CHAPTER
ONE
1.0 Introduction
1.1 Background
of Study
Like in many areas of businesses, banking is a
sector that is characterized by intense competition for customers. The genesis
of Nigerian banks competition for customers may be traced to a list of monetary,
fiscal policies and programmes by the regulatory authorities beginning from the
middle 1980’s. First was the Structural Adjustment Programme (SAP) of 1986, which
paved the way for the regulation of the banking industry. With the
deregulation, the number of banks chasing the pool of available depositors grew
in leaps and bonds. In the wake of this scenario, the banks began to exert more
effort in their attempts to woo customers. The Nigerian banking industry also
witnessed major changes in 2001, with the Central Bank of Nigeria granting all
banks the Universal Banking license. This allows Merchant banks that could not
perform commercial banking functions, now handle all commercial banking activities.
Some distressed banks were restructured with new management teams and are
operating under new names, while operating licenses were granted new banks.
This has grossly increased competitive pressures as most of these new banks are
focused on improving their liability base and quality of their risk assets.
Presently, there are 88 Commercial and Merchant banks operating in Nigeria.
(This exclude non-bank financial institutions).
Ogunsemore, (1992:15), confirms that the number of
banks grew tremendously from 40 in 1985 to 125 in 1991. the era of “armchair
banking” which was prevalent amongst the first generation banks is clearly over
as to remain in business and to be competitive, banks would have to woo their
customers. Armchair banking refers to a case where officers simply stayed glued
to their chairs and wait for business to come.
Competition is now the key word in the market place
as banks now try to woo prospective customers, and retain the existing ones by ensuring
that quality service is delivered at all times to make the banks distinct in
the crowded market place. Even the first generation banks realized this and
have greatly improved their services and over hauled their systems to remain
competitive. Also, increasingly, the blue chip companies and certain categories
of customers have become over banked and margins in this sector have shrunk
over time. The difference that banks can make to this sector include offering
firstclass service to remain competitive and relevant. (Adekanye, 1986:12).
Nwankwo, (1994:5), emphasizes that the reform on the
financial sector has been a cardinal goal of the Structural Adjustment Programme
(SAP) adopted by many African countries. One noticeable feature of the
de-regulation of the financial sector is that financial institutions are
encroaching on one another’s territory. Nonbank financial institutions are
aggressively encroaching on banking functions thereby limiting the operational
latitude of the banks. New products proliferate the market, while, old products
are being repackaged.
The banking industry is characterized by a high
level of copycat mentality. Banks are quick to “Xerox” whatever appears successful.
Intensified marketing and public relations is now the order of the day. It is
believed that customers will patronize the bank, which comes closest to
satisfying their particular needs and wants. The average bank customer has
become so enlightened and sophisticated to demand more than just banking
services. Customers will choose service and products designed from customer
point of view (customer orientation). By exploring new technologically based techniques
for providing banking services, most banks expanded their product offerings to
enhance the deposit base and promote competitive efficiency. The level of
competition in the industry has led to improved services; as banks continue to
gradually phase out manual systems.
In the new competitive environment, banks driven by
survival instincts are forced to respond to threats in the environment. Martin,
(1998:203), indicates that service quality is a natural fall-out of the intense
competition going on in the market. High service quality is something the
banking industry as a whole seems to have forgotten for a long time, and was
relegated to the background. It took the entrant of foreign banks, renewed
competition, spurred by deregulation of industry for today’s banks to
re-discover quality in everything they do. Banks must strive for service
quality continuously; always realizing they could fall short of perfection.
Service quality means delighting the customer by
continuously meeting and improving their expectations. Exceeding the expectations
of increasingly sophisticated customers is paramount. It is influenced at every
level of an organization and often depends on how well the levels work
together. From the gate man up to the Chief Executive Officer of the bank,
should be involved in the culture of service quality because it is of paramount
importance to the growth and survival of the banking institutions.
Bankers are increasingly becoming aware of the
strategic importance of improving the quality of their offer and the need to make
extra effort towards satisfying their customers. The customer is king. Where
the customer derives maximum satisfaction is where he/she will frequent.
Because bank products and services are very similar, to be distinct and be
heard in a large market place, quality of its service must set it apart from
its competitors.
A lot of banks have come to realize this and are
conducting training programmes for their staff to imbibe the culture of quality
service and create an error-free environment. The way to the future is service
excellence.
1.2 Statement
of the Problem
Nearly all banks offer the same products and
services; the distinction is no longer clear. Whatever new products are
introduced, with time, other banks catch up. How then can a bank be heard in a large
market place? Service quality is the answer. It is the ability of the bank to
make its offer different from others that will keep its customers coming back.
In order to continuously exceed set goals and
objectives, banks must identify what makes them different from the other, from
the perspective of the customer and ascertain the role and impact of service
quality when practiced. Is there a growing recognition amongst banks that the
way forward is enhanced service quality, otherwise, why would certain customers
prefer to bank with a particular bank in the present competitive environment?
This study would strive to identify that increased service quality would lead
to increased market share, customer loyalty and ultimately, profitability.
1.3.0 Objectives
of the Study
The main objective of this study is to determine the
effect of financial service on profitability banks in Nigeria, while specific
objective includes the following:
i. To examine the key variables that determines
service quality and the extent to which all these variables are applied in the banking
industry.
ii. To ascertain the impact of service quality on
customer satisfaction and loyalty.
iii. To identify growth and profitability potentials
in a competitive environment where the principles of service quality is
adopted.
iv. To identify the key issues banks are confronted
with when adopting the principles of service quality.
1.3.1 Relevant
Research Questions
For the purpose of this study, the following
research questions were formulated to act as a guide.
i. What determines the service quality and extent
variables that are applied in the banking industry?
ii. To what extent does financial
service quality on customer satisfaction and loyalty?
iii. What can be used to identify growth and
profitability potentials in a competitive environment where the principles of
service quality are adopted?
iv. What are the key issues banks are confronted
with when adopting the principles of service quality?
1.3.2
Statement of Hypotheses
Ho:
Service quality and extent variables that are applied have effect on banking
industry
Hi:
Service quality and extent variables that are applied do not have effect on
banking industry
Ho:
Financial service quality and extent variables have negative effect when
applied in the banking industry?
Hi:
Financial services quality and extent variable does not have negative effect
when applied in the banking industry?
1.4
Scope and Limitations of the Study
The study concentrated on First Bank Plc (FBN) with
at least 109 years of operations in Nigeria. The reason being that FBN has gone
through an evolutionary change in the last six (6) years. It is no longer
enough to be the largest bank in Nigeria; they have to fight to remain
profitable and maximize returns due to the competitive pressures faced in the
industry. In order to have an increased share of the mind and wallet, what will
set them apart and ahead of competitions is the quality of services rendered.
The primary data was administered on members of Management
of the bank, who set the goals and objectives of the bank and the strategy to
be adopted to meet those goals and objectives. Secondary data and interviews
were also administered. It is limited to delivery of service quality to
customers in the Nigerian banking industry and focused on customer interaction
within the service delivery. It would also exploit what banks are doing to
improve service quality and its direct impact on the bottom line.
The study was limited to the First Bank Plc Head
Office where the largest concentration of management staff are located, and the
bank customers located on the Island, which includes Victoria Island, Ikoyi and
Lagos Island. The sample size cannot be as large as desirable because of the
process of administering interviews and questionnaires to a large number of
bank customers as well as employees. And thus would demand more time than is
available.
Other limitations include:-
1. The unwillingness of relevant people to grant
interviews, due to their busy schedules;
2. Reliability and accuracy of information supplied
by respondents of the questionnaires
1.5
Significance of the Study
Service quality has played a significant role in the
banking industry. Due to increased competitions, whereby too many banks are chasing
two few banks, the customer is king. He determines which bank he will patronize
and if he is not getting services there, he can always move on, the choices are
many.
This study would assist FBN Plc to better understand
the importance of service quality and the returns they would derive in the medium
to long term if practiced diligently. FBN Plc is the largest bank in Nigeria
and the banking public has at one time or the other used the bank and to
continuously attract these customers and retain them being that most banks
offer almost the same products and services, FBN Plc would have to set
themselves apart from the competition. The answer lies in improving service
quality.
This study would also assist the society and the
individual in particular to increase and improve their awareness of service
quality and what it is all about. With this knowledge, their decision to use a bank
would be determined by the level of service they obtain and the options open to
them to meet their needs.
Service quality has now taken a prominent position
in the strategy of most banks. There is a lot of focused attention on this in the
banking industry in Nigerians and banks are continuously exploring ways and
means as to which they can deliver faster and error-free services to their
customers. In addition, banks can no longer afford to ignore this variable, as
it has an impact on their operational risk.
1.6
Definition of Terms
Customer
Orientation: Is a marketing philosophy, which states
that all business activities should be geared towards the needs and wants of
the customers.
Service
Quality: This means delighting the customer by
continuously meeting and exceeding their expectations.
Profitability:
The
returns gained in a business as a result of expending effort.
Order for full projects: #2000
Payments method: bank deposit / Bank Transfer
Skye Bank 1
Bank account name: Yekeen Idris Adeseun
Bank account number: 3026132730
GTB Bank 2
Bank account name: Yekeen Idris Adeseun
Bank account number:. 0165460421
Send your payments details to.....
Email: idrisyekeen7@gmail.com or 08167674702
- Your full name
- Your email that the documents will be sent to
- Your payments details
- Your mobile number
No comments:
Post a Comment