EFFECT OF TRUST AND SERVICE QUALITY ON CONSUMER

PERCEPTION: A STUDY ON PRIVATE BANKING SECTOR.

1. Introduction
The banking sector is the strength of the economy in a country. Banking organizations play a
dynamic role in the growth and development of a country. Poor banking systems cannot help
the country in economic development. A well-functioning banking system has a key role in
economic growth of the particular country customer loyalty has been a real concern in the
banking sector because of serious rivalry and higher client expectations.

It has caused in an increased rivalry between banks to attract a greater number of customers by
delivering quality services. Customer loyalty is identified as a key factor for the profitability
of a business. Banks can never run smoothly for a long period of time without loyal customers.
Customer loyalty can be accomplished by classifying customers’ needs, managing them and
satisfying them. Customer loyalty is observed as a key construction and desire to hierarchical
achievement, advantage and business performance Loyal customers will permanently give
positive remarks about the banking sector. Banks can increase levels of profitability by
providing secure products and services to the customers.

In order to increase customer loyalty, several banks have announced innovative products and
services Firms can increase level of profitability by providing safe and sound products and
services to loyal customers. There is a positive direct, relationship between service or product
quality, customer satisfaction and consumer loyalty.

1.1 Trust

Trust is described as the fundamental relationship building block. It is viewed as one of the
most relevant antecedents of stable and collaborative relationship. It determines the image of
the bank towards the customers. The trust construct is measured as confidence in quality and
reliability of service provided by bank.
1.2 Service quality
Service quality is the assessment of how well a delivered service conforms to the customer
expectations. Basically, service quality is at the root of customer satisfaction. Quality consist
of two primary elements

(a) Either a product satisfies the needs or

(b) Up to which level it is free from deficiencies.

Services are defined by the characteristics we cannot measure the services by instrument
service quality is determined by the differences between customer’s expectations of the service
and their perception of the services experiences.

The growth of the service industries and the competition between private and public sector
banks have resulted in an increased need for service providers to identify the gaps in the market
in order to improve service provisions to retain customers.

The banking sectors has responded to better services quality needs by paying more attention to
improve service quality. The globalization policy permitted entry to foreign and private banks
in banking sectors leading to increased competition. public sector banks are facing increasing
more competition where as foreign and private sectors are trying to win customer loyalty,
commitment and trust by providing them better quality services. Thus, it is important to explore
service quality and its effect on customer loyalty commitment and trust in banking sector.

1.3 Customer satisfaction

It is a measure of how products and services meet or surpass customer expectations it indicates
the fulfilment that customers derive from doing business with a firm customers derive
satisfaction from a product or a service based on whether their needs are met effortlessly , in a
convenient way that makes them loyal to the firm . It indicates the fulfilment that customers
derive from doing business with a firm customer derive satisfaction from a product or a service
based on whether their needs are met effortlessly, in a convenient way that makes them loyal
to the firm.

Impact of satisfaction on loyalty is researched in broad terms customer loyalty towards

particular products or services is result of their satisfaction. customer loyalty and satisfaction
are significantly affected by cooperate brand image, and customer loyalty and satisfaction are
dependent on each other. if customers are satisfied his loyalty increases. Therefore, firm
specially focus on these factors to make a profitable long-term relationship with customers and
to improve the brand image in the market. by providing high product /service value and
improving the satisfaction, level customers loyalty can be easily enhanced. Customer is known
as the king in the corporate world in order to maintain the leverage in corporate world
companies should provide services and products which meets expectations of the customers.
Following service quality determines customer satisfaction.

1.4 Customer’s Loyalty

Customers loyalty indicates the extent to which customers are devoted to a company’s products
or services and how strong is their tendency to select one brand over the competition. Customer
loyalty is special kind of customer behaviour towards the organization. It is kind of future
prediction about the intentions of the customer to do business with the firm. It is the overall
behaviour of customer regarding product, service or any other aspect of the organization in
which customer is involved makes the term customer loyalty. Consumer faith can be
recognized if marketers try to understand the facts which affect the loyalty. This will also
benefit in building the customer reliability. It was observed that customer’s services play an
important role in increasing the customer loyalty and customers highly consider the price of
these services. Customers loyalty-based behaviours are dependent on numerous factors. If
firms want to optimize the loyalty behaviours of customer, they must balance and manage
different aspects of customer experience and expectations.
Expectation-confirmation theory is widely used in the marketing and information systems
literature to study consumer satisfaction and repurchase intention and behaviour. The model
gives implications that consumers buy goods or services with anticipated performance
expectations. The expectation is argued to be used as a standard (benchmark) or point of
reference against which the product judgements are made. Once the product or service has been
used, outcomes are compared against expectations. An expectation is confirmed when the
perceived product or service performance is judged positive (positive confirmation).
Disconfirmation (negative confirmation) occurs where the perceived product performance is
below expectation.

1.4.1 Role of Variables Influencing Customer Loyalty

(a) Service quality

Service quality is an important element of performance measurement where a bank may

distinguish itself from its competitors Bank management should pay more attention to learning
more about and improving the quality of its organization and its offerings.

(b) Technology

Technology has become key element that influences customer loyalty and trust better and
sophisticated technology provides reliability safety convenience to the customers which
enhances the loyalty of the customers.

Banks have also perceived that an increase in technological level has become a crucial
requirement in achieving their goals in order to improve performance, organizations invest in
IT equipment, personnel, and training annually. In response to the rising demand for quick,
efficient and reliable services, technology is increasingly deployed as a bridge to generate
insights into customers’ behavioural patterns and preference.

(c) Innovation

Innovation is defined as the process of transforming an idea into goods or services to create
value for the customers an innovation involves the creation and implementation of new
processes, technology, the ways of delivery, and human capital which results in significant
improvements in production that make a firm more efficient than its rivals. The introduction of
new products which caters to new customers may lead to an organization’s expansion into new
market segments.
(d) Employee commitment

Employee commitment is one of the main contributing elements towards sustaining long-term
success and creating value, as the employees are the ones who provide services and interact
with customers.

Commitment has been examined as a determinant of job performance. Employee motivation

affects organizational productivity, and is accepted as an important element in increasing
performance Highly motivated and committed employees contribute to a favourable working
environment. Employees better interaction and hospitable relation with the customers will get
the result of better customer satisfaction and hence influences the customer loyalty of the
customer.

1.5 Customer Retention strategy

Customer retention refers to the ability of a company or product to retain its customers over
some specified period. customer retention strategy is essential for the banks to maintain its
position in financial market. Some of the customer retention strategy are described below.

1.5.1 Know your clients

The foremost basic step of the customer retention is to know the potential clients who are opting
the services or those who required financial services Who is this person? What does she/he
expect from you? Use one-on-one interviews, surveys, and questionnaires to get valuable
feedback and understand how your customers think and behave. This way, bank can create
offers that perfectly match the expectations of your target users and hence, can retain
customers.

1.5.2 Be Honest and Clear

Honesty and clarity is the best policy in the world it’s much better to keep the communication
clear and straightforward right from the beginning about all the banking policy and transactions
banks should not manipulate the things for their sole customers should be clear about the
charges of the services tax rate etc benefit it should clear about all the attributes and aspects to
their customers. A report shows that 34% of customers switch off because they are dissatisfied
with the service at the banks.
1.5.3 Take customer service to higher level

Retaining customers requires to take an extra step in the process we should surprise clients
occasionally with an unexpected gesture. Gesture takes only a little time and effort from your
side, but it can do miracles in terms of customer retention. Customer should be acknowledged
for giving opportunity for the different services giving proper respect and privileged.

1.5.4 Offer VIP programs

This strategy works well for the existing clients who need the additional push to keep using
your bank’s services this type of retention tactic gives clients the feeling of uniqueness and
exclusivity, while it doesn’t even have to be too expensive – all it takes is a small incentive to
convince users to apply for your VIP membership.

1.5.5 Create top-notch email newsletters.

The way to convince users that your bank is the right choice is to write high-quality email
newsletters. Let it be the real source of financial news and industry reports, allowing your
customers to learn about the hottest topics and trends in the banking market. It will help you to
present yourself as an industry thought leader, which is the easiest way to earn professional
reputation and win over clients’ trust.

1.5.6 Offer one-time promotions

Banks can come up with a number of time-bound promo offers such as lower interest rates or
some other types of ancillary products. They can invite the current clients to take part in special
campaigns that last only a limited amount of time. Such offers will have two benefits: first of
all, you will drive engagement and additional conversions while you also get to increase
retention rate simultaneously.
2 Review of Literature

1. Hammoud et al., (2018) analysed the impact of E –Banking service Quality on customer
satisfaction Evidence from the Lebanese Banking Sector. The objective of this study is
to examine the relationship between the dimensions of E –Banking service quality and
customer satisfaction to determine which dimensions can potentially have the strongest
influence on customer satisfaction. In this Research Data were gathered using a survey
instrument Bank client were given questionnaire to fill for the purpose of collecting the
data. The data were statically analysed using n structural equation modelling with
SPSS. The main results or findings of this study are different variables affecting
customer loyalty. The independent variable in this research can be reliability, ease of
use responsiveness and communication security and privacy all have significant impact
on customer satisfaction.
2. Paul et al., (2016) studied on impact of service quality on customer satisfaction in
private and public sectors bank. The purpose of the study is to examine the various
impacts of service quality on banking sectors. The data were collected from 500
respondent in India and the respond rate was 65%. In this research paper survey method
was used to collect data and structure questionnaire which based on SERVQOAL
model was used.
3. Singh and Gupta, (2016) measured the customer perception and satisfaction towards
service of public and private sector banks. The objective of this study is to examine the
relative customer satisfaction levels of private and public sector banks. In this study a
survey method (Well-structure) questionnaire was used to collect data. A convenience
(non-random) sampling technique was used. A sample of 900 customers from three
northern region states of Punjab, Haryana and Himachal Pradesh was selected for the
primary survey. The dependent variable was customer satisfaction. And the
independent variable was consumer perception.
4. Hasan et al., (2014) studied effects of perceived value and trust on customer loyalty
towards foreign Banks in Sabah, Malaysia. The objective of this study is to examine
level of customer loyalty towards foreign banks in Malaysia and to investigate factors
such as perceived value and trust effects customer loyalty. In this research methodology
a survey method was used in which customers were given questionnaire to fill for the
purpose of collecting the data. A convenience non-random sampling technique was
 used. The sample size was 239 respondents were selected based on existing account
holders, credit cards holders, ATM users or users of any other banking facilities of
chosen foreign banks. The variable were perceived value and customer loyalty. The
dependent variable was customer loyalty and the independent variables were perceived
value.
5. Karim and Chowdhury, (2014) analysed the customer satisfaction and service quality
in private commercial banking sector in Bangladesh. The main objective of the research
is to discover the impact of service quality on consumer satisfaction in private sector
banks. In this study a structure questionnaire with 5-point Likert scale was used to
collect data by conducting survey. A convenience (non-random) sampling technique
was used. The sample size was 110 and respondents were selected based on existing
account holders. The dependent variable was customer satisfaction. And the
independent variable was service quality.
6. Khan and Fasih, (2014) investigated the impact of service quality on customer
satisfaction and customer loyalty in Pakistan. The objective of this research paper is to
determine the satisfaction level & loyalty of the customers towards the service provided
by the different banks. In this study a survey method was used to collect data. A
stratified random sampling technique had been used. The sample size was 270 and
respondents were selected from private as well as public bank based on existing account
holders. The dependent variable was customer satisfaction &customer loyalty. And the
independent variable was service quality.
7. Seiler et al., (2013) studied on the influence of socio-demographic variables on
customer satisfaction and loyalty in the private banking industry. The objective of this
research to indicate the impact of customer demographics on service value, customer
satisfaction, and customer loyalty. the authors implement a structural equation model
with the help of partial least squares (PLS) in order to examine the influence of socio-
demographic variables analysis of variance (Anova) was conducted furthermore,
analysis of mediation was conducted to test indirect influence of service value on
customer loyalty. The finding of this research is that customer satisfaction has strong
positive impact on customer loyalty.
8. Saghier and Nathan, (2013) investigated the quality perception of bank customer in
Egypt and the differences in relative importance they attach to the various qualify
dimension using servqual model. The objective of this research was to understand the
main factors that affect customer satisfaction and propose a model that would support
 decision maker enhance the quality service. In this research questionnaire method was
used. A random sampling technique was used and the target population was general
public who were at the legal age to hold a saving or current account. And the sample
size was 150. The research finding customer satisfaction in the Egyptian banking
service is mostly affected by the reliability, empathy, assurance and responses.
9. Mohammad and alhamadani, (2011) conducted a research on title “service quality
perspective and customer satisfaction in commercial banks working in Jordan. The aim
of this research was to examine the level of service quality as perceived by customer of
commercial bank working in Jordan and its effect on customer satisfaction. In this study
a structure questionnaire with 5-point Likert scale was used to collect data by
conducting survey. The sample size was 260 and respondents were selected randomly.
10. Kheng et al., (2010) studied the impact of service quality on customer loyalty in bank
in Malaysia. The objective of this research was to evaluate the impact of service quality
on customer loyalty among bank customers in Malaysia. The development and
advancement in banking channel such as internet banking, ATM and so on have forced
bankers to explore the importance of customer loyalty. To conduct this research
underlying model of SERVQUAL with five dimensions was used. The sample size was
238 and respondents were selected from private as well as public bank based on existing
account holders. A 7-point Likert scale with range of 1 (strongly Disagree) to
7(Strongly Agree) were used for measurement. A pretesting of the questionnaire was
done with 10 selected banks customers who have experience with branch banking.
11. Mishra, et al., (2010) analyzed the service quality, customer satisfaction, customer
loyalty in the banking sector of India. It was a comparative study between Public and
Private sectors. The objective of this research was making a comparative study of
service quality expectations of their respective customers. A questionnaire method was
used to collect the data for the study. The sample size was 387 customers selected on
stratified random basis. The research finding was the positive for the two factors (i.e
tangibility and reliability) of public bank sector bank respondents indicating satisfaction
of the customer and quality Gap is significant for private bank but not for the public
bank.
12. Ananth et al., (2010) studied on service quality gap analysis in private sector bank- a
customer perspective. The objective of this research paper is to determine or to analyze
the gap of service quality provided by private sector bank. In this, survey method of
convincing sampling is used in the form of structured questionnaire. The sample size
 was 200 customers of private sector bank. It says that bank should reduce the service
the service gap to retain their existing customers and to attract the new customers.
13. Hazra and Srivastava, (2009) studied the impact of service quality on customer loyalty,
commitment and trust in the Indian banking sectors. The purpose of this research is to
examine the relationship between service quality with customer loyalty, commitment
and trust from the customer perspective in the Indian banking sector. In this study a
survey method (structure interview) was used in which customers were given
questionnaire to fill for the purpose of collecting the data. A purposive (Judgmental)
non-random sampling technique was used. The sample size was 300 respondents were
selected based on existing account holders, credit cards holders, ATM users or users of
any other banking facilities in Indian banking sectors. The dependent variables were
customer loyalty, commitment and trust. The independent variables were service
quality and perception of consumer.
14. Brahmbhatt and Panelia,, (2008) examined the service quality and the customer
satisfaction among private, public and foreign bank. The aim of this research is to
attempt to measure and compare the service quality and customer satisfaction. In this
research methodology a survey has been conducted in which customers were given
questionnaire to fill for the purpose of collecting the data. A stratified random sampling
technique was used. The sample size was 246 and respondents were selected based on
existing account holders, ATM users or users of any other banking facilities of chosen
foreign banks. The variable was service quality and customer satisfaction.
15. Lassar et al., (2000) examined the effect of service quality in USA and South America
on customer satisfaction in private bank from two distinct methodological perspective
i.e. servqual and technical quality. The research objective of this study was to test and
compare the relative efficiency of the predominant conceptualization of service quality
with regard to their ability to predict customer satisfaction. In this research
methodology survey method was used in which customers were given questionnaire to
fill so that data can be collected. A stratified random sampling technique was used. The
sample size was 300, who were the customer of private bank in USA and South
America.
❖ Objectives
• To measure the customer satisfaction towards private sector bank.
• To find out the possible solutions for improving the service quality that make the most
significant contributions on customer satisfaction.

3 Research Methodology

Research methodology is the specific procedure or technique which is used to identify, select,
process, and analyse information for result about a topic. It may include publication research,
interviews, surveys and other research techniques which include both present and historical
information. It helps to understand not only the products of scientific inquiry but the process
itself and it is the way to systematically solve the research problem by logically adopting
various steps.

3.1 Meaning of Research: Research comprises creativity and systematic work

undertaken in order to increase the knowledge including knowledge of humans, cultural
and society, and the use of this knowledge is used to devise new applications. It is the
systematic method consisting of enunciating the problem, formulating a hypothesis,
collecting the facts or data, analysing the facts and reaching certain conclusion either
in the form of solutions towards the concerned problem or in certain generalizations for
theoretical formulation. It is used to establish or to confirm facts, reaffirm the result of
previous work, solve new or existing problems, support theorems, or to develop new
theories on the basis of existing one.
3.2 Target Population: Target population refers to the entire group of individuals or
objects to which researchers are interested in generalizing the conclusion. The target
population usually has varying characteristics and it is also known as the theoretical
population.
In this research our target population will be the customers those who have opened a
account on different private bank sector.
3.3 Sample Size: The sample size of a survey mostly refers to the number of units that
were chosen from data which is gathered. However, sample size can be defined in
various ways. There is the designated sample size which is the number of sample unit
selected for contact or data collection. It is the total representative samples from the
given population used for the research study.
In this research, we will consider100 people as a sample for collecting the data.
3.4 Sampling Frame: A sampling frame is the source material from which a sample is
drawn. It is a list of all those within a population who can be sampled and may include
individuals, households or institutions.
In this research, we will select account holder’s mobile number, customer ID number
to recognize the particular account holders.
3.5 Sampling Technique: A sampling technique is the name or other identification of
the specific process by which the entities of the sample have been selected.
In this research, we will use convenience sampling technique because we have taken
responses of only those account holders of private sector bank to whom we are feeling
comfortable and to get an answer of our questionnaires.
Convenience Sampling: Convenience sampling is the non-random sampling technique
in which the sample population is selected at the ease and convenience of the researcher.
Advantage:
➢ Extensively used/understood
➢ Very low cost
Disadvantage:
➢ Restriction of generalization
➢ Projecting data beyond sample not justified

3.6 Research Design: It is a systematic approach that a researcher uses to conduct a

scientific study. It is the overall synchronization of identified components and data
resulting in a possible outcome. To conclusively come up with an authentic and
accurate result, the researcher design should follow a strategic methodology, in the line
with the type of research chosen.
In this research we will adopt descriptive research design to conduct the study on the
impact of service quality and customer perception towards the private sector bank.
Descriptive Research: A descriptive research is one in which information is collected
without changing the environment. It is used to obtain information concerning the
current status of the phenomenon to describe “what exists” with respect to variables or
conditions in a situation. It is used to describe characteristics of a population or
 phenomenon related to trends, beliefs, public mind, their viewpoint and attitudes, their
effects or development of new trends.
3.7 Data Collection: A data collection methods refers to collect the data from different
sources. It may be the primary or secondary data on the basis of their assumptions.
In this research, we will use questionnaire and indirect personal interview for collecting
the data as per our given problems.

3.8 Analysis: In this research paper we will use graph, chart to present the information
which is obtained from the customers of private sector banks.

4 References
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