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Influence of Quality in Retail Banking

Introduction

In the recent past, the UK retail banks have come under intense pressure owing to increasing competition. Due to the increasing competition, banks began engaging in a number of activities in order to consolidate their market positions (Morris 2000). Various options such as merging and adopting new technologies were considered by banks towards addressing emerging consumer concerns. The banks did this in a bid to improve the quality of services. Despite putting much effort, customers may remain unsatisfied. It is thus necessary to conduct a study to shade light on the role of quality in obtaining a comparative advantage in retail banking in the UK.

Based on the Cruickshank Report, service quality in the UK retail banking was low (Morris 2000). The report further indicated that low service quality translates into little customer satisfaction. The report went a step further to observe that studies into the effect of quality of services offered in retail banking remained scant. The major objective of this research is to establish how quality influences retail banking, in particular its emergence as a foundation of competitive advantage in personal banking in the United Kingdom.

Towards supporting the already existing knowledge on the effect of quality of services on retail banking, the study seeks to examine the actual determinants of customer satisfaction since these attributes influence personal banking. Retail bankers set priorities as they seek to lure customers into their banks. As such, they constantly keep in touch with their customers in order to gather information in regards to which areas of operation need improvement.

Fundamental literature

It is noticeable that the UK retail-banking sector is among the largest in Europe. However, Capie & Webber (2005) observe that few banks such as Royal Bank of Scotland/Natwest, HSBC/Midland, Barclays, Bank of Scotland, and Lloyds TSB dominate the sector. It is also true that although the sector has remained conservative over a long time, currently it is undergoing unprecedented changes. The developments in technology and deregulation are partly responsible for the changes taking place. Based on these developments, new banks have entered the industry. The new entrants have contributed towards the alteration of the retail banking landscape as customers get a variety of banks from which to choose. In the face of these challenges, quality improvement has emerged as a key area that banks focus on in order to gain a comparative advantage in the industry (Ho 1999).

New competitors in the retail banking industry operate relatively easily since they incur lower costs (Baumann et al 2007). This is possible, as new entrants into the industry do not have large numbers of branches to run. Additionally, the use of cheaper methods such as telephone and the internet allows these retailers to reach their customers more conveniently.

It is also worth noting that customers have become too demanding (Jamal & Naser 2002). As an illustration, customers demand personalized products and delivery mechanisms that are convenient to them. This development has an effect not only on the retail banking industry but on other services as well.

It is evident that the quality of the services or products a retail outlet offers influences its success or failure chances. Offering superior quality helps in enhancing customer experience (Tiwari & Buse 2006 and Brunner et al 2004). Enhanced customer experience leads to improvement in loyalty as more customers are retained. This aspect improves business performance (Levesque & McDougall 1996).

Ho (1999) points out that the quality of service presents an effective way to build a competitive position in the business. It is also true that customer satisfaction depends on the quality of services offered. When a retailer offers better quality, customers are encouraged to make repeat purchases leading to improvement in levels of sales (McDonald & Keasey 2002). Mullin & Cummins (2010) support this view as they found that investing in service quality and customer care is profitable.

Methodology

Study Area

This study shall be based within the City of London as the focal location of data collection. The decision to use London as the primary sample area is informed by the fact the city hosts many retail banks as well as has many customers of retail banks. Hence, the city would provide valuable data for this study. Feasibility is the other reason why the researcher opted to choose this zone. This shall enable the researcher to overcome challenges associated with limited resources and time constraints, all of which would have otherwise negatively affected the reliability and validity of research findings.

Sampling Procedure

According to Patton, (1990), the identification of the corrector suitable sampling procedure is positively correlated to the accuracy of the research findings. From the onset, it should be noted that this research is qualitative and therefore the use of an appropriate sampling procedure is desirable. Hence, this study shall use the systematic random sampling procedure to determine the sample for this research. This method has the merit of ease to use. At the same time, the method ensures that representativeness is attained.

Sample Selection and size

Based on the nature of the study, the focus is on retail bank customers and retail banks. The sample is to be selected from the UK. The research aims at carrying out a cross-sectional survey, hence representatives is highly sought.

Data Collection approach

This study shall involve the use of both primary and secondary methods of data collection. Although there are a variety of methods to collect data, this research will use a questionnaire survey. Some questionnaires will be mailed to respondents while others are to be filled by research enumerators who will conduct face-face interviews. This shall be supplemented by the use of probing to allow for the collection of accurate and valid data. Additional information shall also be obtained from secondary sources such as books and related previous studies in this area. The use of secondary sources of information has the merit of providing in-depth information on the topic under study. This in turn helps the researcher to come up with appropriate recommendations. The collected data shall be analyzed and represented using score tables, pie charts, and graphs.

Measurement Scales

The overall quality of the services and the products provided by retail banks will be gauged using the Likert scale. The Likert scale has five scores, 1 to 5.1 reflects very satisfied while 5 reflects very dissatisfied. The aspects to examine include time taken to process a transaction, the length of queuing at the retail outlets, the proximity to cash points, reliability of ATM machines, the efficiency of handling customer complaints, level of privacy, and the perception of the overall quality standards.

Study and Statistical Tools

In order to facilitate an analytical study, this research will use analysis of variance, cross tabulation, and frequency distribution analysis. The frequency analysis would be useful in capturing the satisfaction levels based on the quality of services. The distribution would also indicate whether banks are using high-quality service and product provision as a basis to extend personalized banking. In order to support the use of frequency analysis, the study would also use descriptive statistics such as the standard deviation and the mean.

Critical reflection

The quality of the services offered at a retail outlet affects the satisfaction levels of customers. This is based on the notion that dissatisfaction has a psychological effect on consumers. Moreover, such experience has a long-lasting influence on positive events. Worse still, victims of bad experience badmouth retail outlets that offer sub-standard products and services. It is thus evident that poor-quality services and products do not help a business to achieve its goals. Instead, such quality prepares the ground for rejection. Concisely, poor quality services have a multiplier effect on a retail-banking outlet. It is equally important to note that such experience hurts the reputation of a bank in addition to forcing the business to incur additional costs attributable to losing potential and existing customers. Donaldson & O’Toole (2007) confirm that acquiring a new customer is costlier compared to retaining an existing one.

The dynamics in the field of retail banking lead to changes in the conduct of business. In this regard, the role of competition, new technologies, and deregulation are important aspects that influence the current retail-banking environment. The effect of new technologies is insurmountable in the current times. By way of illustration, the developments registered in information technology have led to unprecedented changes in retail banking. Such technologies as the internet allow banks to improve the quality of both the services and the products they offer to customers. Concisely, the internet has reduced operating costs and enabled new banks to make inroads into the banking industry. The most notable development revolves around the idea that with this latest advancement in technology, retail banks are in positions to personalize their services to customers.

In addition to technological advancement, competition is equally a leading factor in the shifts in service provision in the retail banking industry. Due to both deregulation and technological developments, new entrants have found it easier to join the banking sector. Logically, the entry of new players increases competition. The new entrants have an obligation of offering top-drawer services in order to attract customers. Realizing this, the existing banks seek to bolster their positions by also improving their quality of service. However, the size of big companies does not support the provision of personalized services. Nevertheless, in the face of mounting competition, the banks have no option other than to form new departments to cater to this development.

Based on the evidence gathered in this paper, it is true that the retail-banking sector is undergoing changes hitherto un-witnessed. New entrants into the sector, changes in customer preferences, and technological developments play a big part. As competition increases, the focus shifts to the quality of services and products that the retail banks offer. So, the question is, has the shift in focus to the quality of services and products quality in retail banking emerged as a source of competitive advantage in personal banking in the United Kingdom?

Dissertation Plan

Study limitations

One of the anticipated limitations during this research study is attributable to the idea that some respondents might not provide reliable and truthful information. This limitation carries the potential effect of greatly reducing the validity and reliability of the field study findings. In order to overcome this challenge, the researcher shall request the respondents to be as truthful as possible. The research shall also be based on the principle of voluntary provision of information by the respondents and thereby reduce the likelihood of collecting biased information. The second limitation that the researcher anticipates rests on the issue of insufficiency of resources. This is reflected in terms of labor and finances. Due to this, the researcher intends to solicit enough resources before commencing the study. Additionally, the researcher intends to oversee personally the training of the enumerators who will assist in the collection of data.

Dynamism is a major character in the field of business (Morecroft 2007). The retail banking industry is not an exception since it is also susceptible to changes in the market. This view is held since changes in technology, customer preferences and, levels of competition play a big role regarding the perceptions on the quality of services and goods. As such, this research may encounter problems if monumental changes take place after the research. Although this is a limitation, the researcher intends to remain objective and record findings as they emerge. In this regard, the research will be based on a recording of the state of affairs at the time of the study.

Coding the activities

Activity Code
Preparation for Sampling 1
Preparing questionnaires and arranging appointments 2
Administration of questionnaires and collection of data 3
Data Analysis and examination of findings 4
Preparing the report 5
Presentation of study findings and recommendations to Stakeholders 6

Research time plan

Activity/ Time in Months 1-2 2-4 4-6
1 ×
2 ×
3 ×
4 ×
5 ×
6 ×

This research study shall be based on the above work plan.

References

Baumann, C et al 2007, “Prediction of attitude and behavioral intentions in retail banking”, International Journal of Bank Marketing, 25 (2), p.102–116.

Brunner, A et al 2004, Germanys Three-Pillar Banking System – Cross-Country Perspectives in Europe, Occasional Paper, International Monetary Fund, Washington DC.

Capie, F and Webber, A 2005, A Monetary History of the United Kingdom, 1870-1982: Data Sources and Methods, Taylor & Francis, London.

Donaldson, B and O’Toole, T 2007, Strategic market relationships: from strategy to implementation, John Wiley and Sons, Indianapolis.

Ho, S 1999, Operations and quality management, Cengage Learning EMEA, Jamal,A and Naser, K 2002, “Customer satisfaction and retail banking: an assessment of some of the key antecedents of customer satisfaction in retail banking”, International Journal of Bank Marketing, 20 (4), p.146 – 160.

Levesque, T and McDougall, G 1996, “Determinants of customer satisfaction in retail banking”, International Journal of Bank Marketing,14 (7), p.12 – 20.

McDonald, O and Keasey, K 2002, The future of retail banking in Europe: a view from the top, John Wiley & Sons, San Francisco.

Morecroft, J 2007, Strategic modelling and business dynamics: a feedback systems approach, John Wiley and Sons, San Francisco.

Morris, J 2000, A consideration of Don Cruickshank’s report on competition in the UK banking industry, PLC, United Kingdom.

Mullin, R and Cummins, J 2010, Sales Promotion: How to Create, Implement and Integrate Campaigns that Really Work, Kogan Page Publishers, London.

Patton, MQ1990, Qualitative evaluation and research methods, SAGE Publications, New York.

Tiwari, R and Buse, S 2006, The German Banking Sector: Competition, Consolidation and Contentment, Hamburg University of Technology, Hamburg.

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