Consumer Perception of Public & Private Sector Banks: A Service Quality Approach TABLE OF CONTENTS |S. NO.
|PARTICULARS |PAGE NO. | |Executive Summary |3 | |1 |Introduction |4 | |2 |Objectives |5 | |3 |Hypothesis |6 | |4 |Methodology |6 | |5 |Data analysis |7 | |6 |Findings |21 | EXECUTIVE SUMMARYQuality of service is becoming important differentiator for companies competing in the services sector and this is more pronounced in the domain of retail banking. Almost all the banks provide similar service and with high level of monetary regulation by the central bank, Reserve Bank of India, the freedom to give differentiated products is very limited. Under such circumstances the quality of service provided by the banks becomes a key differentiator.
The difference in quality of service provided by the banks in Public sector has been improving over the years after losing ground initially to foreign banks and private sector banks. This study sets out to determine how effective the initiatives of the public sector banks have been, since the rivate sector banks have also been upgrading themselves all this while. The objective of the study hence is to collect data about the quality of service provided in public and private banks and to compare the perception of general public about the service provided.
1. INTRODUCTION Perception is a process by which an individual select, organize and interprets stimuli in a meaningful picture of the world. Also, we can perception as “how we see the world around us”. Perception is the process of selecting, organizing, and interpreting or attaching meaning to events happening in environment. Customer perception is an important component of any organisation’s relationship with its customers.Customer satisfaction is a mental state which results from the customer’s comparison of expectations prior to a purchase with performance perceptions after a purchase.
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Currently, India has 88 scheduled commercial banks – 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. The private sector banks have made tremendous strides in the last few years.It was in mid 1990’s when Indian banking scenario witnessed the entry of some new private sector banks and in the period between 2002 -2007 these banks have grown by leaps and bounds. They have increased their incomes, asset sizes and outperformed their public sector counterparts in many areas. The scenario post banking reforms of the 1990s thus has made the competition between the banks severe.
The public sector banks particularly are trying hard to update themselves and introduce new practices to attract and retain customers. On the other side, foreign banks and private sector banks have progressed well in areas of technology up-gradation, introduction of new products and customer friendly services.In this study we will try to read the public perception about public and private banks and analyse the parameters which are responsible for the rapid growth and expansion of private banks as compared to public banks and try to provide figure out the areas of improvement for these banks. Customer Perception on banking services These characteristics of service also make service unique and different from goods as described below:- Intangibility: – Unlike goods that are tangible, a service is intangible. The products from service are purely a performance. The consumer cannot see, taste, smell, hear, feel or touch the services like office ambience, Infrastructure, appearance and technology.
Reliability: – Attributes like keeping the promise, providing timely remainder of dues are some of the attributes on which reliability of a particular service provides depends. Responsiveness: – Time holds great importance today and the services provided on or before time contribute to the responsiveness of the company. Empathy: – Empathy is the capability to share and understand another’s emotions and feelings. It is often characterized as the ability to “put oneself into another’s shoes,” Empathy does not necessarily imply compassion, sympathy, or empathic concern because this capacity can be present in context of compassionate or cruel behaviour. Assurance: – Service provider’s knowledge about the customers, their honesty towards them etc are the factors which contribute to the assurance of the customers.Empowerment: – Facilities like Internet banking, ATM’s, 24×7 customer care are the factors which lead to the empowerment of the company’s services. 2.
OBJECTIVES The objectives of this study are: • To assess the major differences in the perception of customers towards public and private banks. • To determine the parameters on which the private banks scores above the public banks and vice versa. • To ascertain suggestions for further improvement of the public and private sector banks. 3. HYPOTHESIS The Hypothesis of this study is: • Quality expectations and evaluation of services received are marginally higher in the private than in the public sector on most of the parameters measured.
4. METHODOLOGYThe study is based on primary data collected through structured questionnaire. The study done here aims to study the perception of public about the service quality of public and private sector banks. The questions in the questionnaire have been designed to elucidate the perception of the customers about the service provided in banks across 22 different parameters. The parameters have been broadly classified into a set of 5 measures as described by Parasuraman et al and several others. The questionnaire was closed-ended and employed dichotomous questions, Likert scales, rating scales and a multiple choice question.
Non-probabilistic sampling techniques were employed to select the respondents.In particular the sampling was judgemental in that respondents in the age group of 18-35 were chosen to reflect the broad demographic profile of the country. Also, the population chosen is representative of different regions of the country, except for eastern region where the response for the survey was less. The sample population is represented more by educated respondents from the services and manufacturing industries. The respondents were contacted primarily through mail and in all 110 responses were obtained. The questionnaire converted to an online document was hosted in a public server and the link for the same was sent across to respondents.
To circumvent the problems arising from restriction of access to private sites in some workplaces, the questionnaire was also mailed to some respondents in the form of spreadsheets. Thereafter a qualitative analysis of the data collected was carried out in anticipation of answers to our study objectives. 5. DATA ANALYSIS The service quality of public and private sector banks were compared along the following parameters. TANGIBILITY Ambience of Premises This parameter is chosen to compare private & public banks on the basis of ambience they offer at their office place. As can be seen from figure 1, the private & public banks score slightly better on ‘very good’ & ‘good’ segment of office ambience.Substantial, 31% of public sector banks fall in Average segment as against 21% of private sector banks. The private sector banks score badly at the bottom of the table with 14% accounting under bad segment as against 5% of public sector banks [pic][pic] Figure 1: Distribution of respondents for Office Ambience for Public and Private sector banks Infrastructure Infrastructure per se private banks outscore public sector banks in ‘very good segment’.
The competition is at par for ‘good’ segment. For rest of the two segments as well, the private banks outscore public sector banks. Overall the infrastructure of private sector banks is superior to public sector banks. [pic][pic]Fig 2: Distribution of respondents for Infrastructure for Public and Private sector banks Appearance of employees The distribution of responses for appearance of employees was similar for both public and private sector banks and is shown in figure 3.
More than half of the respondents for either type of banks felt the employees were well groomed, whereas the remaining seemed to feel they were appropriately dressed. [pic][pic] Figure 3: Distribution of respondents for ‘Employee Appearance’ for Public and Private sector banks Usage of Modern Technology A larger fraction of the respondents from private sector banks, 44 percent, believe the technology used in their banks is state-of-art where the figure for public banks was at 33%.Most of the remaining respondents in either group seem to feel the use of technology is contemporary.
The distribution of the responses is shown in figure 4. [pic][pic] Figure 4: Distribution of respondents for ‘Usage of Modern Technology’ for Public and Private sector banks RELIABILITY Keeping Service Promise Keeping the service means following on the same path of words which they have spoken about in their prior statements. In India words of mouth hold importance in some of the sectors like banking and fulfilling the promises made by them. The satisfaction over service promise was very high for either type of banks and the fraction of respondents answering in affirmative was higher for public sector banks at 90 percent.The distribution of response is given in figure 5. [pic] Figure 5: Distribution of respondents for ‘Keeping Service promise’ Accuracy of Service Providing accurate services means giving the exact service as needed by the customer. It is very important as far as gaining the reliance of the customers is concerned.
According to the survey, the private banks provide more accurate services than public and the reason may be the good processes followed in the private banks and the skill set of the employees is also very good for these banks. [pic] Figure 6: Distribution of respondents for ‘Accuracy of service’ for Public and Private sector banks Timely RemindersTimely remainder of dues mean include the getting the notification of last for submitting the credit card bill and such other services. It should be told to the customers beforehand so that they can react to it accordingly. It is better for the private banks as per to the survey and that is why they have earned more reliability over the public banks in the eyes of their customers over this time period. [pic] Figure 7: Distribution of respondents for ‘Timely reminders of Dues’ for Public and Private sector banks RESPONSIVENESS Promptness of Service In terms of prompt service private banks scores above the private banks at all periodicity i. e. Always, At times, never.
So, prompt service is major attributes to gauge any bank’s responsiveness and private banks leads over the public banks in it by a fair margin. [pic][pic] Figure 8: Distribution of response for ‘Promptness of service’ for Public and Private sector banks Intimating Deadlines & Time Required Every bank work has some time required which is needed for that work to get completed. Now if the bank take more time than what is required than it is said to be taking inappropriate time. Otherwise, it is said to be taking appropriate time just enough to complete the task and not making the customer wait too much. The public banks score slightly above the private anks in this factor. [pic] Figure 9: Distribution of responses for ‘Intimating appropriate time required’ Information about New Initiatives Every bank has to inform its customers whenever they take any new initiative and the private bank is way ahead over the public banks in the ‘always’ periodicity.
And a large of the public bank initiatives lie in the periodicity ‘At times’ and ‘Never’. [pic][pic] Figure 10: Distribution of response for ‘Information of New Initiatives’ for Public and Private sector banks Sincerity in solving Customer Problems To improve the customer care and other bank services they have to show interest in solving the problems of the people.There is not much to choose between the two banks in this criteria and the two scores equally good in all the periodicities (Always, at times, never). [pic][pic] Figure 11: Distribution of response for ‘Sincerity in solving problems’ Queuing Time Queuing time is the wait time that is required for the customers to get their work done from the bank employees. According to the survey we can say that the queuing time is better and lower by a slight margin for private banks may be due to the promptness of services provided by them and various other factors. [pic][pic] Figure 12: Distribution of response for ‘Queuing Time’ for Public and Private sector banks EMPATHY Honesty of Employees [pic][pic]Figure 13: Distribution of response for ‘Honesty of employees’ for Public and Private sector banks Honesty of the employees towards their work which ultimately benefits the end customers is very important as far as empathy towards the customers is concerned. There is not much to differentiate between the two banks i.
e. private and public in this aspect. So, we can say that both the bank’s employees are honest towards their work and customers as well. Security Security is one of the major concerns for any person who is using the services of the bank and getting the less interest over his deposited money as compared to some other investment options.
And, as obvious the public banks scores much better than private banks in this aspect as they are more reliable being under the control of government body. The distribution of response is given in figure 14. [pic][pic] Figure 14: Distribution of response for ‘Security’ for Public and Private sector banks ASSURANCE The Assurance dimension of service quality explains the knowledge and courtesy of the employees of service providers, banks in this case, and their ability to inspire confidence in customers. The study included approachability of employees, their courteousness towards customers and their knowledge of products and services offered to help customers, as the parameters in this dimension. ApproachabilityIn general customers of private banks feel the employees are more approachable than customers of public banks.
This can be seen from responses in obtained, shown in Table 1. |Approachability |Public banks |Private banks | |Very Easy |3 |13 | |Easy |23 |48 | |Difficult |11 |10 | |Very Difficult |2 |0 | | |39 |71 | Table 1: Responses for approachability of employeesFigure 15 gives the perception of customers about the approachability of employees of public and private sector banks in percentage. As seen from the figure, the percentage of customers with private banks who felt the employees were very courteous is rather high. Also, the fraction of customers who felt the employees are difficult to approach is twice as much in public sector banks. [pic] Fig 15: Comparison of responses for approachability Courteousness The responses for courteousness of employees in a scale of 1-5, 1 being very courteous and 5 being very rude, is shown in table 2. The weighted average rating for public sector banks is on marginally higher at 2. 7435 compared to private sector banks (2. 282).
A lower score for private sector bank indicates higher level of courteousness and also the fraction of respondents who felt the employees are highly courteous is also higher than public sector banks. |Courteousness |Public Banks |Private Banks |Public banks (%) |Private Banks (%) | |3 |16 |19 |41 |27 | |5 (Very Rude) |0 |2 |0 |3 | |Weighted average rating |2. 7435 |2. 28169 | | |Table 2: Distribution of responses for ‘Courteousness’ for Public and Private sector banks Knowledge The data available seems to suggest that there is very little difference in the level of knowledge possessed by the employees of either bank.
A large fraction of the customers of both public and private banks, around 60 percent, felt the employees are ignorant about their products, services and processes. The distribution of responses is shown in table 3. |Knowledge |Public banks |Private banks | |Complete |11 |26 | |Moderate |4 2 | |Ignorant |24 |43 | | |39 |71 | Table 3: Distribution of responses for ‘Employee Knowledge’ for Public and Private sector banks EMPOWERMENT Convenience of Branch Locations When we compare the availability of branches of bank for convenient location to customers we found similar trends for both private and public sector banks i.
e most of the banks have their branches at convenient location for customers which means both the banks are giving equal importance to location of banks. [pic] Figure 16: Distribution of response for ‘Convenient branch locations’ Convenience of Operating Hours [pic] Figure 17: Distribution of response for ‘Convenient operating hours’When we see the graph for convenient operating hours we found that private sector bank score over public sector bank for providing more convenient operating hours to customer. From the data it is clear that percentage of inconvenient operating hours for public sector bank is almost double than of private sector banks. Internet Banking After analysis of internet banking facilities provided by both the sectors to their customers, we found public sector bank perform much better than private sector banks. As almost every public sector bank provide internet banking facility, the gap is little high for private sector banks which means private sector bank needs improvement in this area to compete with public sector. [pic]Figure 18: Distribution of response for ‘Availability of Internet Banking’ Accessibility of ATM For providing the ATM accessibility to customer, public sector bank score advantage over private sector banks as from the graph we can see that some of the private sector bank are not available to customer for access, also customers feel that accessing a public sector bank ATM more easier than of private sector bank as from the graph we can see most of the customers of public sector bank found very easy access to ATMs. [pic][pic] Figure 19: Distribution of response for ‘Accessibility of ATMs’ Round-the-clock Customer Care The private sector bank has little ahead over public sector banks in providing better customer care.
The response could be reflective of the larger situation and how much private sector banks are conscious for customer relationship management which helps in retaining the customer for the long run and that public sector banks are fast catching up. [pic] Figure 20: Distribution of response for ‘Round-the-clock’ customer service UNIQUENESS PERCEIVED BY CUSTOMERS The respondents were asked to name the three features, among technology, security, working hours, customer service, location density, queuing time and infrastructure, that they felt were the unique selling propositions of the respective banks. [pic] Figure 21: The distribution of USP of Banks as perceived by their respective customers The private sector bank customers feel Security (20. 7%), Technology (19. 7%) and Customer service (19. 7%) as the unique features that their bank offers them.The public sector bank customers’ response was for Security (20.
5%), Location Density (17. 8%) and Technology and Customer Service (16%). The presence of location density in response of public sector banks could be indicative of the presence built by the banks in pre-reforms era and also added expansions to meet customer demand. 6. FINDINGS Summary of Parametric Evaluation: INTANGIBILITY: Public sector bank scores over private sector bank in offering better office ambience.
The private sector banks offer slightly better infrastructure than public sector banks. On basis of appearance of employees the private sector banks are way ahead than public sector banks.On Technology offering basis the private sector banks are far superior to public sector banks. Thus, on Intangibility parameter private sector bank offering is better than public sector banks. RELIABILITY: Public sector bank has scored over private sector banks in keeping the service promise. The private sector banks have exhibited tendency to provide accurate service more often than that of public sector banks. Again when it comes to timely reminders of dues the private banks score over public banks. Overall private sector banks perform better than public sector banks on reliability parameter.
RESPONSIVENESS: Private Banks scores over public banks in providing prompt services.The public bank is better than private banks in indicating appropriate time required for completion of work. The private banks are far superior to public banks when it comes to informing customers about new initiatives of the bank. There is not much to choose between public and private banks when it comes to sincerity in problem solving. On Queuing time private banks scores over public banks.
Thus on parameter for responsiveness private banks outperforms public banks. EMPATHY: The public sector banks scores over private sector banks when it comes to honesty of employees. The perception of respondents is that the public sectors banks are more secured to do business with than the public sector banks.
Thus, overall the public sector banks outperforms the private sector bank on this parameter. ASSURANCE: The private bank employees are more approachable then the public sector employees. On quality of showing courtesy to customer the private sector banks outshine the public sector banks. The private sector banks outperforms public sector banks when it comes to having customer knowledge.
Empowerment: When it comes to branches at convenient location the private sector banks score at par with that of public sector banks. When it comes to convenient operating hours the private sector banks score over public sector banks. On Internet banking facility the public sector banks outperform private sector banks.Over accessibility of ATMs the public sector banks score over private sector banks. On provision of roud the clock customer care the private sector banks outperforms the public sector banks.
Thus giving equal weightage to each of the service proposition we can say private as well as public banks are at par on Empowerment. ———————– Private Sector BanksINTANGIBILITYPublic Sector Banks Private Sector Banks RELIABILITYPublic Sector Banks Private Sector Banks RESPONSIVENESSPublic Sector Banks[pic] Private Sector Banks EMPATHY Public Sector Banks Private Sector Banks ASSURANCEPublic Sector Banks Private Sector Banks EMPOWERMENTPublic Sector Banks