2  HO CHI MINH CITY OPEN UNIVERSITY UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL OF ECONOMICS & MANAGEMENT MBQPM4 “HUYNH QUANG ANH” “DEVELOP A SERVICE QUALITY MODEL FOR RETAIL BANKING IN VIETNAM: CASE STUDY OF TECHCOMBANK” MASTER FINAL PROJECT MASTER IN BUSINESS QUALITY AND PERFORMANCE MANAGEMENT Tutor’s name: Dr Jacques Martin Ho Chi Minh City (2014) 3  Statementofauthentication I certify that I wrote this thesis myself I certify that the study has not been submitted for any other degrees I certify that any help received and all sources used have been acknowledged in this thesis with the best of my knowledge This study does not necessarily reflect the views of the Ho Chi Minh City Open University or Vietnam – Belgium Master Programs 4  Acknowledgement I would like to express my sincere appreciation to my thesis advisor, Dr Jacques Martin, for his enlightening guidance and inspiring instruction in the development and completion of this study.Thanks also go to the administrator of the class, Ms Hien, for her support in searching articles on ULB’s library and solving other issues during master course. I also want to thank my boss and my colleagues, my boss for their support in carrying out my works during my absence for prepairing the thesis. Thank you my cousins, Tuyet and Thien, for their support in inputing data into SPSS and helping me to prepare some paragraphs of this thesis. A special gratitude and love goes to my family for their unfailing support. I thank my parents and my sister for their abiding love. I thank my lovely daughter, Tao Heo, for playing with me when I am stressful caused by my work and my learning. Finally, I want to express my deepest love and thanks to my loving wife, Le Na, for her support, understanding as best friend forever, taking care of our daughter, and sharing the housework during 2 years of my study and the most difficult time of thesis writing especially her idea on conducting survey on Techcombank staffs instead of external customer really helps me a lot to complete my thesis successfully. 5  Table of Contents Statement of authentication 3 Acknowledgement 4 List of pictures and tables in report 7 Introduction 8 Research questions of the study 10 The scope & research method of this study 11 The Struture of this study 11 Chapter 1. Literature review 12 Why need a service quality model for retail banking in Vietnam? 12 Still debate but want to use because it is a good diagnostics tool 12 Develop a Service quality model based on SERVQUAL 13 Chapter 2. Research Methodology 16 Design questionnaire 17 Data collection 23 Data analysis 23 The Sample characteristics and banking behavior 23 Develop a service quality model based on Customers’ expectation about institutions offering banking services 25 Measuring Service quality Using New Service quality model and Relative Importance of service dimensions expected by Customer 32 Measure Service quality using New Service quality model & Equation of Service quality rating and Customer Perception of Techcombank Service quality 35 Chapter 3. Discussion 38 Is this possible to use this new Service quality model for Techcombank? 38 Is there two equations of measuring service quality can be used for Techcombank? 39 Conclusion 41 Limitations of the study and avenues for further research 41 6  References 42 Appendix 1. Relationship’s customer with other banks 44 Appendix 2. Customer expected on Service quality of Techcombank 45 Appendix 3. Customer survey 46                  7   Listofpicturesandtablesinreport Figure 1. Modified SERVQUAL Model Figure 2. Research Process Figure 3. Total Variance Explained Figure 4. Rotated Component Matrix for the first attempt Figure 5. Rotated Component Matrix for the second attempt Table 1. Questionnaire for evaluating Service quality at the banks Table2. Vietnamese translated versions of Service quality models Table 3. Gender and Working Experience in Techcombank Table 4. Statistics of using Products with Techcombank Table 5. Relationship working and customer experience with Techcombank Table 6. Cronbach’s alpha calculation Table 7. KMO and Bartlett's Test Table 8. Total Variance Explained Table 9. Rotated Component Matrix Table 10. Score of Each factor based on customers’ evaluation Table 11. Mean of each criteria perceive by Techcombank customers Table 12. Measuring service quality by Equation 1 Table 13. Regression Model summary Table 14. Regression Cofficients 8  Introduction Vietnam Technological and Commercial Joint stock Bank - Techcombank was established on September 27th, 1993 with the initial registered capital of VND 20 billion with the aim to become an efficient financial intermediary bridging the savers with the investors in need of capital for business and economic development in the open-door era. Techcombank is ranked as one of the best banking Vietnam, it continue to be widely recognized as the Best Bank overall as well as a leading bank in a number of specific areas by some of the world’s most highly-regarded financial magazines such as the Asian Banker, Global Trader review and Asian Banking and Finance and Alpha South East Asia. Techcombank has more than 3 million customers to use personal financial service such as personal accounts, savings and loans. It also has more than 300 branches across the country in order to best serve our customers, with a dense network of ATMs which are online 24/7 in order to help customer with cashiers. Branch network is constantly upgraded spacious, clean for better serving customers. However, apart from the fact that our customers have not only used our products and services but also use the products and services of other banks, which are among top of banks in Vietnam such as Vietcombank, ACB, Sacombank, Agribank and a number of foreign banks such as HSBC, ANZ. In this study, we interviewed 145 customers of Techcombank (see Appendix 1) who are our employees with working experience from 3 to 5 years and the results are much interesting that 45% of them use the bank's products and services of Vietcombank – one of the largest bank in Vietnam; 34% of them use the ACB and Sacombank products – two largest commercial bank; 26% of the products used Vietinbank – one of four state –owned banks; 25% of them use the products of HSBC – the most well-known foreign bank in Vietnam and Agribank – the 9  largest bank in Vietnam. Even our bankers, who love Techcombank most, tend to use products and services of other banks not prove loyal. In other words, Vietnamese customers are not loyal to retail banks, according to the latest research of Ernst & Young (Thanh Thanh Lan, 2014), as 65–77 per cent of surveyed people were ready to close their banking accounts and change to another bank. Regarding to the less loyalty of Vietnamese customers table, the reason is there are many banks in Viet Nam while Australia and Japan, for example, which have simple of banking system, have 3-4 large banks, thus customers with leaving little choice. In addition, Vietnamese banks provide simple product and retail banks compete mainly with each other deposit whilst banks in other countries have on a range of products from pension, credit, savings or insurance to mortgage, thus their Customers do not change banks, as they will have to change all of the services. Another factor was the quality of service of Vietnamese banks. This research also revealed that one-half of Vietnamese customers closed their accounts or left their banks due to issues of communication and experience in banking services. No official research was done by Techcombank on how many customers have left Techcombank because of bad service quality. But we have understood that services are strategic development of global corporation and Techcombank is in the race for better service quality and larger operations. As a matter of fact, maintaining high service quality can make a profit, reduce costs and expand market share. Convenient and effective distribution systems and transaction processes, like clear-cut borrowing applications and quick processing, are a sign of good service, financial strength, broad networks and technological prowess. Besides, service quality also depends on the environment and the surroundings, like the design and layout of customer service desks. 10  Among elements that make up excellent service quality, staff is the most important. While ATMs provide standard services at the same quality for customers, bank staff can supply more complex services or customer-tailored services. Arguably, enhancing service quality and using service quality as a useful competitive instrument for form the groundwork, develop sustainably and take firm steps are urgent requirements in the process of regional and international integration. In recent years, we - quality management and improvement team of Techcombank have developed a service quality model to control and improve service quality of the bank. The model includes 3 factors physical facilities, process and people. We thought that we will provide excellent service quality to customers if we would manage well people, process and physical facilities by setting several quality standards such as visibility and cleanliness of sign board, condition of building Interiors and exteriors, staff attendance system in order, satisfactory dress code of staff (following Techcombank regulations) or displays customer friendly body language and postures, application and workflow updated & approved by SLA which was committed with customers. The fact that the model is working smoothly, however, we don’t know what we need to focus on improving people or physical evidence factors. The other question is also important is that whether service quality which we try to provide to customer will meet the customer expectations? What customers perceive service quality is what we actually deliver to them. Researchquestionsofthestudy The objective of the study is to try to answer 3 questions as follows: - The first question regarding how to apply the SERVQUAL model in order to build the service quality model for retail banking in Vietnam 11  - The second question regarding how to develop an equation in order to measure service quality for retail banking of a bank, particularly in this study for retail banking in Techcombank; - The third question regarding what is relationship between perceptions of customer on service quality and service quality dimessions Thescope&researchmethodofthisstudy This study concentrates to develop the service quality model for retail banking in case of Techcombank. The questionnaire is to try to understand the expectation and perception of customers who are working for Techcombank on the service quality of the retail banking. TheStrutureofthisstudy The structure of this study divide into 4 chapters: The first chapter is to introduce about the role of service quality and why need to measure service quality; the second chapter is to review some literatures related to service quality, particularly, SERVQUAL model; the third chapter will provide all data analysis and results and the last chapter will come up with some conclusion and recommendation. [...]... Chapter 1 Literature review Why need a service quality model for retail banking in Vietnam? We need to develop a model of service quality for retail banking in Vietnam because almost articles assumed that the service quality model already existed, they used directly Western models like SERVQUAL or SERVPERF for searching the relationship between service quality and customer satisfactions in Vietnam bank... location, convenient internal areas, neat and clear facilities Other criterias are added into this list because some of them are not available on current standard such as website with clear and up to date information, convenient internet banking or staffs play role as financial consults instead of simple banking saleman Table 1 Questionnaire for evaluating Service quality at the banks # 1 Dimension TANGIBLES... total score of each factor is received by summarizing the base point of each item The weight of each factor is calculated by dividing the total score of each factor by total of score of all factors The rating of customers on each criteria of Techcombank service quality are calculated and presented in Table 11 34 According to the new service quality model, the rating for each factor of Techcombank service. .. satisfaction in retail banking sector in Vietnam but they did not explain the reason why they use the SERVPERF instead of SERQUAL model for their examination Still debate but want to use because it is a good diagnostics tool Underpinning our understanding of service quality is an array of factors or determinants A number of researchers have provided lists of quality determinants and researchers further agree... service quality and Overal banking service quality will be defined by mean of score of each criteas and presented in Table 12 Item TCB-Tangibles-Bank locations TCB-Tangibles-Internal bank area TCB-Tangibles-Physical facilities TCB-Tangibles-Motorcycle parking TCB-Tangibles-Professional appearance TCB-Tangibles-Marketing materials TCB-Reliability -Banking system TCB-Reliability-Bank promise TCB-Reliability-Bank... SERVQUAL scale has greater interest for practitioners because of its richer diagnostic value By comparing customer expectations of service versus perceived service across dimensions, managers can identify service shortfalls and use this information to allocate resources to improve SQ (Parasuraman et al., 1994) For instance, Karin Newman (2001) presented a case analysis of a pioneering service quality. .. below For example Lien and Minh used SERVPERF model as proposed by Cronin & Taylor to assess perceived service quality at a Vietnamese commercial bank, and then study the relationship between service quality and customer satisfaction on banking service quality through regression analysis In addition, in other articles authors such as Dinh & Pickler also examined Service quality and Customer satisfaction... Table 13 Measuring service quality by Equation 1 At it is shown in Table 13, the result of Techcombank service quality rating calculated by Equation 1 (3.61) is close to the result of Techcombank service quality perceived by customer calculated by SPSS (3.52) (see in Appendix 2) In addition, the gap between Service quality of Techcombank and Overall banking service quality is 0.62 Measure Service quality. .. 184 Table 10 The base point of each service quality item In the new service quality model, the total score and the relative importance of three factors and the importance are converted in Table 11 below 33 Factors Bank capability Bank Image Bank Convenience Item Responsiveness-Staff Complaint Skill Reliability-Bank new information Reliability -Banking system Reliability-Bank promise Assurance-Staff work... Assurance-Staff work Skill Assurance-Staff Knowlegde Responsiveness-Contact Center Tangibles-Physical facilities Tangibles-Internal bank area Tangibles-Bank locations Tangibles-Professional appearance Tangibles-Motorcycle parking Tangibles-Marketing materials Assurance-Staff Attitude Convenience-Website Convenience-Internet banking Empathy-Financial Advising Convenience-ATM Network Empathy-Customer Care Convenience-Website . areas by some of the world’s most highly-regarded financial magazines such as the Asian Banker, Global Trader review and Asian Banking and Finance and Alpha South East Asia. Techcombank has. strategic development of global corporation and Techcombank is in the race for better service quality and larger operations. As a matter of fact, maintaining high service quality can make a profit,. recommendation. 12  Chapter1.Literaturereview Whyneed a service quality model for retail banking in Vietnam?  We need to develop a model of service quality for retail banking in Vietnam