Reasons for choosing the topic
The rapid advancement of technology presents both immense benefits and significant challenges for businesses, particularly in the financial and banking sectors To meet evolving customer needs and thrive in the 21st-century digital economy, banks must embrace innovation Financial technology (FinTech) is transforming the global financial landscape, altering how consumers interact with their banks In response to customer demands and cost-saving imperatives, there has been a notable shift towards digital banking (DB) Additionally, the COVID-19 pandemic has accelerated this transition, as social distancing measures necessitate a greater reliance on digital solutions.
DB is increasingly recognized by both providers and customers as a vital tool for banks It ensures that financial institutions can meet market demands while safeguarding the well-being of their employees, clients, and the broader community.
Digital banking (DB) offers numerous advantages that can drive a new wave of global economic growth, particularly in Vietnam, where it remains a relatively new concept With a population of 96.5 million, predominantly composed of young individuals (approximately 70%), and a significant smartphone ownership rate of 72%, Vietnam presents a promising market for digital banking expansion The State Bank of Vietnam (SBV) reports that 94% of commercial banks are actively pursuing or developing digital transformation strategies As socio-economic conditions and technological advancements progress, the use of banking services through the internet and mobile devices is steadily increasing In 2020, the SBV noted that internet payment transactions totaled 282.4 million, valued at 17.4 trillion VND, while mobile payment transactions reached 682.3 million, amounting to nearly 7.2 trillion VND Currently, around 30 million individuals utilize internet banking daily, highlighting the critical need for banks to adopt digital banking solutions to ensure sustainable growth in this evolving landscape.
In recent years, many banks have shifted their focus to digital banking (DB), with Timo, Tnex, and Cake leading the way These digital banks operate independently from their parent institutions, offering unique services and marketing strategies Timo, the first digital bank in Vietnam, was launched by Vietnam Prosperity Joint Stock Commercial Bank (VP Bank) in 2016 and later partnered with Viet Capital Bank, establishing itself as one of Asia's eight reputable digital banks In 2020, Vietnam Maritime Commercial Joint Stock Bank (MSB) backed the Tnex digital bank Cake, originally known as Yolo, was created by VP Bank in 2018 and later rebranded in 2021 after collaborating with Be Financial, making it the first digital bank integrated within a ride-hailing application in Vietnam.
In Vietnam, while numerous studies have explored customer satisfaction with internet banking services, there is a notable lack of research focusing on digital banking services It is crucial for banks to prioritize enhancing customer satisfaction to maximize the potential for digital banking expansion and customer outreach To achieve this, an investigation into the factors influencing digital banking development in Vietnam is essential This study aims to identify the factors affecting customer satisfaction with digital banking in Ho Chi Minh City, enabling banks to better understand customer behavior and implement effective solutions to improve service quality Ultimately, this research will help banks meet customer needs and foster the growth of digital banking services.
"Factors affecting customer satisfaction when using digital banking in Ho Chi Minh City" had been chosen.
Research objectives
This thesis aims to identify the key factors influencing customer satisfaction with delivery services in Ho Chi Minh City Through the development of research models and evaluation analyses, it will propose solutions to enhance service quality in order to boost customer satisfaction levels.
In addition to the general objective, the study also has the following specific objectives:
Determine factors that may affect customer satisfaction
Assessing the level of impact of factors on customer satisfaction
Giving a conclusion and recommendation for DB in Vietnam to improve the quality of services.
Research questions
This study is designed to answer the following questions:
What factors affect customer satisfaction when using DB?
How do factors impact customers satisfaction?
What solutions can be drawn to improve the quality of DB in Ho Chi Minh city?
Research subjects
The satisfaction of customers when they use DB in Ho Chi Minh city
Time range: from June to September 2021
Space range: Ho Chi Minh City, Vietnam
Respondents: Customers have used DB services which are Timo, Tnex, and Cake
Services studied: Timo, Tnex, and Cake.
Research methods
This research builds on prior studies by integrating qualitative and quantitative methods to assess the factors influencing customer satisfaction with DB Additionally, it highlights key areas for improvement to enhance the overall quality of DB services.
Qualitative research plays a crucial role in synthesizing and comparing theories, legal regulations, and prior studies concerning digital banking (DB) Additionally, it facilitates the descriptive analysis of DB activities, focusing on the current status of digital banking in Vietnam, particularly with platforms like Timo, Tnex, and Cake.
The study employed quantitative research methods to evaluate the research model through a questionnaire survey targeting 304 customers utilizing DB services in Ho Chi Minh City This approach aims to gather and analyze customer opinions, using a structured questionnaire based on the research framework Data collected from the survey will undergo processing and analysis using Cronbach's Alpha reliability coefficient, exploratory factor analysis (EFA), and multiple regression analysis via SPSS 20 software The study ultimately seeks to assess the impact of various factors on customer satisfaction with DB services and provide recommendations for enhancing service quality in Ho Chi Minh City.
Contribution
This study addresses the significant gap in research on digital banking (DB) customer satisfaction, particularly in Ho Chi Minh City, where the highest level of digital banking services in Vietnam is offered While existing literature primarily focuses on factors influencing the intention to use DB or examines other services, few studies explore customer satisfaction in-depth By providing empirical evidence on the factors that affect customer satisfaction with DB, this research serves as a valuable reference for future studies in the field.
During the uncertain times of the Coronavirus pandemic, digital banking (DB) has gained significant importance among both providers and consumers, as it facilitates social distancing while ensuring banks can meet market demands This study serves as a valuable resource for commercial bank managers, offering insights into customer behaviors and suggestions for enhancing the quality of digital banking services By leveraging these insights, banks can better address customer needs and strengthen their competitive position in the market.
Structure of research
This study consists of five following chapters:
Describing reasons for selecting the topic as well as stating research objectives, research questions, subjects, research methods, contributions in practice, and scientific studies
Chapter 2: THEORETICAL BASIS AND LITERATURE REVIEW
Describing some theories about DB, service quality, customer satisfaction and reviewing previous empirical researches as a basis for proposing a research model Chapter 3: RESEARCH METHOD
This article outlines the research model, detailing the description of variables, scale development, and the hypotheses guiding the study It also discusses the research methods employed, including data sampling and processing techniques Furthermore, the article emphasizes the construction and validation of scales designed to assess the influence of various factors on customer satisfaction.
Highlighting the legislative frameworks related to DB in Vietnam, the establishment of digital banks in Vietnam, especially the present status of Timo, Tnex, and Cake's
Simultaneously, presenting results from the estimation model and discussing the obtained result
Chapter 5: CONCLUSION AND MANAGEMENT IMPLICATION
This study summarizes key findings regarding the quality of databases (DB) in Ho Chi Minh City and offers actionable suggestions for improvement It aims to establish a foundation for further exploration and development in this area, while also acknowledging the research's limitations and proposing directions for future studies.
Overview of digital banking
Definition of digital banking
Singapore is recognized as the first country to establish a digital banking platform, with DBS Bank, founded in 1968, being the world's first digital bank and currently the highest-rated among its peers In recent years, countries globally have been advancing their own digital banking initiatives, with notable institutions such as the Royal Bank of Scotland, UniCredit (Italy), Bank of America, Barclays (England), HSBC (England), Banco Santander (Spain), and JP Morgan Chase (America) leading the way.
The concept and function of DB have been defined in various ways by numerous researchers, leading to diverse interpretations Despite these differences, there are notable similarities in their explanations of DB.
Digital Banking revolutionizes traditional banking by digitizing all services and operations, allowing customers to access banking functions through websites or mobile applications using just a smartphone and an internet connection This transformation extends to banks' internal processes, including risk management, capital management, and marketing, ensuring that all aspects of a conventional bank, such as organizational structure and human resource management, are fully integrated into the digital framework Unlike e-banking, which serves as a supplementary system, Digital Banking encompasses the entire banking experience, enabling banks to operate entirely online without the need for physical branches or face-to-face interactions, thus embodying the concept of no-branch or auto banking.
Despite the widespread adoption of digital banking (DB) by commercial banks in Vietnam, there remains a significant gap in the legal framework governing its use Currently, there is no clear definition of digital banking or specific licensing regulations outlined in Vietnamese law As a result, digital banking operations in the country depend solely on the licenses issued by their parent commercial banks.
Table 2.1 The difference between Digital banking and e-banking
The tools which help customers make transactions and manage their accounts online anytime, anywhere with an internet- connected device
Can activate online 100% without branches or transaction offices
Having transaction offices or branches
Digitizing all traditional banking operations
Digitizing some services of traditional banks
Registering for an account online without going to the bank
Must go to the bank to register for the service
Answering questions and resolve issues via mobile support
Customers nees to go to the bank to get their questions answered
Customers have an electronic signature
Customers don not have an electronic signature
Covering all features of a traditional bank, which are:
Just digitizing a few basic features of a bank, which are:
Source: Author's own calculation and visualization
DB, or digital banking, functions as a comprehensive banking solution that fulfills all the roles of a traditional bank, operating exclusively online without physical branches or transaction offices Unlike e-banking, which focuses solely on transaction-based services, DB offers a full range of banking activities and services, making it a complete digital banking platform.
Benefits and limitations of digital banking
The rapid advancement of technology plays a crucial role in enhancing human life, offering numerous benefits to both consumers and banks Despite its significant advantages, technology also presents certain limitations that need to be addressed.
DB offers advanced features, including 24/7 access to services through the internet and mobile applications, allowing customers to save time and effort With the convenience of using banking services anytime and anywhere, DB enhances the overall customer experience.
During an epidemic, visiting banks for transactions poses risks to both customers and staff To mitigate these dangers, DB offers solutions that allow customers to conduct their banking activities safely from home.
DB enhances customer experience by streamlining services through digitization With simplified administrative paperwork, customers can effortlessly access product information, learn how to utilize banking services, and complete forms quickly and easily.
Customers can enhance their banking account management with digital banking (DB) solutions By consolidating all their bank accounts into a single platform, users can effortlessly access and oversee their financial activities Additionally, DB services ensure that all transactions are recorded on the website or application, enabling customers to easily monitor their trading activities.
Digital banking significantly accelerates transaction speeds compared to traditional banks, where customers must physically visit branches and rely on the qualifications and attitudes of bank staff By utilizing digital banking, customers can bypass these obstacles, ensuring that transactions are completed more accurately and swiftly, often in just seconds.
DB significantly reduces risks for customers by eliminating the need to carry cash, which can expose them to potential dangers while traveling Traditional cash transactions often lead to counting errors at the counter, resulting in financial losses for customers (Nguyen The Anh, 2020) Furthermore, DB utilizes advanced technologies like Blockchain to enhance security, safeguarding customers' account data from theft Additionally, all transactions are conducted online, minimizing the risk of information disclosure by bank staff.
DB significantly lowers costs for customers by enabling them to access services remotely, eliminating the need for travel expenses and additional service fees (Nguyen The Anh, 2020).
Digital banking (DB) significantly reduces operational costs for banks by eliminating the need for substantial investments in infrastructure and staff salaries (Nguyen The Anh, 2020) As banks provide essential services, they often face high customer traffic, which can overwhelm their staff By automating repetitive tasks through DB, banks can alleviate this pressure, allowing employees to focus on more critical functions and improving overall efficiency.
Digital banking enhances operational efficiency for banks, leading to increased income and profit (Do Quang Tri, 2021) By improving customer interactions and accelerating the fulfillment of customer needs, digital platforms also streamline internal functions, resulting in more effective operations.
DB introduces innovative and specialized products that set banks apart from their competitors, boosting their overall competitiveness (Nguyen The Anh, 2020) Furthermore, DB serves as an effective solution for commercial banks to pursue their globalization strategies without the need to establish foreign branches.
DB enhances customer care quality for banks by allowing staff to prioritize product improvement and direct communication with clients, rather than solely focusing on attracting a high volume of customers.
DB enhances transaction accuracy for banks, which is essential for compliance with government regulations and financial precision (Do Quang Tri, 2021) The effectiveness of banking operations largely relies on the skills and attitudes of the staff Traditional banks, often reliant on paper processing, face risks of errors that can negatively impact their performance By adopting automation and streamlining the verification process with eKYC, banks can eliminate cumbersome manual tasks, resulting in improved accuracy in their accounting practices.
DB provides banks with a mechanism to hedge against certain risks, such as bank fraud Unlike traditional banks where staff may collude with customers to perpetrate fraud, this is less likely in DB since employees do not interact directly with clients.
Despite advancements in modern technology aimed at enhancing database security, professional hackers still find ways to infiltrate accounts and steal customer information during online transactions.
Forms of digital banking
According to IBM (2015), DB may be divided into four types
Digital banks are created by leveraging the resources of their parent institutions, including infrastructure and distribution channels, to establish a distinct brand aimed at millennials This strategy allows traditional banks, which often face challenges in appealing to younger customers, to maintain their existing brand while offering tailored products under a new identity Although these digital banks utilize the parent bank's resources, they can effectively market themselves as separate entities.
Digital banking channels allow banks to create and deliver their products and services through an improved interface, separate from traditional offerings, while establishing a new distribution channel Many banks view the gap between consumer expectations and the experiences provided by traditional banking as a lucrative opportunity By enhancing the user experience and reselling traditional banking products, these banks aim to lower operational costs.
A digital bank subsidiary operates as an independent entity, distinct from its parent bank, leveraging innovative digital channels and flexible back-end technologies This structure enables the subsidiary to provide consumers with a streamlined and simplified end-to-end banking experience.
Digital native banks are exclusively online institutions that prioritize digital technologies in their operations Customers engage with these banks primarily through digital channels, although some may offer a hybrid model that includes in-person interactions at financial centers, cafés, or through video chats on mobile devices.
Source: IBM, 2015 Figure 2.1 Digital bank models
Most Vietnamese digital banks are currently limited to the first two forms of digital banking, relying heavily on traditional operational networks and distribution channels While services have been adapted to align with emerging trends and new customer segments, there remains significant room for growth and innovation in their digital offerings.
In Vietnam, three notable digital banks—Timo, Tnex, and Cake—have established independent branches that operate on digital platforms with their own services and sales policies, separate from their parent banks Despite their independence, these digital banks rely on the back-end systems of traditional banks, necessitating collaboration to enhance customer experience As a result, Timo, Tnex, and Cake exemplify the digital bank subsidiary model, contributing to the growing popularity of digital banking in Vietnam.
Perspectives on service quality and customer satisfaction
Service quality significantly impacts customer satisfaction, with various perspectives on what constitutes quality service These differing viewpoints are shaped by individual researchers, the subjects of their studies, and the specific research contexts.
Service quality, as defined by Parasuraman et al (1988), is the organization's ability to meet or exceed customer expectations, measured by the gap between customer perceptions and expectations when using services This gap serves as a crucial indicator of customer satisfaction; the smaller the gap, the higher the customer satisfaction Lewis & Mitchell (1990) further emphasize that exceptional service effectively fulfills customer wants and expectations.
The term “customer satisfaction” is not an unfamiliar term There are a number of different definitions for this term
“Satisfaction is the result of a comparison with predictive expectations” (Bolton and Drew, 1991; Bitner, 1990; Parasuraman et al., 1988, 1994; Zeithaml, Berry and Parasuraman, 1990)
Customer satisfaction, as defined by Oliver (1980), refers to the complete fulfillment of an individual's expectations and is shaped by their experiences with a product or service According to Parasuraman et al (1991), customer satisfaction can be categorized into two levels: the desired level, which represents what customers aspire to achieve, and the adequate level, which reflects the minimum standard of service that customers find acceptable.
"accept" without being overly happy with
Consumer satisfaction is a crucial factor for businesses, defined as the fulfillment of consumers' needs, desires, and expectations, which leads to repeat sales and loyalty (Brown, Churchill, & Peter, 1993) Taylor and Baker (1994) emphasize that customer satisfaction significantly influences the intention to repurchase Levesque and McDougall (1996) describe customer satisfaction as the perception of the service provider after utilizing their services, while Bitner and Hubbert (1994) note that it reflects feelings based on previous interactions with the company Oliver (1999) adds that customer satisfaction is an emotional response derived from comparing actual experiences with prior expectations.
In 2001, Philip Kotler identified that customer satisfaction hinges on the gap between actual results and expectations, which stem from personal needs, past experiences, and external influences like advertising Customers feel dissatisfied when the service outcome falls short of their hopes, while satisfaction occurs when there is no difference between the two Exceeding expectations leads to heightened happiness Kotler and Keller (2006) define customer satisfaction as the emotional response—either pleasure or disappointment—derived from comparing a product's perceived performance with the customer's expectations.
2.1.4.3 The relationship between service quality and customer satisfaction
Numerous studies indicate a strong correlation between service quality and customer satisfaction, highlighting that service quality serves as a key indicator of customer contentment Research by Anderson & Sullivan (1993), Cronin Jr & Taylor (1992), Levesque & McDougall (1996a), and Taylor & Baker (1994) confirms that high-quality service enhances customer satisfaction, while poor service diminishes it.
Service quality significantly impacts customer satisfaction, as noted by Parasuraman et al (1988) When banks deliver high-quality services tailored to customer needs, it leads to increased customer happiness and a greater likelihood of repeat usage While service quality and customer satisfaction are interconnected, they are distinct concepts, as highlighted by Oliver (1993) Service quality is primarily influenced by subjective factors related to service delivery, whereas customer satisfaction is shaped by customer expectations and various elements, including pricing, customer relations, and service duration Ultimately, service quality is just one of several factors that contribute to overall customer satisfaction.
Research by Keiser (1993) and Lian (1994) highlights that high service quality enhances customer satisfaction, attracts new clients, and retains existing ones Cronin and Taylor (1992) and Yavas et al (1997) emphasize that service quality is the most significant factor influencing customer satisfaction Additionally, Spreng and Mackoy (1996) assert that service quality serves as the foundation for customer satisfaction.
Theoretical models to measure service quality
Parasuraman's SERVQUAL model is built base on the concept of service quality This model is the comparison between the expected value and the actual value perceived by the customers
Quality of Service = Perceived Level - Expected Value
In 1985, Parasuraman identified ten key factors that influence service quality: access, communication, competence, courtesy, credibility, reliability, responsiveness, security, tangibles, and understanding the customer Access ensures that customers can conveniently obtain services, while communication involves clearly addressing customer inquiries and explaining service details Competence reflects the staff's willingness to assist customers directly, and courtesy pertains to the respectful attitude of the staff Credibility is built through customer trust, which stems from brand recognition and staff professionalism Reliability signifies the ability to deliver services accurately and on time, and responsiveness indicates the staff's readiness to assist customers Security encompasses the bank's commitment to protecting customer information and assets Tangibles refer to the visible aspects of the service, such as staff attire and equipment, and understanding the customer involves recognizing and addressing their needs through attentive service and familiarity with repeat clients.
The ten-component model of service quality is comprehensive but complex to measure In 1988, Parasuraman introduced the SERVQUAL scale, which simplifies this by using 22 statements to evaluate five key components: reliability, assurance, tangibles, empathy, and responsiveness Reliability refers to the ability to consistently deliver promised services accurately, including service delivery accuracy and timeliness Responsiveness is the readiness to assist customers promptly, encompassing the speed of service delivery and problem-solving Tangibles relate to the physical aspects of service, such as facilities and equipment, reflecting the company's image and service quality Empathy involves providing personalized attention to customers, understanding their needs, and addressing their concerns effectively Assurance encompasses employees' professionalism and expertise, instilling trust and confidence in customers.
Source: Parasuraman et al, 1985 Figure 2.2 The SERVQUAL model
The SERVPERF model, developed by Cronin and Taylor in 1992, enhances the original SERVQUAL model by omitting the customer expectation factor, focusing solely on perceived service quality According to Cronin and Taylor, "quality of service = level of perception," emphasizing that cognitive factors are more effective predictors of service quality Their research indicates that actual performance is a better determinant of service quality than expected performance, leading to potential confusion between customer satisfaction and attitudes in the SERVQUAL framework The SERVPERF model utilizes 22 statements across five key dimensions: reliability, responsiveness, assurance, empathy, and tangibles Reliability refers to the consistent delivery of promised services, while responsiveness highlights the eagerness to assist customers promptly Empathy involves providing personalized attention, assurance encompasses employee expertise and professionalism, and tangibles pertain to the visual appeal of facilities and staff Overall, the SERVPERF model is recognized for its simplicity and efficiency compared to the SERVQUAL model.
In 1984, Gronroos introduced the Gronroos model, which assesses service quality by comparing customer expectations before service use with the actual value received afterward He identified two key criteria for evaluating service quality: technical quality and functional quality, emphasizing that functional quality holds greater significance Additionally, Gronroos noted that a company's image, influenced by these two quality dimensions, plays a crucial role in perceived service quality He proposed three factors for measuring service quality: technical quality, functional quality, and company image While researchers acknowledge that customer expectations are shaped by various elements, including marketing efforts and word of mouth, the model has limitations in providing a clear method for measuring technical and functional quality.
Source: Gronroos, 1984 Figure 2.3 The GRONROOS model
There are many models about service quality, and among them, many models of service quality measurement for the characteristics of different industries In the year
In 2000, Bahia and Nantel introduced the Bank Service Quality (BSQ) scale for assessing perceived service quality in retail banking, integrating ten components from Parasuraman's SERVQUAL model and the "7Ps" marketing mix, along with additional elements like courtesy and access The BSQ model comprises 31 observed variables across six components: effectiveness and assurance, access, price, tangibles, service portfolio, and reliability Effectiveness focuses on efficient service delivery and staff capability to ensure customer security, while assurance highlights communication skills in addressing customer needs Access measures service delivery speed, price evaluates service costs, tangibles assess the bank's physical environment, and the service portfolio examines the range of services offered Reliability gauges the bank's ability to fulfill customer requests accurately and promptly This model not only builds on Parasuraman's framework but also enhances item consistency across various research dimensions.
Literature review
Vietnamese studies
Ho Diem Thuan (2012) conducted a study to evaluate the quality of e-banking services for individual consumers by applying a satisfaction assessment model that combines SERVPERF and GRONROOS frameworks The research focused on individual customers of Vietinbank's Da Nang branch and utilized a scale comprising six key components: responsiveness, tangibles, reliability, assurance, empathy, and price The findings highlighted the significance of these components in determining the overall quality of e-banking services.
"responsiveness" and "reliability" has the greatest influence
The study focuses on customer satisfaction with Vietinbank's e-banking services, specifically targeting consumers in Hanoi and Ho Chi Minh City who utilize Vietinbank Ipay and SMS banking Giang and An Huong (2016) adapted the SERVQUAL model to evaluate customer satisfaction across six dimensions: reliability, responsiveness, assurance, empathy, tangibles, and price The findings indicate that reliability significantly influences overall customer satisfaction.
In a 2018 survey conducted by Nguyen Thi Thanh Tam among individual customers of commercial bank branches in the Dan Phuong area of Hanoi City, recommendations were made to enhance customer satisfaction and improve e-banking services Utilizing the SERVQUAL model, which includes tangibles, reliability, empathy, price, and responsiveness, the study found that tangibles have the most significant positive impact on customer satisfaction, while pricing was determined to have no effect on customer satisfaction.
A study conducted by Nguyen Hong Quan in 2020, based on survey data from 225 regular e-banking customers of Tien Phong Bank, evaluated the factors influencing satisfaction with e-banking services Utilizing the e-SERVQUAL model, which comprises six key elements—reliability, responsiveness, assurance, electronic media, empathy, and price—the research aimed to quantify consumer satisfaction The findings revealed that electronic media emerged as the most significant factor affecting customer happiness.
International studies
A study by Nupur (2010) explored the impact of e-banking quality on customer satisfaction from 2006 to 2009, a period when e-banking was emerging in the banking sector Utilizing the SERVQUAL model, which encompasses reliability, responsiveness, assurance, empathy, and tangibility, the research gathered data through structured questionnaires from 250 customers The findings indicated that reliability, responsiveness, and assurance are key factors influencing customer satisfaction with e-banking services, with responsiveness identified as the most critical element for meeting customer needs in Bangladesh.
This article investigates the application of e-banking functions and their impact on customer satisfaction in commercial banks in Jordan A survey conducted by Ala`Eddin and Hasan (2011) involved 179 customers with diverse demographic characteristics, including gender, age, and internet experience The findings revealed that factors such as accessibility, convenience, security, privacy, content, design, speed, and fees associated with e-banking significantly enhance customer satisfaction in Jordan's commercial banking sector.
A study by Sakhaei et al (2014) investigated the impact of internet banking service quality on customer satisfaction in Iran, proposing a model comprising six key elements: reliability, efficiency, responsiveness, fulfillment, security, and website design Conducted through a survey of 384 participants from April to July 2013, the findings revealed that reliability had the strongest correlation with customer satisfaction, while website design showed the weakest relationship.
In 2015, Tran Van Quyet, Nguyen Quang Vinh, and Taikoo Chang established a five-factor model—reliability, responsiveness, empathy, tangibles, and assurance—based on the SERVQUAL framework to assess the quality of bank deposit services A survey involving 150 participants was conducted, revealing that all five dimensions positively influence customer satisfaction However, the reliability dimension received only partial support, highlighting the necessity for Vietnamese commercial banks to enhance reliability in order to remain competitive in the market.
In 2016, Worku et al conducted a study on the impact of electronic banking on customer satisfaction, comparing it to traditional banking at Dashen and Wogagen banks in Gondar city, Ethiopia The researchers utilized questionnaires from 402 customers and conducted interviews at four branches of the two banks Their findings revealed that electronic banking is predominantly used by younger, educated, and salaried individuals, and it significantly enhances customer satisfaction due to its various benefits.
In 2017, Sulieman and Warda conducted research on the impact of electronic service quality on customer satisfaction in Islamic Banks in Jordan, utilizing a model consisting of six components: reliability, ease of use, effectiveness, website design, privacy, and responsiveness The study surveyed 300 participants and found that the factors of reliability and effectiveness did not significantly influence customer satisfaction.
In 2018, Miah conducted research utilizing mixed methods, incorporating the UTAUT2 theoretical framework and E-service quality dimensions to assess customer satisfaction and loyalty regarding DB services in Finland The study measured customer satisfaction through six independent variables: performance expectancy, effort expectancy, responsiveness, reliability, personalization, and security, with a survey administered to 190 participants online The findings revealed that all variables positively influenced customer satisfaction, with the exception of responsiveness.
In 2018, Aisyah conducted a study on the service quality of Islamic banks in Indonesia, focusing on its impact on customer satisfaction and loyalty The research involved a survey of 100 respondents, revealing that customer satisfaction and loyalty are influenced by six key factors: assurance, tangibility, responsiveness, compliance, reliability, and empathy Notably, the study found that assurance has the most significant positive effect on customer satisfaction and loyalty, while empathy has the least influence.
In 2019, Sulaiman et al investigated the influence of electronic banking on customer satisfaction in Palestine Their research involved a survey of 347 customers across eight banks, employing two data collection methods to gather comprehensive insights.
Palestine and a direct interview with the managers of Arab Bank and Bank of
A recent study on customer satisfaction in Palestine identified five key factors: ease of use, reliability, information security and privacy, cost and fees, and availability Among these, availability emerged as the most significant factor influencing customer satisfaction.
Hadid et al (2020) conducted a study to explore the connection between digital banking service quality and customer loyalty in Malaysia Utilizing a quantitative research approach, they collected data from 384 participants across five commercial banks, analyzing the results with Partial Least Squares Structural Equation Modeling.
Modeling using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS software revealed that four out of five factors—reliability, tangibility, responsiveness, and assurance—positively influence customer satisfaction, achieving a statistical significance of 95%.
Research model
The model assesses customer satisfaction in digital banking by utilizing the SERVPERF framework developed by Cronin and Taylor (1992), which simplifies measurement by omitting the expected value factor found in the more commonly used SERVQUAL model by Parasuraman This streamlined approach not only enhances the clarity of survey questions but also facilitates easier responses from customers, ultimately improving the evaluation process of their satisfaction.
The SERVPERF model identifies five key elements that influence customer satisfaction: tangibility, reliability, responsiveness, assurance, and empathy However, Scardovi (2017) notes that in the context of digital banking (DB), which lacks physical branches or transaction offices, the interface element is more relevant than tangibility.
In digital banking, the assurance factor closely aligns with reliability, emphasizing the critical importance of network security for both banks and consumers Given that digital banks operate primarily on digital platforms, any lapse in security can lead to the loss of client information and assets, ultimately jeopardizing the entire financial system Research indicates that security significantly influences consumer satisfaction, making the term "security" particularly relevant and clear for users of digital services.
The key distinction that appeals to customers between traditional banks and digital banking is cost Digital banks typically provide free account opening, management, and transfers, unlike traditional banks, highlighting a significant advantage for digital banking Research, including the BSQ model by Bahia and Nantel (2000), demonstrates that pricing significantly influences customer satisfaction.
The research model was refined by adjusting the scale and incorporating additional variables to align with the study's conditions It consists of six components influencing customer satisfaction, three of which are derived from the SERVPERF model—reliability, responsiveness, and empathy—while the other three newly added components are website interface, security, and price.
Source: Author's own calculation and visualization Figure 3.1 Proposed research model
Variable description
Interface
The interface serves as the initial point of interaction for customers utilizing the bank's services, encompassing features for feedback and complaints A visually appealing and user-friendly interface directly correlates with increased customer satisfaction Therefore, we hypothesize that H1: the interface positively influences customer satisfaction The website interface is measured using a scale (Int) consisting of five observed variables, labeled Int1 through Int5.
Table 3.1 Encrypt data for Interface component
Int1 The interface is attractive
Int2 It is fast to access services in DB
Int3 DB has a sitemap and contact page that are easy to use
Int4 I can search service information on DB easily and quickly
Int5 I can log into DB easily
Reliability
Reliability is essential in banking, as it is shown through accurate transactions, clear communication, and timely record-keeping for customers Increased reliability leads to higher customer satisfaction, supporting the hypothesis H2: reliability positively influences satisfaction The reliability scale (Rel) consists of four observed variables, labeled Rel1 to Rel4.
Table 3.2 Encrypt data for Reliability component
Rel1 DB keep its promises to deliver a service at a specific time
Rel2 DB deliver its services without any error
Rel3 DB perform the service right first time
Rel4 DB always actively notices to customers when it have a change in the service information
Responsiveness
Responsiveness is crucial for timely customer service, directly impacting customer satisfaction Our hypothesis, H3, posits that increased responsiveness positively influences customer satisfaction The responsiveness scale (Res) consists of five observed variables, labeled Res1 through Res5.
Table 3.3 Encrypt data for Responsiveness component
Res1 Customers can make transactions 24/7
Res2 DB give me prompt service
Res3 DB solves my problems quickly and in a timely manner
Res4 DB can do everything for me as employees do
Res5 DB has online customer service representatives
Security
Security plays a crucial role in safeguarding customer information, directly influencing customer satisfaction Our hypothesis H4 posits that enhanced security positively impacts customer satisfaction levels The security scale (Sec) consists of four observed variables, labeled Sec1 through Sec4, which measure this critical aspect.
Table 3.4 Encrypt data for Security component
Sec1 I am not worried about the security of DB services
Sec2 I trust in the technology of DB services
Sec3 I trust that DB protect my privacy
Sec4 Using DB services is secure
Empathy
Empathy is showed through how DB cares about its customers The more empathetic
DB's close engagement with customers enhances their satisfaction levels This leads to our hypothesis H5: empathy positively influences customer satisfaction The empathy scale (Emp) consists of three observed variables, labeled Emp1 to Emp3.
Table 3.5 Encrypt data for Empathy component
Emp1 When I have a question or complaint, DB always solves it satisfactorily Emp2 DB has many good customer care policies
Emp3 DB always cares and understands customers’ needs about digital banking services
Price
The relationship between pricing and customer satisfaction is crucial for the long-term use of DB services Reasonable pricing leads to higher customer satisfaction, supporting our hypothesis H6 that price positively influences customer satisfaction The price factor is measured through three observed variables, labeled Pri1 to Pri3.
Table 3.6 Encrypt data for Price component
Pri1 DB has many promotions for customers
Pri2 The interest rate of the bank's services is suitable for my ability
Pri3 The cost of using DB is reasonable
Satisfaction
Satisfaction is showed customers' attitudes when using DB
Table 3.7 Encrypt data for Satisfaction component
Sat1 I feel that choosing to use DB is the right decision
Sat2 I will continue to use DB
Sat3 I will introduce my friends to use DB
Source:Nguyen Hong Quan, 2020 Table 3.8 Summary of correlation between factors and customer satisfaction
Source: Author's own calculation and visualization
Data collection method and technique
Data collection method
The research employs a mixed-method approach, integrating qualitative and quantitative techniques Quantitative data is collected through questionnaires, which consist of two key sections: the first gathers general demographic information and digital banking usage, while the second examines the relationship between service quality and customer satisfaction in digital banking Detailed questions can be found in Appendix 1 Data collection involves interviewing users of digital banking services such as Timo, Tnex, and Cake in Ho Chi Minh City, with the survey conducted from July to August.
In 2021, amidst the challenges posed by the coronavirus pandemic, social distancing became essential, leading to an increased reliance on digital banking (DB) by both providers and consumers While social distancing made DB more accessible, it also complicated data collection efforts, necessitating the use of online methods such as email and social media to distribute questionnaires The study employed a five-point Likert scale to gauge respondents' approval levels, with ratings ranging from 1 (strongly disagree) to 5 (strongly agree), as outlined by Maholtra (2009) and Riduwan and Kuncoro (2008).
Sample size
The appropriate sample size varies based on the estimation method employed, with differing perspectives on the ideal dimensions Hair et al.'s formula provides a guideline for determining the necessary sample size to ensure accurate results.
To conduct exploratory factor analysis (EFA), a minimum sample size of five observations per measured variable is essential, with a total sample size exceeding 100 For instance, if a study includes 20 observed variables, at least 100 participants are required In this case, with 30 observed variables, a sample of 150 consumers is necessary to ensure robust analysis.
N: the size of sample n: the observed variable
To achieve optimal results in regression analysis, a sample size must meet the formula n ≥ 8m + 50, as stated by Tabachnick and Fidell (1996) In this study, with 6 independent variables, the required sample size is at least 98 participants.
Recent research indicates that a minimum sample size of 150 is necessary for effective analysis In this survey, 320 participants contributed their responses, with the majority completing all questions After reviewing and eliminating invalid responses, a total of 304 valid samples were retained for data processing and analysis.
N: the sample size m: the number of independent variables
Data analysis method and technique
Cronbach Alpha's confidence coefficient method
The Cronbach Alpha coefficient is a crucial method for assessing the reliability of a scale, guiding the decision to retain or exclude variables A higher Cronbach Alpha indicates greater reliability, focusing on the homogeneity of observed variables and the removal of irrelevant ones prior to Exploratory Factor Analysis (EFA) According to Nunnally and Bernstein (1994), only variables with a Cronbach Alpha above 0.6 and corrected item-total correlations exceeding 0.3 are deemed acceptable for analysis However, an excessively high Cronbach Alpha (greater than 0.95) may signal multicollinearity, suggesting the presence of redundant observed variables within the scale.
Exploratory factor analysis (EFA)
Exploratory factor analysis (EFA) is a statistical technique that simplifies a large set of interrelated observed variables into fewer, more meaningful factors, preserving the majority of the original information (Hair et al., 1998) This method investigates the relationships among variables across various groups to identify any misassigned observed variables or to reveal underlying patterns within the data.
There are several criteria in the analysis of EFA which are the KMO (Kaiser-Meyer- Olkin) index, Bartlett’s test of sphericity, eigenvalue, total variance explained, and factor loading
The KMO index is a crucial indicator for assessing the suitability of factor analysis Variables with KMO values between 0.5 and 1 indicate a lack of correlation within the population, making factor analysis appropriate for the data Conversely, any variable with a KMO coefficient below 0.5 will be excluded from consideration.
Bartlett’s test of sphericity, like the KMO index, assesses the correlation among observed variables within a factor A statistically significant result (p < 0.05) indicates that these variables are correlated, suggesting that factor analysis may not be appropriate for the data.
The eigenvalue is a commonly used criterion to determine the number of factors in
EFA analysis With this criterion, only factors with Eigenvalue ≥ 1 are kept in the analytical model
Total Variance Explained describes how much percent of the factor analysis is explained and how much percent of it is lost Only factors with total variance explained ≥ 50% are acceptable
Factor loading indicates the strength of the relationship between observed variables and their corresponding factors A higher factor loading coefficient signifies a stronger correlation, while a lower coefficient suggests a weaker connection For effective variable retention, the factor loading should fall between 0.3 and 0.7 for sample sizes of 350 or more, and between 0.5 and 0.7 for sample sizes ranging from 120 to 350.
Regression analysis method
Regression analysis is a statistical method employed to assess the relationship between a dependent variable and multiple independent variables There are three primary models of regression analysis: linear, multiple linear, and nonlinear The linear model involves one independent and one dependent variable, while the multiple linear model encompasses one dependent variable and several independent variables In contrast, the nonlinear model deals with more complex datasets where the relationship between the dependent and independent variables is not linear Given that this research focuses on one dependent variable and six independent variables, the multiple linear regression model will be utilized.
The multiple linear regression is expressed using the equation:
The suitability of the model is determined by the adjusted R square coefficient (R2)
The ANOVA analysis method was employed to examine the linear relationship between the dependent and independent variables A significance level (Sig) of less than 0.05 indicates a valid linear relationship, confirming that the model is appropriate and well-suited for the data.
The Durbin-Watson statistic is a crucial statistical test employed to detect autocorrelation in the residuals of regression analysis Values of the Durbin-Watson statistic range from 1 to 3, with results indicating the absence of autocorrelation in the model.
Variance inflation factor (VIF) is used to check if multicollinearity exists in the model
If VIF is greater than 2, the model can have multicollinearity
The significance of each independent variable is determined by its Sig value, with thresholds set at 1%, 5%, or 10%, corresponding to Sig values of 0.01, 0.05, and 0.1 A Sig value of 0.1 or lower indicates that the variable is statistically significant, while a higher Sig value suggests it is not significant and should be excluded from the analysis.
The standardized regression coefficient (beta) quantifies the influence of an independent variable on a dependent variable When the significance level (Sig) is greater than 0 and beta is positive, it indicates that the independent variable positively impacts the dependent variable, suggesting that increases in the independent variable lead to increases in the dependent variable The independent variable with the highest beta among all regression coefficients signifies the most substantial effect on the dependent variable's change Conversely, if Sig is less than 0, it implies that the independent variable does not affect the dependent variable.
ANOVA (analysis of variance)
Analysis of variance (ANOVA) is employed when demographic factors exhibit three or more attributes, allowing researchers to assess differences among population groups based on individual customer characteristics There are two primary types of ANOVA: one-way ANOVA, which is used when there is one independent variable, and two-way ANOVA, applicable when there are two independent variables In this study, one-way ANOVA is utilized since customer satisfaction serves as the sole independent variable A significance level (Sig) of Levene greater than 0.05 indicates equal variance among groups; if the Sig ANOVA value exceeds 0.05, it suggests no significant differences between groups regarding the dependent variable Conversely, a Sig ANOVA value below 0.05 indicates notable differences, while a Sig Levene of 0.05 or less reveals unequal variance, rendering the model unsuitable for ANOVA analysis.
The reality of digital banking in Vietnam
The legal framework
Digital banking encompasses various aspects beyond traditional banking regulations, including personal data privacy, data sharing laws, the legal validity of electronic contracts, and standards for electronic signatures To support and enhance the digitization of banking services, the government has implemented several regulations aimed at fostering this transformation.
The legal framework for digital banking in Vietnam was established in 2007 with the government's decree on banking e-transactions (No: 35/2007/ND-CP) However, it wasn't until 2016 that digital banks began to emerge in the country, following the Prime Minister's Decision on December 30, 2016, which approved a scheme for the development of non-cash payments in Vietnam for the period of 2016-2020.
2545 / QD-TTG) to support and promote the use of electronic payment
On September 27, 2019, the Politburo adopted resolution No 52-NQ/TW, outlining guidelines and policies to engage in the Fourth Industrial Revolution, which includes enhancing legal frameworks for digital transformation and investing in technical infrastructure to ensure network safety and security Subsequently, on November 14, 2019, the Government implemented Decree No 87/2019/ND-CP, which specifies the enforcement of certain articles from the anti-money laundering law This decree empowers banks to request customer information and determine whether to conduct face-to-face meetings when establishing initial relationships If a face-to-face meeting is not held, banks must utilize methods and technologies, such as e-KYC, to identify and verify customers effectively.
On June 3, 2020, the Prime Minister approved Decision 749/QD-TTG, which outlines a national digital transformation program aimed at 2025, with a vision for 2030 This program prioritizes the financial and banking sectors by developing high-quality, high-speed infrastructure nationwide, establishing electronic identification and authentication systems, streamlining business processes, digitizing records, and enabling the testing of digital services and business models in the absence of complete legal regulations.
The Prime Minister's Decree No 127/QD-TTG, issued on January 26, 2021, aims to enhance the development and application of artificial intelligence (AI) in the banking sector This initiative focuses on analyzing and predicting loan demand and borrower behavior, improving credit-granting processes, detecting fraudulent activities, personalizing banking services for customers, and offering immediate support through virtual assistants and chatbots.
In alignment with government initiatives, the legal framework governing banking activities is being enhanced to support digital transformation The State Bank of Vietnam (SBV) actively promotes this transition through targeted policies and actions aimed at facilitating digital advancements in the banking sector.
On December 18, 2015, the SBV issued Circular No 28/2015/TT-NHNN regulating the management and use of digital signatures, digital certificates, and digital signature authentication services of the SBV
On July 8, 2020, the State Bank of Vietnam (SBV) issued Decision No 1238/QD-NHNN, which established regulations for creating payment accounts using electronic client identification (e-KYC) without face-to-face interaction This decision encourages commercial banks to partner with payment intermediaries and financial technology (Fintech) firms to develop innovative, safe, convenient, and cost-effective service solutions.
On October 21, 2020, the State Bank of Vietnam (SBV) released Circular No 09/2020/TT-NHNN, which outlines essential requirements for ensuring the safety of information systems in banking operations, particularly focusing on network security Subsequently, on December 4, 2020, the SBV introduced Circular No 16/2020/TT-NHNN, which amends the earlier Circular No 23/2014/TT-NHNN.
On August 19, 2014, the Governor of the State Bank of Vietnam issued a circular outlining the guidelines for opening and utilizing checking accounts at payment service providers This circular provides specific instructions for individuals to open payment accounts using electronic methods, known as e-KYC (electronic Know Your Customer).
On May 11, 2021, the State Bank of Vietnam (SBV) issued Decision No 810/QD-NHNN, which approved the "Plan for Digital Transformation of the Banking Sector to 2025, with orientation towards 2030." This decision mandates credit institutions to create and enhance digital banking models annually, encompassing operational frameworks and fee structures, while also implementing a comprehensive risk management system to address minimum operational, business, IT, and legal risks from 2021 to 2025 Furthermore, the SBV emphasizes the collaboration between the information technology department and credit institutions to effectively utilize digital data and maintain consistent network safety and security.
The legal documents indicate that the State Bank of Vietnam (SBV) is committed to fostering innovation and promoting digital transformation in banking, aligning with the government's vision for the fourth industrial revolution Despite this support, challenges remain within the legal framework, particularly regarding the licensing of digital banks, which currently must operate under the license of their parent banks, and regulations surrounding peer-to-peer lending These restrictions have resulted in significant issues, posing risks to both customers and digital banks.
The status of digital banking implementation in Vietnam
The COVID-19 pandemic has significantly accelerated the adoption of digital banking as individuals adhered to social distancing guidelines and sought to minimize contamination risks With the ability to transfer money instantly and conduct financial transactions without visiting a bank, digital banking has become essential for both consumers and businesses during this time According to the State Bank of Vietnam (SBV), 95% of commercial banks are currently implementing or developing digital transformation strategies, with 39% having already put digital banking into practice Additionally, 42% are still in the research and development phase A survey by the SBV in 2020 revealed that 88% of banks aim to digitize both customer communication channels and internal operations, while only 6% plan to focus solely on front-end digitization.
Source: The SBV, 2020 Figure 4.1 Level of research and implementation of digital transform strategies of commercial banks in Vietnam
Source: The SBV, 2020 Figure 4.2 Digital transformation model in Vietnam
According to IBM (2015), digital banking comprises four levels: digital bank brand, digital bank channel, digital bank subsidiary, and digital native bank In Vietnam, while many commercial banks have initiated digital banking plans, no digital native banks have emerged yet Currently, the digital banks established by commercial banks operate mainly at the brand and channel levels, remaining heavily reliant on their parent banks However, three digital banks—Timo, Tnex, and Cake—are recognized as digital bank subsidiaries, functioning almost entirely on digital platforms and operating independently from their parent banks, albeit still utilizing their licenses and backend systems.
Timo, established on May 8, 2016, is Vietnam's first digital bank, initially developed and backed by VP Bank until September 8, 2020 Following this period, Timo partnered with Viet Capital Bank on September 28, 2020, rebranding as Timo Plus, which continues to operate today Timo offers a comprehensive range of features to meet customer needs, including online account opening via e-KYC, easy sharing of account information, balance checking, online deposits and loans, as well as seamless money transfers and payments through scanning.
Timo, a pioneering digital bank in Vietnam, offers a variety of services including QR code payments, bill payments, phone recharges, and the ability to send reminders for splitting payments among friends or colleagues, exclusively for Timo members The bank has achieved significant milestones, boasting over 2 million transactions monthly and an impressive annual transaction value averaging $2.5 billion as of August 5, 2021 Additionally, Timo provides access to financial products such as insurance and investment options, solidifying its large market share in the Vietnamese banking sector.
Timo Digital Bank has been recognized as the "Best Digital Bank in Vietnam" for two consecutive years, 2019 and 2020, by Asiamoney In 2020, Timo also received accolades for being "The Fastest Growing Digital Bank" and "The Most Innovative Digital Bank," awarded by The Global Economics, a renowned UK financial magazine Continuing its success, Timo was again honored as the "Best Digital Bank in Vietnam" in 2021 during the International Business Awards organized by International Business Magazine.
Yolo, established by VP Bank on August 14, 2018, was rebranded as Cake on January 12, 2021 Within just three months of its launch, Yolo garnered over 200,000 downloads, and by the end of 2018, Cake digital bank reached over 500,000 downloads As the first digital bank in Vietnam created by a collaboration between a bank and a ride-hailing firm (VP Bank and Be Group), Cake stands out by being the first digital bank integrated into a ride-hailing service in the country Cake offers a range of banking services, including online account creation, savings deposits, money transfers, bill payments, and card issuance, allowing customers to select their card color Additionally, linking a Cake account with the Be app provides users with financial benefits.
Launched on December 11, 2020, Tnex, a digital banking service under MSB, has quickly gained popularity with over 100,000 downloads It offers a comprehensive range of features tailored to meet diverse client needs, including online account opening, ATM card issuance, money transfers, bill payments, savings deposits, and QR code transactions What sets Tnex apart from other digital banks is its focus on enhancing customers' lifestyle by enabling online purchases for food and shopping, making it a versatile choice for modern banking.