Conceptual Categories Related To Banking Service Quality

Published Date: 02 Nov 2017

2.0 Introduction

This chapter reviews books, articles, journals, and other forms of documentary evidence on the role of information communication technology in total quality management stressing on the issue being discussed and not the documents. The researcher explores and assembles evidence from documents that concern the research question. Hence the literature review relates various arguments on relevant works that focuses on the theme of the research.

2.1 Information Communication Technology

Information technology (IT) is increasing in importance for companies and its effects on global trading are becoming widely felt (Mahan & Gotlieb, 1992). Technological developments particularly in the area of Telecommunications and Information Technology are revolutionizing the way business is done in Ghana. ICT is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to buy products and services. This uprising in the financial industry has activated a new signal of change in the banking sector for the provision of service and products that is well-matched with demands of ICT. Without doubt, the advances in ICT have introduced new delivery channels in the Ghanaian banking sector (Amoako, 2012).

Weston (1993) claims that all these interventions rely on IT, since they act as a feedback mechanism to users who are keen to measure productivity and, in addition, they also serve as the means to get rapid and more accurate information, improve communication links, and facilitate the implementation of advanced tools, systems and modelling techniques. Fortunately, the technology has caught up with Ghana. Data are always being collected consciously and sometimes unconsciously. The names, addresses, and telephone numbers of customers; items in stock, items purchased; marks scored in assignments and examination, number of students in the university, the number and classification of books in a library etc. are examples of data that is collected by various establishments (Amoako,2012). The improvement in ICT has enhanced the creation of new business models and has revolutionized the distribution channels of financial system resulting in not only a reduction in the transaction costs but also has improved the convenience and accessibility for the customer (Curtain, 1998).

2.1 Theoretical Framework

2.1.2 Total Quality Management (TQM) in the Banking Sector

According to Talib et al (2012), after the successful implementation of TQM in manufacturing it is now being extensively applied in service sectors including banks, to improve business performance. Their findings indicated that to ensure successful implementation of TQM in the banks, there were certain critical dimensions which needed to be addressed, viz: management commitment and support towards TQM, motivating and training of employees, and monitoring of customers’ requirement through feedback. Beside this, it was also found that service quality is an important construct in banking sector and identifies four broad conceptual categories related to service quality. It also provided an understanding of the role of TQM and service quality in banking sector and it also provides useful direction for future research (Talib et al, 2012).

2.1.3 Conceptual Categories Related to Banking service quality

Talib et al identified the following four broad conceptual categories related to banking service quality:

Customer service quality

Banking service product quality.

Online/e-service quality.

Automated service quality.

Customer service quality: Banking is a high involvement industry. Customers, whether at the retail or corporate level have always been important for banks. Customer satisfaction is highly related with service quality as service quality improves the probability of customer satisfaction (Joseph & Stone, 2003), this results in commitment, intent to stay (customer retention), creation of a mutually rewarding relationship (bond) between the service provider and the user, increased customer tolerance for service failure and positive word-of-mouth advertising about the organization (Newman ,2001)

In the era when intense competition is being greatly facilitated by technology, the need of providing adequate service quality will necessitate that banks have to focus attention on issues of improving, measuring and controlling their service quality and efficiency. Banking industries therefore should emphasize deeper penetration of the existing customer database. The data about customer needs and behavior enables organizations to identify today’s key customer, develop relations with tomorrow’s customers and estimate their future investment opportunities (Talib et al, 2012)

Banking service product quality: The bank product quality is primarily associated with product variety and diverse features. Banking service product quality plays a significant role in determining customer’s perceptions of the overall banking service quality. Banks have increased emphasis on marketing a wide array of financial services in order to survive in the market due to tough competition (Strieter et al J, 1999). Dixon (1999), also argued that the key of getting more customers for the banks through the online service is not the attraction of the internet itself but the product offered to the customers. Bank customers wants variety of functions at one site and with ease like financial transactions, paying bills electronically and automatically, viewing their balance, monthly bank statements, purchasing shares and insurance, home loans with minimum rate of interest, purchasing cars and lands. Although banking service product quality is an intangible asset, it contributes to the competitive advantage in the banking industry. Therefore, it should be noted that continuously introducing and innovating the variety of banking service product quality to the current hi-tech customers can have unlimited access to financial information and enjoy a wider range of choices in selecting competitive products and financial institutions than ever before (Mols, 2000).

Online/internet/e-service quality: E-service is conceptualized as an interactive information service that provides a means to organizations that can build its service offerings and develop a competitive advantage (Baeur et al,2005) The basic reason behind development of online services was the cost reduction and to delight customers through automation (Rust & Kannan,2003) The article by Liu and Arnett (2000), considered the four quality factors as major ingredients for the success of website as: system use; system design quality; information quality; and playfulness. As for internet banking, Sathye (1999) found two factors such as "difficulty in use" and "security concern" which are important reasons for consumers not opting for internet banking services.

Automated/technology service quality: Automated service quality is defined as the customer’s overall evaluation of the excellence of services provided through electronic networks such as the internet, ATM, and telephone banking (Al-Hawari et al, 2009) . Dabholkar (1996) argue that when the customer is in direct contact with the technology there is a greater control such as with internet banking, however, if there is no direct contact, such as with telephone banking, it is assumed that there is less control perceived by the customer during this transaction. Overall, the need for technology to support superior service quality is viewed as very important factor for managing total quality in the banking sector.

2.1.4 Availability of E-Banking facilities at GCB

Owusu-Afriyie (2012) discovered that Ghana Commercial Bank Limited has introduced a wide range of e-banking facilities in order to capture a greater share of the market. It was discovered from the survey that e-banking services and products available at the Ghana Commercial Bank Limited branches included the use of the automated teller machine (ATM), e-zwich and other cards such as the mastercard visa, debit internet banking, credit cards and e-statements.

Different platforms for e-banking

The table below summarizes different platforms for e-banking

Delivery Platforms for Electronic Banking Type of Service

Description

PC banking (private dial up)

Proprietary software, distributed by the bank, is installed by the customer on their PC. Access to bank via a modem linked directly to the bank

Internet Banking

Access their bank via Internet

Managed networked

The bank makes use of an online service provided by another party

TV Based

The use of satellite or cable to deliver account information to the TV screens of customers(Also internet based) information to the TV screens of customers (Also Internet based)

Telephone banking

Customers access their bank via telephone (Own personal ID and password required)

Mobile phone banking (SMS, WAP, 3rd generation

Access with text message (SMS), Internet connection

(WAP), or high speed 3rd generation mobile connection (also Internet based).

Source: Owusu- Afriyie (2012)

2.2 Role of ICT in Banking

Information and communication technologies are playing a very important role in the advancements in banking. In fact information and communication technologies (ICT) are enabling banks to make radical changes to the way they operate. According to Consoli (2003), the historical paradigm of IT provides useful insights into the ‘learning opportunities’ that opened the way to radical changes in the banking industry such as the reconfiguration of its organizational structure and the diversification of the product line.

Banks are essentially intermediaries, which create added value by storing, manipulating and transferring purchasing power between different parties. To achieve this, banks rely on ICT to perform most functions, from book keeping to information storage and from enabling cash withdrawals to communicating with customers (Shah & Clarke, 2009). In developed countries at least, this high degree of reliance on ICT means that banks spend a large chunk of their budget on acquiring as well as maintaining these technologies. A focus on ROI reveals that ICTs provide a very limited return unless accompanied by changes in organizational structures and business processes. These changes also need to be followed by a diversification of service offerings, with many banks introducing new product lines such as credit cards, stock brokerage and investment management services. Thus, ICT has mostly enhanced productivity, as well as increased the choice for customers both in terms of variety of services available and in terms of the ways in which they are able to conduct their financial activities (Shah & Clarke, 2009).

2.3 ICT System That Have Made Great Impact on the Banking Activities

Banks have made extensive use of Information and Communication Technology (ICT) for many years in operations. The following Information and Communication Technology (ICT) Systems have made great impact on the banking activities

2.3.1 Banker’s Automated Clearing Services (BACS)

Banker’s Automated Clearing Services (BACS) use computers to carry out most financial transactions between banks. These consist of, clearing cheques, paying salaries, payment of standing orders or direct debits. The BACS does its processing by batch processing in which all transactions from the previous day are processed at one time. The processed data is passed between banks on magnetic tapes. Logs are kept of all the transaction (Mishkin and Strahan, 1999)

2.3.2 Automated Teller Machines (ATM)

Rose (1999) describes Automated teller machines (ATMs): An ATM combines a computer terminal record-keeping system and cash vault in one unit, permitting customers to enter the bank’s book keeping system with a plastic card containing a Personal Identification Number (PIN) or by punching a special code number into the computer terminal linked to the bank’s computerizes records 24 hours a day¨ once access is gained, it offers several retail banking services to customers. They are mostly located outside of banks, allowing customers to have access anytime of the day. ATMs are able to provide a wide range of services, such as making deposits, fund transfer between two accounts and bill payments (Amoako, 2012).

2.3.3 Telephone Banking

Telephone Banking ‘Telebanking’ can be considered as a form of remote or virtual banking, which is essentially the delivery of branch financial services via telecommunication devices where the bank customers can perform retail banking transactions by dialing a touch-tone telephone or mobile communication unit, which is connected to an automated system of the bank by utilizing Automated Voice Response (AVR) technology¨ (Balachandher el al, 2001).

2.3.4 Personal Computer Banking

PC-Banking is a service which allows the bank’s customers to access information about their accounts via a proprietary network, usually with the help of proprietary software installed on their personal computer. Once access is gained, the customer can perform a lot of retail banking functions. PC-Banking virtually establishes a branch in the customers’ home or office, and offers 24-hour service, seven days a week. It has the benefits of Telephone Banking and ATMs (Chorafas, 1988).

2.3.5 Electronic Funds Transfer at Point of Sale (EFTPoS)

An electronic Funds Transfer at Point of Sale is an on-line system that allows customers to transfer funds instantaneously from their bank accounts to merchant accounts when making purchases (at purchase points) (Amoako,2012). A POS uses a debit card to activate an Electronic Funds Transfer Process (Chorafas, 1988). Increased banking productivity results from the use of EFTPoS to service customers shopping payment requirements instead of clerical duties in handling cheques and cash withdrawals for shopping.

2.3.6 Internet Banking

The idea of Internet banking according to Essinger (1999) is; ‘to give customers access to their bank accounts via a web site and to enable them to enact certain transactions on their account, given compliance with stringent security checks’. Internet Banking by its nature offers more convenience and flexibility to customers coupled with a virtually absolute control over their banking. Service delivery is informational (informing customers on bank’s products, etc) and transactional (conducting retail banking services). In Ghana, Commercial Banks such as Ghana Commercial Bank, Standard Chartered Bank Ghana Limited, Ecobank Ghana Limited, Zenith Bank Ghana Limited and United Bank for Africa (UBA) are using some of the above mentioned products/services in their services delivery to customers. Examples of software’s being used include, FLEXCUBE - Ecobank Ghana Limited, and Electronic Business Banking System for the Standard Chartered Bank Ghana Limited (Amoako, 2012). According to the ARB Apex Bank report (2007), the banks have purchased emerging software for 123 Financial Institutions (Rural Banks) in Ghana to ensure uniformity in functionality and facilitate exchange of information between the banks. The developments in information collection, storage, processing and transmission and distribution technology have influenced all aspects of banking activities and are regarded as the main driving forces for the changes in banking industry.

2.4 Importance of Information and Communication Technology (ICT) On Banking Operations in Ghana

Amoako (2012) noted the influences of technology the banking industry in his publication on The Impact of Information and Communication Technology (ICT) On Banking Operations in Ghana in the International Journal of Business and Management Tomorrow Vol. 2 No. 3 in the following aspects below

2.4.1 Influence in Competition and the Degree of Contestability in Banking

Due to the development of technology, bank’s superiority in information is declining. Entry barrier have been declining, new competitors have emerged. Some financial products and services have become more transparent and, customers show willingness to unbundle the demand for financial products and services, all these lead to a more competitive environment. Due to lowered entry and exist and deconstruction, for some sub-financial markets, contestability in banking is also raised (Lucas, 2003).

2.4.2 Influence in Economy of Scale

Competitive pressure forces banks to lower their cost. Bank seeks to get economy of scale in bank progression instead of being a big bank. Bank seeks to secure the optimal business structure, and secure the competitive imperative of economy of scale (Amoako, 2012). There are other options to get economy of scale, including joint venture and confederation of financial firms. Small firms also can get economy of scale by outsource (Lucas, 2003).

2.4.3 Improve in delivery of Service

Technology has a major impact on the way banking and financial services are delivered. A wide range of alternative delivery mechanism becomes available, internet, ATM etc. these reduces the dependence on the branch network as a core delivery mechanism (Amoako, 2012).

2.4.4 Safe and Accessible for Users

Internet Banking gives you access to banking 24 hours a day, seven days a week. Online Banking also eliminates time and distance as barriers to banking. The use of internet banking helps to keep operating costs down for banks, resulting in cheaper transaction costs for customers (Amoako,2012). Bill payment is a service that allows a person to pay your hills online whenever the person wants to and whatever account you have. One can pay almost anyone from friends to businesses and creditors (Amoako,2012).

2.4.5 Convenient and Easy

Online banking has made this feature convenient and easy. With this feature one can transfer money between one’s accounts. This is not just limited to one’s accounts within one particular banking institution but almost any banking institution that the person has an account with. E-banking allows one to obtain real-time information about one’s bank accounts (Amoako,2012).

2.5 Expected Benefits of Using ICT in Rural Banks

Under the Millennium Development Authority, the Millennium Challenge Account (MCA) Ghana Program is sponsoring the US$25 Million Ghana Rural Bank Computerization Project which commenced in 2008 and is expected to be completed in December 2011(source: Ghana Rural Bank computerization project, http://mida.gov.gh/site/?p=2664). The benefits are listed below.

It makes it easier for the bank customers to access to more, varied and cheaper banking services with longer banking hours and greater convenience. Also bank staffs have shorter working hours and flexibility in rolling out more and cost effective services. There are also better career opportunities as rural banks work on the same hi-tech platform as the larger banks.

Concerning bank operations in general, ICT services take the drudgery out of service delivery and enables banks to focus on customer services. The needs of the customer become central to the decisions of banking business which is less determined by the limitations of current manual systems. Finally on economic development of rural areas, the rural economies with the state-of-the-art banking system acquire the critical infrastructure to support the commercialization of their economy away from the subsistence level especially with regards to payment services as well as savings and credit facilities from cheaper and safer regulated financial service providers(source: http://mida.gov.gh/site/?p=2664) .

2.6 Benefits of TQM implementation

Juran (2001) wrote that the benefits and goals of total quality are lower costs, higher revenues, delighted customers, and empowered employees. Costs can be lowered by reducing errors, reducing rework, and reducing non-value added work. Higher quality can also equate to higher revenues through satisfied customers, increased market share, improved customer retention, more loyal customers, and premium prices. Customers continue to demand higher quality goods and services. Delighted customers purchase over and over again, advertise goods and services for the company, and check first when they are going to buy anything else to see what is offered by the company they are loyal to. Empowered employees have the means to measure the quality of their own work processes, to interpret the measurements, and compare these measurements to goals and take action when the process is not on target. These empowered employees also understand who their customers are; what the customers need, want, and expect; how to design new goods and services to meet these needs; how to develop the necessary work processes; how to develop and use the necessary quality measurements; and how to continuously improve these processes.

The effective implementation of TQM will increase customer satisfaction with the service offerings (Omachonu & Ross, 1994). Quality enhances customer loyalty through satisfaction; this in turn can generate repeat business and lead to the attraction of new customers through positive word of mouth. The word of mouth communication will help in cost reduction. This Omachonu and Ross (1994), noted will provide competitive edge to the company. The improvement in quality will result in increased market share and profitability. In banking, quality means not just meeting but exceeding customer expectations. For this reason, service quality is viewed as an important aspect in the banking industry. Further, it is evident that over the years, bank customers’ perception of service quality has been changed tremendously. Today, quality includes a commitment towards continuous improvement and service relationships with customers. Also, the need for technology based services, new and improved product services, and e-services are also viewed as important aspects of banking service quality that supports improved and superior quality services provided to customer. Hence, these are the areas where banks have to focus upon in order to satisfy their customers (Talib et al, 2012).

2.7 Dimensions for the success of TQM in the banking sector

Talib et al found that several dimensions are responsible which are critical for success of TQM in the banking sector. In order to ensure a successful implementation of TQM in the banks, there is a need to motivate employees to improve the level of services provided by them. Also, appointment of qualified and competent managers will successfully contribute to the management of the banks together with giving enough training and education to employees so that they understand specific quality policy and TQM strategy. Lastly, monitoring the customer satisfaction and taking the feedback frequently would further improve the performance of the banking sector. Above all there is a need of top-management commitment towards TQM and giving full support for its successful implementation (Talib et al, 2012).

2.8 Barriers to E-Banking

The following factors demonstrate why e-banking may be difficult to implement, or why a bank may not realise the full benefits from it.

2.8.1 Access to the internet

Although the growth of the Internet has been very fast, there is still a large population not connected to the Internet. Lack of computer literacy, high cost of hardware and call charges and various other social and economic factors are some of the reasons cited for this (Walczuch et al., 2000). This is changing fast as more and more people connect to the Internet, and numbers are expected to grow even faster with the maturity of mobile communications (Samuals, 2002).However, this is still more of a problem in some developing countries, where the telecommunications infrastructure is less developed.

2.8.2 Fear of competition

Some banks have been hesitant to promote e-banking systems, fearing that their costs will become too high and that it will be difficult for them to match the prices of competing Internet only banks (Shah & Clarke, 2009). These fears have proven to be significant in most developed markets. Mols(1998) also stresses this point but suggests that not offering-Services is not an option, instead, companies should focus on other means such as product differentiation to protect themselves from excessive competition. Traditional banks could also use their well-established brand names and product development expertise to manage competition from new entrants (Mols, 1998).

2.8.3 Security issues

Internet security is still one of the major issues hindering the growth of Internet related trade. Since the Internet is an open network, high security risks are involved with financial transactions (Han & Noh, 1999-2000). Internet fraud is common, and related stories get immediate media attention, making people hesitant to bank online. Different security methods (including hardware and software) are being tested and employed currently but there is still some way to go to win the trust of a large majority of customers (Mols, 1999). Another type of fraud is "phishing." This is the use of emails to lure victims onto a fake bank website to steal their information. Victims could be asked not their specific internet banking information but also other private data like social security number, or driver's license number. (Source: http://correctbanking.com/why-some-people-fear-internet-banking.php)

2.9 Challenges of ICT in Banking

Banks rely heavily on ICT for their internal operations and their interaction with individual as well as business customers. To deliver services via the e-banking channel, a bank needs Internet technologies for universal connectivity, back end applications such as account systems, support applications such as Customer Relationship Management (CRM systems), communication technologies to link e-banking to the payment systems. Backend systems include data processing systems, accounts management systems and management information systems. Most of these systems were developed before the arrival of e-banking (thus the term legacy systems used for them) so they often lack connectivity, meaning they are difficult to connect to each other or with new systems (Owusu Afriyie,2012). Lack of integration with other systems is one of the most common reasons for the failures of e-banking projects (Shah & Clarke, 2009).

Bedman (2012) noted that some of the challenges include the cost of ICT devices. Also the consumers’ level of education and ICT knowledge impacts their acceptance or otherwise of e-banking services. On the institutional based factors, the quality of ICT personnel, the ICT policy framework of the country and the ICT legal framework for the country could impact on the marketing of e-banking products in Ghana. While some of these factors such as top management commitment and quality of ICT personnel relate directly to the efforts of banks, others can be traced directly to the door steps of the government which must enact the right policies to ensure ICT development receives national priority.

On the banks, there must be enough ICT professionals, well trained, who will manage the e-banking system in order to ensure its smooth running on a continuous basis (Shah and Siddiqui, 2006). Similarly, the banks must also highlight corporate policies related to e-banking services in their marketing communication messages in order to assure their customers that they are protected while using any form of e-banking services.

Extremely slow internet connection and frequent breaks in this service affect the use of internet banking services. Broadband connections via satellite do not live up to their hype and multinational telecommunication giants, offering mobile broadband do not extend their 3.5 G (third generation) of developments in wireless technology coverage to rural areas in Africa and particularly Ghana. All the above factors conspire to make Internet access unattractive to potential users. The poor quality of service comes with high connection costs due to the high operational costs incurred by providers. High connection cost for a service that does not guarantee value for money is a big disincentive for most users in Ghana. (Source: http://www.ghanabusinessnews.com/2008/12/06/ghanas-low-internet-penetration-high-cost-and-national-growth/)

2.10 Conclusion

This chapter has reviewed available literature on total quality management, its benefits, the importance of ICT on Banking Operations in Ghana, its challenges among others. This research will add to the existing literature on this subject area especially with regards to Ghana Commercial Bank and it would try to solve the problem that comes as a result of the role ICT plays in banking.