Impact of Determinants involved in Retail Banking and its Users

Dr. Mangal Mishra*, Jaikishan Sahu**

Abstract

The banking industry in India has this huge picture in account, which covers the

traditional banking practices from the time of Britishers to the reforms period,

nationalization to privatization of banks and now increasing foreign banks in India.

Banking industry in India has achieved a new height in terms of Retail Banking. The

use of technology has brought a revolution in the working style of banks. In this paper

an attempt has been made to identify the general sentiments, challenges & opportunities

for the Indian Banking Industry. The main objective of this paper is to identify all the

main factors that influence the customer satisfaction in banking at the present

contemporary global & highly competitive market. In this study a comparative research

design has been chosen to elucidate the determinants of customer satisfaction. The

research method will help in examining the various factors that result in Retail Banking.

Factor Analysis has been used for data analysis. Implications of this research will help

the bankers of small town banks in identifying the various factors that can affect their

customer satisfaction. Also the study will help in understanding the pros & cons of

Retail Banking in Tier II cities of India.

Key Words: Banking Industry, Customer Satisfaction, Retail Banking, Tier II Cities.

* Asst. Professor, Cloth Market Institute of Professional Studies, Indore

**Asst. Professor, Acropolis Institute of Management Studies and Research, Indore

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Altius Shodh Journal of Management & Commerce

INTRODUCTION

The banking industry has ever since transforming from the era of industrialization. Nowadaysbanking industry is metamorphing into customer centric industry. The major focus of bankingindustry has now become customer's satisfaction. Lot of factors like technology increment,customer awareness and leniency in policies has led to intense competition in the world. InIndia also the customers have starts expecting higher service quality from banks which, iffulfilled could result in significantly high level of customer satisfaction.

Due to rapidly changing market, new technologies, economic uncertainties, heavy competitionand more aware customers banks are facing huge challenges to keep their customers satisfiedand retained. Many new entities domestic as well as cross border have made the process aswell as operation more vigorous & intense. Over a decade, Indian banking industry hasfaced major challenges and have show massive growth. They have expanded geographicallyas well as functionally. They have been meticulous in keeping customer details, requirements& cash potentials.

They have changed a heavy course over the years. Today the banks are market driven &market responsive. The top concern in the mind of every bank's CEO is increasing or atleast maintaining the market share in every line of business against the backdrop of heightenedcompetition (Shah, 2012). This makes customer satisfaction all the more important forcustomer retention. Reichheld & Kenny (1990) mentioned that it call for retention ofcustomers for the long term, which is more economical than attracting new customers. Taylor& Baker (1994) supported by saying that customer satisfaction is widely recognized as akey pressure in the formation of customers future purchase intentions.

The new concept Retail Banking which has become not-so-new now is becoming larger andhence forces to ponder upon the question that is the customer satisfied or not and what arethe essentials of retail banking which lead to the satisfaction or dissatisfaction of customers.Previous results have emphasized that in-branch factors, in particular, staff cooperation andattitude, branch location & convenience are the most noteworthy factors that have somebearing on overall customer satisfaction in retail banking.

RATIONALE OF THE STUDY

The research was conducted to provide information that would help the banks in evaluating& re-designing the market strategies to increase customer satisfaction levels. It could alsohelp in maintaining the existing customers as well in making new customers.

OBJECTIVES

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The study was conducted by keeping the following objectives in mind:

1. To measure customer satisfaction level in retail banking.

2. To identify the major factors of customer satisfaction in retail banking.

SCOPE OF THE STUDY

The study is related to customer satisfaction in retail banking. The study was conducted inIndore, MP. The study is conducted in view of retail banking in India only. Various factorslike banking services, risk & privacy, image & personality, empathy, pricing policies, chargeslevied & employee behavior and customer relationship management were kept intoconsideration.

LITERATURE REVIEW

Lot of studies has been done on customer satisfaction. To be more precise, if customersatisfaction in retail banking is sufficed together, concrete data can be found. Retail bankingis a service industry focused towards the customer's money & its management. An elementthat strongly drove the satisfaction of customers in the banking sector was the convivialityfactor related to the features of a bank & the attributes of its personnel (Shah, 2012). Rust& Zahorik (1993) put forward that satisfaction with perceived product quality was the primedriver of overall customer satisfaction.

Reichheld & Sasser (1990) stated that the customer satisfaction provided effectively canhelp in customer retention. They said that the longer the customer stays with a bank morevalue it generates for the bank. Customer satisfaction can also be generated through bankimage & perceived service quality which leads to customer loyalty (Bolemar & Kasper,1995).

Johnston (1997) generalized that satisfaction or dissatisfaction with retail banking did notarise from the same factors. To be more precise, some elements of service quality, if improved,enhanced the customer satisfaction levels of customers, while on the other hand, other elementsmay not improve satisfaction but simply function to keep dissatisfaction away. Levesque &McDougall (1996) suggested that the determinants of satisfaction in retail banking are drivenby a number of factors and also included service quality dimension.

METHODOLOGY

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The measures used in this study are adopted from previous literature dealing with servicequality and customer satisfaction (Shah, 2012).

A total of 150 respondents were asked to give their respondents in a self administeredquestionnaire. The questionnaire was based on 5 pt Likert Scale. The respondents were amix of various demographic factors consisting of age, gender, income & education. Thestudy was conducted in various retail banks of Indore city, considered to be the secondcapital of MP. Factor analysis was conducted on the survey received.

DISCUSSION

Amongst the respondents 40% were females & 60% were males. The sample was mostly inthe age group of 21-30 years (68%). Maximum respondents belonged to either post graduatelevel (42%) or were professionals (40%) which show the high awareness level of customers.

Factor Analysis Result

The data was factor analyzed through SPSS 19.0 and it summarized 26 variables into smallersegments. These 26 variables were reduced to five principal components through varimaxrotation. On the basis of the analysis, five factors with eigenvalues greater than 1 wereobtained & accounted for 72.446% of the total variance.

Following factors came out from the research conducted:

i. Banking Services: it was found that if the employees of the bank are skilled & properlytrained, the customers feel good talking to them. The competency of employees alsohelps. Behavior of employees towards existing customers as well as potential customershelps in retentions. Also, if number of employees is more it makes their efficiency moreeffective. Some of the respondents also insisted on being punctual on intimated timings.When asked for electronic medium easy usage was the main concern. Younger consumersare adopting electronic mode more due to its "trendy effect".

ii. Bank's Image: The image is directly related to the objectives bank the bank follows.Also the brand image the bank portrays also leads to customer satisfaction. The betterthe image of the bank the higher will be the longevity of transactions from customers.

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iii. Customer Convenience: This factor was seen to score the maximum as far as customersatisfaction is considered. The utmost on convenience was the location of ATMs followedby the number of branches of the bank. Some respondents also showed concern overthe location of the branch. The overall ambience of the bank also leads to satisfaction.Some of the respondents also emphasized on better parking facilities.

iv. Bank charges & Policies: The major reason for dissatisfaction amongst consumers isthe extra high charges the banks levy from consumers. The imposition of penalties onconsumers and recovery measures also constitutes satisfaction levels. The interest ratesoffered by the banks leads to very high satisfaction levels. The charges on loans offeredby the banks also involve in the satisfaction level.

v. Customer Relationship Management: The time the employees take to resolve theproblems, the product & services offered by the banks makes the consumers wish tocontinue. The way by which the employees respond to the complaints also affects thesatisfaction level.

CONCLUSION

The study shows that the customer satisfaction level is on higher side as far as retail bankingin Indore is considered. The overall performance of the banks also plays a big role in increasingthe customer satisfaction of the banks. Moreover, the level of education completes theincreasing usage of retail banking which is usually boosted by lack of time due to busylifestyles. In this research, the factors used can be used for various other industries also.Similar studies can be conducted in different cities too. This study can further guide the bankmanagement on improving their service quality level.

REFERENCES

1. Bolemar JMM & Kasper JDP (1995), "The Complex Relationship between ConsumerSatisfaction & Brand Loyalty", Journal of Economic Psychology, Vol. 16, Pp. 311-329.

2. Johnston R (1997), "Identifying the Critical Determinants of Service Quality in RetailBanking: Importance & Effect", International Journal of Bank Marketing, Vol. 14, No.4,Pp 111-116.

3. Levesque T & McDougall GHC (1996), "Determinants of Customer Satisfaction in RetailBanking", International Journal of Bank Marketing, Vol. 14, No.7, Pp 12-20.

4. Shah A (2012), " Market Research on Factors Affecting Customer Satisfaction in RetailBanking in Vadodara, Gujarat, Western India", Bauddhik, Vol. 3, No.1, Pp 16-32.

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5. Reichheld FF & Kenny D (1990), "The Hidden Advantage of Customer Retention",Journal of Retail Banking, Vol. 7, No.4

6. Reichheld FF & Sasser WE (1990), "Zero Defections: Quality Comes to Services",Harward Business Review, September-October, Pp. 105-111.

7. Rust R & Zahorik A (1993), "Customer Satisfaction, Customer Retention & MarketShare", Journal of Retailing, Vol. 69, No. 2, Pp. 193-215.

8. Taylor SA & Baker TL (1994), "An Assessment of the Relationship between ServiceQuality & Customer Satisfaction in the Formation of Consumers' Purchase Intentions",Journal of Retailing, Vol. 58, No. 2, Pp. 163-178.

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Altius Shodh Journal of Management & Commerce