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To Recognize service quality gaps in the Banking sector: A comparative study of local and international banks. ( A case analysis of Bangladeshi Banking industry).
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Introduction:
The service quality is an important measure for the performance of financial institutions. However, in many cases, services of the financial institutions fail to meet the expectation of customers. However, the service quality in financial institutions differs on basis of server factors such as the way the organizations operate, presence of infrastructure, speed to service delivery and the performance of employees (Zameer et al.2015). The current research aims at comparing the service quality in local and international banks in Bangladesh. The research also focuses on identification of gaps in service quality in both types of banks.
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Place Your OrderResearch objectives:
Objectives of the current research are:
• To realize the level of service quality in local banks of Bangladesh
• To realize the level of service quality in international banks of Bangladesh
• To compare the service quality in local and international banks in terms of responsiveness, reliability, tangibles, empathy and assurance and identification of gaps in both cases
Hypothesis:
The hypotheses for the current research are as follow –
H0: The service quality in the Bangladesh banking sector is not satisfactory to the customers in terms of reliability, responsiveness, assurance, empathy and tangibles.
H1: The service quality in the Bangladesh banking sector is satisfactory to the customers in terms of at least one of the factors among reliability, responsiveness, assurance, empathy and tangibles.
H0: The service quality of local and international banks in Bangladesh does not differ in term of reliability, responsiveness, assurance, empathy and tangibles.
H2: The service quality of local and international banks in Bangladesh differs in term of at least one of the factors among reliability, assurance, responsiveness, empathy and tangibles
Literature review:
In the intensely competitive banking sector, satisfying the customers is crucial for the organizations. As stated by Saeidi et al (2015), presence of loyal customers is effective for an organization to gain stability. Sabir et al (2014) also stated that the satisfied customers are important asset for the organization. The satisfaction level of customers increases when they are provided with products and services of superior quality. The customers also become satisfied when the organizations give special attention to improve the relationship with them. However, to enhance the satisfaction level of customers effectively, the organizations need to be aware of the right techniques for providing them with high quality services. SERVQUAL is a technique that assists the businesses to improve their service quality and hence help the organizations to satisfy the customers more effectively.
The SERVQUAL technique defines five dimensions of the service quality. Tangibility of the services is an important dimension that help the customers to access the physical tools and facilities of the organization easily. Therefore, high tangibility indicates that the physical assets of the organization are easily accessible to the customers and hence, makes them satisfied. High reliability is effective for the organization as it helps the organizations to serve customers with the promised services in proper manner (Izogo & Ogba, 2015; Kashif et al 2015). As a result, a trustworthy image of the organization can be developed among the customers. The speed to deliver services to the customers is essential for attaining high satisfaction level. So, the high responsiveness to meet the requirements of customers helps the organizations to improve the level of satisfaction. The degree of accountability of an organization indicates to what extent the organization is interested to serve the customers with appropriate services. Taking care of customers is necessary for satisfying those (Vu & Huan, 2016; Sayani, 2015). So, the high empathy of the organization indicates that the business os capable for making its customers satisfied easily.
Data collection:
The data for the research is collected by conducting survey among the customers of local and international banks in Bangladesh. The customers were provided with a number of questionnaires on different parameters of service quality in the banking sector. Likert scale is an effective tool for measuring a parameter quantitatively (Paul et al. 2016).The respondents of the survey were also provided with the Likert scale to rate each of the parameters associated with service quality of the financial institutions.
Quality of service offered by an organization depends on the factors like responsiveness, reliability, empathy, assurance and presence on tangible factors. SERVQUAL is an effective instrument to quantify the service quality using all its dimensions (Khan & Fasih, 2014; Kaura, et al. 2015). In this research, the service quality needs to be measured from multiple aspects. Therefore, SERVQUAL is used to frame the questionnaire. It ensures that the researcher gets an idea on quality of services offered by the financial institutions in Bangladesh from all aspects.
Quality of service offered by an organization depends on the factors like responsiveness, reliability, empathy, assurance and presence on tangible factors. SERVQUAL is an effective instrument to quantify the service quality using all its dimensions (Khan & Fasih, 2014; Kaura, et al. 2015). In this research, the service quality needs to be measured from multiple aspects. Therefore, SERVQUAL is used to frame the questionnaire. It ensures that the researcher gets an idea on quality of services offered by the financial institutions in Bangladesh from all aspects.
Two set of samples of 100 respondents each, were used for the research. The samples were chosen among the customers of local and international banks in Bangladesh. Getting unbiased responses is important for analyzing the service quality of local and international banks in b Bangladesh. Selection of sample is crucial for eliminating biasness from the survey results (Ennew et al.2015; Brannen, 2017). Therefore, in this research the respondents are selected using the stratified sampling. The stratified sampling is a type of probability sampling techniques that enable the researcher to divide the entire population into multiple strata and then choose the sample using simple random sampling technique from each strata (Saha et al. 2015 ; Flick, 2015). The other probability sampling techniques such as cluster or multistage sampling does not provide such scopes and so, they are not used here. The non-probability sampling methods such as convenience sampling can provide biased results. So, the non-probability techniques also are not used here.
In this research, the entire population of bank customers in Bangladesh was divided into two groups -- the customers of local banks and the customers of international banks. Then using the simple probability sampling, the samples for local banks and international banks are chosen from each stratum.
Data interpretation and analysis:
In this research, the data through the customer survey is presented in tables. The T-State analysis is also used to interpret the data. All the parameters such as assurance, reliability, responsiveness, tangibility and empathy are assessed through the survey questionnaire for both local banks and the international banks.(Refer to Appendix 1)
Assessing the level of assurance:
For local banks:
Table 1: Evaluating assurance of the local banks
For international banks:
For international banks:
Table 2: Evaluating assurance of the international banks
T –test for the assurance level:
T –test for the assurance level:
Table 3: T-test for assurance
The t-value from table 1 is:
T=-(0.42/100)/((0.6125-(0.6125/100)/(100-1)100))1/2=0.042 (Refer to Appendix 2)
The degree of freedom in this case = (100-1)= 99
Assuming the alpha value is 0.05, the p-value for the t-table is found as 0.3376
Now the p value is less than t-value for the alpha level of 0.05. Hence, the null hypothesis that there is no difference in the service quality of local and international banks in terms of assurance is rejected.
Interpretation of table 1 and 2:
Figure 1: Level of assurance in local and international banks of Bangladesh
The findings of the T-test indicate that the service quality of local and international banks in Bangladesh differs in terms of the level of assurance. However, to get a deeper insight on the level of assurance in both type of banks, the data collected through survey is presented in graphs. The graph indicates that the international banks provide more accurate and effective services to the customers while the local banks lag in terms of accuracy and troubleshooting effectiveness.
Evaluating the level of responsiveness:
For local banks:
For local banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Average time taken to carry out regular banking activities | 15 | 15 | 45 | 15 | 10 | 2.9 |
| Timelines of your bank to provide occasional services | 20 | 20 | 40 | 15 | 5 | 2.65 |
Table 4: Level of responsiveness for local banks
For international banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Average time taken to carry out regular banking activities | 5 | 5 | 30 | 60 | 10 | 3.95 |
| Timelines of your bank to provide occasional services | 3 | 7 | 40 | 45 | 5 | 3.42 |
Table 5: level of responsiveness in international banks
T-test for responsiveness:
| Factor | Average score for local banks (X) | Average score for international banks(Y) | (X-Y) | (X-Y)2 |
| Average time taken to carry out regular banking activities | 2.9 | 3.95 | -1.05 | 1.1025 |
| Timeliness of your bank to provide occasional services | 2.65 | 3.42 | -0.77 | 0.5929 |
| Total | -1.82 | 1.6954 |
Table 6: T-test for responsiveness
The T value= -1.39 (Refer to Appendix 2)
Assuming the alpha level 0.05, using the t-table, the p value is 0.838
As the p value is less than t-value, the null hypothesis is rejected in this case also.
Interpretation of table 4 and 5:
Figure 2: Responsiveness of local and international banks
The above graph indicates that the customers in the banking sector or Bangladesh consider that the international banks provide faster services than the local banks. In case of regular banking services such as cash deposits and cheque clearance, the international banks provide better services. Similarly, in case of occasionally availed services, such as processing the bank loans also, the international banks perform better.
Assessing the tangible:
For local banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Availability of branches | 15 | 15 | 55 | 7 | 8 | 2.78 |
| Availability of ATMs | 20 | 25 | 45 | 5 | 5 | 2.5 |
Table 7: level of tangibility for local banks
For international banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Availability of branches | 5 | 5 | 30 | 40 | 20 | 3.65 |
| Availability of ATMs | 4 | 6 | 20 | 50 | 20 | 3.76 |
Table 8: level of tangibility for international banks
T-test for tangibility
| Factor | Average score for local banks (X) | Average score for international banks(Y) | (X-Y) | (X-Y)2 |
| Availability of branches | 2.78 | 3.65 | -0.87 | 0.7569 |
| Availability of ATMs | 2.5 | 3.76 | -1.26 | 1.5876 |
| Total | -2.13 | 2.3445 |
Table 9: T-test calculation for tangibility
The T-value is: -1.42 (Refer to Appendix 2)
The p value at the alpha level of 0.05 is: 0.079375
In this case also, the null hypothesis that the service quality of local banks is not different than the international banks in terms of tangibility, is rejected.
Interpretation of table 7 and 8:
Figure 3: Tangibility of local and international banks
The data collected on the tangibility of local and international banks in Bangladesh indicates that the as per the customers’ perception, the international banks perform better in terms of tangibility. The availability of branches and the ATMs is more in case of international banks and as an impact, the customers can easily access services of these banks. However, the local banks do not perform as efficiency as the international banks do in terms of tangibility . it reduces the satisfaction level of customers in the local banks to a great extent.
Assessing reliability:
For local banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Security of services | 10 | 10 | 55 | 20 | 5 | 3 |
| Trustworthiness or organization | 5 | 5 | 60 | 25 | 5 | 3.2 |
Table 10: Reliability of local banks
For international banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Security of services | 5 | 5 | 55 | 25 | 10 | 3.3 |
| Trustworthiness or organization | 5 | 15 | 50 | 20 | 10 | 3.15 |
Table 10: Reliability of international banks
T-test for reliability:
| Factor | Average score for local banks (X) | Average score for international banks(Y) | (X-Y) | (X-Y)2 |
| Security of services | 3 | 3.3 | -0.3 | 0.09 |
| Trustworthiness or organization | 3.2 | 3.15 | 0.5 | .25 |
| Total | 0.2 | .34 |
Table 11: T-test for reliability
The T-value is: -0.34 (Refer to Appendix 2)
The p value is (alpha value = 0.05): 0.3672
The p value is slightly higher than the t value. Hence, the null value is proved true here. It means that in terms of reliability, there is no difference between the local banks and the international banks. In other words, in terms of reliability, both the local and international perform equally efficiently in Bangladesh.
Interpretation of table 9 and 10:
Figure 4: Reliability of local and international banks in Bangladesh
The t-test indicates that there is no significant difference the local and international banks in Bangladesh in terms of the reliability. Customers of the banking sector of Bangladesh consider that both the local and international banks have reliability of equal level. However, the information collected from the survey gives a deeper insight on the perception of the customers on reliability of the banking organizations. Findings of the survey indicate that the customers consider the international banks provide more secured services and it increases their level of satisfaction. Presence of advanced infrastructure and accessibility to the latest technology may be one of the reasons behind the ability of international banks to provide more secured services. However, analysis on the other parameter used for realizing the level of reliability indicates that the banking customers consider the local banks are more trustworthy than the international ones. The perceived trustworthiness of local banks increases the level of satisfaction of their customers. The customers have more knowledge on the local banks than the international organizations in the market of Bangladesh. It may be one of the reasons behind the perception of customers on trustworthiness of these organizations.
Assessing the empathy:
For local banks:
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Behavior of staffs | 15 | 20 | 55 | 5 | 5 | 2.65 |
| Understanding your requirements | 20 | 20 | 50 | 6 | 4 | 2.54 |
Table 12: Level of empathy in local banks
For international banks
| Factor | 1 | 2 | 3 | 4 | 5 | Average rating |
| Behavior of staffs | 4 | 6 | 30 | 10 | 50 | 3.96 |
| Understanding your requirements | 5 | 10 | 20 | 20 | 45 | 3.9 |
Table 13: Level of empathy in international banks
T-test for level of empathy:
| Factor | Average score for local banks (X) | Average score for international banks(Y) | (X-Y) | (X-Y)2 |
| Behavior of staffs | 2.65 | 3.96 | -1.31 | 1.7161 |
| Understanding your requirements | 2.54 | 3.9 | -1.36 | 1.8496 |
| requirements | ||||
| Total | -2.67 | 3.5657 |
Table 14: T-test for empathy
The T-value is: - 1.42 (Refer to Appendix 2)
The p value for alpha value of 0.05 is, 0.793
As the p-value is lower than t-value, the null hypothesis is rejected. It can be stated that the there is a difference in the service quality of local and international banks of Bangladesh in terms of empathy.
Interpretation of table 12 and 13:
Figure 5: level of empathy in the banks of Bangladesh
The result of t-test reveals that the level of empathy in the banks of Bangladesh varies significantly with the type of organization. The data collected through survey also indicates that the services offered by the international banks are perceived as more satisfactory to the customers. Here, two parameters, behavior of bank staffs and understanding on the requirements of customers is assessed to understand the conception of customers on the level of empathy. In both the cases, the international banks perform significantly better than the local organizations. The customer-oriented approach of the international banks may help them to behave with the customers in more professional manner. Similarly, the international banks are experienced in larger and more diverse group of customers. Therefore, managing the customers and handling their requests becomes easier for them. On the other hand, the local banks have more knowledge on the local customers. But, the lack of experience for handling larger customer groups may prevent them from competing with the international organizations.
Assessing overall service quality
For local and international banks:
| Overall service quality | 1 | 2 | 3 | 4 | 5 | Average rating | (X-Y) | (X-Y)2 |
| Local banks | 4 | 6 | 70 | 10 | 10 | 3.16 (X) | --0.69 | 0.4761 |
| International Banks | 5 | 5 | 10 | 60 | 20 | 3.85 (Y) |
Table 15: T-test for overall service quality
The T-value is: -1 (Refer to Appendix 2)
Hence the p-value for alpha range 0.05 is 0.1598
As the p-value is lower than t-value, it can be stated that the null hypothesis is rejected. It indicates the overall service quality in the banking sector of Bangladesh is satisfactory.
Interpretation of table 15:
Figure 6: The overall customer satisfaction level in the banks of Bangladesh
The information on the level of overall satisfaction indicates that the international banks are more efficient than the local organizations to satisfy the customers. However for both type of organizations, the average score on service quality is below 4. It can be stated that the banks in Bangladesh meet their customers’ requirements although there are scopes for improvement.
Identification of gaps: The findings of t-tests and graphical interpretation of survey results indicates any gaps in the service quality for both local and international organizations. The gaps are mentioned below:
For local organizations:
Improving assurance, tangibility, responsiveness and overall customer satisfaction: The current research indicates that the local banks in Bangladesh requires improving their accuracy and effectiveness of services, presence of the organization in terms of branches and ATMs, security of the services, speed to service delivery and solving the customer problems. The behavior with customers and understanding their issues also require being improved. The local organizations currently meet the requirements of their customers roughly and it also needs to be improved for sustaining in the competition.
For international organizations:
Improving trustworthiness and overall service quality: The international banks require enhancing their trustworthiness to the customers for retaining their share in the Bangladesh banking sector for longer term. Currently, the international organizations meet the demand of customers effectively. However, these organizations have to exceed the expectations of customers to long-term success.
Conclusion:
The above discussion indicates that the service quality of local and international
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