service quality and core banking

1. Assessing the impact of Core Banking &
Service Quality On Customer Satisfaction
In CBE (Bishoftu Branch)
By:
Endalkachew Abebe

2. Background of the Study
 Banking industry is marked by aggressive competition and




ever-changing customer demands.
As a result, banks need to adopt themselves to the
changing environment.
the growth in ICT made the world banking industry enter
into new phenomena.
Application of ICT is a recent phenomena in Ethi.
Many banks use different ICT like ATM, Core Banking,
Mobile Banking, and etc… that improve the service quality
in order to increase customer satisfaction.

3. Contd…
 Core
Banking is an integrated application that
supports real time multi-Banking and MultiChannel strategies
 It enables customers to be a customer of the bank
rather than being a customer of a particular branch
 enable banks to strengthen and extend their
relations with credit card providers
 customers will enjoy reduced waiting time and a
greater choice of banking channels and services
 currently there are 13 banks who have acquired
CORE banking application in Eth.

4. Contd…
 Berry et al., (1990), defined service quality as the
discrepancy between customers’ expectations or
desire and their perceptions.”
 Service quality is not objectively measured
according to some technical standards but is
subjectively felt by customers and measured
relative to customer-determined standards

5. Contd…
 Service quality is “more difficult for
consumers to evaluate than product quality;
this is due to a lack of tangible evidence
associated with the service”
 According to Philip Kotler (2005), customer
satisfaction is a person's judgments of a
product's perceived performance (or
outcome) in relationship to expectations.

6. Organizational Background
 established in 1942
 Pioneer to introduce modern service
 first bank to introduce ATM in Ethiopia
 has more than 4 million account holders
 has12,800 talented and committed
employees
 is the leading African bank with assets of
Birr 155 billion as of June 30th 2012

7. Statements of the Problem
 Satisfying customers is the major mission.
 As customers are satisfied - organizations
achieves higher sales, profit, market share ,
gain loyalty and vice versa
 Nevertheless, banks in Ethiopia have little
care about their customers. They use more
obsolete and traditional technologies that
cause dissatisfaction

8. Contd…
 This is also true for CBE
 Though CBE has been providing many kinds
of banking services since its establishment in
1942, it couldn’t go further in satisfying its
customers until the last decade.
 The bank applied core-banking technology in
2004 E.c to integrate the services delivered in
its all branch banks and to improve the quality
of its services.

9. Contd…
 The application of this technology is
believed to have many contributions for the
bank.
 The purpose of this study was to examine
the impact of core banking and service
quality on customer satisfaction.

10. Significance of the study
 important to the bank to assess whether its
application of core banking service enhance
the level of customer satisfaction and
identifies the position of service quality at
the bank.
 Identifies issues related to the application of
core banking and service quality and thus
provide feedback to managers.

11. Contd...
 Result of this research project can be used
as a base point for further studies in the
related issues.

12. Objectives of the study
1. General objective

To assess the impact of Core Banking
and service quality on Customer
Satisfaction
in Commercial Bank of
Ethiopia Bishoftu Branch.

13. Contd…
2. Specific objectives
 To assess the changes that comes after the
application of core banking service
 To identify the impact of core banking on
customer satisfaction in the banks
 To identify the impact of service quality on
customer satisfaction in the banks
 To analyze the customer satisfaction level in CBE
 To provide some recommendation for the bank

14. Research questions
 What are the changes that have come after the
application of core banking service?
 How satisfied are customers with the application
of core banking service in CBE Bishoftu branch?
 How satisfied customers are with service quality
in CBE Bishoftu branch?
 What is the level of customer satisfaction in CBE
Bishoftu branch?
 What must be done to further improve the services
in CBE Bishoftu branch?

15. Scope of the study
 Delimited to the changes that come after the
introduction of core banking in the bank.
 the project focus area is only CBE Bishoftu
branch.

16. Limitation of the study
 Not be considered as a representative of the
whole service quality of CBE; that is the
generalizability of the finding and the
conclusion drawn will be limited to CBE
Bishoftu branch.
 Moreover, since this project is designed to
be completed in four months time, it may
not present detailed data to the intended
level.

17. Conceptual framework for the impact of core
banking and service quality on customer
satisfaction
Reliability
Assurance
Responsiveness
Empathy
Tangibles
Core banking
}→
Customer
satisfaction

18. Research methodology
A. Research design
 Descriptive-correlational form of research
design to provide solutions to the research
problems
 It involves gathering data that describe
events and then organizes, tabulates,
depicts, and describes the data collection.

19. B. Types of data
A. Primary data
 information gathered from customers of the bank
 Questionnaire that have both open end and closed
end question were prepared and delivered to
customers
B. Secondary Data
 information gathered from websites, books, and
journals, periodicals released by the bank and
articles etc.

20. C. Population of the study
 current account holder =5000
 saving account holder=25,00
Sub total=30,000
 all one time customers

21. D. Sample and sampling techniques
 probability -stratified sampling techniques.
 proportion allocation method was used to
determine the sample size
 n0=n*p0/N,

22. Contd…
 Based on the above formula the researcher
took a sample of
20 customer from c/a =5000
100 customer from s/a=25,000
Sub total=30,000=120
all one time customers=average customer per
day=1000 customer (i.e. using 10 percent of
1000 customer per day) =100
 total sample size= 220 customers.

23. E. Method of data collection
self-administered questionnaire
F. Reliability test
 a questionnaire of 25 respondents was taken and
Cronbach alpha has been employed to evaluate the
reliability scale of construct and dimension of
each construct. Reliability scale of the overall
service quality was 0.842.this means that it has
high reliability

24. G. Method of data analysis
Descriptive statistics
- Frequency, Percentage, Mean, Standard
deviation
Inferential statistics
-correlation and regression
 analysis of data was carried out using SPSS
version 20.0.

25. Data Analysis
 Two Hundred Twenty questionnaires (220)
were distributed to the respondents and out
of these 210 of them were collected with a
response rate of 95.5 percent.
 However, only 200 responses were valid
with complete answers.

26. Background information of Respondents
10 %
41.5 %
18 %
58.5 %
39 %
1.5 %
45 %
1.5 %
3.5 %
25 %
28.5 %
33 %
15.5 %
79.5 %

27. Mean & Standard deviation result

28. Pearson correlation
Customer satisfaction
Assurance
Pearson Correlation
Sig. (2-tailed)
N
.877**
.000
200
Responsiveness
Pearson Correlation
Sig. (2-tailed)
N
.349**
.000
200
Empathy
Pearson Correlation
Sig. (2-tailed)
N
.867**
.000
200
Tangibility
Pearson Correlation
Sig. (2-tailed)
N
.715**
.000
200
Reliability
Pearson Correlation
Sig. (2-tailed)
N
.850**
.000
200
Core banking
Pearson Correlation
Sig. (2-tailed)
N
.737**
.000
200
Correlation is significant at the 0.01 level (2-tailed)

29. Regression Analysis
Regression model for core banking
Model
1
R
R2
Adjusted R Square
Std. Error of the Est.
.737a
.543
.541
.296
Regression model for service quality model

30. Impact of service quality & core banking on
customer satisfaction
1. Impact of core banking on customer satisfaction

Model
(Constant)
Core
banking
Unstandardized
Coefficients
Standardized
Coefficients
B
Std. Error
.202
.047
.737
Sig.
6.143
15.337
.000
.000
Beta
1.239
.719
T
Dependent Variable: customer satisfaction
 Source: own survey, 2013

31. 2. Impact of service quality on customer satisfaction
Model
Unstandardized
Coefficients
B
T
Standardized
Coefficients
Std. Error
Sig.
Beta
(Constant)
.110
.117
.936
.351
Reliability
.311
.042
.325
7.425
.000
Assurance
.437
.053
.459
8.177
.000
-.004
.021
-.006
-.202
.840
Empathy
.300
.057
.302
5.275
.000
Tangibles
-.072
.043
-.084
-1.687
.093
responsiveness
Dependent Variable: customer satisfaction
Source: own survey, 2013

32. Analysis of open ended question
 Majority of the respondent states their
opinion regarding core banking service.
From their suggestion it can be inferred that
network problem is the big issues.
 It is a major obstacle in the check clearing
operations, quick transfer of fund, cash
withdrawal and etc.
 Temporary failures in core banking
services are not corrected immediately.

33. Finding, Conclusion and
Recommendations
1. Discussion of findings
 Majority (58.5 percent) are male,
 Majority (39 percent) aged in the range of
18-30 years,
 Majority (45 percent) are degree holders,&
 Majority (79.5 percent) of the respondents
visits the bank once in a month.

34. Contd…
 The results of the descriptive statistical
analysis
customers were most satisfied with the
assurance (Mean=4.34) followed by reliability
(Mean=4.32), empathy (Mean=4.29) and
tangibility (Mean=4.26)
customers were less satisfied with
responsiveness (Mean=3.83)
customers are satisfied with the application of
core banking (Mean=4.28)

35. Correlation result
there is a positive and sig. r/s b/n:
Ass. and customer satisfaction(.877**),
Resp. customer satisfaction(.349**) and
Emp. and customer satisfaction(.867**),
Tan. and customer satisfaction(.715**),
Rel. and customer satisfaction(.850**),
Core banking and customer satisfaction(.737**).
 Correlation is significant at the 0.01 level (2-tailed)

36. Contd…
 Highest relationship
 Ass. and customer satisfaction (.877**),
 Lowest relationship
Resp. and customer satisfaction (.349**)

37. Regression result
 Reliability has a positive and significant effect
on customer satisfaction
 Assurance has a positive and significant effect
on customer satisfaction
 Responsiveness has a negative & insignificant
effect on customer satisfaction.

38. Contd…
 empathy has a positive and significant
effect on customer satisfaction
 tangibility has a negative and insignificant
effect on customer satisfaction
 core banking has a positive and significant
effect on customer satisfaction

39. Overall regression results
 Coefficient of determination-R2 is the measure of
proportion of the variance of dependent variable
about its mean that is explained by the
independent or predictor variables
 The independent variables (ser. Qual.)
accounted for 87.9 percent of the variance
in customer satisfaction (R2 = 0.879)
 The independent variable (core banking)
accounted for 54.3 percent of the variance
in customer satisfaction (r2 =0.543)

40. Conclusion
 customers of bank were satisfied by core
banking and the five service quality
dimensions
 customers were most satisfied with the
assurance dimensions of service quality
 customers were less satisfied by
responsiveness dimensions of service
quality

41. Contd…
 correlation result shows positive and
significant relation ship between
 core banking and customer satisfaction
all service quality dimensions and
customer satisfaction

42. Contd…
 Regression results shows that
Reliability , Assurance and Empathy
have positive and significant impact
on customer satisfaction
Tangibility and Responsiveness has no
positive and significant impact on customer
satisfaction
core banking has positive and significant
relationship with customer satisfaction

43. Recommendations
 Reliability
 The bank managers should enhance reliability on
the bank by:
fulfilling the service as promised,
performing the service exactly at the first
time,
showing a keen interest in solving
customers problems,
providing the service at the promised
time and
by insisting on error free record.

44. Contd…
 Empathy
One way of addressing this could be by:
treating customer with great respect,
giving individual attention to customers,
serving customers based on their specific
needs and treating customers in a friendly
manner

45. Contd…
 The bank should create some mechanism to
minimize the network problem or to find
other techniques that unstop the service at
the time of disconnection of the network.