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Customer Satisfaction trends in Banking Industry-A Literature Review
Mr. Munish Kumar #1 Dr. Sandhir Sharma#2
Chitkara College of Sales and Retail Marketing
Chitkara University, Punjab Campus
Rajpura, Punjab, India
E-mail ID: firstname.lastname@example.org
Chitkara Business School
Chitkara University, Punjab Campus
Rajpura, Punjab, India
E-mail ID: email@example.com
Now a days banking has changed because banking services are no more based on Brick and
mortar structure. Due to Continues growth of technology, increasing customer base, evolution of
alternate banking channels, has changed the way of banking services, so hence the customer
satisfaction. Banking is a customer oriented service industry and customer satisfaction has
become the most important aspect of any banking business due to immense competition. Banks
are more determined to retain their existing customers by providing quality services leading to
Customer satisfaction. The concepts and determinants of customer satisfaction has changed
significantly as transition has taken place from traditional to modern banking. This could be
witnessed by exploring the literature regarding customer satisfaction in banking industry. This
paper is based on extensive literature review and attempts to investigate how the concepts and
determinants of customer satisfaction has changed significantly during the transition from
traditional to modern banking. The findings of the study will provide an important insight into
the past trends of customer satisfaction and will provide a base for the bank managers to devise
customer satisfaction strategies in near future.
Keywords: Customer satisfaction; Traditional and Modern banking
Psychology describes that satisfaction as “a state of mind that normally is derived out of a
comparison between the expected and the perceived.” Satisfaction is a mindset which comes
from Past experiences and knowledge. Now in a competitive world customer satisfaction is the
area where all organizations are focusing on. Ultimately it’s the customer satisfaction which will
decide whether the organizations will remain in the business or not.
The literature of satisfaction advocates satisfaction as an result as well as a process (Yi, 1990;
and Parker and Mathews, 2001). Howard and Sheth (1969, p. 145) had given the definition of
customer satisfaction: “the buyer’s cognitive state of being adequately or inadequately rewarded
for the sacrifices he has undergone.” Customer satisfaction factors in service industry are
different from any other industries.
Our research aims is to find out the relevant factors which contributes to customer satisfaction in
banking industry. Because of the immense competition, entry of foreign and private banks in
India, the Indian Banking industry has been changing in terms of services, customer satisfaction,
product offering etc. No doubt increasing competition sometimes confuses the customer for
making the right decision. Every bank is using the customer satisfaction methods, tools,
techniques and even softwares because customer satisfaction is the only way to survive in the
today’s cut-throat competition. On the other hand we are entering into modern banking from
traditional banking where customers are more aware and knowledgeable then the past. In the
competitive and dynamic environment it becomes mandatory to find out the customer
Need and relevance of the study
Banking industry has changed drastically. From traditional banking where customers use to walk
to bank, take and fill the form and after that standing in the line for depositing and withdrawing
the money. Like other service industries, banking is also a customer focused service industry,
where the attention or we can say that focused attention is on differentiate customer services as
compare to the competitors. The main challenges for the banking industry is increasing
satisfaction of customer through advance quality services, lesser cost of documentation. Now the
attention has shifted to look up the service quality, when customer come in to the bank and
having personal contact with the bank employee. (Chakravarty, 1996). But today banking has a
new face. Customers prefer to do the online transactions then branch banking. For this banks
need to know whether their customers are satisfied with the services they are providing or not.
The main concern of this literature review based study is to find out the factors which really
contribute to customer satisfaction which will further help to the bank management to assess the
strategies in order to satisfy the customers.
"If you cannot measure it, you cannot improve it." - Lord William Thomson Kelvin 1824-1907.
Objective of the study
From last two decade Banking has taken shape into modern banking form traditional banking.
Customers have more options in choosing the banks than the past. Every bank is trying to retain
and maintain their valuable customers at any cost. Banks are adopting different softwares and
technological aspects to make their customers satisfied. Here the question arises that “how they
make their customer satisfied”. Our objective is to find the customer satisfaction trends in
banking industry with extensive literature review.
Ameme, B., & Wireko, J. (2016) claimed in his research that in today’s competitive world
where technology plays a very important role and if we talk about banking sector or industry
there is a positive relationship between technology and customer satisfaction. They also stated
that satisfaction of customers is not merely introducing innovative products and services rather it
is much more than that. They also found that if the bank wants to become the market leader in
the competitive environment it must use the innovation approach in all the aspects like products
and services. Also there is a significant relationship between technological innovation and cost.
As the innovation increase the cost is also increase.
Machogu, A. M., & Okiko, L. (2015) research brought to light that with e-banking complexities
on customer satisfaction. Results shows that there are factors which leads to customer
satisfaction particularly in e-banking, which is one of the very important and fast growing way of
doing banking. Factors are accessibility, convenience, security, privacy, content, design, speed,
fees and charges have influence on customer satisfaction where the other factors notified have no
Chochol'áková, A., Gabcová, L., Belás, J., & Sipko, J. (2015) research stated that in
comparison with dissatisfied customers, satisfied customers were significantly more like by to
recommend their bank to their friends and to consider using their current bank in the future, and
they are more resistant to offers from other banks. Loyal customers are more interested in the
services of their own banks when considering investments in all the aspects such as in the
financial market, deposit their own savings to their own bank, take out a mortgage from their
own bank and use other banking products and services from their current bank. According to a
research by Ernst & Young (2012), the financial literacy of ordinary bank customers is still
relatively low, but personalized recommendations still work well here. According to the results
of our research, loyalty of customers with different intensities transforms into a potential
purchase of additional banking products. The biggest potential interest of the bank customers
was in depositing savings in the bank and in mortgage loans. The intensity of interest in the
purchase of investments and other products was relatively low. Findings of Deloitte research
(2012a), only 17% of respondents in the Czech Republic have changed their bank in the past or
have accounts in two different banks, in comparison with Slovakia where 52% of respondents
changed their account to another bank (12% in Poland, 28% in Hungary and 42% in Romania)
Kaur, N., & Kiran, R. (2015) founded in their research which was on public, private and
foreign shows that customer are more satisfied with the services quality of the foreign banks then
the private and public banks.
Kundu, S., & Datta, S. K. (2015) research found regarding e-service quality, customer
satisfaction and trust they found that there is a significant relationship among e-service quality,
trust and customer satisfaction. Internet banking service quality has huge impact on trust. They
also researched that in case of internet banking privacy and fulfillment are the main factors of
service quality which have influence on trust. Also banks should be more concerned about the
privacy of individual transaction of the customers. According to Ernest and young 2012 survey
showed that price factor was the main concern for 50 percent customers.
Zeinalizadeh, N., Shojaie, A. A., & Shariatmadari, M. (2015) opined that out of the nine
customer satisfaction factors fees and loan, prompt service and appearance are the major factors
which have more significant impact on customer satisfaction followed by interest rate and
accessibility of bank and availability of service which have less impact on the satisfaction on the
Rahi, S. (2015) research findings show customers are more loyal towards those banks who are
facilitating internet banking services. Also good brand image build relationship between banks
and customer and enhance the customer loyalty toward bank. He also concluded that those banks
that are giving the internet banking services to their customers, loyalty of those customers are
more towards the banks. He also suggested that if the brand image also plays a significant role
between loyalty of the customers and internet banking. The role of brand image is positive in
making a positive relationship between customers and internet banking.
Pareek, V. (2014) research opined with a remark that out of several factors few causal
fundamental factors like product attributes, employee characteristics, customer convenience,
bank tangibles, cost of transactions and customer communication contributes in customer
satisfaction in Indian banks. Interestingly convenience one of the 4 P.s i.e. marketing mix was
found to be an unimportant in deciding customer satisfaction in Indian banks (studied banks).
Vyas, V., & Raitani, S. (2014) opined that there are many drivers of switching behavior in the
banks. Particularly they found nine critical factors which contribute in switching the banks. One
very interesting driver is customer satisfaction in all the drivers which contribute in the switching
behavior of customers. So again we can’t ignore that customer satisfaction of the major factors
among. Banks should come out with the strategies that increase the customers satisfaction.
Suriyamurthi, S., Mahalakshmi, V., & Arivazhagan, M. (2013) stated that in the cutthroat
competition where every bank is focusing on retaining and attracting new customer, relationship
marketing is the key element which should be adopted by the banks. They also found that
banking sector is one of the major service sector and the business of banks is more or less
dependent on the customer services and satisfaction. Banks should increase their services and
make good relationship with the customer.
Gupta, A., & Dev, S. (2012).opined satisfaction of customer is dependent on variable then
independent variable. These dependent variables largely depend on service quality, ambience,
involvement, accessibility and financial factors of the bank. According to the findings of the
research. The impact of nearness of bank and financial factors on customer satisfaction is not up
to the mark.
Sharma, N. (2012) research study used the 17 variables related to the quantitative aspects of e-
banking. Study on rural customers satisfaction from e-banking was found to be significant.
Research suggests that satisfactions in rural customers are quite satisfied in e-banking services.
So, in order to improve the tendency to use e-banking channels in rural areas the use of local
languages during dealings should be promoted as well as publicized. Her research also suggest
that ATM is one of the important channel out of all alternate banking channels for securing
patronage of rural customers.
Ganguli, S., & Roy, S. K. (2011) Research opined that in fast driven technology world banks
should adopt the technology which can lead to customer satisfaction and loyalty. Keeping this in
mind they researched on four dimensions like customer service, technology security and
information quality, technology convenience, and technology usage easiness and reliability.
Results states that there is significant relation between customer service, technology usage
easiness and reliability and customer satisfaction. On the other hand they found the positive
relation between technology convenience and customer satisfaction. So it was found that
technology play an important role in satisfying the customer specifically in the case of banking.
Singh, J., & Kaur, G. (2011) research suggested that customer satisfaction is the outcome of
seven determinants namely social responsibility, employee responsiveness, appearance of
tangibles, competence, and reliability. services innovation, , positive word-of-mouth. According
to their study customer satisfaction if influenced by social responsibility, positive word-of-
mouth, and reliability. they also founded that relationship marketing is the important tool which
can significantly increase the customer satisfaction. Other factors like employee behavior, their
friendliness, politeness, cooperation, promptness, efficiency, knowledge level, trustworthiness,
and appearance also play an important role in satisfying the customer.
Munusamy, J., Chelliah, S., & Mun, H. W. (2010) claimed of their research shows that service
quality is a very important dimension of customer satisfaction in banking industry. All the
determinants of service quality like reliability, assurance, tangibility, empathy and responsiveness
shows significant relationship with customers. They also state that intangibility intension is very
difficult to measure then tangibility particularly in case of service quality. Customer needs,
wants, preferences change any point of time without giving some hints to industry.
Mishra A, (2009) stated that customer satisfaction majorly depends on the provision of an
approach for the manager so that higher customer satisfaction for the future could be obtained by
the bank. Also in his research he used the demographical characteristics of the customers to
know about the satisfaction level of the customers.
Rod, M., Ashill, N. J., Shao, J., & Carruthers, J. (2009) research findings suggests that online
banking positively influences customer perception. So bank management focus should be on
good customer service quality in terms of reliability, responsibility, tangibility and empathic.
This study was also found to be significant that online information system quality is very
important predictor of overall banking service quality.
Lopez, J., Kozloski Hart, L., & Rampersad, A. (2007) Research claimed that by using the one
of the service quality tool in which customer satisfaction was measured on the basis of ten
dimensions. Results significantly show that out of ten six dimensions namely reliability,
responsiveness, tangibles, access, communication, and credibility shows the positive impact on
Molina, A., Martín-Consuegra, D., & Esteban, Á. (2007) brought to light that it is very
important to have good relations with the customers which leads to increase in business. Also in
there research they stated that satisfaction of customers is depends on service policy satisfaction,
on accessibility and on the front line employee satisfaction. So positive relationships with the
customers always lead to financial success to the bank for long run.
Pont, M., & McQuilken, L. (2005) Research study was to find out the whether satisfied
customers are loyal towards the banks. In the research they concluded that there is no significant
relation between customer satisfaction and customer loyalty. They founded that even satisfied
customers are not all the time loyal. If banks want to achieve high customer satisfaction they
need to adopt the good approach because with the less costly approach banks could not get
moderate customer satisfaction. They also stated that banks should exercise and examine the
customer perceptions’ towards the service quality. So if the bank want to keep their existing ones
and want to attract new ones then they should continually supervise customer satisfaction and its
impact on loyalty.
Aaltonen, P. G. (2004) brings an awareness of the importance of the impacts of demographic
variables and of technology on satisfaction of customers and loyalty in the financial service
industry. In past studies they have verified that extremely satisfied customers are, indeed, more
Mols, N. P. (2000) stated internet banking with the help of customer feedback that is in no time
helps banks to construct and keep secure relationships with their customers and diminish
operating and fixed costs makes it is easy for them to utilize electronic fund transfer and foreign
exchange transactions (Kam & Riquelme, 2007). .
Conclusion and Managerial implication
After going through the various literatures related to customer satisfaction in banking industry it
has been reviewed that there are so many factors which leads to customer satisfaction in banking
industry. Customer satisfaction is very crucial aspect for banking industry also a very wide area
to be studied. Researches and academician are continuously doing research on this topic.
Because of the rapid changes in technology, perception of consumer, services, etc it is mandatory
for the banking industry to cope up with the change. Traditional banking has been taken shape
into modern banking. Customers expectations are increasing in terms of services quality,
attention etc. banks are more concerned about satisfaction of customer rather than any others
aspect. Result of my study significantly shows that modern banking leads to moderate customer
satisfaction with the help of recent customer satisfaction trends. Results of the this study produce
the trends which contribute in customer satisfaction in banking industry are Service quality, E
banking, Customer relationship management (Customer services), Employee behavior, Less
documentation process and cost, Tangible appearance, Prompt service and appearance, Less
Interest rate. All factors are crucial and must be anticipated by bank managers if they really
want their customer satisfaction.
Every bank wants to retain and maintain their valuable customers for long term. Fact is that they
due to too much competition in the banking industry (public, private and foreign banks) it
becomes difficult for the bank managers to frame out the customer satisfaction strategies. My
research regarding customer satisfaction trends in banking industry will give an insight to the
bank managers about the customer satisfaction trends. I am sure after applying these trends in
their respective bank; they will work with more focused approach for customer satisfaction. It is
time to understand for the bank managers that customer is not merely a customer, they are more
then what a banking industry thinks. So they need to understand the factors like service quality,
customer services, employee behavior, prompt services, customer relationship management
which significantly contribute in customer satisfaction. So I hope this paper will definitely
provide important information to the bank managers regarding customer satisfaction in banking
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