DETERMINANT OF BANKS SERVICES SELECTION

DETERMINANT OF BANKS SERVICES SELECTION

Services quality
Numerous literature review on previous research shows that service quality is the most important factor that the consumer consider when choosing a bank of their choice. However, services are something tangible and not easy to measure as different people have different perception and expectation on the quality level. According to Angur, Natarajaan & Jaheera Jr (1999), quality in services plays an important role in industry that needs a lot of human encounter like banking services. Traditionally quality services are related to good long lasting relationship between banks and the customers. Quality services are necessary to achieve success and survival of baking industry that is full of competition. (Samli & Frohlich. 1992). This is the fact that changes in consumers that hunger for the best services and banks because exist of choices for them to choose. According to Brenda Lewis in her book’s Financial Service Marketing, the consumer nowadays begin to understand alternatives that available for product and services, organization that provides it and the increasing expectation of services quality. Higher expectation on quality causing them to be more critical when evaluating the services or products that received. Quality of services is critical for banking sector because the products offered are mostly homogeny and hard to be differentiated. That is why banks focus on maintaining long lasting relationship with its customers. (Stafford et al., 1994) According to Filotton, Tanzi & Saita (1997), banks need to provide good customer relationship in line with their expectation in order to fulfill their satisfaction and influence the choose the banking services. According to Bloemer, Ruyter & Peeters (1998) there is correlation between the quality of services and satisfaction & loyalty of the customers. It is true that a satisfied customer will be a loyal customer devoting to the same bank for a long period and will not change the bank unnecessary so it depends how the bank continue to take care of their customer base. According to Avkiran (1999), it is more costly to pull in one new customer than to maintain one existing customers by providing a quality services to them. Research by Huu & Kar (2000) where they used the literature review from Singapore Business (1992) also stated that banks today could not solely compete on pricing but in the context of service quality.

In depth literature review also shows that service quality is a very general variables because it service quality there are a lot of criteria that a customer will evaluate or have specific attention. Few early quality guru and researcher have categorized the service quality dimension in their models such as Parasuraman et.al, Crosby and Groonroos (1985). Parasuraman, Zeithamel and Berry (1988), three professors in marketing from Texas A&M University stated in their research the five dimension of service quality such as tangible, reliability, assurance, responsiveness and empathy. Groonroos come out with his five key service quality indicator such as professionalism & skills, reputation & credibility, behavior & attitude, accessibility & flexibility and lastly reliability & trustworthiness. Not all dimension stated by the researcher mention just now is totally the same but it has some criteria relatedness and same core in the dimension perception.

Even though service quality is not the main influence or factor that can be easily seen but Bradford (1999) said that service quality is the most important factor in choosing a bank but it is very subjective and normal customers will use experience and recommendation as a motivator to choose a bank. For example in a poor and developing country, service quality may not seem as important as the developed and advance nations. According to Frimpong (1999) in Ghana, service quality is not significant compare to safety of the cash fund for the consumer there and that is why there is no market segmentation in that country.

Quality Service
In evaluating the SERVQUAL model, 5 dimensions shows the variables of reliability, assurance, responsiveness, tangible and empathy. Reliability means the capability of provider to show performance of service quality that is consistent and correct. [Parasuraman et. Al, 1984] According to Parasuraman (1988), do not matter what quality of services we research, reliability is the most critical dimension and follows by other dimension. Dick & Basu (1994) also concluded that reliability and confidence is playing an important role in intangible dimension to maintain and build customer loyalties. Customer want reliable services because banks deal with their important asset and money. In one of the research by Anthony A. Alfred & H. Lon Adams, it was found that a lot of customers close their accounts with banks because there are error in recording done, few mistakes happened in transaction and failure of banks to admit the mistake or compensate for the error it has done to the customers. Customers will not tolerate inconsistency of services arises from poor management and problematic computer system that will impact their asset.

Tangible means something that is real, can be seen and feel. In service too there are some physical elements that can portray its products such as facilities, its workers, communication material and other tools or devices used in the works encounter with customers. (Parasuraman, Berry & Zeithaml). Parasurama et al. Leithnen & Lethinen (1988) stated that the quality of physical such as conveniences provided in the premises and other tools is one of three dimension of quality. For example some banks will hire good personality and good looking front line counter staff to attract the customers even though such aspect is not related to work performance. However this is the good strategy to build good perception that staff of the banks can provide good services. In Turkey, Yavas, Bilgin & Shemwell (1997) research showed that physical elements is important as banking customers will be more comfortable and satisfy if bank can provide conveniences such as air-condition and no-smoking allowed. James Poon (1998) stated that non verbal communication is one of the services customer looking for. He conclude that if banks can create environment or surrounding that welcome the custom, for example such as its design and interior design can give a positive perception.

Responsiveness is the swiftness and correctness of services provided by the provider. Avkiran (1994) study of Australian banking showed that responsiveness and credibility is the most important factor. James Poon (1994) stated that customers like to related quality of services and the responsive bank tellers or cashier as it is normal for human do not want to wait long. Study by Kangis & Voukelatos (1997) also support the claims because decrease of waiting time in counter is the most important thing customer evaluate on the service quality.
Assurance according to Parasuraman is knowledge and courtesy of workers in stimulating and building confidence of the customers (Foster, 2001). According to Galloway (1996) older customers needs more services from staff who are knowledgably on services than other group as they need more information before making decisions.
Empathy is service quality is special attention to customers with caring attitude and understanding of other’s needs (Foster, 2001). According to Lewis & Spyrakopolous (2001) customers want to see banks taking care of their problem and have considerable efforts to solve their problem. Yavas, Bilgin & Shemwell (1997) banks that can provide empathy service can create good relationship with customers and have good complaint receiving mechanism.

Rates
East Asian countries has high rate of savings compare to other nation. One of the motivator for savings is the rate offered by the bank. This was proven by research of Lunt (1994) which showed that Asian people doing any decision on keeping cheques or savings accounts are taking into consideration of rates. Huu & Kar (2000) in Singapore refers to research conducted by Javalgi et al (1989) and Khazeh & Decker (1992) shows that high rates giving second most heavy importance factors of choosing bank services. Higher income or medium household income value more on the rates given because they have more disposable income for savings compare to poorer household that will use large proportion of income towards basic requirement. (Boyd, Lornard. & White, 1994). Huu & Kar also study the behavior of Singaporean university students proven that interest rates is the factor they choose the bank and DBS Bank was choose by most of the students because it provides higher interest rates to savers. Boyd et. al also confirmed in his research that married couples are more interested in rates when choosing the bank than other groups.

Conveniences
Research by Joseph, McClure & Joseph (1999) shows that individual that age 41 years old and above more focus on importance of having suitable location, efficiency, electronic banking exposure, customer information system that is reliable, special services for old people and those who has special needs (such as disability) than the younger group of customers. The research also see the respondent give higher importance of usage of tele-banking services that can helps to solve the queuing long in counter problem and electronic banking will give more educational and reliable information to eager customers.

James Poon (1999) referring to one research in Turkey by Kaynak et al where customer who has secondary education and above will put facilities or conveniences in the form of fast and efficient services besides having knowledgeable staff, friendly staff and good location. James Poon also refer to Nicholas et al where dominate factor in satisfying the customers of the bank is time. Same goes to Malaysia where fast service and location are important element of choosing a bank because it saves the time of customers. Due to customer value time, the importance of having more counters, shorter processing time, ATM, operational hours and volume of staff available is important. Customers always tend to evaluate services by comparing to each other bank on the waiting time or counter efficiency. Hours of operation is one of aspect Mohammad Almossawi (2001) study in Bahrain and opening of bank in Friday is something appreciated by the customers, making that in Islamic country Friday is the holiday. However for Galloway and Blanchard (1996), youngster are more depending on ATM machines for withdrawal and other transaction compared to other people which is more dealing with the banks’ counter thus hours of operation is more important to other people.

Facilities and conveniences is not something to be unimportant to customer as Filotto, Tanzi & Saita (1997) study in Italy shows that a lot of Italian customers are running away from Italian back to foreign banks because foreign bank can provide better facilities than the local bank. Huu & Kar (2000) stated also facilities offered by banks is important to students because student want faster services and they evaluate banks service based on service provided by the staff. This is true especially some banks are providing only few staff causing counter jam and long processing time to the customers.

For conveniences, one of the factor do not miss look in choosing the bank is the factor of location. According to Lewis (1982) and Lewis & Bingham’s (1991) location can give impact to the customer as strategic located bank can ease the customer to go to the bank. Sub urban area is more comfortable as it is near the housing area and there is no problem such as high crime rate like in big cities, traffic jam and sound pollution. James Poon (1998) again using the research from Mehrabian (1976) stated that city sound pollution is not comfortable and causing stress, so factors on locating new banks branch will influence the customers who want to do business with the bank. However Kangis & Voukelatos (1997) research show a contradicted decision as they used the research from Wong & Perry (1991) which claims that location is not anymore important as banks nowadays have branches almost at any important spot or location.

Reputation
Reputation is one of the factor that was given attention by the customer when choosing the bank especially those who are status conscious and youngsters. Boyd et al (1994) found that those who are age below 21 years old and below giving attention to reputation of the bank follow by the location, interest rates in saving account and fast and correct services. Besides Boyd study other researches from Haron et al., 1994; Javalgi et al., 1989; Kazeh and Decker, 1993; Yuen and Tom, 1995; and Erol et al.,1990 also shown the same indicators on the bank reputation.
Youngster are more brand conscious and they would like to choose for product and services that has reputable name, so same as choosing a banking services. Banks can build its reputation by filling the gap between itself and customers expectation by doing a lot of public relation activities, promotion, advertising and social welfare activities or campaign. According to Mohammed Almossawi (2001) this type of campaign can strengthen the brand name of a bank. Youngster are giving more attention to status and social class and peer influence is important when choosing something that represent themselves in the public eyes. McDougall & Levesque (1994) also agree that good marketing and public relationship is an agent to bridge the bank and customers and attract them to choose and maintain the services. Differentiation of the banking services compare to its competitors can distinguish itself and hold attention of the market.

Safety
Safety of the banking services become a concern to the customers when choosing a bank and reputation has some relation to the feel of safety by the customers. In Frimpong study (1999) in Ghana, sample of study age over 60 years old mostly are poor farmers keep their money in own house because not confidence with banking system and government. This is maybe due to macro political scenario and according to Frimpong the cheques are not widely used because it was not consider trustworthy mechanism compare to cash. In Australia, Rugimbana & Iversen (1994) explained that customer fear the reputation of bank not up to standard because the ATM card safety. For Martin (2002) privacy is the most important aspect that the bank customers looking at in the modern banking industry nowadays.

Using technology in banking has caused a lot of issue that giving anxiety to the customers on the safety. We have heard a lot of online fraud, ATM theft, identity theft on credit cards and more in the news. According to Joseph, McClure & Joseph (1999), 22% of the respondent want to see improvement in safety of ATM in the whole banking industry. For example they want banks to install good lighting on ATM machines and data is protected by the technology fraud cases. Banks information is very sensitive and confidential and protection of customer data integrity is a must responsibility of the bank. Customer will not believe the banking services if they do not have equip themselves with capable technology to prevent frauds and theft.

Pricing
Pricing in the banks is not widely discuss as most bank will have almost the same pricing but a differentiated services as pricing is almost regulated by the Bank Negara. According to Mourinho & Meiden (1989) on the price sensitive customers, interest rate that is too high will give negative impact on the usage rate of credits and loyalty of customers towards bank. High rate of taking loans will cause customers to look for other bank. Filotto, Tanzi & Saita (1997) do not push out the importance of banks to provide good conveniences and technological facilities to customer but it should be done at a reasonable pricing. Kennington et al (1996) stated that pricing of services or product should be reasonable so that customer may feel that they do earn something from the relationship with the bank.

However not all researcher giving the importance of bank pricing as important in decision of choosing a banks. According to Zineldin (1996) due to banks giving unique services compare to other industry, cost and pricing is not important is this field. Most important is the rate is still in the range as regulated by the central bank and giving too low rate can cause the bank profitability compare to competitors. Of all the independent variables as stated by the previous researcher it seems that services quality of the bank is the most important variable of choosing a banks making the facts that banks offered unique services to the customers. The six most important variables – service quality, conveniences, saving rates, pricing, safety and reputation will be taken as variables for analysis in this research in Penang , Malaysia.


REFERENCES
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Bank Selection in Poland




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Bank Selection in Singapore