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Overview of Banking Service Quality and Customer Satisfaction


also occurs due to the bank's technology system and transmission lines malfunctioning, causing program errors during the transaction process. The consequences of operational risks are very serious, affecting the bank's reputation and assets. However, these risks are completely preventable.

1.1.7.2. Legal risks

Legal risks are risks related to the law regulating international payment activities in general and money transfer activities abroad in particular, the rights and obligations of the parties involved, and the law on dispute resolution when complaints arise. Legal issues in international payment activities are also an important and very complicated issue, because the parties involved are in different countries, in different legal environments and legal systems. In the legal system regulating foreign trade activities in general and international payment activities in particular, there are international laws and national laws.

1.1.7.3. Political risks

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Political risks occur when the legal environment, economic-political environment of a country is unstable and constantly changing. When a country changes its policies on foreign exchange reserves, import-export taxes, exchange rates, interest rates, etc., it will directly affect the international payment activities of the parties involved. In reality, these changes often make it impossible for banks, exporters, and importers to fulfill their commitments, causing the payment process to be suspended or even canceled, causing damage to the parties involved.

Political risks are also related to sanctions imposed by countries, especially the US sanctions against certain countries and organizations. If you transfer money to countries on the US embargo list in USD through banks in the US, the payment will be immediately blocked. The bank making the payment loses money while the beneficiary has not yet received the money they are entitled to.


1.1.7.4. Moral hazard

Moral hazard is the risk when a party intentionally fails to fulfill its obligations, affecting the interests of the parties involved. This is an important issue in international trade, because the partners are often far apart, or do not even meet each other during the buying and selling process, so they may not have clear information about the reputation, business ethics, and financial capacity of the partner. Furthermore, because the partners are far apart, it is difficult to have regular access to monitor and supervise the performance of obligations. Under such conditions, moral hazards are very likely to occur, causing serious consequences for both customers and banks.

Moral hazard also occurs for banks when customers intentionally present fake or edited documents, making it difficult for banks to check and control transactions.

1.2 Overview of banking service quality and customer

1.2.1 Banking service quality

Quality of service is a very broad and complex category, reflecting the synthesis of economic, technical and social contents. Due to this complexity, there are currently many different concepts of quality. It can be seen that, depending on the approach, the concept of quality is understood in different ways, each understanding has a scientific basis to solve certain goals and tasks in reality. Some quality experts have defined Quality of service as follows:

According to ISO 8402, QoS is “The set of characteristics of an object that give it the ability to satisfy stated or implied needs”. QoS can be understood as customer satisfaction measured by the difference between expected quality and achieved quality. If expected quality is lower than achieved quality, QoS is excellent, if expected quality is greater than achieved quality, QoS is not guaranteed, if expected quality is equal to achieved quality, QoS is guaranteed.


According to Feigenbaum, “Quality is a customer's judgment based on actual experience with the product or service, measured against customer requirements, which may or may not be stated, conscious or merely perceived, purely subjective or technical, and always represent a moving target in a competitive market.”

Service quality is the extent to which a service meets the needs and expectations of customers (Lewis & Mitchell, 1990; Asubonteng et al., 1996; Wisniewski & Donnelly, 1996). Edvardsson, Thomsson & Ovretveit (1994) believe that service quality is a service that meets customers' expectations and satisfies their needs. According to the authors Bui Nguyen Hung and Nguyen Thuy Quynh Loan (2010), each customer often feels differently about quality, so customer participation in developing and evaluating service quality is very important. In the service sector, quality is a function of customer perception. In other words, service quality is determined based on customers' perceptions, or feelings, related to their individual needs.

According to Parasuraman et al (1985:1988, cited by Nguyen Dinh Tho et al, 2003), QoS is the gap between customers' expectations and their perceptions after using the service. He is considered the first person to study QoS specifically and in detail in the field of marketing.

Through the above definitions, it can be seen that the problem of approaching the concept of service quality as the level of meeting the needs and desires of customers is the trend of quality experts in the current period.

According to that point of view, CLDV has the following characteristics:

- Quality is the satisfaction of customer needs. If a product or service does not meet customer needs, it is considered to be of poor quality.

- Because quality is measured by the level of satisfaction of needs, and needs always fluctuate, quality also always fluctuates over time, space and conditions of use.

- Customer needs can be clearly stated in the form of regulations,


standards but also needs that customers feel during and after the end of the usage process.

1.2.2 Customer satisfaction

Customer satisfaction is a major content in business activities, so there are many books, newspapers, articles related to this topic and there are also many different evaluation views on customer satisfaction. Customer satisfaction is their response to the perceived difference between known experience and expectations (Parasuraman et al., 1988; Spreng et al., 1996). That is, the customer's known experience when using a service and the results after the service is provided.

According to Kotler and Keller (2006), satisfaction is the level of a person's emotional state resulting from comparing the perception of a product to that person's expectations. Accordingly, satisfaction has the following three levels:

If customer perception is less than expectation, customer feels dissatisfied.

If perception equals expectation, the customer feels satisfied.

If perception is greater than expectation, the customer feels satisfied or delighted.

According to Kano (Kano, 1984), he believes that each customer has 3 levels of needs: basic needs, expressed needs, and latent needs.

- Basic needs: this is a type of need that is never expressed. If this type of need is met, it will not bring customer satisfaction. However, if it is not met, the customer will not be satisfied.

- Expressed needs: this is the type of need that customers express their desire and expectation to achieve. According to him, there is a linear relationship between customer satisfaction and the fulfillment of this need.

- Latent needs: this is the type of need that customers do not demand, however, if there is a response from the service provider, customer satisfaction will be


increase.

A popular theory to examine customer satisfaction is the “Expectation-Confirmation” theory. The theory was developed by Oliver (1980) and is used to study customer satisfaction with the quality of services or products of an organization. The theory includes two small processes that have independent impacts on customer satisfaction: expectations about the service before purchase and feelings about the service after experiencing it. According to this theory, customer satisfaction can be understood as the following process:

(1) First of all, customers form expectations in their minds about the elements that constitute the service quality that the supplier can bring to them before customers decide to buy.

(2) Then, the purchase and use of the service contribute to the customer's belief in the actual performance of the service they are using.

(3) Customer satisfaction is the result of comparing the effectiveness of the service between what they expected before purchasing the service and what they received after using it and there will be three cases: Customer expectations are:

Confirmed if the effectiveness of the service completely matches the customer's expectations;

Will be disappointed if service performance does not match customer expectations;

Will be satisfied if what they feel and experience after using the service exceeds what they expected before purchasing the service.

According to experts, customer satisfaction plays an important role in influencing the goals and development strategies of organizations and businesses. Customer satisfaction becomes an important asset in the effort to improve service quality, maintain loyalty, and enhance the competitiveness of organizations and businesses.


Customer satisfaction is an important factor for maintaining long-term success in business and appropriate business strategies to attract and maintain customers (Zeithaml et al., 1996)

1.2.3 The relationship between service quality and customer satisfaction

Many studies on customer satisfaction in the service industry have been conducted and generally concluded that service quality and satisfaction are two distinct concepts. Customer satisfaction is a general concept that expresses their satisfaction when consuming a service, while service quality is concerned with specific components of the service (Zeithaml & Bitner, 2000).

Cronin & Taylor (1992) examined the relationship between service quality and customer satisfaction and concluded that perceived service quality leads to customer satisfaction. Studies have concluded that service quality is an antecedent of satisfaction and is the main factor influencing satisfaction.

Parasuraman et al. (1993) argued that there are some differences between service quality and customer satisfaction, the main difference being the issue of “cause and effect”. Zeithalm & Bitner (2000) argued that customer satisfaction is influenced by many factors such as: product quality, service quality, price, situational factors, and personal factors.

According to Oliver (1993), service quality affects customer satisfaction. That is, service quality is determined by many different factors, and is a part of the determinant of satisfaction (Parasuraman, 1985, 1988).

Therefore, to improve customer satisfaction, service providers must improve service quality. In other words, service quality and customer satisfaction have a close reciprocal relationship, in which service quality is created first and then determines customer satisfaction. The causal relationship between these two factors is the key issue in most customer satisfaction studies.


1.3 Research model to evaluate factors affecting the quality of international

1.3.1. SERVQUAL service quality measurement model

Nowadays, there are two popular models used to evaluate service quality: the Gronroos model (1984b) - which states that service quality is evaluated on two aspects, (1) technical quality and (2) functional quality; and the Parasuraman et, al. (1985) model - service quality is evaluated based on five gaps. But perhaps the Parasuraman et, al model is the most popular, because of its specificity, detail and the evaluation tools are always tested and updated by the author and colleagues.

Parasuraman was a pioneer in service quality research (1985). The success of the research created a breakthrough means for businesses to get the results of their service quality through the research of customer evaluation - service users. The SERVQUAL model is a combination of the two words Service and Quality, which is considered by many researchers to be quite comprehensive. After that, the Servqual Model continued to be perfected through focusing on the concept of "Perceived quality" of consumers. Customer perception of quality is the most objective assessment of service quality. Parasuraman's research suggests that Service quality is the gap between customers' expectations of the service they are using and their actual perception of the service they enjoy.

This model with five specific differences is illustrated in Figure 1.1 and explained as follows:

Gap 1 is the difference between customer expectations and service provider perceptions of those expectations. The interpretation of customer expectations without a thorough understanding of service quality and customer characteristics creates this gap.

Difference 2 is created when the supplier encounters both objective and subjective difficulties and obstacles in translating perceived expectations into specific quality criteria and delivering them as expected. These criteria become


into marketing information to customers.

Difference 3 occurs when employees deliver services to customers that do not meet predetermined criteria. The role of direct transaction employees is very important in creating CDL.

Gap 4 is the difference between the service delivered and the information the customer receives. This information can raise expectations but can also lower perceived service quality when customers do not receive what was promised.

Gap 5 is formed from the difference between perceived quality and expected quality when customers consume the service.




( Source: Parasuraman & ctg (1985)


Figure 1. 2 SERVQUAL service quality model

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