Evaluating service quality and individual customer satisfaction with retail banking service in vietinbank hanoi branch

Cohort 2015 - 2017 MASTER’S THESIS EVALUATING SERVICE QUALITY AND INDIVIDUAL CUSTOMER SATISFACTION WITH RETAIL BANKING SERVICE IN VIETINBANK - HANOI BRANCH Author: Nguyen Quang Hung

Cohort 2015 - 2017

MASTER’S THESIS

EVALUATING SERVICE QUALITY AND INDIVIDUAL CUSTOMER

SATISFACTION WITH RETAIL BANKING SERVICE

IN VIETINBANK - HANOI BRANCH

Author: Nguyen Quang Hung Supervisor: Dr Dao Tung

Hanoi, June 2017

ACKNOWLEDGMENT

First of all, I would like to send my sincere thanks to the lecturers, especially to my supervisor Dr Dao Tung for their devoted attention, lessons and guidance, which have equipped me with key knowledge and essential skills throughout the course More importantly, everything I have learned here would undoubtedly help me tremendously in my work in the future

I would also like to thank International School - Vietnam National University, Nantes University for useful supports during studying and researching to complete this paper This course has equipped and improved and added a lot of knowledge about the different areas

In addition, the course also helps me to have a relationship, have the opportunity to share information and learn from other students in the program

I am pleased to gratitude leaders and employees of the The Vietinbank – Hanoi Branch for their enthusiastic support and creating favorable conditions for me to have more useful information to complete thesis

In my thesis will not avoid the shortcomings I look forward to receiving comments from lectures and students so that I can add to complete this paper

Sincere thanks

Author

Nguyen Quang Hung

ABBREVIATIONS

VietinBank Vietnam Commercial Bank for Industry joint stock and Trade

SERQUAL Service Quality

SME Small and medium enterprises

IFC International Finance Corporation

VNBA Vietnam Banking Association

AABA Asian Bankers' Association

SWIFT Interbank Financial Telecommunication Association

M&A Mergers and Acquisitions

VIF Variance inflation factor

WTO World Trade Organization

LIST OF GRAPHS, FIGURES AND TABLES

Table 2.1 Encoded data

Table 2.2 Cronbach alpha values and internal consistency

Table 3.1 VietinBank’s growth in total assets, shareholders’ equity and charter

capital Table 3.2 Vietinbank’s growth in profits in the period from 2012 to 2016

Table 3.3 Vietinbank’s growth rate and mobilized capital structure in the period

of 2012-2016 Table 3.4 The growth rate and loan structure of Vietinbank in the period of

2012-2016 Table 3.5 Back payment and indicator of loan balances by quality

Table 3.6 Payment service activities period of 2012-2016

Table 3.7 Vietinbank’s market share of payment cards in the period 2012-2016 Table 3.8 Vietinbank’s POS market share in the period 2012-2016

Table 3.9 Vietinbank’s guarantee service turnover in the period 2012-2016

Table 3.10 Data description

Table 3.11 Gender distribution among 123 participants

Table 3.12 Reliability of scale

Table 3.13 Exploratory factor analysis for service quality scale

Table 3.14 Reliability statistics and factor analysis for service quality scale – 2nd

time Table 3.15 Exploratory factor analysis of customer satisfaction scale

Table 3.16 Correlations

Table 3.17 Collinearity Statistics

Table 3.18 Regression analysis summary

Table 3.19 Regression analysis – the second time

Table 3.20 Hypotheses tested results

Table 3.21 Perception on retail banking service quality at Vietinbank-Hanoi

branch Figure 3.1 Vietinbank’s market share of mobilization capital period of 2012-2016 Figure 3.2 Vietinbank’s market share of gross loan in Vietnamese banking

industry in the period of 2012-2016 Figure 3.3 Age distribution among 123 participants

Figure 3.4 Kind of services used by 123 participants

Figure 3.5 Research model – Version 2

Figure 3.6 Regression Standardized Residual

Figure 3.7 Research model result

TABLE OF CONTENTS

ACKNOWLEDGMENT i

ABSTRACT vii

INTRODUCTION 1

1 Problem identification 1

2 Research objectives and questions 2

2.1 Research objectives 2

2.2 Research questions 2

3 Research scope, objects and methods 2

3.1 Objects 2

3.2 Research scope 2

3.3 Research methods 3

4 Contributions of the research 3

5 Structure of the thesis 3

CHAPTER 1 - THEORETICAL FRAMEWORK 5

1.1 Conceptual framework on retail banking service 5

1.1.1 Concepts of retail banking 5

1.1.2 Retail banking features 6

1.1.3 The role of retail banking 6

1.1.4 Products and service categories of retail banking 7

1.2 Retail banking service quality 9

1.2.1 Concepts of service, bank service and service quality 9

1.2.2 Major aspects of service quality and measuring 10

1.2.3 Service quality and customer satisfaction 13

1.2.3.1 Concepts of customer satisfaction 13

1.2.3.2 Relationship between service quality and customer satisfaction 13

1.3 The factors influencing on retail banking service quality 14

1.4 The necessary to improve the retail banking services quality 16

1.5 Research model and hypotheses 16

1.5.1 Research model 16

1.5.2 Hypotheses 17

CHAPTER 2 - RESEARCH CONTEXT AND METHODOLOGY 19

2.1 Overview of Vietnam Joint Stock Commercial Bank for Industry and Trade

(Vietinbank) 19

2.2 About Vietinbank - Hanoi branch, N0 6 Ngo Quyen street, Hanoi 22

2.3 Research Methods 25

2.3.1 Design Questionnaires 25

2.3.2 Sampling and collecting data 26

2.3.3 Analyzing data plan 27

2.3.3.1 Cronbach’s alpha coefficient analysis 28

2.3.3.2 Exploratory factor analysis 29

2.3.3.3 Regression analysis 30

CHAPTER 3 - ANALYSIS OF SITUATION OF RETAIL BANKING SERVICE QUALITY IN VIETINBANK – HANOI BRANCH AND SURVEY RESULTS 32

3.1 VietinBank’s business results in period from 2012-2016 32

3.1.1 The growth in total assets, shareholders' equity and charter capital 32

3.1.2 The growth in profits 33

3.2 The reality of retail banking services development in Vietinbank in the period from 2012-2016 33

3.2.1 The development reality of Vietinbank’s capital mobilization service in the period of 2012-2016 33

3.2.2 The reality of loaning and investment services activities 36

3.2.3 The reality of payment service activities 40

3.2.4 The reality of card service activities and POS 41

3.2.5 The reality of Guarantee services 43

3.2.6 The reality of internet banking service activities 45

3.3 Evaluating the quality of retail banking services in Vietinbank – Hanoi branch in the period from 2012-2016 45

3.4 Research result and analysis 48

3.4.1 Data description 49

3.4.1.1 Gender 50

3.4.1.2 Age 50

3.4.1.3 Vietinbank retail banking service using 51

3.4.2 Reliability analysis and scale 51

3.4.2.1 Reliability analysis 51

3.4.2.1 Reliability of scale 52

3.5 Exploratory factor analysis 55

3.5.1 Exploratory factor analysis of retail banking service quality scale 55

3.5.2 Exploratory factor analysis of customer satisfaction scale 58

3.5.3 Research model – Version 2 59

3.6 Regression analysis 60

3.6.1 Regression analysis 60

3.6.2 Research model and hypotheses tested result 63

CHAPTER 4 - FINDINGS AND DISCUSSION 65

4.1 Assessment of perceived retail banking service quality at Vietinbank - Hanoi branch 65

4.2 Impact of retail banking service quality factors on customer satisfaction at Vietinbank-Hanoi branch 66

4.3 Suggestions to improve service quality and customer satisfaction at Vietinbank - Hanoi branch 67

4.3.1 Improve RESPONSIVENESS and RELI-ASS components 67

4.3.2 Improve EMPATHY component 68

4.3.3 Improve other components of retail banking service quality 69

CONCLUSION 70

REFERENCES 71

APPENDIXES 73

ABSTRACT

In retail banking, quality of service plays a vital role in the context of sustained business survival and growth The relationship between a bank and its customers must be a permanent and lasting one, which needs to be maintained with good quality services An attempt has been made to ascertain the level of satisfaction of customers with regards to retail banking services in Vietinbank-Hanoi branch This study assesses customer satisfaction of service quality and determines whether services provided by the selected private banks are acceptable to Vietinbank-Hanoi branch’s customers based on various levels of customer opinion regarding service quality The methodology is based on primary data collected through a well-structured questionnaire administered on a sample size of 123 respondents randomly selected from Vietinbank-Hanoi branch In order to assess the customer satisfaction in relation to the quality of service, SERVQUAL model with five attributes were used to create a better understanding of the relationship between the attributes and customer satisfaction, by focusing on the retail banking industry in Vietinbank-Hanoi branch

Data used in making analysis was collected from conducting survey at Hanoi branch Based on 123 valid responses from customers, the study indentified three components RELI-ASS (reliability combined with assurance), RESPONSIVENESS, and EMPATHY which explain customers’ evaluation of perceived service quality at Vietinbank-Hanoi branch The results indicate that Vietinbank-Hanoi branch’s service

Vietinbank-quality is assessed with a fairly high level in customers’ perception Furthermore, the

relationship between these service quality components and customer satisfaction is also investigated through regression analysis As the result showed, these three components of service quality have positive relationship with customer satisfaction in which RESPONSIVENESS has the most significant impact on customer satisfaction level In addition, based on these findings, the thesis also gives some suggestions for Vietinbank-Hanoi branch to further improve service quality and customer satisfaction level

Key words: Retail banking service, products, reality, customer satisfaction, effective

use

INTRODUCTION

1 Problem identification

International integration has opened up development opportunities and also brought many challenges to Vietnam's banking service providers due to fierce competition with foreign bankers, who are not only strong in financial strength but also have extensive experience in developing modern banking services Competitive pressure on banking service provision and the rapid development of information technology have led retail banking providers intensively come close to groups of individual customers, small and medium enterprises With a population of 90 million people approximately and their incomes increasingly, Vietnam is a potential market for commercial banks as non-cash payment target is focused Therefore, a retail banking development strategy of Vietnam Commercial Bank for Industry joint stock and Trade (Vietinbank)- Hanoi branch will focus

on individual customers with diversified and professional retail products which convenient

to the needs and capabilities of different objects/customer segments Its objective is to build

a secure, high-quality and secure retail banking system based on enhanced international economic integration and expanding retail banking services market accordance with the commitments of bilateral and multilateral At the same time it also applies advanced banking technology and develops appropriately its distribution network to provide retail banking products and services sufficiently, conveniently and at the right time for all types of customers

The consumer trend always changes according to their life's need so it requires Vietinbank Hanoi branch must have new development strategies and solutions as an oriented multi-functional retail bank To meet customers' increasingly demand for banking services, as well as run a fierce competition race among bankers, Vietinbank – Hanoi branch is trying to expand its network, diversify retail products, improve services quality and enhance the customer service style to achieve sooner its goals namely becoming a leading multifunctional retail financial group; developing a retail banking system on par with regional countries in terms of categories, quality and competitiveness; step by step improving the prestige and brand of VietinBank in the international financial market From

this fact, the author has chosen the research topic "Evaluating service quality and individual customer satisfaction in retail banking service of Vietnam Commercial Bank for Industry joint stock and Trade - Hanoi Branch"

2 Research objectives and questions

2.1 Research objectives

The paper focuses on researching and analyzing to systematize and clarify retail banking activities, retail banking service quality The study also looked at the relationship between individual customer satisfaction and service quality by applying SERQUAL model

to analyze collected data of survey It evaluated the reality of the retail banking business activities in Vietinbank – Hanoi branch and their customer satisfaction on this service quality Thereby, the paper proposed some solutions to improve the retail banking services quality at VietinBank - Hanoi branch in the future as well as individual customer satisfaction

2.2 Research questions

In this study, the author will find out the answers to following three questions:

i How are the relationship between the retail banking service quality and customer satisfaction?

ii What factors effect customer satisfaction on the retail banking service quality of VietinBank-Hanoi branch?

iii What solutions improve the retail banking service quality of VietinBank-Hanoi city branch?

3 Research scope, objects and methods

3.2 Research scope

The study mentioned the factors impact individual customer satisfaction on the retail banking service quality of VietinBank-Hanoi branch and the relationship between the retail banking service quality and customer satisfaction Therefore, it is not only stopped at testing the theories regarding retail banking service quality and the models used to measure customer satisfaction but further, it is the way for me to apply the knowledge, skills and my experiences into the construction of the strategy for a specific enterprise, from that contribute the useful point in business activities of Vietinbank – Hanoi branch where I am

working for In this paper, I will focus on research the information and figures related to the reality of the retail banking business activities of Vietinbank – Hanoi branch in the period from 2012 to 2016

3.3 Research methods

In order to answer the three main research questions, the author uses following research methods:

Secondary data: figures were collected from financial statements, annual reports of

commercial banks, data published by Vietnam banking association, reports by independent organizations and actual data of retail banking products and services at Vietinbank-Hanoi branch

Primary data collection and analysis: collected data would be processed by software

SPSS version 21.0 with methods such as reliability test cronbach alpha, exploratory factor analysis, one-way anova and multiple linear regression analysis The author found out solutions to achieve the research objectives

4 Contributions of the research

Within the boundary of this thesis, the author pointed out the significant correlation between the retail banking service quality and customer satisfaction as well as the specific factors impact customer satisfaction on the retail banking service quality of VietinBank-Hanoi branch

Base on evaluated results the reality of the retail banking business activities in Vietinbank – Hanoi branch and their customer satisfaction on this service quality, the author proposed some solutions to improve the retail banking services quality at VietinBank - Hanoi branch in the future as well as customer satisfaction Those solutions constituted enhancing the Vietinbank’s prestige and brand at domestic and abroad markets; diversifying service’s functions, selective develop retail service products as the strength of VietinBank-Hanoi branch; strengthening marketing and effectiveness of distribution channels; investing

in technology development, security enhancement and modern distribution network

5 Structure of the thesis

Regardless of the introduction, conclusion, reference and appendices the thesis has four major parts as following

Chapter 1: Theoretical Framework

Chapter 2: Research Methodology and overview of Vietinbank - Hanoi city branch

Chapter 3: Analysis the reality of retail banking business activities in Vietinbank –

Hanoi branch and survey result

Chapter 4: Findings and Discusion

CHAPTER 1 - THEORETICAL FRAMEWORK

This chapter will provide theoretical framework for the research It includes fundamental concepts, characteristics and role of retail banking service as well as the main types of products The SERQUAL service quality model and its criteria for assessing the retail banking service quality will be presented too Furthermore, the factors affecting retail banking services as well as research model and its hypotheses is also mentioned in there

1.1 Conceptual framework on retail banking service

1.1.1 Concepts of retail banking

In an open economy, the number of individual customers use banking services has increased rapidly, especially retail banking service because they are simple, easy to operate and frequent with an outstanding financial services group such as deposit, account, loans and credit card opening etc The concept of "Retail Banking" depends on the different perspectives and research approaches Reynold E.Byers and Phillip J.Lederer (2001) defined that a retail market is a completely new look at financial markets, whereby the majority of Individual customers will have access to banking products and services that create a potential, diverse and dynamic market The term Retail Banking means to provide products and services

to consumers in small quantities Therefore it is possible to understand retailing as a distribution activity that includes different activities such as searching, promoting, researching, testing, discovering and developing modern distribution channels Retail services constitute three main areas: market, distribution channels, service and service response The economists at the Asian Institute of Technology showed that retail banking is a delivery of banking products and services to individual consumers and small and medium enterprises (SME) through a branch network Customers may be access directly to banking products and services by telecommunication electronic media and information technology According to the WTO study, retail banking is a typical banking service type where individual customers can go to branches/transaction offices of banks to carry out transaction such as: savings, checking account, mortgage, loan, credit card service, debit card and other services Dictionary of banking and informatics determined retail banking is a providing activity products for individual customers with services such as savings, card services, money transfer

to study abroad, remittances, e-banking, personal consumption loans, production and business Thus, retail banking can be fully understood as "retail banking is a banking service provided to individuals, SME clients through branch network or customer may directly access

to banking products through telecommunication electronic media"

1.1.2 Retail banking features

Retail banking is serving an extremely large number of customers who are individuals, households and SME and it provide diversified products However transaction value of each product is not high so the risk level is relatively low Retail banking services require building

up multiple distribution channels to provide products and services for consumer in a wide range They operate largely base on modern information technology and professional staffs to expand, improve their product quality and bring these products to each customer Most of the served objects are individual customers so retail banking services are typically focused on the simple, easy-to-implement services comprise deposit, payment, loan and card services Their business developing mainly depended on the bank’s brand and good service quality which are important factors to develop retail banking services Due to a large number of customers and widely dispersed, the transaction points are hardly concentrated Moreover, bankers often expand their network and invest costly investment in their online transactions which push average operating cost up Their management methods and product marketing forms are also more diverse, more complex due to the network of customers spread

1.1.3 The role of retail banking

For the economy: retail banking service has changed directly from a cash economy to a

non-cash economy, improved state management efficiency and reduced social costs of payment and cash flow In addition, through retail banking, the cash flow is enhanced and more efficient It utilized and explored the potential capital resources to contribute to promoting production, business and consumption, improving people lives

For banks: retail banking services plays an important role in diversifying products,

expanding markets, enhancing competitiveness and creating main medium and long term capital for banks It changes the bank's income structure, minimizes risks in banking operations, contributes to diversify banking operations and strengthens national finance

For customers: retail banking services bring convenience, safety, economy and

efficiency to customers in the process of payment and using their income source In fact, retail banking service has provided banks a stable income source and dispersed risks that create a solid foundation for bank operations As a result, commercial banks have considered retail banking as one of core activities to build up, consolidate and develop a steady customer base, thereby expanding their other business operations Vietnam commercial banks have been developing and improving the retail banking quality according to the inevitable trend, accordant with the general trend of banks in the region and the world

1.1.4 Products and service categories of retail banking

Capital mobilization service: mobilize capital for lending and investment is one of

essential functions of commercial banks They used measures and tools to mobilize capital from individual customers and SME clients such as demand deposits, time deposits, issue valuable papers (promissory notes, bank bonds ect.) and other deposit forms Individual customers and SME have got small idle capital, however if this capital source creates from a large number of customers it will become a potential and abundant capital source for commercial banks Currently, in addition to traditional deposit products, commercial banks have diversified many flexible savings products in terms and interest rates in order to improve the services quality to meet all customers’ needs

Retail Credit service: it provides short-term, medium and long-term loans to individuals

and small businesses consist of study-abroad loans, real estate loans, consuming loans, securities business loans, business loans, overdrafts, valuable paper mortgages etc The loan proportion to individual customers, SME clients is getting bigger in the bank's total outstanding loans and contributes to increased revenue and profit for them These loan services for individual customers, SME promise a great potential market and grow continuously Nevertheless, small, scattered loans push management cost up Furthermore, these borrowers are sensitive to interest rates, terms and procedures so commercial banks are often pressured by competitive factors and customer’s profiteer ability

Payment services: they are considered as a professional segment which brings high

profit margin Common payment tools encompass checks, encashment, standing orders, commercial paper and credit transfer etc The banks on behalf of customers do payment for goods and services through clearing and transferring via electronic payment network of the internal banking system or external banking system, domestic or overseas remittance Payroll services through personal accounts, payment for electricity, telephone and water bills by card services are developing strongly and generate significant revenue for commercial banks Transfer, receiving remittances services are increasingly expanding and developing Many commercial banks have connected and cooperated as the receive-transfer money agents and remittance disbursement of some international financial organizations such as Western Union, Money Gram etc

Card Services: bank cards are a multi-function personal financial product that brings

many benefits to customers and issued by the bank It can be used to withdraw/send money, provide credit, pay bills or transfer money Moreover it is also used for many non-financial services such as information query account Today there are different types of debit cards but

popularly two types of debit cards types (domestic and international) and credit card Debit card uses the available balance on the individual account while credit cards’ outstanding feature "buy first, pay later" based on a bank's issued credit limit Card services significantly contribute to commercial banks in mobilizing capital, collecting services fees and enhancing the bank’s image in the public Card service products are associated with the applying technology and connect ability among commercial banks in exploiting the market and utilizing the information technology infrastructure

E-banking services: in the integrated context of financial-banking market, Vietnam is

gradually opening up its doors to foreign banks so domestic banks need to find differentiate for their products and services both in form and content Modern technology banking services such as SMS banking, e-banking, mobile banking etc are preferred by customers They do not need to go to the bank neither spend too much time to carry out necessary transactions as transfer, checking account, bill payment, deposit transaction as well as loan These are really convenient services help them come closer the modern life Applying e-banking services in commercial banks’ business operations is a competitive advantage and one of the important factors to determine the success of retail banking development trend in the future Modern e-banking services products following:

 Call center provide information and answer customer complaints At present, most banks have their own call centers such as 247/247 switchboard of Asia Commercial Bank, 24/7 switchboard of Vietinbank

 Phone banking is a service type that customers can use their phone call to certain bank machines that provide services to do transactions or check account statements, listen to rates information and interest rates

 Mobile banking is a bank service type that customers can do their transaction by smart phone They can check account balance, list transactions, receive balance notices, exchange rates, automatic interest rates via SMS banking, pay bills of electricity, water, telephone, internet etc

 Home banking is the service type where transactions can be made at home through a connected computer system to the bank's computer system, including money transfer, credit, debit, exchange rate, interest rate etc

 Internet banking is the banking service that customers interact with the bank by internet Customers can search information about bank’s products or services or access personal account information, balance, deposit, loan

Other services: in addition to above services, other services for individual customers

also include standing/encashment orders, study-abroad money transfer, keeping rare property, rental safes etc Services for SME clients include international payment, foreign exchange, and guarantee

1.2 Retail banking service quality

1.2.1 Concepts of service, bank service and service quality

Services are one of the two key components of economics - the other being goods - and they are consumed at the point of sale A service is a product that consists of any activity, benefit or satisfaction that one party can offer to another for sale Services are essentially intangible and do not result in the ownership of anything Services’ production may or may not be tied to a physical product (Kotler et al., 2005)

Bank is a financial intermediary which performs the intermediary function between two

or more parties in a certain financial activities In other word, bank supports the channel flow

of capital between lenders and borrowers under the indirect method Banking services are the various ways in which a bank can help a customer such as operating accounts, making transfers, paying standing orders and selling currency (InvestorWords.com)

The American Society for Quality gave the definition of quality as “the totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs” (Jay et al., 2009) We can define quality products as goods and services that are reliable in the sense that they do the job they were designed for and do it well, which increases perceived value, but they are also differentiated by various attributes that customers perceive to have a higher value (Charle et al., 2004) Service quality can be defined as the difference between customer expectations of service and perceived service If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs (Parasuraman et al., 1985; Arash Shahin) In another way, service quality can be defined as the ability of a service to perform its functions including the overall durability, reliability, precision, ease of operation and repair, and other valued attributes (Kotler et al., 2005)

Banking service quality is intangible and estimated highly base on customers’ experience Most bank claim that the bank is in the financial industry; therefore, they tend to compete each other base on their financial capacity rather than service quality However, existence of any business including banking is due to customers who decide the amount of company’s sales based on their perceptions of service quality In other words, service quality will determine the bank’s profitability, and customers will determine how service quality

should be In this thesis, banking service quality may be defined as the ability to satisfy the customer’s requirements and needs This ability includes everything that customers think they will be received from those services like accurate process, affordable price, on-time delivery, attitude of staffs, etc

1.2.2 Major aspects of service quality and measuring

There are several major aspects of service quality (Jay et al., 2009):

First is the tangible component of many services That can be understood as how well the service is designed and produced make a difference For example, this might be how accurate, clear, and complete your account at the bank etc

Second important aspect of service quality is the service process There are 10 determinants of service quality which relate to the service process: tangible, reliability, responsiveness, competence, access, courtesy, communication, credibility, security, and understanding/knowing customers An operation manager can design processes that have these attributes to ensure their service quality

Third, the customers’ expectations are the standard against which the service is judged Customers’ perceptions of service quality result from a comparison of their before-service expectations with their actual-service experience In other words, service quality is judged on the basis of whether it meets expectations Thus, company completely should not promise more than they can deliver

The final aspect of service quality is the “exceptions” There is a standard quality level

at which the regular service is delivered, such as the bank teller’s handling of a transaction However, there are “exceptions” or “problems” initiated by the customers or by less-than-optimal operating conditions (for example, the computers cannot work) This implies that the quality control system must recognize and have a set of alternative plans for less-than-optimal operating conditions Designing the product, managing the service process, matching customers’ expectations to the products, and preparing for the exceptions are keys to quality services (Jay et al., 2009) Measuring quality in service sector is more difficult than measuring quality of manufactured sector because quality evaluations are not made solely on the outcome of a service; they also involve evaluations of the process of service delivery There are many service quality research models on the world nowadays Among them, SERVQUAL (Parasuraman et al., 1985, 1988) and SERVPERF (Cronin & Taylor, 1992) seem to be more popular SERVQUAL scale is the gap model for assessing customer perceptions of service quality in service and retailing organization The gaps refer to differences between customer

“expectations” - (E) and “perceptions” - (P) about service quality The gaps revealed by the executive interviews are shown in Figure 1.1 (Parasuraman et al., 1985; Arash Shahin):

Figure 1.1: Service quality model (Parasuraman et al., 1985)

- Gap 1: The gap between customers’ expectations and management perceptions of those expectations This gap is a result of the lack of marketing research orientation, inadequate upward communication and too many layers of management

- Gap 2: The gap between management perceptions of consumer expectations and the firm’s service quality specifications This gap is a result of inadequate commitment to service quality, a perception of unfeasibility, inadequate task standardization and an absence of goal setting

- Gap 3: The gap between service quality specifications and actual service delivery This gap is a result of role ambiguity and conflict, poor employee-job fit and poor technology-

job fit, in appropriate supervisory control systems, lack of perceived control and lack of teamwork

- Gap 4: The gap between actual service delivery and external communications about the service This gap is a result of inadequate horizontal communications and propensity of over-promise

- Gap 5: The discrepancy between customer expectations and their perceptions of the service delivered This is a result of the influences exerted from the customer side and the shortfalls on the part of service provider In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences Service quality depends on the size of gap 5 which, in turn, depends on gap 1, gap 2, gap 3, and gap 4 We can describe this relation in the following function:

Gap 5 = f (Gap 1, Gap 2, Gap 3, Gap 4) SERVQUAL was originally measured on 10 components of service quality (Parasuraman et al., 1985):

- Reliability: involves consistency of performance and dependability It means that the firm performs the service right the first time and that the firm honors its promises

- Responsiveness: concerns the willingness or readiness of employees to provide service It involves timeliness of service

- Competence: means possession of the required skills and knowledge to perform the service

- Access: involves approachability and ease of contact

- Courtesy: involves politeness, respect, consideration, and friendliness of contact personnel (including receptionists, telephone operators, etc…)

- Communication: means keeping customers informed in language they can understand and listen to them It may mean that the company has to adjust its language for different consumers – increasing the level of sophistication with a well-educated customer and speaking simply and plainly with novice

- Credibility: involves trustworthiness, believability, and honesty It involves having the customer’s interests at heart

- Security: is the freedom from danger, risk, or doubt

- Understanding/knowing the customers: involves making the effort to understand customers’ needs

- Tangibles: include the physical evidence of the service

This scale covers almost all aspects of service, but it shows the complexity of measurement Therefore, by the early nineties, the authors had refined the model to measure five underlying dimensions termed Tangible, Reliability, Responsiveness, Assurance, and Empathy (Fogarty et al., 2000) SERVQUAL scale has been criticized on various conceptual and operational grounds Cronin and Taylor (1992) were amongst the researchers who leveled maximum attack on the SERVQUAL scale They questioned the conceptual basis of the SERVQUAL scale and found it confusing with service satisfaction Therefore, they opined that “expectation” - (E) component of SERVQUAL be discarded and instead “performance” - (P) component alone be used They proposed the SERVPERF scale Besides, Cronin and Taylor (1992) provided empirical evidence across four industries namely banks, pest control, dry cleaning, and fast food to corroborate the superiority of their “performance – only” instrument (Sanjay et al., 2004) Methodologically, the SERVPERF scale represents marked improvement over the SERVQUAL scale by reducing 50% the number of items to be measured

1.2.3 Service quality and customer satisfaction

1.2.3.1 Concepts of customer satisfaction

The definition of customer satisfaction has been widely debated as organizations increasingly attempt to measure it Customer satisfaction can be experienced in a variety of situations and connected to both goods and services It is highly personal assessment that is greatly affected by customer expectations (Center for the study of social policy, 2007) Philip Kotler defined customer satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectations If the product performance falls short of expectations, the buyer is dissatisfied If performance matches or exceeds expectations, the buyer is satisfied or delighted (Kotler et al., 2005) Customer satisfaction is an important theoretical as well as practical issue for the marketers and consumer researchers Customer satisfaction can be considered as the essence of success in today’s highly competitive world of business (Vanniarajan et al., 2007) In this research, customer satisfaction can be understood as psychological state of customers when service they received matches or exceeds what they expected

1.2.3.2 Relationship between service quality and customer satisfaction

There is a distinction between service quality and customer satisfaction: perceived service quality is a global judgment or attitude relating to the superiority of the service, whereas customer satisfaction is related to a specific transaction (Parasuraman et al., 1988)

However, many researchers have stressed the positive relationship between service quality and customer satisfaction (Emari et al., 2010) Brady and Robertson (2001) conducted research about fast food restaurants in America and Latin America The results indicated that there was a certain relationship between service quality and customer satisfaction Sureshchandar et al (2002) found that service quality and customer satisfaction were highly related In addition, Ruyter et al (1997) tested the health care service and attempted to determine the relationship between service quality and customer satisfaction The results suggested that service quality should be treated as an antecedent of customer satisfaction From these researches, it can be concluded that service quality and customer satisfaction have

a relationship in which service quality is an antecedent as well as an important factor impacting on customer satisfaction

1.3 The factors influence on retail banking service quality

There are some factors affected on retail banking services quality consist of information technology infrastructure, financial capacity, management ability and effective human resources strategy, distribution channels, customer policy, product service and marketing policy

 Information technology infrastructure

In a science and technology era, high demand for services and banking services quality require providers develop and apply technology in their business Technological factors become the "foundation" for commercial banks to develop banking services Developing and applying new technologies allow bankers to provide the best products and services to meet the increasing needs of customers Furthermore, they would create and develop new distinctive-unique products which highly show off their creative ability as well as creating product brand and reputation Information technology also contributes to improve service quality that always associated with ensure factors convenience for both customers and banks Specifically, it has supported commercial banks to implement business procedures logically and scientific For example, a one-gate transaction model has saved a lot of time for customers when they do transactions with banks Moreover, modern technology supports commercial banks improve their operation and business efficiency due to the service revenue growth, cost savings and reduce risk by diversifying operations business

 Financial capacity

Financial capacity plays a vital role in banking operation Only when the financial capacity is strong enough, the bank has enough money to equip the necessary assets for their business including a modern information technology system

 Management ability and effective human resources strategy

The development of service system must be connected with the management capacity

of each bank to ensure its operations are stable develop, secure, sustainable and controlled To do those, bank administrators and executives are not only comply the law but also have professional knowledge of banking operations and skills to analyze and evaluate the possible risks of each service, development trend of each professional type to take appropriate prospective measures Similarly, they must have professional staffs because human factor is always considered as the most important of all success In order to approach new technologies, banks must have a training plan to their staffs and well prepare manpower before launching new services

self- Distribution channel

Wide distribution network distributed in appropriate locations facilitates the transaction process while reduces the providing services cost to customers On the other hand, the operation network is not only a distribution channel, but also acts as a feedback channel for the provided services products as well as a receiving information channel from market These feedbacks help providers make an appropriate strategy for the retail services development

 Customer policy

It represents marketing strategies at the customer level or customer segment based on decisions to allocate bank’s available resources The ultimate goal is providing services to satisfy the increasing demands of their customers thereby achieving the bank's profit maximizing Satisfying customer needs, improving customer perception, and building customer loyalty are things banks need to do Therefore, the developing an appropriate customer policy and competitiveness enough is necessary to maintain and develop customer relationships Customer policy helps the providers select right customers to serve and create a traditional customer system thereby enhancing the bank's competitive position in the market Through customer policy, the bank may be devise operational measures follow its oriented development For customers, customer policy gives them the trust, convenience, accuracy, save time which would bring the highest satisfaction for customers

 Service products

Service quality is a survival condition of any service type in market In the banking industry customer-oriented services always necessary to change toward increase utility and improve service quality

financial- Marketing policy

In order to develop whole sale/retail banking services, improving service quality and marketing policy are the key steps that determine development strategy and orientation of this kind of service

1.4 The necessary to improve the retail banking services quality

Firstly, in business sectors, banking business is considered as a sensitive business area and the most competitive Because monetary is a special business subject, sensitive to all socio-economic fluctuations that can lead to large fluctuations in monetary value and via In addition, retail banking products are highly competitive because they are diversified, easy to copy and difficult to keep copy right therefore, competition is a vital issue for banks They can do it by improving their service quality to raise competitiveness so the higher the service quality, the greater the competitive advantage

Secondly, provided banking services meet customer needs If the service quality is more perfect customers will commit longer-term and accept service Furthermore, the customers’ compliments, acceptance, satisfaction with service quality will spread to others customers who need services and come to the bank

Thirdly, at present more and more new commercial banks so the number of service products on the market increase Customers are increasingly more rigorous demand for provided quality of products and services they will compare, evaluate and decide to transact with banks with good service quality or even if the bank's products and services quality is less attractive and does not meet the requirements, they can switch to a better quality bank Finally, a multi-function banking development requires bankers provide the variety retail products with high quality, comprehensive on modern banking technology platform Similarly, improving retail banking services quality is not only in increasing product utility and services but also in the service quality, care service style, always considered "customer

is god "and best serve all customers’ requirements and bring high economic efficiency for the bank

1.5 Research model and hypotheses

1.5.1 Research model

SERVQUAL model and SERFPERF model are two popular quality models in the world They were used in research such as “Measuring service quality using SERVQUAL model: A case study of e-retailing in Iran” by Seyed Hossein Siadat (2008), “Measuring information science system service quality with SERVQUAL: Users’ perceptions of relative importance of the five SERVPERF dimensions” by Hollis Landrum et al (2009) In banking sector, there are also many studies used these models to analyze data namely

“Measuring service quality of banks: Scale development and validation” by Osman et al (2005), “SERVPERF analysis in retail banking” by Vanniarajan et al (2007), “Service quality in e-banking: Comparison between SERVQUAL model and GRONROOS model”

by Nguyen Thi Phuong Tram (2008), “Service quality perspectives and customer satisfaction in commercial banks working in Jordan” by Anber Abraheem Shlash Mohammad and Shireen Yaseen Mohammad Alhamadani (2011)

This research will use the SERQUAL scale to measure perceived performance of banking service Five components of service quality are tangible, reliability, responsiveness, assurance, and empathy They represent the perceived performance on components of service quality can be expressed in the following equation:

Where: SQ = perceived and expected service quality of individual

k = Number of attributes/items

Pij = perception of individual “i” to performance of service on item “j”

Eij = expectation of individual “i” to performance of service on item “j”

In addition, the research also analyzes the relationship between service quality and customer satisfaction This relationship is modeled as following:

1.5.2 Hypotheses

There are several hypotheses for this research model as following:

- H1: Reliability component and customer satisfaction have a positive relationship That means the higher/lower customer evaluate reliability factor, the higher/lower level of customer satisfaction

Figure 1.2: Research model

- H2: Responsiveness component and customer satisfaction have a positive relationship That means the higher/lower customer evaluate responsiveness factor, the higher/lower level of customer satisfaction

- H3: Tangible component and customer satisfaction have a positive relationship That means the higher/lower customer evaluate tangible factor, the higher/lower level of customer satisfaction

- H4: Assurance component and customer satisfaction have a positive relationship That means the higher/lower customer evaluate assurance factor, the higher/lower level of customer satisfaction

- H5: Empathy component and customer satisfaction have a positive relationship That means the higher/lower customer evaluate empathy factor, the higher/lower level of customer satisfaction

In short, the fundamental concepts about retail banking, service quality, customer satisfaction and the relationship between customer satisfaction and the retail banking service quality, research models and hypotheses are provided in this chapter will help the author to select an appropriate research method that will be presented in the next chapter

CHAPTER 2 - RESEARCH CONTEXT AND METHODOLOGY

This chapter has described the context where the research is conducted In addition, it will also provide detail research method from preparing for collecting data to analyzing data

2.1 Overview of Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)

 The establishment and development: Vietinbank was established in 1988 after

being separated from State Bank of Vietnam Being one of the four largest State-owned commercial banks of Vietnam In nearly 30 years of development, Vietinbank has affirmed its position as a leading commercial bank, holding a vital role in Vietnam’s monetary market It is also the first state-owned commercial bank has strategic foreign shareholder who is IFC international finance corporation that belong to International Monetary Fund and Bank of Tokyo-Mitsubishi UFJ Currently, Vietinbank is the second largest bank in terms of total assets accounted for 15% domestic market share It is the best quality commercial bank in Vietnam By the end of 2016, total assets of Vietinbank reached 948.699 billion dong, chartered capital came up to 37.234 billion dong, shareholders' equity gained 60,399 billion dong Together with development process, Vietinbank set clear vision, mission, and core values and business philosophy for themselves (Vietinbank’s website)

 Vision: To be the largest bank of total assets value and the leading in operational effectiveness in banking system in Vietnam in 2017 Striving toward the goal of becoming a regional banking and financial group of international standard

 Mission: To be a financial leader in Vietnam that offers a full spectrum of international standard banking services and financial solutions to individuals and corporate clients

 Core values:

 Customer Orientation: “Serving our customers is at the heart of our business and

we are committed to constantly explore better ways to deliver advanced services and a differentiated experience to meet each and every financial need of our clients”

 Towards Excellence: “With internal strength and resources, VietinBank management and staff are committed to reform towards perfection”

 Dynamic, creative, professional & modern: “We understand that our continued success as a financial services organization is dependent on the innovative,

dedicated services we provide We always put our relationships with the clients and partners first in everything we do”

 Integrity, Honesty & Transparency: “We have solid foundation of openness and accountability We ensure each and every transaction is transparent and available for public viewing”

 Respect: “Fair dealing is basis of our business, we treat every individual with respect and dignity”

 Brand protection and development: “VietinBank staff and management are proud to be responsible for the reputation of our brand name and always carry it with honour and dignity”

 Sustainable development and social responsibility: “Our motivation is driven by constant reform and creativity with clear objectives of strong growth, prudent business & sustainable development It is an honour to give VietinBank staff the opportunities to participate in various volunteer programmes and to allow them

to reach out further to the community and take responsibility for the society and fellow citizens”

 Business philosophy:

o Safe, effective and sustainable

o Loyal, dedicated, passionate & committed, wise and principled

o The prosperity of VietinBank customers is our ultimate success

 The activities of Vietinbank comprise these following business lines:

- Fund Mobilization in the form of Term Deposits for Retail and Corporate clients

- Internet Banking and

- Other innovative financial and investment services and solutions licensed by the State Bank of Vietnam

 The strength of Vietinbank is reflected in the following aspects:

 It has got the second largest network in Vietnamese banking system (after Agribank) spreading all over country Its branch network comprised of Head Office located at 108 Tran Hung Dao Street, Hoan Kiem District, Hanoi; 155 local branches in 63 cities and provinces across the country; 02 foreign branches in Germany and 01 Subsidiary in Laos PDR; 02 Representative Offices in Ho Chi Minh City and Da Nang; 01 Representative Office in Myanmar In addition to the extensive network, VietinBank has established correspondent relationship with over 1,000 financial institutions of more than 90 countries and territories worldwide Vietinbank also has got 6 subsidiaries, associated companies include VietinBank Fund Management Company Ltd; VietinBank Insurance and abbreviation; VietinBank Leasing Company Ltd.; VietinBank Securities Joint Stock Company; VietinBank Gold and Jewelry Trade Company and VietinBank Debt Management and Asset Exploitation Company Ltd

 Being a founding member of financial and credit institutions: Saigon Bank; Indovinabank (the first joint venture bank in Vietnam) Vietnam international leasing company - VILC (the first international finance leasing company in Vietnam); Asia - VietinBank Joint venture insurance company

 Being an official member of: Vietnam Banking Association (VNBA); Asian Bankers' Association (AABA); Southeast Asia Bank Association; SWIFT Interbank Financial Telecommunication Association; Issuing and paying visa card, international master card; Vietnam Chamber of Commerce and Industry; Association of financial institutions APEC loans for SME; Vietnam SME Association

 Awards and accolades: VietinBank was named in Forbes Global 2000 for the fifth consecutive year; It ranked 1,808th in 2016, an improvement of 94 spots since last year VietinBank was the only local financial institution to be recognized in the world's top 400 banking brands with a brand value of US $ 249 million and A + brand rating by Brand Finance VietinBank was also recognized in Brand Finance's 10 most valuable trademarks and the strongest growing trademark in Vietnam For the fourth consecutive year, VietinBank was honored to accept the National Brand Award This prestigious award, initiated by the Prime Minister, was presented by the National Trade Promotion Agency - Ministry of Industry and Trade, National Brand Council and Secretariat of the National Brand Award VietinBank was honored to be in the list of 10 strongest trademarks in Vietnam for the 12th consecutive year This award recognizes local companies with outstanding results in their business performance, service quality, tax contribution, in

innovative solutions and technology to protect the environment as well as in ensuring the rights of employees This award also honors VietinBank for active participation in social activities Vietinbank is proud of their tailored digital banking solutions that provide our customers with a simple, fast and secure access to key banking services on their digital devices Our three innovative digital products including VietinBank iPay Mobile App, VietinBank eFAST Mobile App and Early Warning System (EWS) for credit risks proudly received the 2016 Khue Star Award for outstanding digital solutions

2.2 About Vietinbank - Hanoi branch, N0 6 Ngo Quyen street, Hanoi

Beginning to expand network activities covering Hanoi and other North provinces, VietinBank officially opened and operated Hanoi branch at No.6, Ngo Quyen, Hoan Kiem District, Hanoi in 2010 The building was designed with the formation of management blocs according to new model which helped raise the effectiveness of the bank’s activities In addition, this location is considered as the heart of Hoan Kiem District which is one of the most thriving economic zones with crowded population in Hanoi Capital With the rapid development of the economy, economic units located in this district have great potential to grow That also creates favorable conditions for Hanoi branch to access and meet the financial needs of enterprises and residents in surrounding area Besides, Ngo Quyen is known as one of the famous streets in Hanoi With a convenient location, large and beautiful area, and a car park, Vietinbank-Hanoi branch is an ideal place to make transactions as well as meet business partners

Like all other VietinBank’s branches, Hanoi branch performs all bank services within the permitted activities of Vietnam Joint Stock Commercial Bank for industry and trade In addition, Hanoi branch is located from the first floor to seven floor of the VINAFOOD1 building where many other business activities of the bank occur every day Therefore, customers can not only assess services which they received, but also observe and assess service quality in a more overall view

 Offered Services:

Card services: The card services are various from the debit card E-Partner (G-card, card, S-card, Pink-card, the 12 zodiac animals card) to the international payment credit cards such as Visa, Master Cerium, Visa Platinum,

C-Oversea Remittance services: With the advantages of being a leading commercial bank in Vietnam, maintaining the relationship with more than 1000 correspondent banks and remittance companies worldwide as well as possessing modern technology system and

nationwide network of 157 branches, over 1000 transaction offices; Vietinbank-Hanoi branch provides the remittance service from foreign countries to Vietnam in two ways: Transfer through the bank systems: Use the SWIFT system, Vietinbank can receive payment messages from all banks worldwide

Speed Remittance Service through Western Union: Vietinbank cooperates with Western Union in provide the customers with the speed remittance service worldwide Internet banking services: using the Vietinbank Ipay service, the customer can carry out the transaction with Vietinbank on their account via internet and mobile which is ensure

by two security layers using the transaction confirmation OTP (One Time Password) Vietinbank Ipay meets customers’ requirements with three major options: information query (request for the banking information or account information, financial transaction (giro, online saving, normal pay or pay for the credit card), send the loan application online In addition, other banking services are also provided for individual customers namely SMS Banking, Mono

Account services: accounts opened with Vietinbank will be managed safely, precisely and securely while earning attractive interest rates

The accounts for individual include:

- Payment deposit account;

- Saving deposit account without term;

- Deposit account in term and the deposit products:saving, bond, certificate of deposit;

- Other deposit account

Wire transferring: Vietinbank provides the wire transferring domestic as well as oversea

Domestic VND wire transfer services: implement all legal transferring orders (transferring to relatives and domestic friends, or pay the bank interest, pay for the services and goods ) for the customers (all status in the society including the foreigner coming to Vietnam) to every province on nationwide according to the transferring orders Customers could order to transfer cash or use payment instrument

Overseas wire transfer services: Thank to the network with more than 800 agency banks worldwide, Vietinbank can meet requirement for the transferring demand of the customer to any where for different purposes such as studying, treating, paying salary, payment for the import contract, as well as supporting the customers in receiving the money safely, precisely and securely

Foreign currency trading: the foreign currency trading products in Vietinbank include:

- Could mortage the savings, bonds, time bills

- Automatically receive due interest into the original amount and calculate the due interest for the next term

- To be able to transfer ownership of savings; to bequeathed, authorize another person on their behalf to receive and send to other people

- Attractive interest rates, flexible in each period, each type of savings

Loans: Vietinbank is willing to offer the loans for the financial purposes of individual

as follows:

- Study aboard

- Bank guarantee

- Car loans

- Loans to buy houses in housing projects

- Loans to staffs working aboard

- Loans to business in the market

- Loans for Vietinbank Staff

- Consumption loans guaranteed by the saving account;

- Advances for the sale of securities

- Normal consumption loan

- Normal business loan

- Loans to buy houses including land use rights

- Loans for house construction and repair

Securities: Vietinbank, represented by the Vietinbank SC, provides with the security services as follows:

- Brokerage;

- Agency, issuance guarantee;

- Securities investment consultancy, corporate financing advisory, listing, equitization advisory, consulting for enterprise transformation, consulting mergers and acquisitions business (M&A)

- Custody

2.3 Research Methods

This part has presented the used methods to carry out the survey that compose of designing questionnaires, selecting sample and data, analyzing data plan Data processing was conducted by softwave SPSS 21.0 consist of Cronbach’s Alpha confidence coefficient analysis, exploratory factor analysis and multiple linear regression analysis

2.3.1 Design Questionnaires

Building measurement scale based on SERVQUAL scale which is popular used in the world Designing questionnaire referred to quality measurement scales used in previous research such as “SERVPERF analysis in retail banking” by Dr.T.Vanniarajan et al (2007),

“Service quality in e-banking: Comparison between SERVQUAL model and GRONROOS model” by Nguyen Thi Phuong Tram (2008) Besides, measurement scale in this research was adjusted in order to be suitable for services in VietinBank – Hanoi branch Questionnaire was designed in Vietnamese, and divided into two main parts (appendix A):

- Part I included questions about customers’ basic information to classify participants and questions relate to which services they used in VietinBank

- Part II was designed to collect assessments from customers about perceived retail banking service quality of VietinBank-Hanoi branch and their satisfaction level

This part comprised 24 variables in total Assessing perceived service quality under SERQUAL model included 22 variables to measure 5 above components while the research used 2 variables to measure customer satisfaction This measurement based on a 5-point rating scale which corresponding to 1 = strongly disagree, 2 = somewhat disagree, 3 = neither agree nor disagree, 4 = somewhat agree, 5 = strongly agree Customers gave points for 24 following opinions:

 Reliability:

- Employees conduct professional transactions, accurately, and quickly

- The bank performs services exactly as what they promised

- The bank keeps secrets of customer information and transactions

- The bank always keeps credibility to customers and considers customers’ interests

at first

 Responsiveness:

- Employees always serve fairly with all customers

- Fast service and timely

- Employees are willing to help you

- The Bank applies flexible pricing policies, competitive interest rates and reasonable transaction fees

 Tangible:

- The bank has got effective marketing, communication services products, impressive and always improved

- Transaction office location convenient, spacious parking

- Service products are diverse and appropriate

- The bank has got beautiful space, modern equipment and machinery, full facilities (chairs, books, newspapers, drinking water etc.)

- The bank’s website has got full information, clear and eye-catching products and services

- Employees wear uniform, polite and impressive

 Assurance:

- Customer feel safe when you make transactions with the bank

- Employees have got professional knowledge to perform transactions

- Employees behave courteously, politely, considerate, willing to guide, consult and answer questions efficiently

- Employees’ behaviour creates confidence for the customer

 Empathy:

- Having individual customer care

- Bank’s promotions, customer care after the sale reliable

- Employees always pay attention to customers’ needs

- Employees provide full and easy-to-understand customer procedures

 Customer satisfaction:

- You are very satisfied with quality of services at VietinBank

- In the future, you will continue to use Vietin Bank’s services

2.3.2 Sampling and collecting data

According to a staff in Hanoi branch, there are about 200 customers coming to there every working day Most customers are young people who come to open bank account or card Many others come to give savings or represent for their company to make payment

transactions This study has 24 variables in totals According to Hair et al, (1998), cited in Nguyen Thi Phuong Tram (2008), the sample size should be at least 5 respondents per 1 observed variable In order to collect at least 5 respondents per 1 observed variable, the study need to collect at the minimum sample size of 110 respondents To get this sample size, 150 questionnaires were given to customers

Method to collect data was conducting surveys with customers who come to make transactions in VietinBank-Hanoi branch, N06, Ngo Quyen, Hoan Kiem, Hanoi Questionnaires were provided to customers who have free time and be ready to answer survey questions It took each customer about 10 to 15 minutes to answer the questionnaire Survey process was carried out from April 15th 2017 to April 24th 2017

2.3.3 Analyzing data plan

At first, data will be input and screened to identify missing samples After rejecting all invalid samples, data will be encoded as in the following table:

Table 2.1: Encoded data

5 RESPONSIVENESS 1 Employees always serve fairly with all customers

6 RESPONSIVENESS 2 Fast service and timely

7 RESPONSIVENESS 3 Employees are willing to help you

8 RESPONSIVENESS 4 The Bank applies flexible pricing policies, competitive

interest rates and reasonable transaction fees

TANGIBLE

9 TANGIBLE 1 The bank has got effective marketing, communication

services products, impressive and always improved

10 TANGIBLE 2 Transaction office location convenient, spacious parking

13 TANGIBLE 5 The bank’s website has got full information, clear and

eye-catching products and services

14 TANGIBLE 6 Employees wear uniform, polite and impressive

17 ASSURANCE 3 Employees behave courteously, politely, considerate,

willing to guide, consult and answer questions efficiently

18 ASSURANCE 4 Employees’ behaviour creates confidence for the

customer

EMPATHY

19 EMPATHY 1 Having individual customer care

20 EMPATHY 2 Bank’s promotions, customer care after the sale reliable

21 EMPATHY 3 Employees always pay attention to customers’ needs

22 EMPATHY 4 Employees provide full and easy-to-understand customer

(Designed by the author)

The data collected will be cleaned and processed by software SPSS 21.0 Some methods of processing data used in this study are as following:

2.3.3.1 Cronbach’s alpha coefficient analysis

Cronbach’s alpha is a common measure of internal consistency (reliability) of a test or scale Internal consistency describes the extent to which all the items in a test measure the same concept or construct and hence it is connected to the inner-relatedness of the items

within the test (Tavakol et al., 2011) Cronbach’s alpha is most commonly used when researcher has multiple Likert question in a survey or questionnaire that form a scale and the researcher wishes to determine whether the scale is reliable (Laerd statistics)

The value of alpha (α) may be between negative infinity and 1 However, only positive values of alpha have meaning In general, alpha coefficient ranges in value from 0

to 1, and the increase of this value means that the correlations between the items increase (Amit Choudhury, 2010) Therefore, this processing data method helps analyst assess the reliability of scale through Cronbach’s alpha coefficient A commonly accepted internal consistency using Conbach’s alpha is as follow:

Table 2.2: Cronbach alpha values and internal consistency (George & Mallery, 2003)

Cronbach’s alpha Internal consistency

α ≥ 0.9 Excellent 0.9 > α ≥ 0.8 Good 0.8 > α ≥ 0.7 Acceptable 0.7 > α ≥ 0.6 Questionable 0.6 > α ≥ 0.5 Poor

0.9 > α Unacceptable

As the table shows, an acceptable reliability score should be 0.7 or higher However, lower thresholds are sometimes used in the literature (Reynaldo et al., 1999) In this research, scales which have Cronbach’s alpha coefficient greater than or equal to 0.6 will be accepted Besides assessing the reliability of scales, Cronbach’s alpha analysis also helps to check whether any item is not consistence with the rest of the scale through item-total correlations Item-total correlation performs the correlation of one variable with others in the same scale; the higher correlation value, the better correlation between that item and the others Variables which have greater than 0.3 item-total correlations will be accepted; the others which have smaller than 0.3 item-total correlations will be eliminated from analysis data

2.3.3.2 Exploratory factor analysis

Exploratory factor analysis is a powerful statistical technique which is used for data reduction and summarization The primary objectives of an exploratory factor analysis are

to determine (1) the number of common factors influencing a set of measures; (2) the strength of the relationship between each factor and each observed measure (DeCoster, 1998)

At first, it is necessary to test the sampling adequacy of factor analysis base on Meyer-Olkin (KMO) Measure In case of KMO has value between 0.5 and 1.0 and Sig is smaller than 0.5, factor analysis is more appropriate factor analysis In case of KMO has value smaller than 0.5 or Sig is greater than 0.5, it indicates that factor analysis may not be appropriate

Kaiser-By performing exploratory factor analysis, investigator can decide the number of factors to extract in the model The Kaiser creation states that investigator should use a number of factors equal to the number of the eigenvalues of the correlation matrix that are greater than one (DeCoster, 1998) In this research, the eigenvalues will be plot in descending order, then the number of factor will equal to the number of eigenvalues that occur prior and have greater than 1.0 values

An important part in exploratory factor analysis is interpreting factor matrixes This research will use varimax rotation process to produce multiple group factors Factor loadings which indicate correlations between the variables and the factors are required to have greater than 0.5 values Then, a factor can be interpreted in terms of the variables that have high load on it

The regression model in this research is:

Y = b0 + b1 X1 + b2 X2,……+ bk Xk + ε

Where:

- Y = Scores on the customer satisfaction towards Vietinbank-Hanoi branch

- X1, X2,……, Xk = Scores on the attitude towards the quality components (tangible, reliability, responsiveness, assurance, empathy)

- b1, b2 ……, bk = Regression co-efficient of independent variables

- b0 = an intercept

- ε = an error term

At first, it is necessary to test assumptions for regression analysis The principal assumption is that there is a linearity of the relationship between dependent and independent

variables This research investigates the model with more than one independent variables, the correlation among independent variables (multi-collinearity) should be checked Variance inflation factor (VIF) is used to measure the multi-collinearity in this regression analysis Regression model accept variables which have VIF smaller than 10 If VIF for one variable is around or greater than 10, there is collinearity associated with that variable; this variable should be removed from the regression model In addition, it is assumed that the error terms ε are independent, normally distributed random variables with mean value of 0, and constant variances As long as these assumptions are not seriously violated, regression model will be established Once regression function was given, the research can investigate relationship between service quality and customer satisfaction in Vietinbank-Hanoi branch R-square (coefficient of determination) will provide a goodness-of-fit measure With higher R-square value, the model is higher fit for analysis

CHAPTER 3 - ANALYSIS OF SITUATION

OF RETAILBANKING SERVICE QUALITY IN VIETINBANK - HANOI BRANCH AND SURVEY RESULT

This chapter gave description the reality of retail banking service quality in Vietinbank – Hanoi branch in the period from 2012 to 2016, data collected and then show analysis results from software SPSS 21.0

3.1 VietinBank’s business results in period from 2012-2016

3.1.1 The growth in total assets, shareholders' equity and charter capital

According to VietinBank’s financial results was cited in annual report in 2016 The Bank’s total assets as of 31 December 2016 reached VND 949 trillion, an increase of 22% compared to that of 2015, achieved 107% of objective set at the 2016 General Meeting of Shareholders; Profit before tax was reported at VND 8,569 billion; total funding up by 22% while outstanding loans rose 18% compared to the year before NPL ratio was kept at 0.9% Profitability ratios including ROA and ROE ratios were 1.0% and 11.8% respectively Tabble 3.1 VietinBank’s growth in total assets, shareholders’ equity and charter capital

Source: The Vietinbank’s annual reports from 2012-2016

The figures in Table 3.1 showed that in the five years from 2012-2016, Vietinbank’s total assets have increased by VND445,169 billion Before equitization in 2009, Vietinbank

is a 100% state-owned commercial bank, so its equity was formed by chartered capital and self-replenishes capital from the profits left in the business operation process Equity capital improved significantly from VND 33,625 billion in 2012 to VND 60,399 billion in 2016 while chartered capital also increased VND11,016 billion in the same period