Open University: Service Quality and Customer Satisfaction in Banking

This report examines the crucial relationship between service quality and customer satisfaction within the banking sector. It begins by identifying the research problem, focusing on the need for banks to meet customer needs in a competitive market. The report discusses five key factors: tangibles, empathy, assurance, responsiveness, and reliability, justifying the significance of reliability, responsiveness, and assurance. A literature survey analyzes three journal articles on service quality's impact on customer satisfaction and loyalty, highlighting the importance of service dimensions and the influence of technology-based banking. The problem statement and five specific purposes are outlined, followed by a literature review of five research articles, providing a comparative analysis of research methodologies and findings. The report justifies the chosen research methods and addresses four ethical considerations. A timetable for the research is included, and the report concludes with a summary of the key findings and implications. The study emphasizes the importance of high-quality services, efficient customer service, and the impact of these factors on customer loyalty and retention within the banking sector.

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Service quality and customer satisfaction in
the banking sector
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Table of Contents
Introduction.................................................................................................................................................2
Identification of the research problem.........................................................................................................2
Discussion of the five factors suitable for the research problem..................................................................3
Justification of the three factors for the research problem...........................................................................3
Literature survey (three journal articles)......................................................................................................4
Problem statement.......................................................................................................................................7
Five specific purposes.................................................................................................................................8
Literature review (Five research articles)....................................................................................................8
Justification of the methods.......................................................................................................................15
Four ethical issues.....................................................................................................................................16
Timetable...................................................................................................................................................16
Conclusion.................................................................................................................................................18
References.................................................................................................................................................19

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Introduction
The paper will evaluate the identification and discussion of five factors of selected research
problem. It will also provide the justification of the three factors related to the research problem
along with the literature survey based on the topic. It further will discuss the key characteristics
of the problem statement and provides with the research questions and hypothesis based on the
articles. The primary aim of the paper is to focus on the five articles that will be discussed in the
literature review. The five articles provided with the comparative study reflects the comparison
between the researches based on different topics. It provides with the critical analysis of the
methods based on the comparative study. It also focuses upon the four ethical consideration
related to the articles. The paper will discuss the factors that put an impact on satisfaction of
customer related to quality of service in the financial institution.
Identification of the research problem
In various countries, the dynamics of quality of service and satisfaction of the customer in the
banking sectors shows that previous studies offer no services to satisfy the needs of customers. In
today's world, all the foreign, private and public banks focus on retail banking and its urban and
rural customers with core banking services (Sanjuq, 2014). This is done to control customer’s
loyalty and retention facilitating 100% satisfaction. It is observed that some of the foreign,
private and public sectors banks do not provide suitable services to their retail customers in order
to maintain quality of service and satisfaction of the customers. In the era of Information,
technology and communication, the method of online financial services and direct pay has shown
advancement. Nowadays the customers prefer suitable hours of transparency, customization and
operation. The defection rates of the customers are higher due to the increased competition in the
market. It is observed that as compared to the nationalized bank the foreign bank provides with
an excellent quality service to its customers. To develop the satisfaction of the customers the
financial institution must provide better services to its customers (Ndikubwimana and Berndt,
2016). Each and every issue of the customers must be solved at a rapid speed. Nowadays
customers highly prefer high-quality services and if the bank fails to facilitate such services than
the customers are dissatisfied. Dissatisfied customers put a significant impact on the financial
institutions to a greater extent.

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Discussion of the five factors suitable for the research problem
The five factors that are suitable for the research problem are tangibles, empathy, assurance,
responsiveness and reliability. As per the study, the most critical dimension is reliability as
compared to responsiveness, assurance and empathy to the customers. The customers are least
concerned about the tangibles. Reliability states that whatever is promised that must be provided
to the customers in the appropriate time. Also, the foreign, private and public sectors banks must
maintain an error-free record (Kasiri et al., 2017). The data of the customers must be handled
systematically by providing suitable services. On the other hand, as per responsiveness, it shows
that its duty is to inform the customers about when the services will be executed. It must provide
the customers with prompt services and must help the customers whenever needed. The requests
of the customers should be fulfilled immediately so that the customers will have a full
confidence towards the employees of the banks. Another factor assurance states that it makes the
customers feel secure while doing transaction and employees must possess the knowledge to
answer the questions asked by the customers. Empathy means paying special attention to
customers in order to deal with their problem. While tangibles mean utilization of the modern
equipment's and providing the efficient facilities to make the customers comfortable (Van Quyet
et al., 2015).
Justification of the three factors for the research problem
The three factors such as reliability, responsiveness, and assurance in the banking sectors are
utilized for customer satisfaction. Such factors refer to facilitate the consumers with high-
standard of services every time. All these factors state that how the financial institution controls
the problems of the customer's services systematically without any error. Related to the
performance and standards of the products or machine parts the customers must not face any
difficulty in functioning. There must be compatibility and uniformity among the machine or
product parts (Ali, and Raza, 2017). As the customers are more dependent on ATM transaction
thus, the security of the ATM has been considered to be a significant factor in the banking sector.
It also states that the issues of the customers must be responded rapidly without taking much
time for providing convenience to the customers. The customers must be assured that they can
safely transact through the banking procedures. The factors for the research problem are based
on the 22-item scale that demonstrates the capability of each factor in providing convenience to
the customers in the banking sectors. The primary aim of the factors is that the customers must

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not face any kind of difficulty in the banking procedures so that banking customers will be
highly satisfied (Zameer et al., 2015).
Literature survey (three journal articles)
Based on the topic of quality of service and satisfaction of customer in the banks the first journal
“Impact of service quality on customer satisfaction in private and public sector banks” states
the influence of the variables of the quality of service quality for the satisfaction of the customer
and the comparison of the public and private sectors bank. It is stated by Paul et al., (2016) that
the service quality shows the difference between the satisfactions of the customers in performing
the services before the identification of the service. Quality of service is determined to be the
primary factor responsible for providing customers with overall satisfaction and gaining
competitive advantage. The research paper provides a view of several quality of service for
satisfaction of customer. It also describes the gap in the marketing services based on the service
quality for the customers in the developed countries. To remove the gaps the study utilizes the
gap model that recognizes the gaps and creates various tools and techniques to eliminate the gaps
(Al-Hawari, 2015). It is observed that in order to provide the facilities the services of the public
sectors banks are poor in comparison with the private sector banks. The loyalty of the bank is
influenced by the service quality satisfaction.
Whereas, another journal “Impact of Service Quality on Customer Satisfaction and Customer
Loyalty: Evidence from Banking Sector” focuses on determining the banking consumers
satisfaction related to various quality of service facilitated by the bank. Also, it demonstrates the
customer’s loyalty with the particular bank. As per Khan and Fasih, (2014) service quality
comprise of several dimensions and the research paper examines that which dimension of the
service quality is better to improve loyalty and satisfaction of customer. In the financial market,
the banks play a significant role in running the economy of the country smoothly. Nowadays
corporate sector which is highly competitive, the service qualities is an important factor in
demonstrating loyalty and satisfaction of customer. These elements are considered to be the
significant factors in improvising the bank's performance to get success in relation to the bigger
market share and better profitability. In the past five years, the privatization of the banking
sectors has led to higher expectations from the banking customers. It is observed that from the
financial institutions that the customers expect a high quality of services. The study states that

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facilitating high-standard of services to the customers not only fulfills their present needs but
also focuses on their future requirements (Choudhury, 2014). It provides with a brief description
of the five dimensions of the quality of service in banking sectors.
The journal “Service Quality, Service Convenience, Price and Fairness, Customer Loyalty and
Mediating Role of the Customer Satisfaction” focuses upon the increasing expectations and
demand of the customers because of the increase in the competition within the market. It
investigates the relationships between customer loyalty and satisfaction, the guaranteed strength
of the perceived service, and perceived service value and service convenience. The dimensions
of the service quality related to technology-based banking have influenced customer loyalty and
satisfaction. It is stated by Kaura et al., (2015) that cumulative and specific transaction are the
two different factors of the satisfaction of the customers. It also shows that the information
technology, tangibility and employee behavior are considered to be the service quality
dimensions. In quality of service, the perceived cost play a vital role in the concept of decision
making. The convenience of service is measured by five dimensions they are, cost-benefit, and
transaction, access and decision convenience. The service convenience affects the overall
satisfaction of customer both on private and public sectors. It is observed that as compared to the
customer attraction the customer retention is more significant. The study states the significance
of customer loyalty and behavior toward the bank (Amin, 2016). It signifies that loyalty of
customer is the mixture of behavioral and attitudinal factor. Thus, the professionals of the
financial institutions are focusing on the factors of customer loyalty and satisfaction.
The ten articles that are relevant to the topic of quality of service and satisfaction of customer in
the bank are as follows:
1.” A Conceptual Framework for Understanding Customer Satisfaction in Banking Sector:
The Mediating Influence of Service Quality and Organizational Oath”
2. “Customer Satisfaction on Service Quality in Private Commercial Banking Sector in
Bangladesh”
3. “The Relationship between Service Quality, Customer Satisfaction and Customer Loyalty:
An Investigation in Vietnamese Retail Banking Sector”
4. “Service Quality and Customer Satisfaction among Bank Clients in Rwanda”

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5. “Integration of standardization and customization: Impact on service quality, customer
satisfaction, and loyalty”
6. “Service Quality Effects on Customer Satisfaction in Banking Industry”
7. “Service Quality and Customer Satisfaction in Selected Banks in Rwanda”
8. “The Impact of Service Quality Dimensions on Customer Satisfaction: A Field Study of
Arab Bank in Irbid City, Jordan”
9. “Service quality perception and customer satisfaction in Islamic banks of Pakistan: the
modified SERVQUAL model”
10. “The Impact of Service Quality Delivery on Customer Satisfaction in the Banking Sector
in Riyadh, Saudi Arabia”
The following three journals are chosen as it states the influence of quality of service and
satisfaction of customer in the private, foreign and public banking sectors around the world. It
signifies various dimensions of the quality of service that helps in satisfaction of customers. It
provides with the factors that are related to various service qualities and satisfaction of the
customers. It evaluates the importance of the service quality to satisfy the customers in the
banking sectors in the developing countries (Buil et al., 2016). It states the functional values such
as innovativeness, efficiency, accessibility, flexibility, customer service, expertise and advice,
size and competitiveness. It describes the three perceived customer service quality such as
convenience, tangibles and reliability. Also, it demonstrates the gaps in the quality of service
based on satisfaction and loyalty of customer. It provides with the numerous solutions to develop
the quality of service in the banks as it plays a significant role in satisfying the customers. The
journals describe the criteria that measure the customer's satisfaction level. They are surprise,
novelty, relieved, content and satisfaction. It not only focuses on the factors related to customer
satisfaction but also provides knowledge about customer loyalty and convenience (Al-Tamimi et
al., 2016). It discusses the five factors of the quality of service that are based on satisfaction of
customer such as empathy, reliability, responsiveness, assurance and tangibles. The journals
highly help in demonstrating various item scales of service convenience, perceived value,
customer’s loyalty and satisfaction in the banking sectors. It provides with the research

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questions, methodology, problem statement, and hypothesis and analyzes the similarities and
dissimilarities.
Problem statement
The problem statement is defined to be the clear description of the problem that requires to be
solved by the team of problem-solving executives. It is utilized to focus and center the team at
the start and helps the team to be on track while putting the efforts (George and Kumar, 2014).
After delivering the efforts it validates the outcomes that are formulated by solving the problem
statement.
The problem statement for the service quality of customer satisfaction is the competition as the
customers have different choices and will select the best from various options. Various problems
such as low speed of the services, missing the transaction details, unable to operate or log in, the
bank account, leaking out of the personal data and many more. Also, the customers face several
problems such as the deduction of the service charges fail in the transaction (Kayeser Fatima,
and Abdur Razzaque, 2014). More often the bank employees do not give a proper response to the
customers. All these problems are faced by the customers that put an impact on the satisfaction
of the customers.
Research Questions:
The research questions based on quality of service and satisfaction of customer are as follows:
1. How the quality of service puts an impact on customer satisfaction?
2. Which strategies enhance the customer satisfaction?
3. What are the dimensions of the quality of service?
4. What is the alliance among quality of service and satisfaction of customer?
5. What is the level of quality of service and customer satisfaction for banking customers?
Hypothesis:
The hypothesis of the research study are given below:
H1. Quality of service affects satisfaction and loyalty of customer.

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H2. Tangibles affect satisfaction and loyalty of customer.
H3. Reliability affects satisfaction and loyalty of customer.
H4. Assurance affects customer satisfaction and loyalty.
H5. Empathy affects satisfaction and loyalty of customer.
H6. Dimensions of quality of service positively affect satisfaction and loyalty of customer.
H7. Perceived fairness and price positively affects satisfaction and loyalty of customer.
H8. Convenience to service dimensions positively influences satisfaction and loyalty of
customer.
H9. Satisfaction of customer affects loyalty of customer.
Five specific purposes
The five specific purposes of the research study are as follows:
 The purpose of the study is to evaluate the level of satisfaction of the customers based on
several quality services that the bank provides to its customers
 Another purpose is to understand the elements of price influence on consumer loyalty and
satisfaction, service convenience and service quality in retail banking. It focuses on the gaps
that affect the dimensions of the service quality, service convenience, perceived fairness and
price on cinsumer loyalty and satisfaction
 One of the most significant purposes is to distinguish the public and the private banking
sectors and examining the impact of the variables of the quality of service on satisfaction of
customer
 The primary purpose is to demonstrate the alliance among the services quality and
satisfaction of the customers
 To develop various strategies to improve the satisfaction of the customers
Literature review (Five research articles)
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1 Research
topic
The Impact of
Service Quality
Dimensions on
Customer
Satisfaction: A
Field Study of
Arab Bank in
Irbid City,
Jordan
A Conceptual
Framework
for
Understandin
g Customer
Satisfaction in
Banking
Sector: The
Mediating
Influence of
Service
Quality and
Organizationa
l Oath
Customer
Satisfactio
n on
Service
Quality in
Private
Commerci
al Banking
Sector in
Banglades
h
The
Relationship
between Service
Quality,
Customer
Satisfaction and
Customer
Loyalty: An
Investigation in
Vietnamese
Retail Banking
Sector
Service
Quality and
Customer
Satisfaction
in Selected
Banks in
Rwanda
2 Problem
statement
The delivery of
the quality
service in the
banking business
impacts on the
quality of
service and
satisfaction of
customer. As per
Al-Azzam,
(2015) the
customers
utilizes the
service quality
dimensions that
affect the
satisfaction of
The problem is
that the
employees are
not trained
properly to
deal with the
issues of the
customers
(Sayani, 2015).
Also, the
commercial
banks faced the
problem of the
hyper-
competitive
market.
The
problem is
the
challenges
related to
maintainin
g the
quality of
services in
maintainin
g customer
satisfaction
.
The problem is
the shortage of
consensus based
on the service
quality
conceptualizatio
n (Mardan et al.,
2015).
According to
Felix, (2017)
the
international
perceptions
of the
satisfaction
of customers
are affected
by the
banking
sectors.

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the customers.
3 Research
question
Is there any
particular
relationship
among customer
satisfaction,
security,
empathy,
responsiveness,
reliability, and
tangibility with
the providing of
the services in
the bank?
What are the
levels of
satisfaction of
customer
related to the
dimensions of
services?
What are
the
strategies
to improve
the
customer
satisfaction
?
What is the
contribution of
the research
study?
One of the
research
questions is
What is the
satisfaction
level of the
service
quality in the
banking
sectors?
4 Hypothesis The hypothesis
is as follows:
H1. There
consist of vital
comparison at
the (α ≤ 0.05)
level among the
satisfaction of
customer and
tangibles with
the services.
H2. There
consist of vital
comparison at
the (α ≤ 0.05)
level among the
satisfaction of
According to
Saha et al.,
(2015) There
will be a vital
impact on the
quality of
service based
on the
satisfaction of
the customer.
H1. The
quality of
service is
significantl
y affected
by the
entire
satisfaction
and loyalty
of the
customers.
H1. The overall
quality of the
service is the
antecedent of
satisfaction of
the customers.
H2. The
satisfaction of
the customer
mediates the
relationship
among customer
loyalty and
quality of
service.
The
hypothesis is
“There does
not exist any
relationship
among the
quality of
service and
customer
satisfaction".
Hence it
consists of a
null
hypothesis.

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customer and
reliability with
the services.
H3. There
consist of vital
comparison at
the (α ≤ 0.05)
level among the
customer
satisfaction and
responsiveness
with the
provided
services.
H4. There
consist of vital
comparison at
the (α ≤ 0.05)
level among the
customer
satisfaction and
empathy with
the provided
services.
H5. There
consist of vital
comparison at
the (α ≤ 0.05)
level among the
customer
satisfaction and