank A is very good Loc bank good AT is ve Convenience Debit card of bank A is very good Credit card of bank A is very good Tele-banking of bank A is very good Employee competence Attitude of bank A's staff is very good 10 P:-ofessionality of bank A's staff is very high The environment of bank 11 Service scape of bank A is very good 12 Parking space of Bank A is very good 13 Dissemination of information of bank A IS good 14 15 Query handling of bank A is very prompt Networking of branches of bank A is very wide -66- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City Tr 16 Lo 17 De ,_ 18 Co 19 Wa 20 Tim Please give your level of satisfaction to bank A 21 I to I to 22 fac 23 I to Part 2: Please give us the following infor P y Full - Add - Telephone number: - Ema Do you come to bank A for individ In Please tell your age group U O Please tell your gender M Would you please tell us what can be done to improve customer satisfaction of bank A? Thank you very much for your cooperation! Nguyen Thanh Nien Email: nguyen.thanh.nien@vnp.edu.vn or nienbidv@gmail.com -67- The determinants ofcustomer satisfaction on banking services The case ofcommercial banks in Ho Chi Minh City APPENDIX 4: RESULTS OF PILOT SURVEY 3.1 Reliability analysis of measurement scales Reliability analysis of basic facilities scale Reliability Statistics Reliability analysis ofconvenience scale Reliability Statistics I Cronbach's - 68- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City Reliability analysis ofemployee competence scale Cronbach's Alpha 858 EC1 EC2 a The value is negative due to a negative average covariance among items This violates reliability model assumptions You may want to check item codings Reliability analysis ofthe environment of bank scale Cronbach's Alpha 845 EB1 EB2 EB3 EB4 EB5 -69- The determinants ofcustomer satisfaction on banking senices: The case ofcommercial banks in Ho Chi Minh City Reliability analysis oftransaction cost scale Reliability Statistics • Reliability analysis ofcustomer satisfaction scale Reliability Statistics Cronbach's Alpha 813 Item-Total Statistics 3.2 Factor analysis of independent items KMO and Bartlett'sTest Kaiser-Meyer-Oikin Measure of Sampling Adequacy Bartlett'sTest of Sphericity Approx Chi-Square - 70- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City Rotated Component Matrix• EB3 EB4 EB1 EC2 EC1 EB2 TC3 TC1 TC5 TC4 CON3 CON2 CON1 BF4 BF3 BF1 EB5 TC2 BF5 BF2 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations -71- ... significant impact on customer satisfaction However, they also indicated tl1at -7- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City there did... foundation day, type of contact with the bank, age, gender, and an open question - 23- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City. .. at the banks -13- The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City Statistically, the banking system had approximately 32 million individual