ASSESSING THE IMPACT OF CORE BANKING AND SERVICE QUALITY ON CUSTOMER SATISFACTION IN COMMERCIAL BANK
This research project focuses on identifying the impacts of core banking and service quality on customer satisfaction in commercial bank of Ethiopia Bishoftu branch. The main objective of this project is to assess the impact of core banking and services quality on customer satisfaction in commercial bank of Ethiopia. A sample of 220 customers was selected using stratified sampling technique, and among these 200 was considered. For the purpose of the study primary data were collected using likert scale based questionnaire. And the data was analyzed using descriptive statistics and inferential statistics. The result of this study shows that, there was significant relationship between all service quality dimension and customer satisfaction in commercial bank of Ethiopia. At the same time, there was significant relationship between core banking and customer satisfaction. The three service quality dimension (reliability, assurance, empathy) have positive and significant impact on customer satisfaction at the bank. However, the rest two dimensions (responsiveness and tangibility) have no impact on customer satisfaction Core banking also have positive and significant impact on customer satisfaction. Based on these, it is recommended that the bank should work more on the two service quality dimension (reliability and empathy) to enhance customer satisfaction.
Key words: service quality, core banking, customer satisfaction, SERVPERF
Chapter one Introduction
Background of the study
New age business environment is very dynamic and undergoes rapid changes as a result of technological innovation, increased awareness and demands from customers. Business organizations, especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology (ICT) is at the center of this global change. Information technology is considered as the key driver for the changes taking place around the world. Due to a pervasive and steadily growth of information and communication technology, the world banking industry is entering into new phenomena of unprecedented form of competition supported by modern information and communication infrastructure. E-commerce has become a slogan for companies over a couple of years with increased awareness about the use of computers and internet. The Internet is the driving force for the growth of e-commerce (Bhaskar R. & Tewodros Sisay, 2011).
The information and communication applications are paramount concern to the banks in today’s business environment and internet has become the major platform for all financial, banking and commercial transactions in the present scenario.
A strategic use of ICT helps an organization gain a competitive advantage through its contribution to the strategic goals of an organization and/or its ability to significantly
increase performance and productivity.
Us a result of this many banks in different countries changes their operation to the uses of advanced technologies that will enable them to compete with the growing tastes and preferences of the customers (http//ethiopiaembassy,eu/cbes-core-banking-project-to-
Banking system occupies an important place in a nation’s economy. It plays a vital role in accelerating the rate of economic growth by mobilizing the existing or potential savings and by making the disbursement of credit to commercial undertaking and priority areas. Banking industry is marked by aggressive competition and ever-changing customer demands. As a result, banks need to adopt themselves to the changing environment. It is essential for the banks to adopt appropriate various strategies to merge as the preferred bank of customers. Timely introduction of various products to suit the diverse needs of customers is a functional necessity to the banks. Technology gives the cutting edge to come out with customer centric products and delivery channels in time (Biju K, D. Devandhiran & Sreehari R. 2012).
The use of core banking in Ethiopia
In Ethiopia, the use of information communication technology (ICT) in banking industry is almost a recent phenomenon.
For example if we see the use of core banking and ATM, ATM is currently limited to only certain banks (CBE in some of its branches in Addis Ababa and large cities, Dashen bank in allover its area branches, Wogagen Bank in some selected branches and etc…), with limited services, even though the demand is higher than the service, but still it is a
promising trend. And at the same time the use of core banking is also limited to some commercial banks of Ethiopia.
According to National Bank of Ethiopia, currently there are 13 banks who have acquired CORE banking solutions that are required to interface with the National Bank.
The new IT infrastructure will also enable banks to strengthen and extend their relations with credit card providers such as Visa and Master Card as well as roll out new mobile and Internet banking services. Thus, the bank’s customers will enjoy reduced waiting time and a greater choice of banking channels and services (www.nbe.gov,com).
Statement of the problem
Satisfying customers is the first major mission and purpose of any business organization.
It is when customers are satisfied the organizations achieves higher sales, profit and market share and vice versa.
Customer satisfaction also leads organizations to gain loyalty and achieve the desired objectives. Therefore, it is essential for organizations to satisfy their customers promptly so that they can achieve what they plan. Banks as a business organization should provide a great care for its customers’ to attract, retain and gain their loyalty.
Nevertheless, banks found in our country (Ethiopia) have little care about their customers. This leads them to use more obsolete and traditional technologies that cause dissatisfaction and switching among customers.
This means the banks are not satisfying their customers enough due to many factors in which using traditional technologies is among them. Levesque and McDougall (1996) have confirmed and reinforced the notion that consistent poor customer experience as a result of poor service quality leads to a decrease in the levels of customer satisfaction and the chances of further willingness to recommend the service (i.e., word-of-mouth advertising or referrals) is lessened.
This is true for commercial bank of Ethiopia, which is the leading bank in the country.
Even though CBE has been providing many kinds of banking services since its establishment in 1942, it cannot go further in satisfying its customers.
Simply customers of the bank have not being satisfying by its services. This is due to poor service quality of the bank that results from absence of new and improved technologies.
The bank applied core-banking technology in 2004 E.C to integrate the services delivered in its all branch banks and to improve the quality of its services. The application of this technology is believed to have many contributions for the bank.
The researcher identifies the contribution of this technology on satisfying customers of the bank in Bishoftu branch. The purpose of this study is to examine the impact of core banking and service quality on customer satisfaction.
Objectives of the study
The general objective of this research project is to assess the impact of Core Banking and service quality on Customer Satisfaction in Commercial Bank of Ethiopia Bishoftu Branch.
The specific objectives of this study are the following:
A. To assess the changes that comes after the application of core banking service
B. To identify the impact of core banking on customer satisfaction of the banks
C. To identify the impact of service quality on customer satisfaction of the banks
D. To analyze the customer satisfaction level in CBE
E. To provide some recommendations for the bank
The study answers the following questions:
1. What are the changes that have come after the application of core banking?
2. How satisfied are customers with the application of core banking service in CBE?
3. How satisfied customers are with service quality in CBE Bishoftu branch?
4. What is the level of customer satisfaction in CBE Bishoftu branch?
5. What must be done to further improve the services in CBE Bishoftu branch?
Significance of the study
Since most bank services are easy to duplicate and provides nearly identical services, they can only distinguish themselves on the basis of quality of service (Kebede and Eshetu, 2012). Therefore, this study is greatly important to the bank to assess whether its application of core banking service enhance the level of customer satisfaction and identifies the position of service quality at the bank.
Moreover, the study will have the following significances:
⦁ Identifies issues related to the application of core banking and service quality and thus provide feedback to managers.
⦁ Identify the gap between what customer thinks about customer satisfaction and what actual customer satisfaction look likes in the bank.
⦁ Result of this research project can be used as a base point for further studies in the related issues.
Scope of the study
This study was undertaken to evaluate customer satisfaction on core banking and service quality in CBE Bishoftu branch. Therefore it was delimited to the changes that come after the introduction of core banking in the bank. Moreover, the project focus area is only CBE Bishoftu branch; the result will not be extended to other branches of CBE.
Limitation of the study
This project report the result of the study of impacts of service quality and core banking on customer satisfaction in CBE Bishoftu branch and can therefore not be considered as a representative of the whole service quality of CBE; that is the generalizability of the finding and the conclusion drawn will be limited to CBE Bishoftu branch. Moreover, since this project is designed to be completed in four months time, it may not present detailed data to the intended level.
Organization of the study
The paper consists five chapters. The first chapter deals with the introduction part that consists of background of the study, statements of the problem, objectives of the study, significances of the study, scope of the study and limitation of the study. Chapter 2 contains a review of the related literature. The research design and methodology is presented in chapter 3. In chapter four, the results and findings of the study is discussed. Finally, the last chapter deals with the summary of findings, conclusions and recommendations that is forwarded both by the respondents and by researcher based on the result obtained..