1
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
Table of Contents
No.
TOPIC
1
PAGE
Abstract
2
2
1
Introduction
3
3
2
Literature Review
4
4
2.1
Women-Only-Banks
8
5
2.2
Saudi Islamic Banks
8
6
2.3
The National Commercial Bank (NCB)
9
7
3
Methodology
10
8
4
Data Processing
10
9
4.1
Demography of the Respondents
12
10
4.2
Descriptive Statistics
13
11
5
Quantitative Analysis
14
12
6
Qualitative Discussion
19
13
7
Research Findings
20
14
8
Recommendations
22
15
9
Conclusion
23
16
References
25
17
Appendix
27
Research Questionnaire
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
2
Abstract
For over a number of decades, banking sector or banking industry in Saudi Arabia has been on a
constant growth. It has been the Saudi economy’s most significant and deeply seated sector,
which is represented by roughly a third of the aggregate market capitalization of all the nation’s
listed companies. As a result, banks within the banking industry have been on a constant
competition for customers. Banks must thereby be innovative enough to come up with a number
of ideas and new systems that aid their competitive advantage. The success and/or failure of
banking services, thereby depend on the quality of the relationship between service providers and
customers. This is a very vital aspect in the determination of customer satisfaction with the
banking services provided. In this context, we thereby define “customer satisfaction” as the
evaluation of products and/or services from the customers, with regards to the ability of that
product or service to fulfil their projected needs and expectation. In this research report, we
reveal customer satisfaction to be resolutely founded upon the reliability and quality of products
and services offered by the service providers or suppliers. This research also reveals and brings
to light the most relevant determinants for describing and measuring the levels of customer
satisfaction with services, from the retail banking sector in the Saudi Arabian market. In a survey
conducted on different Saudi banking customers through questionnaires, the paper provides the
real world data, which was analysed through a model known as SERVQUAL model. This model
relies on five aspects: reliability, empathy, assurance, tangibles, and responsiveness in order to
define and expose the levels of customer satisfaction with banking services in Saudi Arabia.
Key Words: Banking, banking services, customer satisfaction, quality, reliability, customer,
bank, service quality.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
3
1. Introduction
Banking has been one of the Saudi Arabian economy’s most essential and deep-seated
sectors, represented by approximately a third of the aggregate market capitalization of all the
Kingdom’s listed companies. Banks in the Kingdom of Saudi Arabia trace their long history,
including the large-scale ground-breaking development when oil prices soared by 1970s.
Nonetheless, the success or failure of service providers commonly and largely depends on the
quality of their relationship with their customers, which is quite critical in the determination of
customer satisfaction. Shankar (2010) reveals that all organizations, to some degree, compete on
the basis of service provisions, which are targeted at fulfilling the demands or needs of their
customers. Customer satisfaction can thereby be defined as the evaluation of a product or a
service by a customer in terms of the ability of the product or service to meet their intended
needs and expectations (Woodruff, 1997). Customer satisfaction is resolutely founded upon the
reliability and quality of the products and services offered by the product, supplier and/or service
provider (Tri, 2011). Nevertheless, almost every retail bank operating within the Saudi Kingdom
encounter similar problems with regards to service quality assurance and meeting of their
customer service expectations and satisfaction (Shankar, 2010).
The practical necessity for customer satisfaction has thereby forced several banks to
participate in a number of services, such as the opening of female-only branches. This research,
thereby reveals and brings to light the most relevant determinants for describing and measuring
the levels of customer satisfaction with services, from the retail banking sector in the Saudi
Arabian market (Shankar, 2010). Through a closer scrutiny of the Saudi National Commercial
Bank (NCB)’s activities and other banks’ services, the research reveals a very close relationship
between service quality and customer satisfaction. High quality bank products and services,
thereby means a high level of customer satisfaction, while low quality services would mean a
low customer satisfaction level, hence a dwindling customer base (Shankar, 2010).
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
4
2. Literature Review
According to the UK Group of 20 (2009), in a relatively short duration of time, the
Kingdom of Saudi Arabia has been transforming into a global economic force, as evidenced by
its inclusion in the Group of 20 (G-20). By 2008, the Kingdom’s total population topped by
approximately 28 million people. A close scrutiny at this number reveals that about 20 million of
the total population were Saudi citizens, with the remaining approximation of 8 million being
expatriate residents (United Kingdom, 2009). With the upsurge of oil extraction and majorly due
to the oil revenues, the years of prosperity have resulted in a large baby boom within the country,
with a the population of those under 15 years of age making about 38% of the total population;
this is approximately 10.6 million. As this young generation begin to hit maturity age, they
definitely require banking services for their businesses and daily activities – services that meet
their needs, wants and expectations. Abdulaziz (1995) thereby confirms that the sustainability
and growth of the Saudi banks clearly and completely rely on this maturing population;
attracting, servicing and retaining the younger generation as their target customers, and also as
skilled and productive employees. In the interest of gaining deeper insight into this domain
segment’s perception, preferences, and customer satisfaction, this research undertook a survey,
which investigated the banking experiences of the Saudi young and mid generations, with close
regards to the levels of their satisfaction with the banking services offered to them.
Nearly 17 million young citizens defined under the age of 30 years, currently live within
the Kingdom of Saudi Arabia. The young generation below this age bracket represent about 60%
of the nation’s total population. Obviously, no entity or individual (i.e. a corporation, religious
leader, educational institutions, and government segments among others) would fail to take into
account or consider the influence that this young generation exerts to the nation’s economy.
Alternatively, another phenomenon that exists in the modern Saudi Arabia is that despite the
previous economic downturns experienced by a number of the world’s economies, the Saudi
economy has been on a continuous and constant growth (Churchill & Surprenant, 1982). Many
industrial segments are showing an increase in demand in products such as appliances, housing,
electronics, and home furnishing. Consequently, this increase in disposable incomes within the
country has resulted in an expansion and advancement in the banking industry. Research reveals
that by 2008, there about 11 commercial banks operating business within the kingdom, 5 of them
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
5
being completely Saudi-owned and about 6 were Saudi-owned with minority foreign holders
(Churchill & Surprenant, 1982). Even though the banks preferred the traditional way of cash
transaction only, the Saudi citizens began to embrace the banking and purchasing practices as
done in other developed nations, such as the use of credit cards, debit and charge cards, which
they currently utilize to greater frequencies (Euromonitor International, 2009). Moreover, an
augmenting number of Saudi banking customers currently and regularly use ATMs, as well as
online services, which they greatly prefer as opposed to the common teller-based services
(Euromonitor International, 2009). This rend reveals to what extent the Saudi bankers are
continuously getting satisfied with the technologically improved banking services, and it is in no
doubt that these trends are piloted or propelled by the younger generation who grow up with and
are comfortable with the technology-based services.
So, what actually does this research reveal and tries to make us understand about the
impressively large group of young population in Saudi Arabia? May be, this will make us
understand the banking trends and customer tastes for banking products and services in Saudi
Arabia, which would satisfy their banker wants and needs. Wilson (2004) portrays the Saudi
youths to be a generation with higher education and greater expectations than their preceding
generations or parents. This young generation is different from their predecessors in several
ways. For instance, there is a greater possibility that their higher education has not been received
from non-Saudi universities. The young females are educated as well as men of their age, since
they are increasingly found to be hardworking and working outside their home comforts
(Churchill & Surprenant, 1982). Unlike their parents, the generation grew up engulfed by
technology, such as computers and cell phones; they are more likely to have knowledge of the
importance of banking, and on relationships among people from diverse cultures, which is made
possible by travelling, while studying, from media exposure, and via the internet, just to mention
a few. This generation has formed a market segment, which this research found to be more
comfortable while using the new banking technologies of credit cards, debit cards, and charge
cards (Euromonitor International, 2009). They also find it easier to utilize consumer loans in
order to enable them to experience their desired living-style or lifestyle earlier in their life.
Thanks to the younger generation, by 2013 Saudi National Bank Report revealed that consumer
loans had hit SR 630 billion, as opposed to the 2008’s SR 240 billion.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
6
Despite this awareness of the significance of the young population segment in the
banking activities, a question still persists in the best way the banks can use to completely earn
the loyalty of this potential and lucrative market segment. To find out how best this question can
be answered, TNS/NFO- a market research company within the Middle East region, defines the
Saudi banking environment as an environment where bank customers are faced with an
increasing options for products/services, as well, they are becoming highly demanding since they
currently witness banks competing to offer high-level services (Woodruff, 1997). Supposing
banks do not have better mechanisms for understanding their customers’ needs, targeting
customers with a “segmentation approach” (the one-size-fits-all principle will no longer work)
and offering superior services, they are more likely to face a dwindling customer loyalty, which
may in the long run or short run, result in an increased cost of customer retention or acquisition.
Furthermore, TNS/NFO stated that bank customers will start selecting which bank to attend to
them, on the basis of higher order intangible and emotional benefits (Churchill & Surprenant,
1982).
Taking a deeper insight, many researchers generally conceptualized customer satisfaction
as the feeling of disappointment or pleasure that a person gains by comparing the perceived
outcome or performance against their expectations (Babatunde & Olukemi, 2012). The two
common conceptualizations of customer satisfaction are: (i) cumulative satisfaction, and (ii)
transaction-specific satisfaction. The cumulative satisfaction denotes how customers evaluate
their overall consumer experience, and set their personal standards that they subsequently use to
gauge the service quality (Tri, 2011). Transaction-specific satisfaction, on the other hand, refers
to how customers evaluate their experience, and react to their service encounters. In essence,
higher service quality, thereby means higher customer satisfaction (Babatunde & Olukemi,
2012). However, there is a general global agreement that the banking sector holds no recognized
or standardized scale for measuring the perception of their customers on the quality of their
services (Hossain, 2009). As a result, gaining a competitive advantage through offering highquality services is currently becoming greatly essential for the survival within this sector. On the
contrary, Babatunde and Olukemi (2012) argue that the unique characteristics of services such as
intangibility, heterogeneity, perishability, and inseparability make it almost impossible for the
banking service providers to measure their service quality.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
7
According to Wilson (2004), the provision of high-quality banking services in Saudi
Arabia enhances the attraction of new customers and customer retention rates, hence increased
productivity, which leads to higher market share, low costs of operation and stock turnover, and
improves the profitability, financial performance, as well as morale among employees. This
research, thereby asserts that if managers in the Saudi Arabian banking sector can deeply
understand what underlies the service quality and its impacts on customer loyalty (Shankar,
2010), it can be able to direct all efforts on the fields that greatly contribute to customer retention
in both short and long run.
Since customer satisfaction is largely derived from reliability and quality, high-quality
services can lead to high customer satisfaction hence increase in customer loyalty. Churchill and
Surprenant (1982) found out that customers who were highly satisfied were more loyal as
opposed to those who were just satisfied. In support of that statement, this research also found
that a good percentage of Saudi bank customers (approximately 40%) switched banks due to
what they perceived as “poor service.” An improved service quality alongside professional
behaviours thereby translates to an improved customer satisfaction, and reduced customer
attrition (Shankar, 2010). It is true that almost all banks globally deliver almost similar products
and services, with only minimal interest rate varies, yet a number of customers still have their
preferred bank choices. Therefore, bank managements tend to alternate their firms from their
competitors simply through service quality (Woodruff, 1997). It is thereby clear that service
quality is a very imperative element the greatly impacts customer satisfaction levels within the
banking industry (Churchill & Surprenant, 1982). Within the banking sector, quality is thereby a
multi-dimensional concept and variable, which involves differing forms of reliability,
convenience, service portfolio, as well as the service delivering stuff. The degree of customer
satisfaction by a bank, thereby determines the bank’s competitive power and survival (Woodruff,
1997). Hence, Saudi Banks pay a very close attention their customer satisfaction.
In efforts to optimize their service quality and ensure customer satisfaction to their
advantage, the banking sector in Saudi Arabia has introduced exclusive services such as WomenOnly banks, and Saudi Islamic banks (Khattak, 2010). The Saudi Islamic banking was
established to ensure the satisfaction of Islamic customers and this explains the high-level
relationships between the Islamic banks and their clients, as well as the customer satisfaction and
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
8
shifting behaviours at the Islamic banks in Saudi Arabia (Abdulaziz, 1995). Owing to the rising
women movements and advocacy for women's rights from 1960s to 1990s, banks in Saudi
Arabia saw an opportunity to establish women-only banks, which only offer banking services to
women. This abated the predominant or customary situations of female misperception and
gender imbalance in the Asian continent, and introduced a platform upon which the Saudi
women can comfortably and easily satisfy their banking quests (Wilson, 2004). The introduction
of women-only banks also helped the Saudi banking sector to eradicate the gender imbalance in
banking hence everyone, both males and females, could easily find a fair platform for satisfying
their banking needs or wants (Khattak, 2010).
2.1
Women-Only Banks
In its edition dated: 18th December, 2012, Al Arabiya highlighted a growth in the Middle-
East’s women-only bank branches and related funds. It also stated that women in Saudi Arabiathe world’s leading crude oil exporter, are believed to be sitting on about $12 billion pure cash.
The nation’s NCB has about 46 women-only bank branches since 1980. As well, the Saudi,
Holland Bank also plans to add more women-only branches onto the existing 22 branches. All
these are targeting the satisfaction of female bankers in Saudi Arabia with banking services
without any gender interruption or business.
2.2
Saudi Islamic Banks
Another predominant trend in the Saudi banking is the re-structuring of bank products, so that
they become aligned with the Islamic Sharia law teachings (Naser, 1999). One of the creeds of
this banking philosophy is that “it prohibits interest-bearing transactions.” This banking system
has resulted in the development of Sharia-compliant products and services, which encompass
‘profit-loss sharing’ arrangements rather than the outmoded principles and interest-based
transactions or payments. Such services and products have proved to be extremely popular
amongst large chunks of Muslim populations (Naser, 1999). As a result, even the transnational
banks situated within the Kingdom of Saudi Arabia are currently offering the Shari-based
product lines and services in order to meet the needs and wants of their target customers, hence
customer satisfaction (Naser, 1999).
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
9
Service as a strong pillar of the Islamic monetary systems, the Islamic Banking sector has gained
an unprecedented reputation from both Muslims and Non-Muslims over the past three decades.
In Saudi Arabia, the Saudi Islamic Banking sector witnessed an average growth rate of about
22%, and approximately $1.8 trillion of the total value of assets, which was valued at $2 trillion
by the fiscal year ended 2014 (Woodruff, 1997). The growing adoption of Islamic banking
system shows the support for the Islamic financial systems, both for the Muslim majority and the
Western nations (Naser, 1999). Its rapid growth also proves higher levels of public acceptance
and customer satisfaction.
2.3
The National Commercial Bank (NCB)
One of the Saudi banks that this research was focused on being the National Commercial
Bank (NCB). This bank served as the best research choice for a number of reasons. According to
ABQ Zawya Ltd (2008), NCB was the first bank in the Kingdom of Saudi Arabia, and it remains
a hundred percent Saudi-owned. Currently, it is the largest bank in the Saudi Kingdom in terms
of capital. It operates at 267 branches, has over 4,600 employees and over 2 million customers.
NCB is a full-service-commercial bank offering both traditional and Sharia-based personal
banking services, such as debit, credit, charge cards, investments, savings, and consumer loan
services. ABQ Zawya Ltd (2008) affirms that the NCB keeps up with technological advances,
including the offering of thousands of ATMs and point-of-sale devices nationwide (Euromonitor
International, 2009). Additionally, they offer customers with phone, SMS-based banking and online banking capabilities via electronic channels. This study, thereby supports that all these
services specifically aim at the satisfaction of customer wants and needs.
By 1953, approximately 20 years after the birth of the kingdom, the Saudi government
established the nation’s central bank- the “Saudi Arabian Monetary Agency (SAMA).” One year
later, the first commercial bank- “National Commercial Bank (NCB)” was established in Saudi
Arabia. For a number of years, banking entities within the country remained Saudi Owned, not
until 2003 when the government permitted the first foreign bank- Deutsche Bank to open its
branch within the nation’s capital.
In 2007, NCB reported an operating income of about SR 10 billion, and a net profit of
over SR 6 billion. Indeed, technological reports reveal that more than 70% of the bank’s annual
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
10
transactions are conducted via electronic channels. The Tadawul- the bank’s free online trading
platform is reportedly handling an average of 1.2 million transactions monthly. Nonetheless,
regardless of all the bank’s efforts, it still struggles to hold its position and reputation within the
Saudi banking industry. Even though they were ranked at the top on the basis of capitalism, NCB
is indeed the second in terms of Sharia-based product selling within Saudi Arabia, as well as in
terms of ATMs and POSs (Naser, 1999). Also, in 2007, the NCB was ranked the second in terms
of market share when it comes to credit, debit, and charge cards in Saudi’s circulation
(Euromonitor International, 2009). The key to NCB’s success in the future, thereby lies upon
their ability to attract and/or retain the young generation of the Saudi’s potential banking
customers to their products and services.
3. Methodology
This study aimed at the evaluation of what impact service quality has on the SERVQUAL
model, and on customer satisfaction in Saudi Arabia’s banking sector. It was quantitative in
nature and involved the distribution of structured, self-administered, and pre-tested
questionnaires that were based on convenience methods to about 300 bank customers of various
bank branches within the Saudi capital city of Riyadh; the NCB being the central focus. The
research survey was conducted at different bank branches within Riyadh and involve a number
of NCB branches as well as other reliable local bank branches for data reliability, efficiency, and
accuracy. NCB branches were the centre of focus since they are the only banks that are 100%
Saudi-owned (ABQ Zawya Ltd. 2008). The 300 questionnaires were used on 300 Saudi bank
customers. The respondents were picked at random, provided an individual was a bank account
holder in Saudi Arabia. The data obtained was then analysed in order to come up with a
conclusion about customer satisfaction in the Kingdom of Saudi Arabia.
4. Data Processing
Data for this research were majorly from questionnaire responses obtained from a direct
survey conducted with respondents living within the city of Riyadh in Saudi Arabia. The
respondents were all bank account holders receiving banking services within Saudi Arabia. The
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
11
formula used to select the sample size out of the large and unknown population for the study is
adapted from Israel (Israel, 1992). The formula is given as:
𝑍 2 𝑝𝑞
𝑛0 =
𝑒𝑧
Where:
n0 – sample size
z – Z- value of α (for this study, the value of α was assumed to be 1.484%)
p – Variability (variability for this study is 0.5)
q–1–p
e – Level of precision or error in sampling (the sampling error tolerated in this study is 0.05).
Therefore, the sample size equals;
1.4842 (0.5)(0.5)⁄
𝑛0 =
= 220
0.052
Hence, the total number of respondents was approximately 450, but only 220 questionnaires
were usable, about 80 were found unusable, and the rest were never returned.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
12
4.1
Demography of the Respondents
Gender
Age (Years)
Marital Status
Education
Variable
Frequency
Percentage %
Male
188
85.5
Female
32
14.5
< 25
27
12.3
25 – 35
86
39.1
36 – 45
45
20.5
46 – 55
34
15.5
55 >
28
12.7
Married
164
74.5
Single
56
25.5
Elementary – High
22
10
Diploma
29
13.2
Undergraduate
141
64.1
Postgraduate
28
12.7
Entrepreneur
58
26.4
Government
59
26.8
Private Sectors
27
12.3
Lecturer
17
7.7
Teacher
45
20.5
Other
14
6.4
< 2 years
34
15.5
2 – 5 years
70
31.8
5 – 10 years
46
20.9
School
Degree
Job Type
Employee
Duration of Being
Customer
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
13
Account Type
Bank Ownership
10 – 15 years
48
21.8
Variable
Frequency
Percentage %
15 – 20 years
17
7.7
20 > years
5
2.3
Current
118
53.6
Savings
67
30.5
Credit card
18
8.2
Loan
25
11.4
Demat
0
0
Local bank
198
90
Foreign bank
22
10
Table 1: Respondents Demography
4.2
Descriptive Statistics
Out of the 220 respondents considered the analysis of this study, 188 (85.5%) are males
while the remaining 32 (14.5%) is female respondents. Furthermore, in terms of respondents’
ages, the majority 86 (39.1%) respondents are the youth falling under the age bracket of 25 – 35
years of age. This is followed by those who fall under the age of 35-45 years who contributed to
45 (20.5%) respondents in our data. 34 (15.5%) fall under 45-55 years, while the old and young
generations contributed least with 28 (12.7%) and 27 (12.3%) respectively. The majority of the
respondents are married 164 (74.5%) respondents, while the singles were 56 (25.5%)
respondents. In terms of education, the majority of the bankers are undergraduates, diploma,
postgraduate degree holders, and elementary-high schoolers having 64.1%, 13.2%, and 12.7%,
and 10% respondents respectively. Most of the bank account holders are government employees
and entrepreneurs both contributing to 53.2% of our respondents. The duration for account
holding differs, with most of the account holders having been in that position, receiving the
banking services for about 10 to 15 years (21.8%), followed by those who have been holding the
accounts for 5 to 10 years (20.9%). Moreover, the highest number of bank account holders have
current account types, contributing to about 53.6% of our respondents; those with savings
accounts follow with approximately 30.5%, while the credit accounts and loan account holders
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
14
come after with 18% and 25% respectively. Finally, the results from our questionnaire reveals
that the majority of respondents was holding accounts with Saudi local banks (90%), while only
10% have accounts with the foreign banks.
5 Quantitative Analysis
The SERVQUAL (service quality) model is used to measure the performance versus
expectation gaps across ten dimensions: competence, access, communication, courtesy,
credibility, reliability, responsiveness, security, tangibles, and customer understanding (Herbig &
Customer Satisfaction
Genestre, 1996). The elements of the SERVQUAL theoretical model are summarized as:
Asurance
Employee knokledge, courtesy and ability to
convey convidence and tust
Reliability
Extent to which the service can perform
reliably and accurately
Tangibles
How the physical equipment, facilities,
communication and personnel materials
appear
Empathy
Company's individualized attention and
care to its customers
Responsiveness
Willingness to provide helpful and prompt
service to customers
Fig. 1: SERVQUAL Model.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
15
In this data processing method, we propose five hypotheses, which are given in their objective
form as follows:
H1: Assurance holds a significant positive effect on customer satisfaction.
H2: Reliability holds a significant positive impact on customer satisfaction.
H3: Tangibles hold a significant impact on customer satisfaction.
H4: Empathy holds a significant impact on customer satisfaction.
H5: Responsiveness hold a significant impact on customer satisfaction.
An exploratory factor analysis (EFA) is then used here to identify the construct
dimensions in order to select the higher factor loadings, as well as results that are shown in the
Table 2. The high KMO measures of the factor analysis meet the required statistical
assumptions:
Component
SERVQUAL Items
1
Bank equipment looks modern
2
Excellent banks are visually
appealing physical facilities.
3
Staff at professional bank look
professional
4
Tangible Reliability Responsiveness Assurance Empathy
.753
.782
.800
Materials associated with the
services are visually appealing
.651
at excellent banks.
5
Excellent banks keep promises
to do things in a certain time.
6
.731
Excellent banks show sincere
interests in solving customer
related problems.
.591
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
16
SERVQUAL Items
7
Excellent
banks
Tangible Reliability Responsiveness Assurance Empathy
perform
services correctly the first time
8
.642
Excellent banks offer services
within
the
promised
or
.791
indicated time frame.
9
Excellent banks insist on errorfree records.
.686
10 Staff at excellent banks inform
customers exactly when certain
.613
services are performed.
11 Staff at excellent banks deliver
prompt service
.620
12 Staff of highly performing
banks are always willing to
.631
help customers.
13 Staff excellent banks are never
too busy to respond to request
.625
from customers.
14 Staff working at an excellent
bank behave in a way that
instils
confidence
amongst
.729
customers.
15 Customers
banks
using
feel
safe
excellent
while
.712
conducting their transactions.
16 Staff
working
in
excellent
banks is extremely cautious
while handling or dealing with
customers.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
.732
17
SERVQUAL Items
Tangible Reliability Responsiveness Assurance Empathy
17 At excellent banks, the staff has
the
knowledge
and
skills
required to handle customers
.731
and answer their questions
well.
18 Excellent
banks
offer
individual and close attention
.781
to their customers.
19 The hours of operation at
excellent banks are convenient
.731
for their customers.
20 Staff at leading banks offer
their
customers
personal
.821
attention.
21 Excellent
customers’
banks
hold
best
their
interest
at
.636
heart.
22 At
excellent
understands
banks,
the
staff
specific
.835
customer needs.
Table 2: Rotated Component Matrix.
All the items we found were loaded onto the dimension which they were designed for.
All the factor loadings were higher than 0.5, meaning that every item was loaded higher on its
associated construct as opposed to any other construct. As suggested by Johnson and Fornell
(1995), we considered a factor loading that is higher than 0.34 to be statistically significant at
alpha level 0.05. This finding thereby provides support for the “measurement’s discriminate
validity.”
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
18
A reliability test can thereby examine how consistent individuals were in their responses. Hence,
Cronbach’s alpha measures the study’s internal consistency and variables are based on sample
estimations (Israel, 1992).
Construct
Reliability Test
α
No. of Items
Tangible
4
0.912
Reliability
5
0.760
Responsiveness
4
0.894
Assurance
4
0.885
Empathy
5
0.868
Table 3: SERVQUAL Scale Reliability Analysis
For the above five SERVQUAL dimensions, the Cronbach’s alpha reliability co-efficient are
similar to those obtained from some of the previous studies. Even though we suggested 0.7 to be
the accepted cut-off point, any value greater than 0.6 was considered satisfactory. The reliability
test and analysis, thereby measures the stability on various conditions.
Model
R
𝑹𝟐
Adjusted Std. Err
F change
𝑹𝟐
1
0.782
a.
0.698
0.671
Change
Sig
St. df
3.8042
34.813
5
0.000
Predictors: (constant) - Responsiveness 1, Reliability 1, Tangible 1, Assurance 1,
Empathy 1.
b.
Dependant Variable: Customer Satisfaction 1
c.
P < 0.01
Table 4: Model Summary.
The table 4 above indicates that altogether, reliability, assurance, tangibles,
responsiveness, and empathy had approximately 75% influence on customer satisfaction. The 𝑅 2
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
19
For the five dimensions designates that these variables exhibit a strong influence on customer
satisfaction. The changes in F value (34.813) are essential, implying that the model is fit and
robust for this study.
6 Qualitative Discussion
Assurance: The assurance, which implies the customers’ feeling of account safety, holds
a positive relationship with customer satisfaction. However, there is no significant effect on it.
Basing on the responses obtained from bank customers (the respondents), customers hardly
consider assurance as an important aspect of service quality (Herbig & Genestre, 1996). A
number of customers report security at branches, perhaps on the phone banking and internet
banking- this is often due to customer carelessness. Banks must thereby enhance the levels of
their customer assurances in their services in order to retain the existing loyal customers and
attract new customers.
Reliability: This concern the timeliness and accuracy of services. Holding to the
responses to our questionnaires, reliability shows no significant impression on customer
satisfaction, perhaps due to the augmenting popularity of internet and phone banking, which
offer customers various alternative face-to-face customer services (Julian & Ramaseshan, 1994).
The full day (24/7) nature of the internet and phone banking implies that retail banks are capable
of reducing their operational costs by limiting the hours of branch operations and employing a
few numbers of staff. As a result, customers place their demands upon the reliability of machines
as opposed to humans while dealing with banks.
Tangibles: These include an organization or company’s equipment, facilities and
representatives. This study, thereby identifies a positive correlation and high-level significance
between tangibles and the overall customer service. For instance, when Saudi retail banks reduce
their hours of operation to five days a week, their customers find it impossible to visit bank
branches in person, hence they resolve to use the internet and telephone banking instead.
Empathy: Our results and hypotheses suggest that there is very little or no significant or
positive relationship existing between empathy and customer satisfaction with banking services
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
20
in Saudi Arabia. Nonetheless, several customers still enjoy using new bank facilities, while
others prefer face-to-face customer service.
Responsiveness: This refers to how timely and efficient a bank reacts to its customers’
demands and needs. In our study, responsiveness hold a great significance and better relationship
with customer satisfaction, though with little effect on it. We thereby conclude that
responsiveness is a positive aspect of quality service and customer satisfaction (Herbig &
Genestre, 1996). In essence, we found machines to have an averagely shorter time for response
and can constantly be improved upon, while human responsiveness may be affected by moods
and emotions, hence reducing the banks’ productivity in line with responsiveness.
7 Research Findings
In Saudi Arabia, the practical necessity for customer attraction and retention has forced
the banks to “up their game” in service provision and customer handling. Consequently, this has
also seen Saudi banks open up more Islamic (Sharia) banks, as well as Women-Only Banks,
which are services introduced with the sole aim of satisfying the banks’ target customers.
Keeping in view the objectives of this research, the SERVQUAL model has been used and it
proves that there are indeed five factors (empathy, responsiveness, reliability, assurance, and
tangibles) which truly affect and explains (up to 65%) the ways of business in the daily routines
of banking sector in Saudi Arabia. The introduction and implementation of customer satisfaction
models and theories in banking will thereby create a room for customer satisfaction and change
them to have positive perceptions towards banking services in Saudi Arabia. To draw the
conclusion from the findings, three hypotheses were stated and justified out of the proposed five
hypotheses:
i)
There is a substantial relationship between customer satisfaction and bank service
quality and efficiency.
ii)
There is a significant reliability and assurance, and the satisfaction of bank customer
needs and wants.
iii)
There is a significant relationship between responsiveness, tangibles, and the banking
system and customer satisfaction, (see Table 5)
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
21
Hypothesis
Service Aspect
Customer Satisfaction
Level (High, Medium,
Low)
H1
Assurance holds a significant positive effect on Assurance
High
customer satisfaction.
H2
Reliability holds a significant positive impact Reliability
High
on customer satisfaction
H3
Tangibles hold a significant impact on Tangible
Medium
customer satisfaction
H3
Empathy holds a significant impact on Empathy
Medium
customer satisfaction
H5
Responsiveness hold a significant impact on Responsiveness
High
customer satisfaction
Table 5: Questionnaire Hypotheses.
In Saudi Arabia, the banking sector have realized the need for customer satisfaction. As a
result, the banking sector has come up with a number of banking alternatives, systems and
programs that help them build a broad platform for satisfying their customers. For instance, the
Saudi banking industry came up with the Saudi Islamic Banks and Women-Only Banks by
1990s, which operate under certain regulations, all with a central goal of satisfying a given group
of customers. The Saudi Islamic banks operate under Sharia laws, which commonly embrace the
Islamic norms. On the other hand, the Women-Only banking systems were introduced in order to
cater for female banking needs, without the exploitation of their vulnerability.
Our research has also revealed that a good number of Saudi bankers are the young
population between the age brackets of 25 – 45 years. This population is very significant to the
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
22
Saudi Arabian banking sector since it provides a large number of bankers. As well, the young
population in Saudi Arabia is the central focus and the source of bank employees, who are
creative and innovative when it comes to the generation of new banking ideas. The Saudi
banking industry, thereby grabs the opportunity and utilizes the potentiality in knowledge and
skills of the youth in order to come up with quality services which satisfies their customer needs
and wants (Herbig & Genestre, 1996). Moreover, the research results reveal that customer
satisfaction is highly dependent upon the quality of services offered – high service quality allows
for customer retention and as well attracts more new customers, hence an evidence of customer
satisfaction (Herbig & Genestre, 1996). On the contrary, low quality of services would scare
customers away and even lead to the collapse of the business.
This research also found that:
i)
Respondents’ feeling of banking service quality is positive.
ii)
The bank customers feel much more secure with their bank accounts of the Saudi
banks offer timely and prompt banking services.
iii)
We also found that in order to maintain their customers and attract new customers,
the Saudi banks must enhance their banking technologies and introduce new
programs that improve service quality (Iymperopoulous, Chaniotakis & Soureli,
2006).
iv)
Finally, our study reveals that majority of Saudi bank customers feel comfortable,
secure, and satisfied with current services offered by their banks, and they would
easily acknowledge their banks to their friends, relatives, job colleagues or business
partners.
8 Recommendations
Based on the results obtained from the questionnaires of this study, we recommend the following
to the Saudi banks for the satisfaction of their customers hence their projected success in
banking:
i)
Banks must enhance the levels of their customer assurances in their services in order
to retain the existing loyal customers and attract new customers.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
23
ii)
We recommend the Saudi banks to work on the quality of their service offering in
order to meet the expectations of their customers, hence customer satisfaction.
iii)
The Saudi banks should pay close attention and prioritize their customers’ satisfaction
through looking deep into the satisfying aspects such as assurance, responsiveness,
reliability, empathy, as well as the tangibles.
iv)
We recommend that Saudi banks should continue offering prompt and timely services
in order to create a positive competitive advantage within the Saudi banking industry.
v)
We also recommend that Saudi banks ought to continue making their customers feel
important and highly valued, have experienced staff personnel, as well as an equipped
customer service unit. This will enable them to provide customers with prompt
service and proper solutions to customers’ complaints, challenges and problems.
9 Conclusion
This study examined customer satisfaction, switching behaviour, and the relevant
determinants for describing and measuring the levels of customer satisfaction with services from
the retail banking sector in the Saudi Arabian market. The model used herein for data analysis
reveals these determinants to be empathetic, responsive, tangibles, reliability, and assurance. The
model is known as SERVQUAL model, which relied on the data obtained from the distributed
questionnaires and descriptive analyses. The results from this research further indicate that the
factors for keeping up the good service offering in the Saudi banking market include the
adoption of new technologies in the market, alternative service offering, sharia compliance, bank
and account type, confidentiality, security, bank statement and data accuracy, and bank staff
friendliness. Alternatively, ATM and credit card services, explanation, clarity, promptness in
giving a response, staff understanding of their roles and customer needs, complaint or issue
handling are very vital for the operation of retail and commercial banks in Saudi Arabia. Since
these factors are very essential to customer retention and attraction of new customers, it is
advisable for the Saudi banks to pay more attention and high priority to these factors and
customer needs and/or wants (Julian & Ramaseshan, 1994).
In order to enhance the discussion on banking activities and customer satisfaction, and to
test the strength of further findings in other customer satisfaction and banking related studies,
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
24
further researches are recommended for the following: (i) Replication of similar studies in other
countries, (ii) The use of diverse approaches and methods in order to find out whether the
approach employed and the model we proposed and used in this study is robust, applicable and
suitable.
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
25
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Customer Satisfaction of the Banking Financial Services in Saudi Arabia
27
Appendix
Research Questionnaire
Dear Sir/Madam,
I am a student at Al Yamamah University, doing MBA (Masters in Business
Administration). I am preparing a project report on Customer Satisfaction of the Banking,
Financial Services in Saudi Arabia,” studying the most relevant determinants for describing
and measuring the levels of customer satisfaction with banking services from the retail banking
sector in the Saudi Arabian banking market. For this reason, I have designed a questionnaire to
seek for your views on the banking services. Please, kindly fill in the information required and
answer the questions provided below according to your thinking and experience! I will be so
much grateful and thankful to you for this.
Instructions: The research survey questionnaires that were used to obtain information from the
involved bank customers (the respondents) was categorized into two parts, and they were as
follows:
Part A:
This sectioned included optional questions, which the respondents were to answer at own
discretion. They were majorly personal details which included:
i.
Name:
ii.
Gender:
iii.
Occupation:
iv.
Annual Income:
Part B:
The questions in this section intended to obtain the information for the major research concern.
They included:
i)
What is the name of your bank?
ii)
Do you feel or think that your bank caters for all your banking needs?
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
28
a) Agree
b) Strongly agree
c) Disagree
d) Strongly disagree
e) Not certain
iii)
For how long have you been a customer of your bank and their services?
a) Less than 2 years
b) Between 2 to 5 years
c) Between 5 to 10 years
d) Between 10 to 15 years
e) Between 15 to 20 years
f) Over 20 years
iv)
What kind of account do you hold in this bank?
a) Savings
b) Current
c) Credit card
d) Loan account
e) Demat
v)
Which facilities are given the higher concentration at your bank?
a) Loan facilities
b) O/D facilities
c) ATM facilities
vi)
Whenever you think of your bank, what comes to your mind?
a) Insecurity
b) Security
c) Wide branch network and customer base
d) Good customer service
e) Digital banking (computerized) and responsible banking
f) Personalized services, or
g) Any other, specify).
vii)
Do you think your bank offers a competitive service for interest rates?
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
29
a) Yes I strongly agree
b) Agree
c) Disagree
d) Strongly disagree
e) Not certain
viii)
Does your bank charge unnecessarily for maintaining a minimum balance in your
account?
a) Yes, it does
b) No, it doesn’t
c) Not certain
ix)
Does your bank keep money safe while allowing for withdrawals whenever needed?
a) Keep money safe and allow for withdrawal at any time
b) Money not safe and withdrawals allowed at any time
c) Keep money safe, but limits the number of withdrawals done
d) Money not kept safe and withdrawals are also limited
x)
Does your bank hold a documented list of its shares in stock exchange stock market
portfolio, domestic, international or both?
a) Domestic only
b) International only
c) Both domestic and international
d) Not sure
xi)
Issuance of check books so that bills can be paid and other forms of payments can be
delivered by post:
a) Check books issued for bill payments, but other forms of payment not delivered
by post
b) Check books issued for bill payments and other types of payments delivered by
post
c) Check books not issued, but other forms of bill payments delivered by post
d) Check books not issued and other forms of payment also not delivered by post.
xii)
Have you ever at any time interacted with your bank branch manager on a special
bank issue or concern?
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
30
a) Yes, I have
b) No, I have never
c) If yes, how did he/she address you; were you satisfied with his support?
xiii)
In a five-star rating, how can you rate the willingness of your bank to respond to
customer concerns?
a) 1 star
b) 2 stars
c) 3 stars
d) 4 stars
e) 5 stars
xiv)
Have you applied for credit (line of credit, a loan or mortgage) in the past few years?
a) Yes, I have applied
b) No, I have never applied
c) If yes, how satisfied were you with the service? (Rate in terms of five stars).
xv)
Do you receive a monthly bank statement? What is your stand about it?
a) Bank statements issued monthly
b) Bank statement not issued
c) Bank statements issued but with a lot of errors
d) Bank statements issued with higher accuracy and exact account details
e) Bank statement issued but not reliable
xvi)
Do you use services for alternative banks?
a) Yes, I do
b) No, I don’t
xvii)
Are you generally satisfied by the way your bank offers you services?
a) Highly satisfied
b) Satisfied
c) Not satisfied
d) Undecided
xviii) Provide personal loans, mortgage loans, commercial loans (typically loans to
purchase a property, home, or business)?
a) Offer all forms of loans or loan services a customer would need
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
31
b) Only provides personal loans and mortgages
c) Offers loans, but in limited amounts that can't purchase lucrative properties,
homes or businesses
d) No loan services offered
xix)
Issuance of debit cards and processing of credit card billings and transactions
a) Debit cards issued and debit card billings and transaction processes conducted
b) Debit cards not issued and debit card transactions and billings not offered
c) Debit cards issued, but debit card billings not performed
d) Debit cards issued only for customer transactions (withdrawals and deposit)
xx)
Use of debit cards for use as a substitute for cheques
a) Debit cards used as substitutes for cheques
b) Debit cards not issued
c) Debit cards issued but not used as substitutes for cheques
xxi)
Allow financial transactions at branches or by using Automatic Teller Machines
(ATMs).
a) Financial transactions or use of ATMs at branches allowed
b) Financial transactions or use of ATMs at branches not allowed
c) Financial transactions of use of ATMs only allowed at the main branch or
headquarters
d) Financial transactions at branches allowed, but no use of ATMs
xxii)
Would you recommend this bank or branch to a friend, relative, or business
associate?
a) Yes
b) No
c) If No, give reason.
xxiii) What do you feel about the overall service quality of your bank?
a) Excellent
b) Very good
c) Good
d) Average
e) Poor
Customer Satisfaction of the Banking Financial Services in Saudi Arabia
32
f) Very poor
Customer Satisfaction of the Banking Financial Services in Saudi Arabia