The determinants of customer satisfaction on banking services , the case of commercial banks in ho chi minh city

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES
THE HAGUE
THE NETHERLANDS

VIETNAM- NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE DETERMINANTS OF CUSTOMER SATISFACTION ON
BANKING SERVICES: THE CASE OF COMMERCIAL
BANKS IN HO CHI MINH CITY

By

NGUYEN THANH NIEN

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, MAY 2011

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UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE
THE NETHERLANDS

VIETNAM- NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE DETERMINANTS OF CUSTOMER SATISFACTION ON
BANKING SERVICES: THE CASE OF COMMERCIAL
BANKS IN HO CHI MINH CITY

A thesis submitted in partial fulfillment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

NGUYEN THANH NIEN

Academic Supervisor:

Dr. CAO HAO THI

HO CHI MINH CITY, MAY 2011

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CERTIFICATION
"I certify that the substance of this thesis has not already been submitted for any
degree and has not been currently submitted for any other degree. And to the best of
my knowledge and belief it does not contain any material previously published or

written by another person except where due reference is made in this thesis".

Ho Chi Minh City, May 2011

NGUYEN THANH NIEN

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ACKNOWLEDGEMENT .
I would like to express my gratitude to all people who gave me the support to
complete this thesis.
First, I would like to show my sincere and deep gratitude to my supervisor, Dr. Cao

•

Hao Thi who gave me valuable guidance, comments, advice for the success of my
thesis.
Second, I would like to thank to all lecturers and staffs of the Vietnam- Netherlands
Programme.
Third, I also send my gratefulness to my colleagues in the Department of Individual
Customer Relationship, Bank for Investment and Development of Vietnam Transaction Center 2 Branch for their supports during my study.
Especially, many thanks are respectfully sent to my parents for motivating me to
I

complete the thesis.

....

Finally, I give my special thanks to my wife who is always supporting me to finish
this re~ach.

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ABSTRACT
Nowadays as globalization and liberalization of financial institutions accelerate,
competition among banks becomes more intense. Therefore, in order to face with

.

, that fierce competition, commercial banks in Vietnam in general and Ho Chi Minh
City in particular always strive to improve access through expansion of Automatic
Teller Machines (ATMs) and branch network; introduce new features for both
deposit and loan products at attractive rate; and develop new electronic banking
facilities like telephone banking, home banking, SMS banking and Internet banking.
However, in reality, there are so many complaints of customers related to the
products and services of banks. Those show the dissatisfaction of customers, lead to
losing customers and cause negative effect on the market share and the profitability
of commercial banks.
The purposes of this research are to determine the main factors affecting customer
satisfaction on banking services including basic facilities, convenience, employee
competence, the environment of bank, transaction cost; and the relationship
between these factors and customer satisfaction. The research is carried out by using
questionnaires, designed according to five-point Likert scale. It is based on a survey
of245 customers in Ho Chi Minh City. Data obtained from the customers were used
for conducting reliability, factor and regression analysis through SPSS software.
Research findings show that the most important factors influencing customer

satisfaction on banking services are the environment of bank and employee
competence, convenience and transaction cost.
However, this research still has some limitations. First of all, data collection is
restricted within a few commercial banks in Ho Chi Minh City only. Secondly,
according to the result of survey, majority of respondents are only from 30 to 50
years old, may be fail to represent for total the actual situation. Finally, this research
determined the basic factors affecting customer satisfaction on banking services, but
there are still lacked of other factors not be identified.

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TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION ........................................................................... !

,.
I

1.1
1.2
1.3
1.4
1.5

Problem statement. ................................................................................................... I
Research objectives .................................................................................................. 2
Research questions ................................................................................................... 2
Research scope ........................................................................................................ 2
Research structure .................................................................................................... 2

CHAPTER 2: LITERATURE REVIEW ............................................................... 4
2.1 Conceps .................................................................................................................... 4
2.2 Literature review of customer satisfaction ............................................................... 5
2.3 Overview of commercial banks in Ho Chi Minh City and the present main
banking services ..................................................................................................... 11
2.4 Summary..............................................................................
14

CHAPTER 3: ANALYTICAL FRAMEWORK AND METHODOLOGY ...... 15
3.1 Analytical framework ............................................................................................ 15
3.2 Research methodology ........................................................................................... 18
3 .2.1 Research approach .......................................................................................... 18
3.2.2 Research process ............................................................................................. l9
3.2.2.1 Step I: Generation of items ....................................................................... 19
3.2.2.2 Step 2: Pilot survey .................................................................................... 19
3.2.2.3 Step 3: Survey ............................................................................................ 20
3.2.3 Measurement scales of the questionnaire ........................................................ 20
3.2.4 The components of questionnaire .................................................................... 22
3.2.4.1 Open letter .................................................................................................. 23
3.2.4.2 Specific questions ...................................................................................... 23
3.2.4.3 Demographic questions .............................................................................. 23
3.3 Sampling ................................................................................................................ 24
3.4 Data collection ....................................................................................................... 24
3 .5 Statistical methods ................................................................................................. 24
3.6 The scale testing ..................................................................................................... 25
3.7 Assessment of scale's uni-dimensionality, discriminant validity and convergent
validity ................................................................................................................... 25
3.8 Multiple regression analysis .................................................................................. 26
3.9 One-way ANOVA ................................................................................................. 26
3.10 Summary ............................................................................................................... 27

CHAPTER 4: DATA ANALYSIS AND RESEARCH RESULTS ..................... 28
4.1 General information of respondents ...................................................................... 28
4.1.1 Type of contact with the bank .......................................................................... 28
4 .1.2 Age group of customers ................................................................................... 29
4.1.3 Gender of customer .......................................................................................... 30
4 .1.4 Type of ownership of the bank ........................................................................ 31

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4.1.5 The number of bank's operation year from the foundation day ...................... 32
4.2 The results of pilot survey ........................................... ~ ......................................... 33
4.2.1 Descriptive statistics ........................................................................................ 33
4.2.2 Results ofthe scale testing ............................................................................... 35
4.2.3 Factor analysis ................................................................................................. 36
4.2.3.1 Criteria of factor analysis ........................................................................... 36
4.2.3.2 Results of factor analysis (pilot survey) .................................................... 37
4.3 The results of main survey ..................................................................................... 39
4.3.1 Reliability analysis ........................................................................................... 39
4.3.2 Factor analysis ................................................................................................. 40
4.4 Hypothesis testing .................................................................................................. 45

4.4.1 Adjusted measurement scales .......................................................................... 45
4.4.2 Regression model ............................................................................................. 45
4.4.3 Hypotheses testing ........................................................................................... 47
4.5 Hierarchical regression analysis ............................................................................ 49
4.6 Summary ................................................................................................................ 52

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS ...................... 53
5.1 Conclusions ............................................................................................................ 53
5.1.1 Main findings ................................................................................................... 53
5.1.2 Managerial implications ................................................................ ,................. 53
5.2 Recommendations .................................................................................................. 54
5.3 Limitations ............................................................................................................. 55

REFERENCES ........................................................................................................ 57
APPENDICES ......................................................................................................... 6·0

LIST OF FIGURES
Figure 2.1 Capital mobilization status of commercial banks from 2005 to 2009 .... 12
Figure 2.2 Credit operation status of commercial banks from 2004 to 2009 .......... 13
Figure 3.1 Research model ...................................................................................... 18
Figure 3.2 Research process .................................................................................... 19
Figure 4.1 Relative frequency of respondents' type of contact ............................... 29
Figure 4.2 Relative frequency of respondents' age group ....................................... 30
Figure 4.3 Relative frequency of respondents' gender ............................................ 31
Figure 4.4 Relative frequency of banks' type of ownership .................................... 32
Figure 4.5 Relative frequency of number of bank's operation year from the
foundation day ........................................................................................ 33

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LIST OF TABLES

.,

Table 2.1 Literature review summary on customer satisfaction .............................. 10
Table 3.1 Measurement scales ................................................................................. 21
Table 4.1 Frequency of respondents' type of contact with the bank ....................... 29
Table 4.2 Frequency of respondents' age group ...................................................... 29
Table 4.3 Frequency of respondents' gender ............................... ,........................... 30
Table 4.4 Frequency ofbanks' type ofownership ................................................... 31
Table 4.5 Frequency of number of bank's operation year from the foundation day ........ .32
Table 4.6 Descriptive statistics ................................................................................ 34
Table 4.7 Summary of the Cronbach's alpha result (pilot survey) .......................... 36
Table 4.8 Factor analysis of independent variables ................................................. 3 8
Table 4.9 Factor analysis of customer satisfaction on banking services ................. 39
Table 4.10 Result of reliability analysis ................................................................... 40
Table 4.11 Factor analysis of independent variables (EB5 excluded) .................... .41
Table 4.12 Factor analysis of independent variables (EB5 and TC2 excluded) ..... .42
Table 4.13 Factor analysis of the customer satisfaction criteria ............................. .44
Tabie 4.14 KMO and Bartlett's Test of independent variables .............................. .44
Table 4.15 KMO and Bartlett's Test of customer satisfaction on banking services .... .45
Table 4.16 Adjusted measurement scales ............................................................... .45
Table 4.17 Model summary ..................................................................................... 46
Table 4.18 ANOVA ................................................................................................. 46
Table 4.19 Result of coefficients ............................................................................. 47
Table 4.20 Summary of hypotheses testing ............................................................. 49
Table 4.21 Determinants of customer satisfaction on banking services .................. 49
Table 4.22 Hierarchical regression analysis of customer satisfaction ..................... 50
Table 4.23 Coefficients of independent variables and moderate variables ............. 51

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ABBREVIATIONS

1

I .

._

Agribank

: Vietnam Bank for Agriculture and Rural Development

BIDV

: Bank for Investment and Development of Vietnam

MHB

: Housing Bank of Mekong Delta

VietinBank

:Vietnam Joint Stock Commercial Bank for Industry and Trade

Vietcombank

:Joint Stock Commercial Bank for Foreign Trade of Vietnam

Eximbank

:Vietnam Export- Import Commercial Joint Stock Bank

ACB

:Asia Commercial Joint Stock Bank

Sacombank

: Sai Gon Thuong Tin Commercial Joint Stock Bank

MB

:Military Commercial Joint Stock Bank

Techcombank

:Vietnam Technological and Commercial Joint Stock Bank

SeABank

:Southeast Asia Commercial Joint Stock Bank

LienVietBank

: LienViet Commercial Joint Stock Bank

Oceanbank

:Ocean Commercial Joint Stock Bank

HSBC

: HSBC Bank Vietnam Limited

ANZ

: Australia and Newzealand Bank

Shinhan

: Shinhan Vietnam Bank Limited

Hong Leong

: Hong Leong Bank Vietnam Limited

IVB

: Indovina Bank Limited

VIDPB

: VID Public Bank

SVB

: ShinhanVina Bank

VSB

: Vinasiam Bank

VRB

:Vietnam-Russia Joint Venture Bank

I •

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ATM

: Automatic Teller Machine

SMS

: Short Message Service

POS

: Point of Sale

VND

:Vietnam Dong

L/C

: Letter of Credit

CAD

: Cash Against Documents

KMO

: Kaiser-Meyer-Olkin

CFA

:Confirmatory Factor Analysis

SPSS

: Statistical Package for Social Science

i

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rr
.

'J-.

:J
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I._

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II


The determinants ofcustomer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

CHAPTER!
INTRODUCTION

1.1.

Problem statement

Nowadays as globalization and liberalization of financial institutions accelerate,
competition among banks becomes more intense. Therefore, in order to face with

that fif!rce competition, commercial banks in Vietnam in general and Ho Chi Minh
City in particular always strive to improve access through expansion of Automatic
Teller Machines (ATMs) and branch network; introduce new features for both
deposit and loan products at attractive rate; and develop new electronic banking
facilities like telephone banking, home banking, SMS banking and Internet banking.
From that, banks expect to meet the various needs of customers and bring them the
best satisfaction.
•..

Howe"er, in reality, there are so many complaints of customers related to the
products and services of banks as well as the way of service of bank's employees
such as the continual failure of ATMs, too high loan interest rate, too low deposit
interest rate, too high cost of service, complex procedures, the rudeness of
employees, etc. Those show the dissatisfaction of customers, lead to losing
customers and cause negative effect on the market share and the profitability of
commercial banks. Hence it is very necessary for commercial banks to focus on
learning the demand of customers, studying the factors influencing their
satisfaction. Banks must consider satisfying customers as a vital task.
Currently, there are not many researches on the determinants of customer
satisfaction on banking services at the commercial banks in Ho Chi Minh City.
Therefore, this paper will contribute to find out the factors that significantly impact
on customer satisfaction at the commercial banks in Ho Chi Minh City. The result
of this study is crucial for management of commercial banks in Vietnam in general

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The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

' and Ho Chi Minh City in particular to produce important policies to consolidate and
continual enhance their banking services.

1

I

1.2.

Research objectives

The main objectives of this research are:

I

...

To determine the main factors affecting customer satisfaction on banking
services.
To determine criteria of customer satisfaction.
To measure the strength of the relationship between the factors and customer
satisfaction.
To suggest recommendations for banks to improve customer satisfaction.

1.3.

Research questions

This research will focus on answering the following questions:
Which factors affect customer satisfaction on banking services?
What are criteria of customer satisfaction?
Which factors are most strong?
What recommendations for banks to improve customer satisfaction?

1.4.

Research scope

The investigated objects of this research are just focused on individuals. Ho Chi
Minh City is selected as research place. Moreover, the research is carried out in
2011.

1.5.

Research structure

Given the research purpose, the paper is structured into 5 chapters.
First chapter begins with introduction, referring problem statement, research
objectives, research questions, research scope.

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The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

Second chapter is named literature review. This chapter presents definitions of
customer satisfaction and banking services. Theoretical framework regarding the

determinants of customer satisfaction, and empirical studies are also reviewed in
this chapter. Finally, overview of commercial banks in Ho Chi Minh City and the
present main banking services are showed .
...
I

Third chapter begin with the analytical framework. Next is research methodology. It
covers background of research place, sampling method and sample size to survey.
Besides, variable description with descriptive statistics and a regression model to
examine the distribution level of each factor to customer satisfaction are presented.
Next chapter is data analysis and research results.
Finally, conclusions and recommendations follow.
In summary, chapter of introduction presents problem statement, objectives of

,.

research, research questions, scope of research and research structure. To
understand clearly about theoretical framework, and empirical studies, the next
chapter will present.

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The determinants of customer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

CHAPTER2
LITERATURE REVIEW

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I.
II"

This chapter starts with definitions of key concepts related to this research such as
customer satisfaction, banking services. Secondly, literature review of customer
satisfaction is introduced. Thirdly, the overview of commercial banks in Ho Chi
Minh City and the present main banking services are presented. Finally, the
summary of literature review concludes the chapter.
2.1.

Concepts

This section contains the definitions of key concepts related to the research such as
customer satisfaction and banking services.
Customer satisfaction

l

Customer satisfaction, a business term, is a measurement of how a company
supplies products and services satisfy or surpass the expectation of customers. In the
context of a highly competitive market economy, enterprises always have to
compete fiercely to attract more customer especially new customers and potential
customers. Hence customer satisfaction has become an extremely important
component in the business strategy of any company because it is considered as the
main aifferentiator.
Banking services

The concept of banking services is very extensive. It refers to a variety of service
products provided by the banks. These service products attach to the main activities
of a bank such as holding people's deposits safe while still enabling them to

withdraw an amount of money when necessary; providing mortgage, individual and
business loan products; credit card issuance and handling credit card transactions;
bill payments; domestic and international remittance; etc.

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The determinants of customer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

2.2. Literature review of customer satisfaction

Cardozo may be considered as the first person carried out the study of customer
satisfaction. In the research on customer effort, expectation, and satisfaction in
1965, he found that customer satisfaction was affected by the efforts expended to

I)

obtain the product, and the expectations related to that product. In detail, customer
satisfaction with a product will be higher when they spend substantial attempts to
acquire that product than when they only spend modest attempts. His findings were
contrary to usual concepts of the convenience of customers and the marketing
effectiveness. Besides, his research also indicated that customer satisfaction was
higher when the product satisfied expectations than when the product did not reach
the expectations.
Parasuraman, Zeithaml and Berry (1985 and 1988) developed a 22-item scale
SERVQUAL with five dimensions (reliability, tangibles, assurance, responsiveness,
and empathy) to evaluate the perceptions of consumers on service quality in the
retail and service companies on the basis of results of a survey of 200 consumers
(greater than or equal to 25 years old) in a shopping mall in a major metropolitan
area in the Southwest of the United States. From the discrepancy be.tween the

expectations and perceptions of consumers of services, they measured the level of
consumer satisfaction.
However, in a research of the correlations between servtce quality, customer
satisfaction and purchase intentions in 1992 through analyzing 660 questionnaires
gathered from customers of four different service industries (fast food, pest control,
banking, and dry cleaning) in a medium-sized city in the Southeast of the United

~,

States, Cronin and Taylor focused on measuring the quality of service based on the

~

actual performance to assess the level of customer satisfaction instead of comparing
the perception and expectations.
II

Anderson and Sullivan (1993) used the database of a survey with 22,300 customers
via telephone from 1989 to 1990 at 57 firms in Sweden in order to determine the

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The determinants ofcustomer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

antecedents and consequences of customer satisfaction. These firms belonged to
many various service industries such as supermarkets, banks, insurance, airlines,
gas stations, cars, etc. Alternative hypotheses were also tested on the basis of the
satisfaction literature. The key findings of their research indicated that the
satisfaction of customers was not directly influenced by expectations. Thus, firms

need to have good customer service as well as solving customer's complaints
cleverly aimed at preventing damage to customer satisfaction. In addition, they
stated that this was a very important issue because meeting well all the requirements
of the current customers and making them feel satisfied would help to bring the
high profitability for firms in the future.
Customer satisfaction has become an extremely important subject for marketers in
many different service industries around the world. In the retail banking sector,
Levesque and McDougall did a research of the main determinants of customer
satisfaction in Canada in 1996 on the basis of data collected approximately 325
usable questionnaires in total of 400 delivered questionnaires through the survey
method. At last, they found that there existed a very strong relationship between
service problems, service recovery ability and customer satisfaction. Besides,
products, service features, and service quality dimensions were also determined as
the important factors affecting customer satisfaction but at a lower extent.
Andaleeb, in his research on the main factors influencing on the satisfaction of
1

patients with the hospitals in the health care service industry at a large city and its
suburt in Pennsylvania (northeastern and mid-Atlantic area of the United States) in
1998, carried out analyzing the data with 130 accepted questionnaires of 390
delivered questionnaires. These questionnaires were collected from patients of four
hospitals, including two hospitals with 100 beds and two hospitals with 450 beds.
He chose the probability sample and tested the hypotheses by the multiple
regression model. The findings of his research showed that five factors had
significant impact on the satisfaction of patients, namely the competence of the

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The determinants of customer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

staff, quality of the facilities, communication with patients, the demeanor of the
staff, and perceived costs.
An another research conducted by Ribiere et al. (1999) also in the health care

service sector in the United States, focused on analyzing the data gathered from a
survey of internal customers (physicians, pharmacists, nurses, quality department,
and laboratory technologists). And they revealed that accuracy, timeliness, and
completeness were major determinants of customer satisfaction on hospital
information systems.
Sonne ( 1999) executed an empirical research with the aim of finding out the main
factors influencing on the satisfaction of customers of Norwegian Institute of
Fisheries and Aquaculture Ltd with consultant services in Tromso, Norway. The
customers of institute were asked about their perception and assessment on different
facets for finished projects through the questionnaire with the Likert scale of seven.
Threugh factor analysis on the basis of collected data, her study showed that the
competence of consultants and technical reliability had substantial effect on
1

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customer satisfaction.
In the tourism industry, a research was done by Ekinci aimed at investigating
factors affecting customer satisfaction in 2003. Through using the structural
equation modeling, ten various hypotheses were tested. The results identified that
the satisfaction of tourists was mostly influenced by service quality.
Meanwhile, Jamal and Naser (2003) undertook a study on the main determinants of

!

customer satisfaction in the retail banking industry in Pakistan. By concentrating on

, analyzing the data collected from 165 completed questionnaires of 300 distributed
questionnaires at a branch of the First Women Bank Ltd. in a major northern city of
Pakistan according to the multivariate regression model, they found that the
contractual (core) and the customer-employee relationship (relational) of the service
' had significant impact on customer satisfaction. However, they also indicated tl1at

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The determinants ofcustomer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

there did not exist a significant link between tangible aspects of the service
environment and customer satisfaction.
I

Eboli and Mazzulla (2007) used the structural equation model to measure and find
out the key factors influencing on the satisfaction of students on the bus service in
the public transportation sector in the urban area of Cosenza, South Italy. In their
research, a survey was conducted with 763 students aim at understanding clearly
about the expectations and needs of students towards the bus service. Based on the
analytical results, they identified that there was a strong link between service quality
attributes (cleanliness, personnel security, information system, helpfulness of
personnel, physical condition of bus stops, availability of shelter and benches at bus
stops, overcrowding, and safety) and the students' satisfaction on the bus service.
Also in the public transportation service industry, Agarwal attempted to provide a
model of six major factors affecting consumer's satisfaction on the railway services

in India in 2008. Simultaneously, she concentrated on analyzing the database of 500
respondents who came from Lucknow City according to the survey method. And
then she determined the satisfactory level of consumers through understanding their
perceptions towards the performance quality of proposed factors closely.
The analytical results showed that all six factors had positive impact on overall
customer satisfaction. Among them, employee behavior and customer-oriented
basic platform services were two most important factors. The remaining factors
included reservation counters, services on trains, tangible platform amenities, and
the availability of trains and tickets.
Especially, a recent research of customer satisfaction with the performance of banks

.

was done by Jham and Khan in the retail banking sector of India in 2008. Through
the systematic methodology, they analyzed the data of 555 respondents gathered
from five Indian banks (two national banks and three private banks). In their study,
the level of customer satisfaction was assessed through measuring the satisfactory
degree with the quality of services, the satisfactory degree with the transaction of

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The

det~minas

ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

services, the satisfactory degree with loans facility, and the satisfactory degree with
general services. From that, they explored four key factors affecting the satisfaction

of customers, namely basic facilities (or traditional facilities) of the bank,
convenience (convenient transactions for customers no need to go to the bank), the
behavior of employees, and the bank environment.
Morecver, nowadays in the service industries, when doing the economic exchange,
thing which customers take interest in very much is transaction cost. Beside the
meaning of transaction cost is cost by money which customers have to pay to get a
product or service, it still refers to cost of time as well as the efforts of customers to
perform transactions. Therefore, transaction costs are always costs exceed the cost
of products or services. And they have a significant impact in adjusting consumer's
behavior. Ronald Coase (1937 and 1960) used the term "transaction cost" in order
to expand the theoretic framework aimed at forecasting when economic tasks were
carried out by business firms, and when they were carried out on the market.
Accordingly, every company will extend so long as the activities of that company
may be done within the company cheaper than by outsourcing from external
companies. Transaction costs theory usually concentrates on diminishing costs and
mentions that the hierarchical incentives may encourage the economic collaboration
in which market incentives can lead to economic outcomes inefficiently.
A study on the transaction cost approach was done by Williamson in the United
States in 1981. The results of his research indicated that transaction costs were
influenced by specificity, frequency, opportunistic behavior, limited rationality and
uncertainty. And through his transaction cost approach, transactions related to
buying and selling as well as informal exchanges of gift and emotional interactions
were explained obviously.
Meanwhile, Cheung ( 1987) carried out a research on economic organization and
transar-tion costs in Hong Kong and found that transaction costs were costs people
may not aware.

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The determinants ofcustomer satisfaction on banking sen, ices: The case ofcommercial banks in Ho Chi Minh City

Table 2.1 provides a summary of researches on the determinants affecting customer
satisfaction in the context of many various services. The heterogeneous service
contexts are taken for developing a sound theoretical base for the present research.

.

Table 2.1: Literature Review Summary on Customer Satisfaction

r

Sector

Factors affecting Customer Satisfaction

Authors

Andaleeb (1998)

Health care

Competence of the staff, quality of the facilities,
communication with patients, the demeanor of the
staff, and perceived costs
Accuracy, timeliness, and completeness of hospital
information system

Ribiere et al. ( 1999)

Competence of consultants and technical reliability

Sonne (1999)

Service quality

Ekinci (2003)

Proj~ct

consultancy
Tourism

Public
transportation

Cleanliness, personnel security, information system,
helpfulness of personnel, physical condition of bus
stops, availability of shelter and benches at bus
stops, overcrowding, and safety
Employee behavior, customer-oriented basic
platform services, reservation counters, services on
trains, tangible platform amenities, and the
availability of trains and tickets
Service problems, service recovery, products,
service features, and service quality dimensions

Banking

Eboli and Mazzulla

(2007)

Agarwal (2008)

Levesque and McDougall
(1996)

Reliability, assurance, empathy and responsiveness

Jamal and Naser (2003)

facilities),
traditional
(or
facilities
Basic
for
transactions
(convenient
convenience
customers), the behavior of employees, and the bank
environment

Jham and Khan (2008)

To sum up, there are many factors affecting customer satisfaction in the banking
sector such as service problems, service recovery, products, service features, service
quality dimensions,

basic facilities

(or traditional facilities),

convemence

(convenient transactions for customers no need to go to the bank), the behavior of
employees, and the environment of bank.

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The determinants ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

2.3. Overview of commercial banks in Ho Chi Minh City and the present main
banking services
At present, the commercial bank system in Ho Chi Minh City including 3 stateowned commercial banks (Agribank, BIDV, MHB), 39 joint-stock commercial
banks (in which I 0 largest banks are VietinBank, Vietcombank, Eximbank, ACB,
Sacombank, MB, Techcombank, SeABank, LienVietBank, Oceanbank), 5 wholly
foreign-owned banks (HSBC, Standard Chartered, ANZ, Shinhan, Hong Leong), 5
joint-venture banks (IVB, VID PB, SVB, VSB, VRB) and over 40 branches of
foreign banks that always plays an important driving impetus of the economy.
Mobilizing capital and lending are two major activities of commercial banks.
However, these activities had the tendency of significant decline in the recent years.
In the case of capital mobilization activity, they mobilized significant domestic and
foreign funds, increased savings of the economy. Mobilized capital of the banking
systew has increased over the years from 2005 to 2007. In 2005, the capital
mobilization growth rate was 32.1 %. One year later, the growth rate of mobilizing
capital slightly increased to 36.5%. Then the capital mobilization growth rate
reached to the peak approximately 54% in 2007. And from then onwards, capital
mobilization status of commercial banks declined clearly in the period from 2007 to

2009 due to high inflation and the impacts of global economic depression. The
capital mobilization growth rate decreased to 20% in 2008 and to 10% in 2009.
Details are showed in Figure 2.1 .

•

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The determinants of customer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

Capital mobilization growth rate(%)
60.0

53.9

50.0
40.0
30.0
20.0
10.0

10

0.0
2005

2006

2007

2008

2009

Figure 2.1: Capital mobilization status of commercial banks from 2005 to 2009
Source: State Bank of Vietnam (20 10)

In the case of lending activity, commercial banks contributed to strengthen the
investment for lending to satisfy the demand of capital for the economy. This
helped businesses to maintain the stability of production, technology investment,
changing machines and equipments, thereby enhanced the production capacity of
the ecvnomy. The source of investment capital for the economy through the credit
institutions over the years was divided into three periods. In the first period from
2004 to 2006, the credit growth rate had a slight decrease but still maintained at the
quite high level of over 25%. In the second period from 2006 to 2007, the lending
activity developed quickly with a very high growth rate approximately 54%. But in
the third period from 2007 to 2009, the lending activity was controlled closely and
significant declined to 11.2% in 2009. Details are illustrated in Figure 2.2.

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I

The determinants of customer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

Credit growth rate (%)

60

50
40
30

20
11.2

10
0+-~r

2004

2005

2006

2007

2008

2009

Figure 2.2: Credit operation status of commercial banks from 2004 to 2009

Source: State Bank of Vietnam (2010)

Beside the banking services related to capital mobilization and lending

activ~s,

there are still many other services related to cards, treasury, remittance, etc.
Banking services are also classified into personal banking services and business
banking services. Details will be shown obviously in the Appendix 1.
In addition, banks always study, develop and apply new products and services
especially electronic banking services such as home banking, internet banking,
telephone banking, and SMS banking, etc. These are the most modem banking
technology services of commercial banks. With online processing feature, the
electronic banking service provides inquiry and payment utilities for all types of
customers (individuals, businesses, financial institutions, etc.) who have opened
accounts at the banks.

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The determinants of customer satisfaction on banking services: The case of commercial banks in Ho Chi Minh City

Statistically, the banking system had approximately 32 million individual accounts;
_/

the number of cards in circulation achieved over 28.5 million cards; the ATM
system had over 11,000 machines; and almost 50,000 POS (card

I

acept~

devices) were installed at the end of 2010 1• Moreover, the payment system of the
banking industry is continuously applied with modernized technology, advanced
towards automation; expanded the services, the scope of application, and increased
processing speed aimed at encouraging people enhance card payment, restrict the

use of cash.
Especially, the system of commercial banks has enhanced an important role in
administrating monetary policy of the State Bank, from that affecting the economy.

2.4.

Summary

The literature review of customer satisfaction in various service industries was
presented in this chapter. In there, service problems, service recovery, products,
service features, service quality dimensions, basic facilities (or traditional facilities),
convenience (convenient transactions for customers no need to go to the bank), the
behavior of employees, and the environment of bank are main factors affecting
customer satisfaction in the banking sector. The next chapter will present the
analytical framework, research methodology and set up the questionnaire to conduct
a survey with customers of their evaluation on banking services.

1

Source: Annual Report 2010, State Bank ofVietnam

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--·-.~

The

d~terminas

ofcustomer satisfaction on banking services: The case ofcommercial banks in Ho Chi Minh City

CHAPTER3
ANALYTICAL FRAMEWORK AND METHODOLOGY

At first, this chapter presents the analytical framework. Next is the research
methodology in order to empirically test the research model. Thirdly, the sampling
is introduced. Fourthly, the result of data collection is presented. Fifthly, various
statistical methods are mentioned. Sixthly, the way to test the suitability of the scale
is introduced. Next are the assessment of scale's uni-dimensionality, discriminant
validity, convergent validity; multiple regression analysis and one-way ANOVA.
Finally, summary of analytical framework and research methodology concludes this
chapter.
3.1.

Analytical Framework

Based on the literature review of customer satisfaction, there are many factors
affecting customer satisfaction in various service industries. In particular, in the

1

banking sector, service problems, service recovery, products, service features,
service quality dimensions, basic facilities (or traditional facilities), convenience
(convenient transactions for customers no need to go to the bank), the behavior of
employees, and the environment of bank are main determinants of custorr.er
satisfaction. This paper proposes a model for testing the determinants of customer
satisfaction on banking services in Ho Chi Minh City. The model can be described
as follows:
- Dependent variable: Customer satisfaction

It is measured by the Likert scale with five-point (similar to the paper of Jham and
Khan, 2008)
- Independent variables: basic facilities, convemence, employee competence
(behavior of employees), the environment of bank (similar to the paper of Jham and

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