Service Quality in the Banking Industry - Book Report/Review Example

Literature Review A comparison of service quality in the banking industry: Some evidence from Turkish- and Greek-speaking areas in Cyprus Arasli, Katircioglu and Mehtap-Smadi have presented the paper “A comparison of service quality in the banking industry: Some evidence from Turkish- and Greek-speaking areas in Cyprus” with the aim of analyzing and comparing the service quality of “the commercial banking sector” (Arasli, Katircioglu and Mehtap-Smadi 508) in Cyprus. The paper also presents a study made by the authors to examine the relationship between satisfactions of customers of the commercial banks in the areas in Cyprus where there is Turkish and Greek-speaking population and also their positive word of mouth regarding the experiences they have had with these banks. The works by Parasuraman et al have been reviewed in this paper. The authors have studied the service quality model SERVQUAL developed by Parasuraman. The work by Avikaran in 1994 in which the four factor scale with seventeen items has been presented, has also been reviewed in this paper. The literature review section of this paper presents the evaluation of Newman and Cowling’s work published in the year 1996, in which the quality of service in the banking sector in the United Kingdom. The relation “between quality, productivity and profitability” (Arasli, Katircioglu and Mehtap-Smadi 512) has been examined. Caruana’s paper published in the year 2002 that shows the role played by customer satisfaction in the effect that service quality has on service loyalty, has been cited in this paper. Zhu et al explores the impact put by information technology on the quality of service provided to consumers in large banks, the findings of which finds mention in their paper dated 2002. This paper has been reviewed in the current paper. The 1991 paper by Lewis, which describes the assessment of banks by students, has found mention in this paper. Goode and Moutinho have presented a paper in 1995 on the effects of facilities such as free banking on satisfaction of the students and other customers of the bank. This paper has also been reviewed in the current paper. This research has been conducted in the context of growing importance of services and has addressed in particular the importance of the role played by different dimensions of the SERVQUAL in predicting overall satisfaction level of the customer from the services obtained. The authors selected 268 participants for the research through non-probability convenience sampling. The three authors collected the data in the middle of October 2003. The participants were asked whether their origin was in Cypriot and whether they had used any services of the banks in Cyprus in six months time from that date. The SERVQUAL instrument questionnaire had been distributed to the participants after they answered the questions and were found to be of Cypriot origin and that they had used any of the several commercial bank services. A seven point Likert scale consisting of markings like ‘Strongly Disagree=1’ to ‘Strongly Agree=7’ was used in the questionnaire to make measurements of the items. The expectations and perceptions of the customers were assessed through descriptive statistics. Two groups have been identified from the study, the “Turkish Cypriot customers Living in the North” (Arasli, Katircioglu and Mehtap-Smadi 515) (CLN) and the “Greek Cypriot customers Living in the South” (Arasli, Katircioglu and Mehtap-Smadi 515) (CLS). For ease of research, the SERVQUAL had been translated to Greek and Turkish and then translated back to English for evaluation. The strength of this study is shown by the fact that expectations of these two groups have been found to be significantly different evaluated on the basis of the terms of reliability and empathy scores of these respondents. The weakness of this study is that the respondents were chosen randomly. The selection of ‘willing participants’ might bring a bias on the results of the study. Service quality models in banking: a review Sangeetha and Mahalingam have presented the paper titled “Service quality models in banking: a review” with the purpose of appraising “various service quality models” (Sangeetha and Mahalingam 83) and identifying the prospects for future research on the basis of the literature reviewed in this paper. The authors made this research study in the context of changing structural and regulatory factors have been affecting the banking environment throughout the globe since the last two decades. This paper has been presented after making extensive studies of fourteen papers by some noted authors such as Parasuraman et al., Gro¨nroos, Mersha and Adlakha, Ennew et al., Avkiran, Blanchard and Galloway, Johnston, Joseph et al., Bahia and Nantel, Sureshchander et al., Aldaigan and Buttle, Al-Hawari et al., Karatepe et al. and Ehigie. The methodology approached in this paper is that of comparing the works of each of these authors and evaluating the models developed by them. The subject related to service quality in commercial banks, although new, has already been researched upon by other researchers within the last decade. This subject is rich with definitions, instruments to make measurements and a variety of models. It has been explored from various perspectives by these authors and different methodologies have been used by them in their studies. This paper takes up the responsibility to compare and contrast the work done by other authors till the year 2011 and reveals the fact unrecognized by others before; the different dimensions of the SERVQUAL holds different levels of importance depending on the national and cultural contexts of study. This study indicates the areas that might be focused upon in future for researching in this arena. This study takes into consideration fourteen papers, containing fourteen different models of service quality relevant to banking sector, presented by different authors and identifies the factors that can be compared within the models. A method of comparative evaluation is then followed. Comparisons amongst the different dimensions of the GAP model have been represented in tabular form. The study conducted for this paper has found out the generic models of service quality that might be gainfully applied to banking institutions and also the specific models developed on service quality which are specifically made for banking institutions and are applied to them across the globe. Various studies have utilized the GAP model devised by Parasuraman in different geographical settings. This study has found the results of these studies by comparing the dimensionality of the SERVQUAL, the order in which the importance has been placed upon the different dimensions of the SERVQUAL and the identification of GAPs present in these dimensions. It has been found that the significance of the dimensions changes with the context in which the study is being made. Therefore the dimensions need assessment in every study. Reliability and validity of the dimensions also depend largely upon the context of study, and requires particular assessment for each study. The strength of this study is that it reveals the different practical as well as managerial implications that emerge from the outcomes of the diverse service quality studies. It has been brought to the fore front that SERVQUAL is not an instrument to measure the core service quality. However, better availability of electronic channels of information would enhance the findings of this study. Determining the relative importance of critical factors in delivering service quality of banks The paper by Kumar, Kee and Manshor by the name “Determining the relative importance of critical factors in delivering service quality of banks” is presented with the aim of determining the critical factors that play a major role in “the level of service quality of banks” (Kumar, Kee and Manshor 211). In this paper the authors re-examine the SERVQUAL model that had been pioneered by Parasuraman. Innumerable researchers have used this model to quantify perceived service quality and conduct researches on this subject. This study has reviewed works of some researchers that have used the SERVQUAL in its entirety to inspect service quality in banks. Some other researchers have decided to exploit lesser number of attributes for the representation of each dimension of the SERVQUAL. Again, there are some other researchers that have mentioned about the SERVQUAL in their papers, but, have not made use of it in their works. The papers by Lewis et al. published in 1994, 2000 paper of Bahia and Nantel, 1997 paper of Johnston, 2003 paper of Ramayah et al. and Izah and Wan Zulqurnain’s paper published in 2005 have been reviewed in this paper. The study gap that has been addressed in this paper is the channel of banking which finds maximum use by the people residing in the cities of Malaysia and the quality of service available to the customers from these channels and that from the less utilized channels. Bank customers have been targeted as the target population for this study, regardless of whether they make transactions with domestic, foreign, Islamic or conventional banks. The samples for this study have been collected from the residents of the major cities in Klang Valley, predominantly the two places namely “Kuala Lumpur and Shah Alam” (Kumar, Kee and Manshor 215). The researchers selected this region since the population of this area has good access to all the available channels of banking. They are therefore good representatives of the banking customers in Malaysia. The sample size of three hundred customers of commercial banks was determined by the number of variables involved in the study and the goodness of fit. The survey method has been employed for the collection of data with the help of structured questionnaire. The questionnaire had been distributed personally by the researchers among the customers. The questionnaire consisted of three sections; section 1 relating to the customers’ usage of channels of banking, section 2 relating to the service quality dimensions and section three relating to the socio-demographic status of the respondents. The process of collection of primary data has been ‘convenience sampling method’ that has been the basis of the SERVQUAL analysis. The authors have used descriptive statistics to evaluate the perception and expectation of the respondents. Both “mean and standard deviation of each SERVQUAL statement” (Kumar, Kee and Manshor 215) have been computed. Paired sample t-test has been used to test mean difference among perception, expectation, dimension and overall SERVQUAL. The technique of factor analysis has been applied to find out the relevant dimensions of service quality from the twenty six statements mentioned in the questionnaire and measured by the seven point Likert scale. The study found that the auto teller machine was the banking channel mainly used by the respondents. The channel preferred next was branch banking. It was found that service convenience was a dimension that positively affected customer satisfaction. The overall perceptions about banks’ service quality fell short of expectations. The strength of this study is that it has incorporated a new dimension to assess service quality. It emphasizes on improvement of competence and convenience of service quality of the banks. However, the study might have better results by making greater use of qualitative methods in the collection of data. This would help the researchers understand the behavioral patterns of the ethnic groups and religious sects that affect banking behavior of the customers. Barriers to service quality in Islamic banks in Qatar The paper titled “Barriers to service quality in Islamic banks in Qatar” has been presented by Chaker and Jabnoun and published in the year 2010. The purpose of this paper is to investigate the chief issues that act as barriers to service quality existing in the Islamic banking system. The authors have shown interest in the banking system of Qatar and have taken into consideration the impact that the demographic variables lay on the perceptions of the people regarding such barriers. This paper recognizes that ample research has been made on quality of service in banking sector, but, very little research has been made on the barriers faced by the banks in general in providing service to their customers. This paper reviews the limited amount of literature available on this topic. The works by Gerstner and Libai published in 2006, Chu et al. of 1998, the 2000 paper of Lynn et al., 2001 paper of Burke, 1998 paper of Schneider et al. and Little and Dean published in 2006 have been reviewed in this paper. Parasuraman’s SERVQUAL has also been examined in this paper. Few other studies depict that leadership style affects service quality of banks. The current paper mentions works made in this context by Jabnoun, Waldman, Jabnoun and Ghaysah and also Jabnoun and Rasasi published in 2005. Literature has been reviewed further in the context of management style in the banks in Arab countries. These include works by Al-Kazemi and Ali, Yavas, Bhuian et al., Curry and Kadash, Hofstede, Ali and Sabri, the 2004 paper by Sabri, Alanazi and Rodrigues’ paper published in 2003 and some others. The management system and recruitment procedure in the Arabian banks are “characterized by centralized decision making” (Chaker and Jabnoun 299) and lack of meritocracy. This is depicted in the works by Assad of the year 2002 and Angala of the year 1998 respectively. The authors of the current paper have reviewed the paper by Garvin and Hallowell et al. These two authors have emphasized, in their works, that commitment to the service of customers is very important. One can find the study gap in the aspect that impact of gender perceptions on obstacles to barriers to quality of service has not been addressed by these works which finds mention in the current paper. The methodology consisted of one hundred and fifty employees from six Islamic banks situated in Qatar. The process of data collection for this paper included a thirty three item questionnaire that was distributed among the participants. The questionnaire had been built on the basis of existing literature on this topic. Parasuraman’s service quality gaps have been consulted for this purpose and the measurement has been made on a five point Likert scale consisting of choices between ‘strongly disagree’ and ‘strongly agree’. The point 3 represented ‘neutral’. A response rate of seventy seven percent was achieved. For analyzing the data the method of factor analysis had been used. This determined the different dimensions of the questionnaire. To assess which of the dimensions found were posing significant obstacles to service quality, the t-test had been applied. The researchers have used one-way ANOVA to determine the effect put by demographic variables on the perception of the people regarding service quality. The results obtained determine that “lack of empowerment, centralization, and lack of transformational leadership” are the most significant hurdles toward service quality in the banking sector in Qatar. The first two factors might be related to the dimension of national culture in the countries in the Arabian region. Decentralization and empowerment are two vital aspects in improving leadership and transformational skills. The strengths of this paper is that it has obtained significant results from its analysis of the information. The findings from the paper about the Qatar banking system are valuable and are applicable not only in the Arab countries but also in other countries where Islamic system of banking exists. It provides a hint towards the effects that national culture lay on the service quality of banking institutions. However, the participants might have been less transparent about the answers provided in relation to the pattern of service provided by them. It is assumed that employees possess better perceptions about quality of service than customers. Therefore a high chance might remain that the respondents underestimate the weight of barriers existing in the path of service quality. This would lead to results from the study that might have been biased depending upon their responses. Analysis of gap The first study can be extended by examining in depth the relationship between the instruments of SERVQUAL and the behavioral traits of commercial bank customers. This might be helpful in also guiding the front line employees in banks to enhance their delivery of services. This study can be implemented in the international level as well with benefits. Extending the second study, studies can be made on this subject in future in regard to cross-country and cross cultural aspects. New constructs have to be identified that reflect the various components of overall service offering. The common characteristics and differences between the banking institutions in the countries having followers of Islam demand recognition. Better assessment of the demographic characteristics of major ethnic and regional groups would lead to better quality of service. The future gap in the third study is found in the fact that further extensions can be made to shed light on the differences existing between Islamic banking and conventional banking. The service quality gap between these two types of banking can be closed down by identifying the critical factor. This study can also be extended to sectors like education, tourism and information technology system. Future researchers can further expand the fourth study to other system of banking that exists in the Arab countries. Although the barriers to quality of service would not be possibly eliminated by one time cures, the indications obtained in this study can be used in future to investigate into the service quality of the Qatar banking system. References Huseyin Arasli, Salih Turan Katircioglu and Salime Mehtap-Smadi. “A comparison of service quality in the banking industry: Some evidence from Turkish- and Greek-speaking areas in Cyprus.” International Journal of Bank Marketing 23.7 (2005): 508-526. Online. Jaya Sangeetha and S. Mahalingam. “Service quality models in banking: a review.” International Journal of Islamic and Middle Eastern Finance and Management 4.1 (2011): 83-103. Online. Mukesh Kumar, Fong Tat Kee and Amat Taap Manshor. “Determining the relative importance of critical factors in delivering service quality of banks.” Managing Service Quality 19.2 (2009): 211-228. Online. Mohammed N. Chaker and Naceur Jabnoun. “Barriers to service quality in Islamic banks in Qatar.” International Journal of Commerce and Management 20.4 (2010): 296-307. Online. Read More