Luận văn thạc sĩ NÂNG CAO CHẤT LƯỢNG bán lẻ tại NGÂN HÀNG BIDV CHI NHÁNH NAM hà nội en

THESIS INTERNATIONAL BUSINESS MANAGEMENTTHESIS "IMPROVING THE QUALITY OF RETAIL BANKING SERVICES IN BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - HANOI BRANCH SOUTH"... I declare that

THESIS INTERNATIONAL BUSINESS MANAGEMENT

THESIS

"IMPROVING THE QUALITY OF RETAIL BANKING SERVICES IN BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - HANOI

BRANCH SOUTH"

After all, I would like to send many thanks to my friends, my colleages and

my closed people who did not hesitate to spend time on support, give comments andhelp me during my study time

I want to express my sincere thanks to all of you

I declare that the Thesis for Master of Business Administration "Improving the quality of retail banking services in Bank for Investment and Development

of Vietnam - Hanoi Branch South" has been conducted by myself, which is

reliable with clear information source written by the subjective view I'm solelyresponsible for the accuracy from the reference materials

TABLE OF CONTENS

ACKNOWLEDMENT i

DECLARATION ii

TABLE OF CONTENS iii

LIST OF TABLES AND FIGURES vi

INTRODUCTION 1

CHAPTER 1: THEORETICAL BASES ON RETAIL BANKING SERVICE QUALITY 4

1.1 General view on retail banking services 4

1.1.1 Definition of retail banking services 4

1.1.2 Characteristics of retail banking services 5

1.1.3 Roles of retail banking services 6

1.1.3.1 For the economy 6

1.1.3.2 For the bank 6

1.1.3.3 For the customers 6

1.1.4 Retail banking services 6

1.1.4.1 Capital mobilization 6

1.1.4.2 Credit service 7

1.1.4.3 Card service 7

1.1.4.4 Payment services 8

1.1.4.5 Electronic banking services 8

1.1.4.6 Other banking services 9

1.2 Basic quality issues of retail banking service 9

1.2.1 Service quality concept 9

1.2.2 Relationship between service quality and customer satisfaction 12

1.2.3 The evaluation theory of the service quality 13

1.2.4 Retail banking services quality 17

1.2.5 Measuring the services quality of retail banking 18

1.2.6 The need to improve retail banking services quality 19

1.3 Experience of improving retail banking services quality of a number of banks in the world and lessons for commercial banks in Vietnam 20

1.3.1 Experience of improving retail banking services quality 20

1.3.2 Lessons on improving retail banking service quality for commercial banks in Vietnam 23

CHAPTER II: THE CURRENT SITUATION ON SERVICE QUALITY OF RETAIL BANK AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM – HA NOI SOUTH BRANCH 25

2.1 About Bank for Investment and Development of Viêt Nam – Ha Noi South Branch 25

2.2 Results of business operations of Retail banking at Ha Noi South BIDV 26

2.2.1 Capital mobilazation 26

2.2.2 Credit 28

2.2.3 Other services 30

2.2.4 Business results 31

2.3 Analyse, evaluate the actual situation of service quality of the retail banking through business results of retail banking at the Bank for Investment and Development of Vietnam - Hanoi South Branch 31

2.3.1 The quality of retail capital mobilization service 31

2.3.2 The quality of retail credit service 35

2.3.3 Quality of other service: 38

2.3.3.1 Quality of card service: 38

2.3.3.2 Quality of payment service 42

2.3.3.3 The quality of electronic banking 44

2.4 The main factors affecting the quality of retail banking services at the Bank for Investment and Development of Vietnam – South Hanoi Branch 46

2.4.1 Reliability 46

2.4.2 Responsiveness 46

2.4.3 Tangibles 47

2.4.4 Assurance 47

2.4.5 Empathy 48 2.5 Assessment of retailing service quality at Bank for Investment and Development of Vietnam at South Hanoi Branch based on the comment of

2.6 Review of retailing service quality of BIDV at South Hanoi Branch after investigation and analysis 54

2.6.1 Achievements in the Quality of Retail Banking Services 54

2.6.2 Restrictions on the quality of retail banking services 56

2.6.3 The cause of the limitation 56

CHAPTER III: SOLUTIONS FOR SERVICE QUALITY IMPROVEMENT IN RETAIL BANKING OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM –HA NOI SOUTH BRANCH 58

3.1 The development orientation of Bank for Investment and Development of Vietnam - South Hanoi Branch in the near future 58

3.1.1 The general development Orientation 58

3.1.2 The development of retail banking services 59

3.2 Several Solutions for Retail Banking Service Quality Improvement 60

3.2.1 Improving the quality of infrastructure 60

3.2.2 Solutions to improve the quality of human resources 62

3.2.3 Solutions to improve the quality of organizational management of services systems retail banking 64

3.2.4 Solutions of developing new retail services 69

3.2.5 Designing service quality standards 70

3.3 Suggesting to the State Bank and Government Offices 71

CONCLUSION 73

REFERENCES 74

APPENDIX 76

LIST OF TABLES AND FIGURES TABLES

Table 2.1: The Situation of capital mobilization of Ha Noi South BIDV, 2007

-2011 stage 27

Table 2.2: The Situation of credit activities of Ha Noi South BIDV, 2007 -2011 stage 29

Table 2.3: Business results of Ha Noi South BIDV, 2007 -2011 stage 31

Table 2.5: Expense for interests from mobilizing population’s capital of Noi South BIDV 34

Table 2.6: Scale of individual lending service of Ha Noi South BIDV 36

Table 2.7: The quality of retail credit of Hanoi south BIDV 37

Table 2.8: Card sales of Ha Noi South BIDV in 2007 2011 stage 38

Table 2.9: Number of new card issuance of Ha Noi South BIDV during 2007 -2011 stage 39

Table 2.10: Number of ATM, POS of Ha noi south BIDV during 2007 – 2011 stage .40

Table 2.11: Comparison oF property between domestic debit cards among banks .41

Table 2.12: Number of payment transaction of individuals at Ha Noi south BIDV .42

Table 2.13: Money transfer sales of individuals at Ha noi south BIDV 43

Table 2.14: Average time to deal with payment transaction of individual at Ha noi south BIDV 44

Table 2.15: Number of customers using modern services oF Ha Noi south BIDV .45

Table 2.16: Data encryption 49

Table 2.17: Classifying survey 50

Table 2.18: Result of descriptive survey analysis 50

Table 2.19: Result of testing Cronbach’alpha 51

Table 2.20: Summary of the coefficient on the conformity of model 52

Table 2.21: Result of linear regression analysis 53

FIGURES

Figure 1.1: Model of five service quality gap 13 Figure 1.2: The theoretical study model 16

1 THE THESIS SIGNIFICANE

The international economic integration has opened up many opportunities,but it also places many challenges to the banking service suppliers because theyhave to compete severely with foreign banks who are not only powerful on thefinancial potential but much experienced about modern banking servicedevelopment

Under the competition pressure on banking service supply and the fast ITdevelopment, the year 2010 and 2011 is evaluated to be a “booming year” on retailbanking service with increased approaches to the individual customers and smalland medium enterprises

According to the estimate, the Vietnam population will increase by 90million people in 2012 with the increasing income for people It is the potentialmarket for the commercial banks, when aiming at the payment not by cash.Therefore, the retail bank development strategy of BIDV- the South Hanoi Vietnamwill focus specially on individual customers with various retail products which areprofessional and suitable to the demand and capacity of each different objects andcustomer segments

With the aim of building the retail banking service system of high quality,safety with high economic effectiveness on the base of enhancement of internationaleconomic integration, retail banking service market expansion by through thebilateral and multilateral management, application of advance banking technologyand suitable development of distribution system to provide sufficiently, timely andconveniently retail service products and utilities for all customers

With the continuously changing trend of consumption according to the lifedemand, BIDV- Southern Hanoi Branch must build new strategy and solution tobecome a multi-functional retail bank For meeting the increasing banking demand

in the severe competition among banks, BIDV-Southern Hanoi Branch is trying toextend the business net, increasing the retail banking service with the improved

service style “customers are God”, step by step increasing the reputation and brandname of BIDV in general and BIDV-Southern Hanoi Branch in particular in thefinancial market

From the above fact, the quality re-evaluation of the retail banking servicequality of BIDV- Southern Hanoi Branch as well as supporting banks in buildingsolutions for enhancing the retail services during the incoming time in order toincrease the satisfaction of customer is very important, so I have considered and

selected the thesis subject “Improving the quality of retail banking services in Bank for Investment and Development of Vietnam - Hanoi Branch South" The

subject is conducted for the above objectives and hopefully the author will receivecontribution ideas to complete the subject matter

BIDV-3 SUBJECT, METHOD AND RESEARCH SCOPE

- Research: The quality of retail banking services in BIDV- Southern Hanoi Branch

- Research methodology: Analyze main factors affecting the quality of retailbanking services at BIDV- Southern Hanoi Branch, after that conducting theanalysis of the customer satisfaction through practical survey, then proposing thesolutions for increasing the retail banking service quality

-Scope of study: The research data is to 31/12/2011 in BIDV- Southern Hanoi Branch

4 THE PRACTICAL MEANING OF THE RESEARCH SUBJECT:

Based on evaluation of retail banking service system in BIDV- SouthernHanoi Branch, analyzing the achievements and failures in the retail banking systemquality, then propose the solutions for increasing the retail banking service system

in BIDV- Southern Hanoi Branch

5 STRUCTURE OF THE RESEARCH SUBJECT:

Apart from the Introduction of the subject and the Conclusion, the researchsubject is divided into 3 chapters with the detailed contents as below:

CHAPTER 1: Theoretical bases on retail banking service quality

CHAPTER II: The current situation on service quality of retail bank at bank for investment and development of Viet Nam – Ha Noi South branch

CHAPTER III: Solutions for service quality improvement in retail banking of bank for investment and development of VietNam – Ha Noi South branch

CHAPTER 1: THEORETICAL BASES ON RETAIL BANKING

SERVICE QUALITY

1.1 General view on retail banking services

1.1.1 Definition of retail banking services

In the open economy, the demand on banking services is increasingly high,especially for the retail banking services The targets of retail banking services areindividual customers, so the services are usually simple, easy for implementationwith focus on the services of deposit, account, debts, credit card registering and so

on Depending on different ideas and research approaches, there are some concepts

on “retail banking services” being recognized as followed:

Retail market is a total new concept in the financial market, through which alarge number of individual laborers will approach the banking services, creating apotential, variable and dynamic market The terminology is Retail Banking- itmeans that supplying services to the hand of end-users with quantity It should beunderstood that retailing is an activity of distribution, in which the researching,promotion, study, experiment, discover and develop the modern distributionchannels- the outstanding feature is online business The retailing includes threemain fields: market, distribution channels, services and service supply Retailing ismore developed to be international

According to economic experts in the Asian Institute of Technology-AIT,retail banking service is to supply products, banking services to each individual,small and medium enterprises through branches, customers who can approachdirectly to products and banking services through telecommunication electronicequipments and Information Technology

According to the WTO, the retail banking is a typical service type of bankswhere individual customers can make transactions in branches/ transaction offices

of banks to perform the services like: Deposit, account checking, mortgage, loan,credit card service, debit card and related services

According to the BIDV, retail banking services are the supply of productsmainly for individual customers with services like saving deposit, card services,money transfer for abroad study, remittance services, electronic banking services,individual consumption loans , business, etc In short, retail banking services can befully understood as "retail banking services banking are services provided to theindividual or individuals, small and medium-sized businesses through a network ofbranches or customers can directly access to the banking services through electronicmedia and telecommunication "

1.1.2 Characteristics of retail banking services

- The served customer objects are variable from individuals, households andsmall and medium enterprises

- The retail banking services are variable but the value of each transaction isnot high so the risk level is low

- The retail banking services require building a large number of variousdistribution channels to supply services ton customers on wide region

- The retail banking services base mostly on the modern IT background with

a professional staff team to extend and increase the product quality, bringing theproducts to each individual customer

- The service is simple and easy to implement: The target of retail bankingservice is individual customers, so the services focus on deposit, payment, loan andcard services

- The business development mainly bases on the brand name, quality of thebanking services, so the service quality is an important factor to develop the retailbanking services

-The average operation cost is high Although the number of customers ishigh but they are in different place, so the transaction is not convenient The bankusually opens the network and invest into the online transaction with high cost

- More various management ways which is more complicated because of thewide customer network

1.1.3 Roles of retail banking services.

1.1.3.1 For the economy

The retail banking services directly change the cash economy into the cash economy, increasing the effectiveness of the state management, reducing thesocial cost of payment and cash circulation, Beside, through retail banking services,the money circulation process is enhanced with higher effectiveness, making use ofand exploiting the capital potential to promote the business and consumption,increasing the people’s living standard

non-1.1.3.2 For the bank

The retail banking services play an important role in diversifying theproducts, extending the market, increasing the competition capacity, creating thecapital source for medium and long term for the banks to change the incomestructure of banks, reducing the risks in banking business, at the same timecontributing to diversifying the banking activities, strengthening the nationalfinance

1.1.3.3 For the customers

The retail banking services brings to the customers the conveniences, safety,cost saving and effectiveness in the process of payment and income usage In fact,now the retail banking services have brought to banks a stable income withdecentralized risk, creating a steady base for the bank’s operation Therefore,commercial banks have initially considered the retail banking services as a coreactivity for building, reinforce a stable customer network, then expand the business

to other sectors of the banks Vietnam commercial banks have been developing,increasing the retail banking services as a inevitable trend, consistent with thecommon trend of banks in the region and in the world

1.1.4 Retail banking services

1.1.4.1 Capital mobilization

One of important functions of Commercial banks is to mobilize capital forgiving loan and investment Through methods and tools used, commercial banksmobilizes capital from individual customers and small-medium sized enterprises

under the main forms such as non-term deposits, term deposits, valuable papers(bills, bank bonds, etc.) and other forms of deposit Each individual customer or asmall and medium enterprise has idle capital which is not great but with a largenumber of customers, an abundant and potential source of capital will be created forcommercial banks Currently, in addition to traditional deposit products, thecommercial banks have diversified more flexible savings product in term of termsand interest rate in order to improve the quality of services to meet the needs ofcustomers

1.1.4.2 Credit service

The retail credit services provide individual customers and small andmedium enterprises short-term, mid-term and long-term loans including loan forabroad study, real estate, consumption, securities business, production and business,overdraft loan, mortgage of valuable paper The weight for lending individualcustomers, small and medium enterprises are higher day by day in the total debtbalance of the banks, contributing to increasing sales and profit for commercialbanks Loans to individual customers and small and medium companies brings agreat potential with non-stop development However, the amount for one loan issmall and dispersed, so the management cost is high Besides, customers are verysensitive with the interest rate, term and procedure, so the commercial banks areusually affected with competition factors in the market and the customer’sprofitability

1.1.4.3 Card service

Bank card is a personal multi-functional financial products issued by thebanks with many utilities for customers Cards can be used to withdrawing deposit,sending deposit, issuing credit, payment or account transfer Cards are used formany non-financial services like account information inquires and so on Manykinds of different payment cards are available, but in general, there are two basictypes which are debit card (domestic and international) and credit cards Debit cardsuse the current balance of the account While the credit cards are outstanding withthe feature of “purchasing first, payment later” based on the credit line issued by the

banks The card services contribute an important part to the commercial banks incapital mobilization, service charging and image PR The card services go with thetechnology application and the in interconnection among commercial banks formarket exploitation and IT infrastructure usage.

1.1.4.4 Payment services

The payment services are considered to be a profession component with highprofit rate but has not been paid proper attention Payment means include cheque,payment order, commercial bills, payment orders Banks on behalf of customersmake payments for goods and services through the clearing, m online paymenttransfer through the banking system within the banking system or other, transferwithin the country border or to the foreign countries

Salary payment to the personal account, payment for electrical bills, waterbill, telephone bill and so on through the card services is developing and creatingsubstantial receiving source for commercial banks

Money transfer services, money remittances are increasingly expanding anddeveloping Many commercial banks have cooperated and been agents for moneytransfer and remittance for a number of international financial institutions such asWestern Union, Money Gram

1.1.4.5 Electronic banking services

In the situation of integrated financial- banking market, Vietnam hasgradually opened door for foreign banks, services of domestic banks should bedistinctive in forms and contents In which, the outstanding feature is the modernbanking services

Currently, SMS Banking, eBanking, Mobile Banking and so on are servicesselected by many customers With this service, customers do not have to go banks

or spend much time on performing necessary transactions like account transfer,account checking, payment, deposit and loan and so on It is really an utility,bringing customers to approach closely to the modern life The application ofelectronic banking services in business of current commercial banks is acompetitive advantage and it is one of important factors deciding the success in the

development trend of retail banking services in future The modern electronicservice can be listed as follow:

Call center: The center provides information and explains all questions,claims of customers Currently, most of banks have Call center like 247/247 ofACB, 24/7 of BIDV

Phone banking: is a service, in which customers call to a fixed number ofthe service providing banks for performing transactions or check accounts andexchange rate, interest rate information

Mobile banking: is a banking service through mobile phone Customers cancheck the balance, transaction; receive the balance information, interest rate throughSMS banking, payment for electricity, water, phone, internet and so on

Home banking: is a kind of service in which transactions can be implemented athome through computer system connected to the computer system of the banks includingmoney transfer, report, balance report, exchange rate, interest rate

Internet banking: is a kind of banking services, in which customers performthe transaction with banks through Internet Customers can search informationabout products, services of the banks or access information on personal account,balance, deposit and loan

1.1.4.6 Other banking services

Apart from the above services, services for individual customers includecollection/payment, money transfer for abroad study, valuable asset consignment,safe lease and so on The services for small and medium enterprises includeinternational settlement, foreign currency business, bond security

1.2 Basic quality issues of retail banking service

1.2.1 Service quality concept

Service is a popular concept in marketing and business It is a "specialproducts" with many different characteristics from other commodities such asintangibility, heterogeneity, inseparability and can not be stored Therefore, so farthere is no complete definition for service According to VA Zeithaml and MJ

Bitner (2000), "Service is behaviors, process and method to do a certain work inorder to create value for customers to satisfy their needs and expectations"

Services play an increasingly important role in the national economy Servicequality is one of the determining factors for the efficiency of services and creation

of value to contribute to the national economy

Service quality is evaluated in connection with culture, job sector and field.Therefore there are many different definitions for it Depending on the object andenvironment of research that understanding of service quality can serve as the basisfor implementing measures to improve it

In development history, many service providers have found their differences fromrivals and keep customers through the implementation of excellent quality service.Service quality has become a major marketing tool to differentiate competitors andboost customer loyalty Customers can only assess the quality after havingpurchased and used a service Therefore, the definition of service quality is oftensubjective, largely based on the attitude, feeling and knowledge of service users.After referring to materials, there is some concept of service quality that is used bymany writers

Service quality is a measure of to what level a service has satisfied acustomer’s expectation A quality service is one that meet the expectations ofcustomers in a consistent manner (Luu Van Nghiem, 2008, page 163) Gronroos(1984) saw service quality in two aspects, one is technical quality (what is served)and functional quality (how it is served) In the 1998 study, he described perceivedservice quality is the difference between expectations and the service received.Parasurman, Zeithaml and Berry (1985.1988) (cited from Nguyen Dinh Tho andctg.,2007) thought that "quality is the distance difference the real service andproducts and the perceptions, feeling of customer when they use that products andservices” He explained that in order to know a customer, it is best to identify andunderstand his expectations It is necessary to develop of a system to identifycustomer’s expectation, and then formulate an effective service quality strategy.This can be considered the most general concept that covers the entire meaning of

quality service from a customer’s point of view, and places customer in the centre.

Although there are many different definitions, but taken as a whole, quality

of service includes the following features:

Superiority: For customer, service quality is marked with significant

"superiority" compared to others This superiority becomes competitive strengths ofthe service provider Evaluation of service quality superiority is greatly influenced

by feelings of the services receiver, especially in marketing and customersatisfaction research

Characterization: Service quality is the core of most products and services; it

makes up the characteristics of products and services Therefore, high-qualityproducts and services will have more "dominant characteristics" than low-endproducts and services This distinction is associated with the identification ofsuperior tangible or intangible properties of products and services It is thanks tothese characteristics that clients can tell the quality of a company from othercompanies However, in practice, the core characteristics of the service onlyrelative, it is difficult to determine them fully and accurately

Provision: Service quality is associated with the implementation/delivery of

service to customers Service delivery, serving style will determine whether thequality is good or bad These are internal elements expressed by the serviceproviders Therefore, in order to improve service quality, firstly service providersmust be aware to improve this internal factor to create their long-term advantage

Demand satisfaction: Service is designated to meet the needs of

customers Quality of service must fulfill customer demand and improve according

to customer's requirements If customers feel that the service does not meet theirneeds, they will not be satisfied In the modern business environment, serviceproviders must always pay attention and try their best to meet customers’ needs In

terms of customer service, "Demand satisfaction" includes "provision" This is so

because services quality starts from the moment when enterprises get to knowcustomer needs to the moment when they provide service, in the process of servicedelivery that customers will feel satisfied or not and therefore consider a service

good or bad If the provision has internal factor demand satisfaction is more driven

by external influence

Value creation: The quality of service is associated with the value created to

serve customers It would be useless to provide service that is considered having noquality by customer Enterprise must create value for customer Therefore,consideration of service quality or more specifically value brought to customersdepends on customer assessment, not the enterprise Clients will receive value theservice bring and compare them with what they expect to get Hence, value creation

is the basic characteristics and foundation for the construction and development ofservice quality of business

1.2.2 Relationship between service quality and customer satisfaction

The existence of any business is the customer "Customer is the King", is theones who decide revenue based on their level of satisfaction for products andservices quality Therefore operation principles of suppliers are to meet the needs ofcustomers and then their ability to come back is very high "Customer satisfaction isthe feeling of a person through the consumption of products and services, the level

of value that the product and service offer compared to what he expected" ( PhilipKotler, 1991) Or according to Bachelet (1995), "satisfaction is the emotionalreaction of customers for a product or service based on his personal experience."Normally the service provider often assumes service quality and customersatisfaction to be the same However, many studies have revealed that these twoconcepts are different, but have mutual relationship Quality of service is the mostinfluencing factor on customer satisfaction If service providers bring customersgood quality products that meet their needs, they have set the first step to makecustomers happy

Therefore, to have better customer satisfaction, the service providers mustincrease service quality Quality services must focus on specific components of theservice, it is the source that decide customer satisfaction Customer satisfaction can

be used to measure service quality

1.2.3 The evaluation theory of the service quality

To measure service quality, two models have been tested for many years byresearchers, they are the SERVQUAL model of Parasuraman & ctg in 1988 andGronroos service quality model in 1984 However, the SERVQUAL model is themost widely used and popular one This paper also uses the SERVQUAL model

5 service quality gap model

During service provision, there is always distance between providers (banks)and customer The distance varies depending on the two major factors of customerand the bank Besides are impact from the surrounding environment on customerand the bank Greater distances reflect the lower ability of banks to meet the needs

of customers Therefore, management of service quality is essentially "the servicequality distance" Narrowing the distance is the goal of service providers

Figure 1.1: Model of five service quality gap

(Source: Parasuraman & CTG (1985)

Information dissemination via

Desired level of service

5 Gap CUSTOMER

BANK

3 Gap

1 Gap

Received level of service

Service provision (contact

Client)

Dissemination of external information to client

Gap 1: Appear when there is a difference between customer expectations of

the service and the bank awareness of these expectations Gap 1 usually occursbecause the bank does not understand all the characteristics that make up the quality

of their service and do not see customers' needs

Gap 2: This gap occurs during the implementation of service quality

objectives The bank has difficulty in changing their perception of customerexpectations for the characteristics of their service The second gap depends mainly

on the products design capacity of the bank

Gap 3: Appears when the bank staff does not provide services to customers

according to the specified criteria This depends on the quality of staff directlyproviding products and services Even when the product is designed well, fulfillingcustomer demand, if the provision, attitudes and professionals of the staff are notgood, causing bad impression for customers, the bank's efforts in understandingmarket demand, designing products, is no longer worthy

Gap 4: This is the gap between the actual service quality and the customer's

expectations under the influence of external information dissemination andcommunication such as advertising, marketing, etc They are exaggerations thatexceed ability of the service provider It is very easy to lose customer’s trust if theservice provider advertises far beyong the truth

Gap 5: After using the service, customer will compare the service quality

they receive and what they have expected initially The key is to ensure that thequality customer receive must meet or exceeds what they expect Thus, high or lowquality depends on customer’s perception of the service in the context of what heexpects from a bank Parasuraman & ctg (1985) suggested that service quality is afunction of the fifth gap This gap depends on the distance before it Therefore, toshorten the 5 gap and increase service quality, service managers must attempt toshorten the gap 1,2,3,4

SERVQUAL research model

SERVQUAL is based on the point of view that service quality is the

comparison between the expected values / expectations and the value customersperceive.

The model considers two main aspects of service quality which are is the

outcome and process of service provision though five criteria of study: (1)

reliability, (2) responsiveness, (3) tangibles, (4) assurance and (5) empathy.

The implications of SERVQUAL model can be understood as follows:

(1) Reliability: Consistency and reliability in the process of serviceprovision

- Understand the needs and expectations of customers

- Develop systems and standardized procedures to ensure a consistent supply

of reliable products and services

- Ensure promises made through the media are real and feasible

- Managing customer expectations

(2) Responsiveness:

- Implement procedures to maximize responsiveness to the situationoccurring more and more often

- Training employees so that they can meet customers’ requirement

- Compilation of manual to help staff member respond well to questions,requests and complaints from customers

- Ensure customers do not have to wait for long to get the services

(3) tangibles: the tangible element of the services that make the presence ofphysical matter

- Consider the influence of the surrounding environment such as officedecoration, stationary and equipment

- Provide customer tangible items such transaction slip, forms, manuals,business cards, invoices, documents

(4) Assurance: Professionalism, courtesy and safety that the bank providescustomers

- Create trust through the knowledge and skills of service personnel

- Create professionalism, specialization service of the staff.

- Create widespread image, reflecting the bank's value

- Building a strong brand

(5) Empathy: The availability of services providing to individuals

- Make the customer feel important by responding to their needs andunderstand their concerns

- Develop long-term relationships with customers

- Training staff to recognize customers’ need

The research model

Banking service quality according to SERVQUAL model consists of fivecomponents: reliability, responsiveness, tangibles, assurance and empathy Inaddition, according to analysis of the relationship between service quality andcustomer satisfaction this paper use the theoretical model of quality bankingservices and customer satisfaction as follows:

Figure 1.2: The theoretical study model

Source “Marketing Research" by Nguyen Dinh Tho, 2007

The proposed hypothesis is:

H1: Having the same relationship between reliability of service quality and

customer satisfaction

H2: Having the same relationship between responsiveness of service quality

and customer satisfaction

H3: Having the same relationship between tangibles of service quality and

1.2.4 Retail banking services quality

Retail banking services quality includes:

Firstly, retail employees (from senior management to the lowest level): musthave good professional and communication skills, selling skills, active style,behavior attitude attentive, enthusiasm because retail banking service is apremium service

Secondly, retail products and services: must have individual characteristics,designed to satisfy the most of customer needs

Thirdly is the process: fast, easy, accurate and supported by modern andreliable equipment

The fourth is distribution channel: convenience, ease of access or visit, orientfor best customer service

From that we can define the concept of retail banking services quality as theminimum level of service that a bank selected to provide and satisfy their targetcustomers At the same time, it is also necessary to maintain the level of servicepreviously provided

1.2.5 Measuring the services quality of retail banking

No matter how we defines, we can see that the level of customer satisfaction

is the scale to measure service quality

Due to the specific characteristics of the sector, retail banking servicesquality has different characteristics from overall quality Here we consider themodel of Parasuraman to measure retail banking services quality, with components

Empathy: concern, care and compassion to each individual customer

In addition to satisfaction of retail clients, for assessment of retail bankingservices quality, it is necessary to have some other criteria such as:

- Seamless service: It is understood as minimizing the errors in dealingwith customers and risks in retail banking services Retail banking servicequality must be more and more improved, reducing errors in bankingtransactions, complaints and claims from customers, besides reducing the risks

in retail banking services to zero

- The scale and proportion of income from retail continues to grow This isthe general outcome from the variety of retail products and services, development ofretail banking services and its quality However, retail banking service quality is themost prominent Because if the service quality is not guaranteed, nor enhanced, the

diversity and development of services will not make any sense because they will not

be accepted

- The ability to compete is increasingly improved; market share of each retailbanking services is constantly maintained and promoted

1.2.6 The need to improve retail banking services quality

Firstly, among the business sectors, banking is considered a sensitive areawith the most competition Because money is a special business object, which issensitive to any changes in the social economy, a small fluctuation in socialeconomy can result in large change in money values and vice versa In addition,retail banking service products are highly competitive such as diversified products,which are easy to imitate, and hard to reserve patents Therefore, competition isalways a survival factor of banks They can only enhance competition advantage byservice quality Higher service quality result in greater competitive advantage

Secondly, banking services provided is to meet the needs of customers Ifservice quality is increasingly improved, having high-quality, customer will haveloyalty Furthermore, compliments, acceptance, satisfaction of quality of existingcustomers will pass on to new customers

Thirdly, at present, small commercial banks pay great attention to theproducts with high utility in order to obtain market shares, supply more productsand services for the market Customers is having increasingly stringentrequirements for quality products and services, they will compare, evaluate anddecide to deal with bank with good quality services, or if the quality of the bank'sproduct and service is not attractive, does not meet the requirements, they canswitch to use another bank services

Fourth, the economy is developing, income and people's living standards areincreasing, customers’ requirement of improving service quality certainly has a directimpact on operation of commercial banks They will have to compete more and besensitive to fluctuations of the market to retain old customers and attract new ones toexpand market share, reducing risk, enhance competitiveness and stabilize operation

Fifth, the development towards multi-functional retail banking requiresbanks to provide a variety of retail products, packages and high-quality based onadvanced technology At the same time, improving retail banking services qualitynot only in increasing utility of products and services but also in the service quality,customer care style, always considered "customer as king" with the service of

"pleasing customer" to best serve customers’ need and bring high economicefficiency for banks

Sixth, building system retail banks services with quality, safety andeconomic efficiency on the basis of strengthening international economicintegration, expanding retail banking services market to provide timely retailproducts and services with full utility for customers By 2015, Vietnamese banksstrive to develop a system of retail banking services with similar level to othercountries in the region in terms of types, quality and competitiveness

1.3 Experience of improving retail banking services quality of a number of banks in the world and lessons for commercial banks in Vietnam

1.3.1 Experience of improving retail banking services quality

Journal Stephen Timewell had proposed made the viewpoint that "the trendtoday shows banks that can seize the opportunity to provide retail banking services

to a huge number of people are "hungry" for financial services in emergingeconomies, will become global giants in the future." Banking and financial servicesare moving into a new era, the era of retail banking Never in history the financialworld witnessed has such a large amount of the population had access to bankingproducts and services Estimated that by 2015, the number of banking customerswill double, while the total assets of the banks also increase significantly Therefore,

in order to develop this potential market, Commercial banks of Vietnam shouldlearn experience in developing and improving retail banking services quality from anumber of banks in the world Below is the experience from the Dubai Islamic Bankand BNP Paribas:

Dubai Islamic Bank (DUBAI ISLAMIC BANK: DIB)

Customers are always the top priority at DIB That is why the retail bankingdivision of DIB offers a wide variety of solutions as well as profitable products andservices to meet the many different needs of customers, ensuring that the slogan

"direct to individual customers" of the Bank is not just a slogan but part of eachtransaction in DIB With over 30 years of experience in the banking sector, DubaiIslamic Bank has incorporated the highest ethical standards of Islam with advancedtechnology to provide "a list of the best products in the world" In order to improveretail banking services quality, DIB has expanded the network of branches andATMs across the United Arab Emirates, DIB strives to become the only retail bankfor customer, while improving integrated electronic technology such as the Internet,mobile and telephone banking transactions DIB help customers save time, effort,money and provide consultancy and support to customers at the same time Besides,one of the top concerns of the bank is customers’ loyalty Therefore, if a clientrequires, DIB will gladly advise clients throughout different financial cycles in theirlife, including planning for education, buy a car, buy a house for the first time,established businesses, travel Thus, each DIB customers can double theadvantage with the flexibility of choosing the optimal solution and the benefitsprovided by the bank to complete the entire financial needs from childhood untilretirement With the slogan: "We care, we listen, and we act", DIB always expect aresponse from our customers to constantly improve, to provide customers with themost convenient bank utility

BNP Paribas - France's number one retail bank

BNP (Banque Nationale de Paris) Paribas bank has extensive retailoperations in France, with more than 8 million customers and keep the leadingposition in the banking services through the Internet Through retail branches acrossthe country, BNP Paribas maintain their relationships with individual customers,corporations in a professional and independent manner

In order to maximize the efficiency of retail banking services and better meetcustomer needs, BNP Paribas has restructured the organization to form three core groups:

- Group 1: Product distribution and development (focus on the linkagebetween sales and marketing).

This group focuses on sales and product development strategies based onrelationship with customer including customer behavior and expectations research,market monitoring, as well as competitors and creating new products Retailrevenue help the group determine how the products and services are sold, fromwhich goals and performance measures can be set out

One of the group's top priority is to regularly adjust the types of products andservices for many different distribution channels, extension retail banking servicesprovision in France and promote opportunities for cross-selling products tocorporates and other investment division of the bank

- Group 2: Carry out service and customer care (especially post-salesservice)

This group has two main tasks which are organizing and implementing dailyworks ("back office" unit in the bank) The goal of the group is dealing withtransactions in a specialized manner to achieve the best quality This particularplatform is designed for each individual product that does not depend on thegeographical region

- Group 3: Analysis and research of development strategy

BNP Paribas want to provide their customers access not only through thebranch but also through other transaction location And their provision of products

is not limited within the country Main tasks of the third groups are to figure outimplementation method for the project in accordance with the bank's strategy In theimplementation process, the group has two ways: One is firstly provide servicesthrough a network of branches, then design and implement a system of distributionchannels On the other hand, they will restructure all products distribution channels

In addition, BNP Paribas has implemented a large-scale investment program

to modernize its branch network The growth of consumption network in addition toyoung staff has created advantages for them With its commitment to ensure service

quality, the brand name BNP Paribas will be more and more a "leading retail banks

Firstly, it is necessary to build a comprehensive products developmentstrategy for retail banking on the basis of market research, identification of capacityand development objectives of each bank At the same time, it is necessary toidentify the product development roadmap of retail banking services in each of thestages and conditions of each bank

The second lesson is to construct effective customer policy and improve thequality of customer service The policy establishment should be based on effectivecustomer information system At the same time, to improve service quality it isnecessary to construct standard service style, fast processing speed for customerrequirements, focusing on consultation function for customers

The third thing is continuous innovation, diversification of products andservices to attract customers, in which promote the development of products such ascredit cards, mortgage loans and other financial services for individuals in order tomake a difference in the competition At the same time, continuously improveproduct and services quality to meet the customer’s needs as well as ensure theimplementation of commitments on services and products provided

The fourth thing is to take the most advantage of the extensive branchnetwork and understanding the habit of Vietnamese people to approach morecustomers It is necessary to expand the network of parallel operation to improveoperation of the network, bravely improve or dismiss poor performance unit

The fifth thing is to promote the application of information technology in the

development of banking products and services, especially focusing on thedevelopment of e-banking services to bring more benefits to customers and reducecosts for banks Increasing remote transactions via fax, phone, internet, etc expanddistribution channels via "Agent" as overseas remittance, ATM card issuance agent

The sixth lesson is constructing specific marketing strategies, which is clear

in banking activities to promote and enhance the image of the bank Besidestraining of a professional banking staff, modern marketing of retail banking services

to increase access to each customer should be implemented

CHAPTER II: THE CURRENT SITUATION ON SERVICE QUALITY OF RETAIL BANK AT BANK FOR INVESTMENT

AND DEVELOPMENT OF VIET NAM – HA NOI SOUTH BRANCH

2.1 About Bank for Investment and Development of Viet Nam – Ha Noi South Branch

BIDV Hanoi Vietnam was established on 31.10.1963 with the name asTuong Mai Branch I - construction Hanoi Branch During the war, the Branch I justmade sure to provide capital for constructions in the district of Hai Ba Trung, Dong

Da and Thanh Tri district and both prepared its forces to be ready to fight at anytime But in the period of economic development, the country was unified; Branchcontinues the task of providing capital, economic recovery and capital development

In its name was changed into the Branch of Bank for Investment andBuilding of Thanh Tri district, directly under Ha Noi Bank for Investment andBuilding In 12/1991, its name was changed into Bank Branch for Investment andBuilding of Thanh Tri district

Since 1995, BIDV network has changed from issuing bank to Commercialbank with the tasks of currency trading, credit and other banking services Thereby,

in 7/2004 the Branch carried out modernization for bank; strengthening system ofleadership, headers of departments; increasing number of officers; equippingadvanced machinery to promote the strong development of the Branch

On 1/11/2005, Level 2 branch – Thanh Tri Bank for Investment andDevelopment was upgraded into Level 1 branch – Ha Noi South BIDV

Ha Noi South BIDV are continually investing, widening in terms of everyaspect to meet every customer’s need, but still ensuring development orientation

of BIDV

Ha Noi South BIDV currently provides all services of international Bank, asfollows:

Mobilzing savings, payment deposit from individuals and units in VND,foreign currency and gold Customer’s deposit is guaranteed as in regulations ofthe State.

Providing short term, medium, and long term loan; lending cum supporter;overdraft; lending for living; lending with credit limit in VND, foreign currency andgold at comfortable conditions and simple proceduce

Trading currencies by mode of spot, swap, forward, currency option

Paying, funding for goods import – export, discount for cargo papers andtransferring currency through SWIFT ensuring quickly with reasonable expense,safely with modes of payment such as L/C, D/A, D/P, T/T, P/O, Cheque

Issuing and paying by domestic and international credit cards: Master card of

Ha Noi South BIDV, Visa Ha Noi South BIDV; domestic card Ha Noi South BIDV.Accepting payment by Visa, mastercard, JCB… payment through internet by Card

Dealing with fund, paying salary, collecting and paying in place, exchangingforeign currency, receiving and paying overseas remittance, transferring moneywithin the country and abroad

Inland and abroad guarantee profession (payment guarantee, tax payment,contract performance, bidding participation, offering price, guarantee, paying inadvance…)

Lump sum financial service for studing oversea Consulting for investment –finance – currency

Diverse service for real estate, Home-Banking; Telephone-Banking and so on

2.2 Results of business operations of Retail banking at Ha Noi South BIDV

2.2.1 Capital mobilazation

Through data sheet on capital mobilization of BIDV, we can see that capitalmobilization of the branch during 2007 – 2011 stage increased dramatically Capitalmobilization in VND still makes up high proportion and continually increases,while Capital mobilization in foreign currency continually decreases This showsthat people mainly choose mode of deposit in VND due to frequent changes in

VND/foreign currency and interests from savings in VND are highter than savings

in foreign currency

In term of economic sector, rate of capital mobilization from people andeconomic organization increases year by year but proportion of capital mobilizationfrom people has tendency to reduce The reason for this can be due to high increase

in inflation, people want to invest in other markets such as gold market or realestate Increase in Savings of economic organizations is due to reasonable policy ofcapital mobilization of the branches They reached economic organizations and bigenterprises such á: insurance corporation, Debt trading Company,

Term capital structure varies; short term capital source increases dramaticallyeach year and makes up high proportion, over 70% of total capital source This isbecause the Branch has incorporated different types of active capital mobilization

by mobilizing directly capital from its transaction offices to carrying out mobilizingcurrent capital from people, from credit establishments, financial organizations…

Table 2.1: The Situation of capital mobilization of Ha Noi South BIDV,

10/09 (%) amount

11/10 (%) Total

2008 and 2009 However, bad debt rate of 2011 reduced as low as 0.6% Therefore,

it can be seen that credit quality has been improved because the Branch has carried

out the growth incorporating management, risk control and strictly kept to structure

and credit limit which The state bank has offered

Table 2.2: The Situation of credit activities of Ha Noi South BIDV,

10/09 (%) Amount

11/10 (%) Term end

2.2.4 Business results

With Business guideline "Quality Sustainable growth Effectiveness Safety" the bank has used determined methods, but flexible in business operationsand as a result they bring good business effectiveness for the bank in recent years

-Table 2.3: Business results of Ha Noi South BIDV, 2007 -2011 stage.

10/09 (%) Amount

11/10 (%)

(Source: Summary reports of years 2007 – 2011 Ha noi South BIDV)

The above table shows profits before tax of Hanoi south BIDV has increasedsharply over the years; particularly in 2010 the lowest growth rate was obtained.The reason is that in 2008, the financial crisis of some major economies has pushedthe world economy into recession; export markets, capital market, labor market,were narrowed considerably Monetary policy and operations of commercial banks

in 2009 was fully stressful and varied affecting financial environment within thecountry However, in 2011 after economy’s recovery, the Hanoi South BIDVcontinued to grow

2.3 Analyse, evaluate the actual situation of service quality of the retail banking through business results of retail banking at the Bank for Investment and Development of Vietnam - Hanoi South Branch

2.3.1 The quality of retail capital mobilization service

Capital mobilization from population is the top priority and is the top front inretail service business activities, growing capital source from population as the basisfor the growth of other retail activities at the branch, Hanoi South BIDV has built asolid capital basis from population after 5 years

Table 2.4: The Situation of capital mobilization from population of Ha Noi

South BIDV

Unit: billion dong

Amount Amount 08/07

(%) Amount

09/08 (%) Amount

10/09 (%) Amount

11/10 (%)

(Source: Summary reports of years 2007 – 2011 Ha noi South BIDV)

The size and growth rate of capital from population is always maintained at ahigh level, the average growth rate of 26.5%, making fair contribution in stabilizingcapital source for Hanoi South BIDV, creating a firm foundation for developingretail banking services Over years, capital mobilization structure from populationhas been adjusted in the direction of decreasing term gap in lending activities By

2011, population’s deposits accounted for 49.4% of total capital, the proportion ofmedium-and long-term at an acceptable level (24.3%), however, the proportion ofpopulation’s capital had tendency to change unsteadily, even declining over years,

at the same time the speed growth of population’s capital in 2011 also slowed down.This shows that the competitiveness of deposit products that Hanoi South BIDVsupplied dropped down, less attractive to customers than competitors Hanoi SouthBIDV needs to enhance advertising to promote the development of competitivedeposit products; at the same time building population’s deposit mechanism which

is active, attractive and suitable to the diverse need of sending money frompopulation

In actual operation, the authorities and the trade union of Hanoi South BIDVhave jointly issued regulations on the extraction of a bonus from capitalmobilization activities for marketing and customer care This has brought goodeffectiveness which is shown by the number of customers’s deposit of the branchmaintained and developed However, Hanoi South BIDV needs continuously to