improving customer service quality for individual customers at bank for investment and development of vietnam - western hanoi branch

NATIONAL ECONOMICS UNIVERSITYNEU BUSINESS SCHOOL --- ---LE THI HAI NHU IMPROVING CUSTOMER SERVICE QUALITY FOR INDIVIDUAL CUSTOMERS AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM

NATIONAL ECONOMICS UNIVERSITY

NEU BUSINESS SCHOOL

-

 -LE THI HAI NHU

IMPROVING CUSTOMER SERVICE

QUALITY FOR INDIVIDUAL CUSTOMERS

AT BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM - WESTERN

HANOI BRANCH

MASTER OF BUSINESS ADMINISTRATION THESIS

SUPERVISOR: DR NGUYEN TRUNG KIEN

HANOI - 2013

During EMBA course, I have collected a lot of knowledge about businessadministration First of all, I would like to thank all professor lecturers whoseexperience helped me a lot in developing the thesis

I also express my great gratitude to my supervisor, Dr Nguyen Trung Kienfrom National Economics University whose encouragement, guidance from theinitial to the final level enabled me to develop an understanding of the subject.Special thanks to my fellows of EMBA9A who always support me in manyways during my time of studying the course and doing this thesis

I would like to thank my husband, whose love, patience and persistentencouragement to me have helped me to overcome difficulties in this study

Last but not least, words to me to thank everybody who supported to thesuccessful realization of thesis with valuable information, as well as expressing myapology that I could not mention personally one by one

The thesis could not be done without all of those supports

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

TABLE OF CONTENTS ii

ABBREVIATION iv

LIST OF FIGURES v

LIST OF TABLES vi

LIST OF DIAGRAMS vii

EXECUTIVE SUMMARY viii

INTRODUCTION 1

CHAPTER 1 THEORETICAL BACKGROUND OF CUSTOMER SERVICE QUALITY 7

1 1 The concept of service quality in commercial banks 7

1.1.1 The concept of customer service 7

1.1.2 The concept of customer service quality 9

1.1.3 The factors affecting the customer service quality 10

1.2 Customer service quality measurement model 13

1.2.1 Five - distance service quality model 13

1.2.2 Components of service quality 15

CHAPTER 2 CURRENT SITUATION OF INDIVIDUAL CUSTOMER SERVICE QUALITY IN BIDV WESTERN HANOI BRANCH 18

2.1 An overview of BIDV Western Hanoi branch 18

2.1.1 History and development process 18

2.1.2 The operation of BIDV Western Hanoi branch 19

2.1.3 The organizational structure 21

2.1.4 Retail business result of BIDV Western Hanoi branch 26

2.2 Current situation of Individual Customer Service quality in BIDV Western Hanoi branch 29

2.2.1 The main characteristics of human resources, facilities, technology in BIDV Western Hanoi branch 29

2.2.2 Applying self-examination and correction activities to assure the individual

customer service quality in BIDV Western Hanoi branch 32

2.2.3 The current individual customer service activities at BIDV Western Hanoi branch 35

2.3 Customers’ assessments on the quality of customer care of BIDV-Western Hanoi branch 36

2.3.1 Customers’ assessments on the service quality based on the 5 criteria of SERVQUAL model 37

2.3.2 Other assessments of customers on BIDV Western Hanoi branch 43

2.4 Strengths and weakness in the quality of customer service in BIDV Western Hanoi branch 49

2.4.1 Achievements 49

2.4.2 Limitations: 50

CHAPTER 3 SOLUTIONS TO IMPROVE THE QUALITY OF INDIVIDUAL CUSTOMER SERVICE AT BIDV WESTERN HANOI BRANCH 53

3.1 The development trend of the Bank for Investment and Development of Vietnam- Western Hanoi Branch 53

3.2 Solutions to improve the quality of customer service: 55

3.2.1 Building customer information system: 55

3.2.2 Improving the quality of staff at the branch 59

3.2.3 Improving communication skills of banking teller in direct contact with customers 60

3.2.4 One-door transaction procedure innovation at the branch 62

3.2.5 Applying the model of customer relationship management CRM to improve customer service quality 66

3.2.6 Application of modern banking technology 69

3.3 Recommendations to BIDV Headquarters 72

CONCLUSION 74

REFERENCES 75

APPENDIX A 77

LIST OF FIGURES

Figure 1 Factors that impact customer choice of provider 2

Figure 2.1:Customers’ comments about he image of BIDV 43Figure 2.2: The level of satisfaction of customers about the services offered by BIDV 44Figure 2.3: Customers’ assessments on staffs 46Figure 2.4: Assessment of customers on serving time 48Figure 2.5: Assessment of customers on BIDV facilities: 49

LIST OF TABLES

Table 2.1: Criteria of retail banking for individual customers of BIDV Western

Hanoi branch over 4 years (from2009 to 2012) 26

Table 2.2: Summary of customers’ opinions about “Reliability” 37

Table 2.3: Summary of customers’ opinions about “Assurance” 38

Table 2.4: Summary of customers’ opinion about “Tangible” 40

Table 2.5:Summary of opinions of customers about “Empathy” 41

Table 2.6:Summary of opinions about “Responsiveness” 42

LIST OF DIAGRAMS

Diagram 1 The process of conducting research 4

Diagram 1.1 Service quality model 15

Diagram 2.1 Organization structure of BIDV Western Hanoi branch 22

Diagram 3.1: The procedure of income transactions exceeding limit 63

Diagram 3.2: The procedure of outcome transactions exceeding of the limit 64

Diagram 3.3: The new transaction model at the counter 65

EXECUTIVE SUMMARY

Currently, up to the global trend, commercial banks in the countryunderstand that developing retail banking services for individual customers has nowbeen a new and stable trend of development in the difficult economic situation.Aware of risks during the economic downturn, commercial banks in recent yearsredirected to promote business banking services to individual customers Individualcustomers have become one of the important factors determining the survival anddevelopment of banks In an environment full of fierce competition, maintaininggood relations with old customers, retain loyal customers is not easy In thiscontext, what are the most important in the absence of product differentiation,product quality, the price, the product supplying process? The first thing we shouldthink of is the quality of banking services “How to make them choose us and trust

us to introduce new customers” is a more difficult question for Bank for Investmentand development of Vietnam – Western Hanoi branch One of the most realizablemethods to help Western Hanoi branch is to improve the individual customerservice quality

In this economic background, BIDV Western Hanoi branch also has to face

so many challenges to compete with the other banks with good customer service.With the aim of this thesis of assessing the current individual customer servicequality in BIDV Western Hanoi branch, the objectives of this research areformulated as follows:

Analysis of the current situation of customer service quality at BIDV

-Western Hanoi branch: What are the strengths and weaknesses?

- Identify the causes to the weakness of individual customer service quality

at BIDV - Western Hanoi branch

- Propose solutions to improve the individual customer service quality at

BIDV - Western Hanoi branch

This thesis has used secondary data gathered form BIDV headquarters,BIDV Western Hanoi branch as reports, banking magazines in internal system,internet websites, newspapers and primary data collected by depth interview withthe head of customer transaction department who have experience and deal dailyworkload with individual customers; and surveys of 100 customers who have beenusing banking services at BIDV Western Hanoi branch.

According to above methodology, the research has analyzed 5 dimensions ofSERVQUAL model – the most common method for assessing and measuringservice quality: Reliability; Assurance; Tangibles; Empathy and Responsiveness.There are some shortcomings were given out:

- Incompletely customer information

- Unqualified and shortage of the staff

- Unprofessional “soft” skill of the staff

- Unreasonable transaction procedure

- Poor customer management

- Error information technology.

Base on the above shortcomings on individual customer service quality ofBIDV Western Hanoi branch, some recommendations have been mentioned toimprove the individual customer service quality of the branch in the coming years:

- Building customer information system

- Improving the quality of staff at the branch

- Improving communication skills of banking teller in direct contact with

customers

- One-door transaction procedure innovation at the branch

- Applying the model of customer relationship management CRM to

improve customer service quality

- Application of modern banking technology.

1 Rationale

In the context of difficulties in Vietnam's economy having significantlyinfluenced on the survival and development of enterprises, many business bankloans falling into the risks of being difficult payment or bad debts for allcommercial banks Therefore, individual customers become an extremely potentialmarket segment However, the competition in this segment is not a small challengefor any bank to participate Increasing people's knowledge, the customers’ deeperunderstanding of banking products, the boom numbers of banks invisibly increasecustomer empowerment Customers have the right to review and choose the bestproducts and service Why commercial banks are willing to invest in individualcustomer market segment?

First, enterprises have faced so many difficulties in order to approach capitalfrom banks due to their financial situation does not have the ability to create trust inbanks Second, the individual customer markets are abundant especially during theeconomic downturn People are always in need of safe investment, they do not want

to participate in high profit sector investment but accompanied by the risk ofbankruptcy If there is a good business strategy for this object, the bank will attractand catch a huge number of customers This could be considered as the biggestobjective of each bank on the market

The competitiveness level in bank sector now is higher and higher Bankproducts cannot create competitive advantage, bank interest and service fee cannotalways lower in order to attract customer Customers, especially individualcustomers are more and more fastidious In this economic background, BIDVWestern Hanoi branch also has to face so many challenges to compete with theother banks with good customer service “How to make customers feel happy when

using bank services and return” is a big question of BIDV One of the mostrealizable methods to help BIDV is to improve customer service quality.

Good service is indeed the lifeblood of any business We can offerpromotions and slash prices to bring in as many new customers as we want, butunless we can get some of those customers to come back, our business won’t beprofitable for long

Figure 1 Factors that impact customer choice of provider

Source: Industry Survey and Research for long distance provider(2006)

According to a survey of the factors affecting the customer choice from thepaper “Industry Survey and Research for long distance provider”, year 2006, it hasshown that the most important factor affect to customer’s decision of choosing acompany product of service is "Customer service" (34%) while company’s brandname, image is 21%, "Cost / Value (15%), "Billings (14%), “Other factors”accounted for 16% Banking is a special business services sector - financialsolutions for all different demands, products are more easily imitated, the productdifference is negligible the "Customer Service" plays an important role for banks

to create competitive advantage as well as building the image / brand

With the above analysis, the authors choose the topic "Improving customerservice quality for individual customers at Bank for Investment and Development ofVietnam - Western Hanoi Branch" for this thesis.

2 Research objectives

In order to propose a solution of "Improving customer service quality forindividual customers at Bank for Investment and Development of Vietnam -Western Hanoi Branch ", the thesis focuses on the following objectives:

- Analysis of the current situation of service quality from customers’assessment at BIDV - Western Hanoi branch: What are the strengths andweaknesses?

- Identify the causes to the weakness of individual customer service quality

at BIDV - Western Hanoi branch

- Propose solutions to improve the individual customer service quality atBIDV - Western Hanoi branch

- What are the causes of these weaknesses?

- How to improve individual customer service quality at BIDV - WesternHanoi branch?

4 Research methodology

4.1 Research process

Diagram 1 The process of conducting research

Research process is carried out through by 4 steps: Determining the evaluationmodel; Collecting information / data; Analyzing data; Determining the causes andPropose solutions to improve the individual customer service quality at BIDV -Western Hanoi branch SERVQUAL model is used as the theoretical model

Indepth interview

Determining the evaluation model

Collecting information/data

Analyzing data

Secondary information Survey

Proposing Solutions Determining the causes

* Implementation of the survey:

- Design survey questions: The survey questions are designed according to

05 criteria for assessing the quality of customer service quality SERVQUAL formeasuring individual customer service at BIDV - Western Hanoi branch To get adetailed assessment, each criterion is divided into small criteria, this action makescustomers feel easier to answer as well

- Methodology: Survey Forms are sent to the customer has been using theservices of the Bank via email (the author uses simple list of major customers whohave direct interaction)

- The number of the survey: The survey sent to 300 customers but due tosome unexpected reasons, authors only get 104, but only 100 early feedback is used

in this difficult stage

The interviewee: Ms Nguyen Thi Hoa – Head of Customers TransactionsDepartment of BIDV Western Hanoi branch

4.3 Data analysis

All information and data are collected by using analysis tools in theassessment model to assess study subjects through the information gathered fromthe survey

 First of all, secondary data will be collected, doing statistic, compare…

 To obtain exact result, I use Excel software to process primary data

5 Research scope

- Content: The actual situation of service quality from individual customer’spoint of view at BIDV Western Hanoi branch from all transactions andheadquarters

- Timeframe: Data was collected during the period from the year 2009 to

2012, in which the secondary data was collected from 2009 to the first half of 2012and primary data was carried out from 30/09/2012 to 31/10/2012

6 Thesis structure

Apart from the content, the main parts of this thesis are divided into three chapters:

Chapter 1 Theoretical background for customer service quality.

In this chapter, the author discusses the theoretical background for customerservice quality in commercial banking as well as goes deeper to learn aboutCustomer service quality measurement model - SERVQUAL and the aspects ofcustomer service quality

Chapter 2 The current situation of individual customer service at BIDV Western Hanoi branch

Based on the information / data from customer comments, banks, and otherinformation / data on other media, author analyzes the individual customer servicequality at BIDV Western Hanoi branch, find out the strengths, weaknesses and causes

Chapter 3 Solutions to improve the individual customer service at BIDV Western Hanoi branch

Based on the actual situation analysis study of subjects given in Chapter 2 and thecontext of the banking market in Vietnam, the last chapter proposesrecommendations to improve the individual customer service at BIDV WesternHanoi branch The conditions for the implementation of these proposals arediscussed in the last section of this thesis

CHAPTER 1 THEORETICAL BACKGROUND

OF CUSTOMER SERVICE QUALITY

1 1 The concept of service quality in commercial banks.

1.1.1 The concept of customer service.

* Definition of customer service:

Service is an activity that its products are intangible It solves the relationshipwith the client or customer-owned assets without transferring ownership

According to Looy et al (2003, page 11), "service is any activity that oneparty can offer another that is essentially intangible and does not result in theownership of anything"

According to ISO 8402: The service is the result generated by the actionbetween the supplier and the customer and the supplier's internal operations to meetcustomer needs

* Characteristics of customer service

- Intangibility (or non-material):

One cannot see, taste, hear, cannot stop the service before consumption.Invisibility is the main characteristics to distinguish banking products with theproducts of other manufacturing material Banking products usually follow aprocess rather than specific objects can be observed held Thus, the bank'scustomers often have difficulty in assessing the quality of customer service to makethe decision to choose and use products and services

- Simultaneity:

The process of service production and consumption occur at the same time.Services cannot be separated from its source, while existing material goods does notdepend on the presence or absence of its origin

By the supplier and the consumer banking products and services occur at thesame time, especially with the customer directly involvement in the course of

providing products and services Results services are affected by the relationshipbetween customer and suppliers of products and services This feature requires aclose coordination between the customer and the Bank in providing accurate two-dimensional information Banks usually create, maintain and develop customerrelations by improving the quality of the supply of products and services,development of customer care in the entire staff of the Bank and supply systemmodernization.

- Heterogeneity:

Service quality varies in a very wide range, depending on the circumstancescreated services (such as suppliers, time and place of supply, etc.) In bankingoperations, customer service quality depends very much on the products andservices offered, transaction time, the desired needs of customers, the level ofexpertise, attitude of staff, All these elements are unstable

* The role of customer service

"No customer, no company survive." Review of the famous economistErwin Frand has shown the role of customers in all business fields In the downturnperiod of economy, the company was faced significant decrease of revenue, leading

to staff cuts and downsizing service scale But it does not help the company regaingrowth momentum In the difficult times, the service must be the top prioritybusiness interest Failing in price competition, companies tend to choose service asthe last option in order to create competitive advantage If an organization with

whether goods or services provided in a qualifying period on the market do not havegood customer service support, the customer will gradually leave that company.

1.1.2 The concept of customer service quality

Services quality is what customers perceive Service quality is determinedbased on the customer's perception or feeling related to their individual needs.According Parasuramal, Zeithaml and Berry (1985), the quality of service asperceived by the customer on a service level has created value for their previousexpectations Also according to Parasuramal, the expectation in service quality iswhat customers want, this means they feel that the provider have to implement, notperform the requested services

According to Hurbert (1995), before using the service, customers have had

an expectation about that service When customer expectations and service quality

of suppliers are not the same, customers will feel dissatisfied

According to ISO 8402, service quality can be considered as "the entire ofcharacteristics of an object, giving that object the ability to satisfy the requirementsstated or implied." It can also be understood that service quality is customers’satisfaction measured by the difference between the expected quality and theachieved quality

Expectations of customers (what customers want) made up of four sources:

- Oral Communication;

- Personal needs;

- Undergone experience;

- Advertising and promotion

In these four sources, only the fourth is located in the control of thecompany

Ensuring and improving the quality of service actually are to reduce and eliminate

of the distance:

- Between service expectations and management's perception of customerexpectations;

- Between management perceptions of customer expectations and the action

of making the perception become service quality parameters;

- Between turning awareness into the quality of service parameters andservice provision;

- Between service providers and external information to customers;

- Between service expectations and service benefit

Therefore, the quality of service related to customer expectations and theirperceptions of the service Building a system of customer expectations is essential

to improve the quality of customer service in each kind of business Customerservice mission is informed to all employees of the bank and given authority,responsibility, specific to each department staff, especially staff dealing directlywith customers The bank has a mechanism for attaching the rights andresponsibilities of staff in dealing with customers, especially for effectively bring in

to play the policy to encourage adequate for employees with good service attitudeand attract more customers to the bank

Strengthening infrastructure, modernizing technology to improve customerservice quality and serve customer timely, accurately and quick This may also raisethe reputation, image, symbol of the bank

Focusing on arranging appropriate dealing time with their client and workingoutside office hours and holidays are a common activity of many banks now

1.1.3 The factors affecting the customer service quality

Any business that wants to do business on the market must have a certainfinancial capacity For operation the bank financial strength is an important factor inthe development of new services, improving traditional services increase thecompetitiveness of the market.

Organizational structure of the bank is an important factor, a bankorganizational structure of the logical structure of the suite, customers can haveaccess to these services at your convenience The individual customer needs alwaysdiverse, rich, related to customer activities

+ The conception of development of banking services to individualcustomers of commercial banks Strategy is the plan of action outlined in order toachieve some specific goal Strategic orientation and development platform built onthe basis of the survey, survey customers, the economic environment, competition,banking resources Base on those to make the development plan in a certain period

of time for the service that is supplied in the market

+ Informational technology application

In banking activities, the application of information technology is animportant factor, a direct impact on service quality as well as quantity and quality ofcustomer care that banks can supply out of the market Today, the tendency to useservices through electronic channels without having to go to the bank every day,save time and travel costs of the customer

+The communication skills of staffs

In all social and economic activities, people have a very important role Inthe banking sector, too, man is a decisive factor in the development of each bankitself Serving attitude of the staff is an important factor leading to the individualclient So trained staff of professional adapting with openness, politeness andrespect the customer is a significant factor contributing to helping customers lookfavorably on the banks and banking services provided

+ Marketing activities

For each bank, marketing is indispensable, this activity has a very importantrole in the market economy and especially in the current integration trend Thisactivity will help to reduce distance between customers and banks together, throughwhich the banking services provided will be easier to be accepted by customers.Marketing activities covered by the following:

o Market survey: The purpose of market research is to grasp the marketchanges and timely develop those changes in order to capture the customerneeds to provide banking services in the best way

o Service quality management

Based on these needs, the bank will take into consideration the conduct ofthe provision of services to suit each kind of customer and control the development

of this service, this is the work of the service management thereto For example,from market research on customer needs to use the card, banks determine thecurrent and future needs of customers is used to pay for online goods and services,paying agent, etc which banks offer credit cards, debit card, Good serviceorganization management will bring many advantages to the bank because this willmake the services to be brought to right customers and achieve the objectives set foreach service, thereby creating conditions for development services

o Promote and selling services

This activity aims to introduce the service to the customer, make thecustomer know that banking services and supply in the market As well as otherservices promoting services is important, but the banking industry, it is moreimportant

The promotion and advertisement will create customer confidence andintroduce banking services to customers

* External factors

+ The development of the economy and the integration process

Economic integration is becoming an objective trend of world economicdevelopment as well as the economic development of each country Manifestation

of this process is to increase the flow of international exchange of trade, capital,finance, technology and services This gives the bank a lot of opportunities such as:market expansion, management experience, scientific and technological inheritancebank But besides that, the banks also have to deal with many challenges and risksarising from the integration process

+ Legal Environment

These are factors of the external environment have a major impactconsequently to the operation of organizations and individuals in the economy.With commercial banks, the middle of an important role in the economy, under thestrict control of the new law since the establishment as well as during operation isinevitable The law creates a legal basis for the operation of the bank in the form ofthe Law, the laws, ordinances, decrees, regulations, etc These regulations forcebanks to comply

+ The socio-economic environment

Socio-economic environment has a major influence on the activities of theeconomic entity These effects will impact the activities of people and organizations

in the economy Bank is an economic organization plays an important role in theeconomy, so the bank's activities are sensitive to the socio-economic changes Anyvariation also has a certain impact on customer care operations of the bank

1.2 Customer service quality measurement model

1.2.1 Five - distance service quality model

Parasuraman and CTG (1985, 1988) are the pioneers in service qualityresearch in the marketing area specifically and detailedly The researchers made themodel of five gaps model of service quality Model is shown in diagram 3.1

The first gap occurs when there is a difference between customerexpectations of service quality and service manager’s perception of customer

expectations This difference is due to service companies not fully understandingwhat characteristics make up the quality of their services and how to transfer them

to customers to satisfy their needs

Second gap occurs when the service companies have difficulty in changingtheir perception of customer expectations into service quality characteristics Inmany cases, companies can realize the expectations of customers, but the companydoes not always convert these expectations into specific criteria for quality andconvert in accordance with customer expectations The main cause of this problem

is the ability of service staff as well as excessive fluctuations of service Sometimes,there are so much demand that the company is not unable to meet

Third gap occurs when employees do not transfer services to customersaccording to the criteria defined In service, the employees who have direct contactwith customers play a very important role in the process of creating quality.However, it’s very difficult for all employees to complete the task according to thecriteria set out at any time

Advertising and information media also impact on customer expectations ofservice quality The promises in promotional advertising programs can increase theexpectations of customers but also will reduce the quality that customers feel whenthey do not comply with what was promised This is the fourth gap

The fifth gap occurs when there is a difference between the quality expected

by our customers and the quality they feel Service quality depends on the fifthdistance If a service meets the customer expectations, it means if the customer finds

no differences between the expected quality and the felt quality while using service,it’s actually a perfect service

Parasuraman and CTG (1985) assumed that service quality is a function ofthe fifth distance The fifth gap depends on the distance of 1, 2.3 and 4 So, tonarrow the fifth gap, or improve service quality, service managers must attempt toshorten this gap

Service quality model, according to those researchers, can be performed asfollows:

SQ = F {Gap 5th = f (Gap 1st, Gap 2nd, Gap 3rd, Gap 4th)}

In which, SQ is service quality and Gap 1st, 2nd, 3rd, 4th, 5th are the first,second, third, fourth, fifth gap

Diagram 1.1 Service quality model

(Source: Parasuraman, A., Zeithaml, V.A and Berry 1991 Human resource management)

1.2.2 Components of service quality

Service quality model of Parasuraman and CTG (1985) delineates an overallpicture of service quality According to Parasuraman and CTG (1985), at anyservice, service quality perceived by the customers can be modeled into 10components They are:

 Reliability: the ability to carry out the service in an appropriate and timelyway in the very first time

 Responsiveness: the willingness and readiness of the service staff to supplyservices

Expected servicePerceived service

Information to customersQuality criterion

The perception of company about customer’s expectations

Delivered serviceGap 1st

Gap 2 ndGap 3 rd

Gap 4 th

Gap 5 th

Customer

Banker

 Competence: the professional standard of the service staff to performservices

 Access: relate to facilitate comfortable conditions for customers to accessservice such as shorten the waiting time, provide favorable opening time andplace for customers

 Courtesy: express the respective and friendly manner of the service staff

 Communication: communicate to customers in an understandable way ofexpression and know how to listen to their problems such as explain servicefees, settle their complaints and inquiries

 Credibility: the ability to create trust of the customers in the company,through the name of the company, the direct communicating way of service

 Security: the ability to ensure the security for customers such as financialsecurity as well as customers’ information security

 Understanding/Knowing the customer: the ability to know well thecustomers’ demands by realizing their needs and recognizing their regularity

 Tangibles: expressed by the appearance, uniforms of the service staff andavailable service facilities

The above ten-component model has the advantage of covering almost everyaspect of service But its disadvantage is complicated for measurement.Furthermore, this model is theoretical, there may be many components of servicequality models do not achieve value distinction This is why these researchersrepeatedly tested this model and came to the conclusion that service quality consists

of five basic components, and banks need to build the basis of assessment throughthe level of service quality perceived by customers They are:

1 Reliability: The features related to the process of service delivery which

requires precision, stable and timely Do the banks implement what they promise?When customers have complaints and inquiries, are the banks really interested insolving your problems satisfactorily? Do the banks provide services on timecommitment and focus on not to make errors in the process of work?

2 Responsiveness: reflected by the willingness and readiness of bank staff

to help customers and provide quick service Customers have to know exactly whenthe service is done? Bank has made a quick and timely service? Are bank staff toobusy to meet your demands?

3 Assurance: Expressed by professional knowledge and behaviors of

service providers, as well as the ability to create confidence and trust of them Somequestion surveys to ensure the level of bank service provided such as: Do bankers’behaviors make customers trust? Do customers feel safe when dealing with banks?Bank staffs are polite, affable with customers? And a very important thing isbankers have enough knowledge to answer all of customers’ questions?

4 Empathy: relates to the concern of banks to their clients Bank has

expressed particular interest to individual customers? Time and place of the bank'sactivities are really convenient for customer transactions? For important customersbringing many benefits, do bank have any special priorities and the behaviors ortreat like any other customer? Banks are really interested in the benefits tounderstand the specific needs of customers?

5 Tangibles: demonstrated in material conditions, equipment and the

external appearance of the service providers Physical facilities of banks areequipped with modern, eye-catching layout? Bankers outfit look neat and elegant?Documents relating to products, such as brochures and presentation is beautifullydesigned, easy to read, easy to understand and attractive? Bank employees’uniforms are neat and polite?

CHAPTER 2 CURRENT SITUATION OF INDIVIDUAL CUSTOMER SERVICE QUALITY IN BIDV WESTERN

HANOI BRANCH 2.1 An overview of BIDV Western Hanoi branch

2.1.1 History and development process.

Bank for Investment and Development of Vietnam was established in April

1957 with the initial function of the provision and management of basic capitalconstruction budget for all socio-economic sectors BIDV remained the leadingbanks in the implementation of the government's macroeconomic policies so far.After 55 years of development, BIDV has become one of the largest commercialbanks in Vietnam with diversified scope of business as: banking, insurance,securities trading, financial investment BIDV has stable human resources of morethan well-trained 18.000 working staff having bachelor degree and postgraduatedegree In factors of network operations, BIDV has 117 branches, 551 transactionoffices and 1.300 ATMs all over the country In addition, the bank also began topenetrate the foreign market through the establishment of representative offices inMyanmar, Cambodia and Laos, etc

As one of the branches of BIDV, BIDV Western Hanoi branch was officiallyput into operation in the highly competitive financial market situation on 01December 2008 with the institution fairly far from the capital center BIDV WesternHanoi branch had to face many difficulties and challenges in the search forcustomers in a new area, market expansion, capitals attraction, imageimprovement However, inherited prestige, good brand from the BIDV as well asthe efforts of the working staff, BIDV Western Hanoi branchhas gradually beenbuilding the image and occupying an important position in BIDV system In thebeginning period, Western Hanoi branch was opposite to many difficulties likesmall assets, thin and unskilled workforce, the difficulty of attracting customers

while the head office of the branch based in Tu Liem District which was far fromthe center However, to overcome difficulties, Western Hanoi branch has strivedcontinuously to develop based on new orientation: Focus on serving the small andmedium enterprises, private enterprises, individual customers in the area with theretail banking services, and proposed the development of new products and services

in line with market trends

2.1.2 The operation of BIDV Western Hanoi branch

 Mobilizing the short medium and long-term capital in VND and foreigncurrencies

from other organizations and individuals within the country

+ Get non-term deposits, term deposits, demand deposits

+ Issue of certificates of deposit, promissory notes, bills, bonds

+ Loans from financial institutions in the market

 Lending and investment activities

+ Short-term loans, medium and long term under the existing mechanism inVietnam dong and foreign currencies for enterprises of all economic sectors,households and all individuals in need as loans secured by property, mortgagelending, mortgage lending, discounting valuable papers, guarantee activities…

+ Join bidding, buying bonds, government bonds, central bank bonds….+ Investment in industries and other sectors

 The retail banking services

 Card business: including domestic debit cards and international credit cards.With the type of business activities, BIDV Western Hanoi branch providemany utilities such as Card payment services via POS/EDC, bill payment, ticketpayment on ATM, mobile phone recharge through ATM…

 Other non-credit services:

Domestic payment and international payment: these are one oftraditional activities of BIDV with high transaction speed and high accuracy thanks

to widespread networks of agencies within and outside the country Notably is the

WU money transfer product for individual customers therein

Electricity bill payment with EVN

Payroll service

E-banking services: BSMS, home banking, direct banking,mobile/internet banking…

Products and services for individual customers

Scanning the banking operations of BIDV Western Hanoi branch, we cansummarize the products and services for individual customers as follows:

 Deposits: For individual customers, the branch is implementing variousdeposit products to meet the most different demands of customers, such as: regularnon-term deposits, deposit surplus, specialized capital deposits, securities deposit,margin deposits, term deposits, automatic investment deposits, retail deposits,combined deposits, valuable papers…

 Credit Products: Provide usual short-term loan, usual medium / term to individuals by mortgage lending, discounting valuable papers or securing byreal estate to serve the purposes as: consumption, family economic development,service life, additional business capital lending, guarantees, factoring, etc Some ofthe main products are: overdrafts, supporting housing-demand loans as lending forbuying car, buying house, home repairing, studying oversea, labor exporting…

long- Currency Trading: Products for those individuals wishing to buy and sellforeign currencies for payment and repayment of loans, direct investment, portfolioinvestment, travel, travel abroad Some products are designed to meet differentneeds: Trading in the spot foreign exchange, forwarded foreign exchange, interestrate swaps, foreign exchange option…

 Domestic payment and international payment, especially WU moneytransfer service Besides the traditional domestic payment products, BIDV Western

Hanoi branch strongly develops international payment products to meet thecontinual customers’ demands of fee payment, studying fees overseas, travelling,living support…

 Card Services: Includes products: domestic debit cards, internationaldebit card, international credit cards, etc…with many utilities provided asmentioned above These products help customers more easily in personalconsumption as well as personal payment

 Electronic Banking: The most modern products that BIDV would like toprovide to customers The latest of those is mobile and internet banking whichindividual customers can use their personal computer connected to the internet tomake the transaction at their places accordingly

2.1.3 The organizational structure

To improve competitive ability in the context of international economicintegration, Vietnamese commercial banks system need to quickly implementbanking modernization project BIDV Western Hanoi branch now is also in theprocess of modernization of banking Currently BIDV Western Hanoi branch hasswitched to TA2 model which is the modern model in order to help BIDV become

an advanced bank of multi-disciplinary business, operating under the internationalpractice with high quality like the advanced banks in Southeast Asia

The Western Branch consists of two main sections: front office and backoffice which are included in 10 departments arranging in the following diagram:

Diagram 2.1 Organization structure of BIDV Western Hanoi branch

Customer Transaction Dept

Treasury service Dept

Adm ini stra tive tion niza Orga

Dept

Enterprise Customer Dept 1 &

2

Individual Customer Dept

Risk Management Dept

Transaction Office & Savings Bank & Exchange Counter

To serve customers better and aim to constantly expand the branch size, thebranch has established 4 transaction offices, 2 saving banks and 1 currencyexchange counter settled on over the districts in Ha Noi city and Dong Anhdistrict.

As you can see, the Head of the branch is the Director with the highestdiscretion for financial activities of branch who is responsible for generaladministration of all aspects of branch to ensure branch will safely and effectivelyoperate The task of Director is to build development strategy of branch througheach stage and implement of the approved strategy according to the regulations ofthe State Bank and the development trend of BIDV

There are two deputy directors who help the Director in coordinating thedaily work of the branch, and are responsible for managing a number ofoperations When handling the problems relating to the branch's operations,deputy director is assigned on behalf of the Director and Deputy Director isresponsible to the Director, before law for their decisions within the scope of thework assigned But due to the lack of Senior human resource, the shortcoming inthe executive board in BIDV Western Hanoi branch in this stage is that there is n oclear division between the deputy in charge of sales – front office, and the deputy

in charge of operations – back office

As the described diagram and by the functions and duties of the departments,

we can divide 10 departments, 4 transaction offices, 2 saving banks and 1 currencyexchange counter into two main blocks: front office and back office

Front office block:

Enterprise Customer Dept 1 & 2

Individual Customer Dept

Transaction Office & Savings Bank & Exchange Counter

Back office block

General Ledger Dept (Finance and Accounting Dept.)

Credit Administration Dept

Planning & Synthesis Dept

Customer Transaction Dept (International payment and Trade finance included)Treasury service Dept

Administrative Organization Dept

Risk Management Dept

Well care and serve customers is the duty of every member of the bank.However, the bank has clear division of tasks and functions for each department.Branch divides customers into two groups: individual customers and enterprisecustomers The action of classifying customers into 2 kinds to establish two kinds

of department - Enterprise Customer Department and Individual CustomerDepartment to make it easier for the branch to manage and take care of customersbetter and more professional

In the block of front office who is in charge of sales, mainly servingindividual customers is the function of Individual Customer Department andTransaction Office, Savings Bank and Exchange Counter And in the block ofback office who is in charge of operation, it is Customer Transaction Department

Functions and tasks of departments in charge of individual customer care:

* Individual Customer Department

- Searching, developing relationships with individual customers andmaintain relationships with any old individual customers, maximum care and meetthe demand for banking products and services to customers

- To implement of the individual credit: directly analyze and evaluate creditproposals, monitor and supervise the activities of customers

- Marketing and deploying retail banking products

- Planning and implementing the overall marketing program for eachindividual client’s product group

- Managing and implementing sales quotas on specific products

However, only Individual Customer Department well accomplish the task

of individual customer service care, it is not enough Customers mainly deal withthe staff of transaction processing part, so serving quality of these parts willstrongly influence on customers’ feeling Therefore, in order to improve customerservice quality at the branch, it requires a combination of flexibility between thedepartments in the branch and the attitudes of the service staff

* Transaction processing department:

o Directly doing transaction tasks, handling operations and accountingtransactions with customers:

- Implement the deposit and payment transactions and other operationsrelated to customer payment account

- Implement business deposits, savings mobilization, lending saving-book,certificates of deposit, and other services related to deposit accounts at the request

of the customers

- Implement loan accounting, debt collection

- Manage customer accounts, implement the other operations such asissuing cards, money transfer, checks, purchase and sale of foreign exchange,domestic and international payment, other application service like BSMS, internetbanking, VN Top-up, electronic wallet, etc

o Mortgaging, discounting the valuable vouchers

o Managing customer information and making reports in accordance withprofessional requirements

* Some problems with transaction process at a counter:

At the counter of the branch there are transaction control, and tellers.Tellers work as cashier and counselor concurrently.

Currently, when a customer comes to bank to take a transaction, acounselor will help him to understand about products or services and guide him to

go to the right counters However, due to the large number of customers, theconsultancy activity may not complete And a bank teller has to be a consultant forcustomer and carry out the transactions on the computer at the same time So thetransaction processing time is prolonged and cause jams bank customer retention

For small customers, dealing with the small amount of revenue andexpenditure within the limits of the tellers, customers will only need to workdirectly with the teller And controller will check and approve at right counter.Transaction processing is faster, neat and simple

For customers with large transaction, exceeding the revenue andexpenditure of a bank teller, customers have to do the procedure at the teller’scounter, then bring the money to the cashier to pay and turn back to the counter.Meanwhile, bank teller gives the controller documents to check before delivering

to fund counter to end the transaction For large customers, the transaction withmore than one step may make them not really happy, and extend the processingtime of bank staff

2.1.4 Retail business result of BIDV Western Hanoi branch

The situation of banking area activities in 2011 was judged to be a lot ofpositive changes, but there are still so many difficulties It’s also true for BIDVWestern Hanoi branch Sometime, the serious decline of capital strongly influenced

on branch’s operation, but thanks to the leadership and close administration of theboard of directors, the creativity and collective efforts of staff, business results ofthe branch has completed most of the business targets assigned

Table 2.1: Criteria of retail banking for individual customers

of BIDV Western Hanoi branch over 4 years (from2009 to 2012)

Net total charges

from retail service

Million VND 237 1,313 2,478 3,422

- Card Service Charge

Million VND 44 342 861 1,530

- BSMS Charge

Million VND 21 163 428 738

- WU Charge

Million VND 46 79 78

- Retail Security

Commission

Million VND 4 8 12 15

- Treasury Service

Million VND 1 8 5 5

- Payment charge

Million VND 72 530 680 690

- Guarantee Charge

Million VND 68 115 260 370

- Account Control Fee

Million VND 23 85 146 204

- Other Fees

Million VND 5 16 7 4

2 Total Card Card 3,252 6,954 18,120 24,539

ATM Card Card 3,200 6,500 16,580 22,540

Int’l Credit Card Card 52 454 1,540 1,999

3 Number of POS Item 1 35 64 150

4 Number of customer People 3,445 10,101 18,853 24,900

Source: Report on the 2012 business outcomes – Western Hanoi branch

As we can see from the table above, BIDV Western Hanoi Branch hasreached admirable retail results in spite of many difficulties from the date ofestablishment

From the number of customer of only 3.445 people in 2009, it’s up withincredible speed of 10101 customers in the year 2010, an increase of 293% And

this number is going to increase in the year 2011 of 18.853 customers, 187% up incomparison with the previous year The number of individual customers of BIDVWestern Hanoi branch still achieves steady growth in the year 2012 of 24.900people, make the growing speed of customer platform is 132% This showed thescale of customers growing over the years and increasing at a very fast speed.

A very important criterion must be mentioned is net total charges from retailservice It reflects one part of the net income of the branch These charges includeCard Service Charge, BSMS Charge, WU Charge, Retail Security Commission,Treasury Service, Payment charge, Guarantee Charge, Account Control Fee… If in

2009, BIDV Western Hanoi branch has reached only 237 million VND in retailservice charge, it was up with breakneck speed of 1.313 million VND, up 554%.And BIDV Western Hanoi branch has still maintained significant growth in the year

2011 with 2.478 million VND and in the year 2012 with 3.422 million VND, anincrease of 138% over 2011

In order to build competitive advantage, BIDV Western Hanoi branch notonly improve service quality but also apply flexible offers with traditionalproducts and services of the branch such as: guarantee, export and importpayments In addition, “service towards customers” has brought very good results

in each product line and services For example, card service charge in 2012 was1.530 million VND, accounting for 44.71% of total charges from retail service;BSMS charge was 738 million VND in 2012, accounting for 21.56% of the totalcharge while traditional main product line as payment service and guarantee alsoachieved steady growth: increase 10.14% and 14.23% for each in 2012 incomparison with the previous year 2011

From the number and analysis we can see card service played the largest part

in the total retail service charge The growing speed of issuing cards was soaringthrough the years: if in 2011, BIDV Western Hanoi branch has reached 18120cards, increase 261% over the year 2010, in 2012 this number was 24,539 cardsincluding 22.540 ATM cards and 1.990 international credit cards So it was not

surprising to say the year 2011 and 2012 were successful years of the branch indeveloping retail banking products for individual customers The branch hasexceeded the most retail targets assigned by the head office, and has high growthrate compared to 2010

Despite the difficulties in economic environment, BIDV Western Hanoibranch has constantly strived to meet the needs of the customers to achieveencouraging results comparing to other newly established branches of BIDV at thesame time

2.2 Current situation of Individual Customer Service quality in BIDV Western Hanoi branch

2.2.1 The main characteristics of human resources, facilities, technology in BIDV Western Hanoi branch

The customer is one of the important factors determining the survival anddevelopment of enterprises In an environment full of fierce competition,maintaining good relations with old customers, retain loyal customers is not easy

To make them trust us to introduce new customers is more difficult For customercare, what factors are important in the absence of product differentiation, productquality, the price, the product supplying process? Evaluated factors cover all stages

of the service providing process There are elements as qualification of bankemployees, factors dependent on the skills, attitudes and behaviors in providingservice, but there are also many factors not related directly to the service provider as

a place of transactions, technology, the product itself This speaks to the fact thatthe quality of banking services depending on the stage of many, many peopleinvolving in the different positions All these factors are not other than the purposes

to best meet the needs, expectations of customers Here I would like to mentionthree main factors in BIDV Western Hanoi branch They are human resources,facilities and technology

* Human resources: