Factors affecting users

choice of Bank
Research Methodology

Kamal Kant Kaushik (Roll No. 14)

Surya Sridhar A. (Roll No. 07)
Rishav Garg (Roll No. 11)
Namit Saigal (Roll No. 23)
Sumit Ahlawat (Roll No. 03)

MBA –Banking
NMiMS
Introduction

The Indian banking industry is experiencing its share in the growth of the Indian economy. In the
post nationalisation period, the country witnessed unprecedented expansion in the branch
network of commercial banks with these banks reaching the people in far-flung subserviced
areas. With the help of this large network, today banks provide almost all payment services, and
a bank account is considered indispensable by most businesses, individuals and governments.
Acquiring a customer through opening his account with you is the most reliable way to start a
long lasting customer relationship. Because switching cost is not very high and customer
experience is of foremost importance, most of the banks are trying to woo the profitable
customers with advanced technology, adequate capital for investment, and their customer centric
approach.
.
The intent of choosing this particular study was to ensure that the banks can identify and improve
on the factors which are considered important by the customers before choosing a bank/branch to
open his/her account.

The study can be used by various banks which are providing Retail Banking services. This study
highlights how small measures like ‘personal attention’ at the branches go long way in
establishing the credibility of the bank with the customer.

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S. No Content Page No
1. Objective of study 5

2. Literature review 5

3. Research Methodology 6

4. Scales 6

5. Variables 7

6. Reliability 7

7. Sampling Method 8

8. Results 8

9. Inference 11

10. Conclusion 11

11. Recommendation 12

12. References 12

13. Annexure 13

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Objective of study
To identify and study the various factors which are considered important by the customers before
choosing a bank/branch to open his/her account.

Literature review

The literature search for our study was concentrated mainly on the online mediums. Various
prior researches about bank account opening and users’ consideration about them have been
done where various variables have been captured in these studies.

According to IBA chairman, M B N Rao” The Indian commercial banks have experienced
the shift of preferences of the new generation customers from ‘personalized banking’ to
‘technological banking’. This techno-savvy customer group prefers to complete banking
transactions from their home or offices rather than visiting the bank branch. They have very
little loyalty to their bankers and given a slightest improved technology based service, they
are ready to shift their banking needs from the existing to another bank. In the face of the
threat of losing profitable customers to the new entrants in the banking sector, the existing
commercial banks will have to evolve suitable market strategies aimed at attracting new
customers and retaining the existing ones. In the changed circumstances, the need for ‘need
for customer delight’ will override the need for ‘customer service’. “

Other literature available in journals and websites also conclude that due to the fierce
competition in acquisition of new customers, most of the banks are doing research to find out
the parameters/factors which are of paramount importance for their customers. Although
technology is changing rapidly and so the customer expectation, banks are gaining a lot by
focusing on improvement of the identified factors. Some significant factors are proximity of
branch, brand perception, speed of service and personalized attention.
"If you cannot measure it, you cannot improve it." - Lord William Thomson
Kelvin (1824-1907).

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Research Methodology
Primary data was used for the analysis. The primary data needed for the research was collected
through online distribution of the questionnaire. Direct contacts at the branches and e-mails were
used for the purpose of data collection. The questionnaire was sent to diverse set of users which
covered people working in the I.T. industry, the Banking Sector, Employed with the Central
Government, Students, Self Employed across the various metro and Tier-1 cities.
See Annexure2 for the questionnaire used for the study. While designing the questionnaire the
factors such as distance from home/workplace, brand perception, speed of service were used as
broad guidelines based on the literature review.

Scales
The scale used in the questionnaire is a Likert scale. A Likert item is simply a statement which
the respondent is asked to evaluate according to any kind of subjective or objective criteria;
generally the level of agreement or disagreement is measured. The scale ranges from 1-5 with 1
being “Not considered at all” and 5 being “Given paramount importance”.

1. Not considered at all

2. Not considered very relevant
3. Important but only slightly
4. Considered fairly important
5. Given paramount importance

Variables/Theory
Our study uses a set of 15 questions which cover various facets of customer’s perception
regarding the services quality and easy access to the services. All the variables have a bearing on
the expectation level of users. The questions exhaustively list all the variables that are likely to
effects the user decision regarding opening a bank account. These variables covered the possible
aspects that emerged from the literature survey carried out.

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All the independent variables are addressed through the questionnaire where each question
captures or measures one variable. The interdependence among variables has been taken care of
through data analysis and few factors remain at the end of analysis.

Each question is considered a variable .The questions are in no specific order in order to avoid
any bias from the respondent. Respondents were asked to indicate the preferences they would
like to give to different factors before deciding the bank to open an account.

Reliability
The data collected was tested for reliability using reliability test in SPSS. Reliability refers here
to the degree to which different people review a study in the same way. When more than one
person is reviewing data, there will inevitably be disagreements. Multiple authors need to
develop a plan for comparing information in their data collection forms and for reaching
consensus when there are disagreements. Generally, after collecting limited amount of samples
researchers carry out reliability test before proceeding further with large volume of samples.

Before going into factor analysis it is necessary to check the reliability of the instrument used for
the survey. A reliability analysis of the questionnaire developed has been carried out. As a rule,
the value of Cronbach’s alpha should be more than 0.5 before going for any analysis.

In this case, the Cronbach’s alpha was 0.744, which indicates sufficient reliability.

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Sampling Method
Since the bank accounts are available for the public at large and are generally accessed by most
of citizens hence simple random sampling was used for the same. The intention was to capture
data from people who were from different life style.

Results
When factor test was carried out there emerged four factors from the rotated component
matrix. Please refer the table for the loading. Out of the initial 15 variables 1 could not be
clubbed in any of the factors.
The rest emerged under the following 4 components. These together cover approx. 71% of
the responses in data.

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Description of Factors

Factor 1: IMAGE REFLECTION

 Variable 05 Infrastructure of Bank
 Variable 07 Low Charges
 Variable 08 Crowd and Rush
 Variable 14 Type of Crowd
 Variable 15 Brand Perception

Factor 2: COMFORT

 Variable 01 Proximity to Residence

 Variable 02 Proximity to Workplace
 Variable 06 Whether bank is Technologically savvy
 Variable 10 Number of ATMs

Factor 3: SERVICE QUALITY

 Variable 09 Speed of Service
 Variable 11 Attitude of Staff
 Variable 12 Personalized Attention

Factor 4: OPINIONS
 Variable 04 Friends/Relatives Recommendations
 Variable 13 Knowledge of banks future strategies

The following variable could not be classified under any of the factors
 Variable 03 Immediate Surroundings of the Bank/Branch

Ranking of Factors:

I– Comfort
II – Service Quality
III – Image Reflection
IV - Opinions

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Inferences:
From the study we can safely infer that the banks need to focus on improving the above four
factors which have come out. It is important to realize that where you stand vis-à-vis your
competitor on the factors and then try and improve on the ones you are lacking. However, the
factors resulting have a direct bearing on the consideration level of users which is an important
insight for the banks.

Conclusion
The user decision is dependent on number of factors. Due consideration is given to various
factors but certain issues can be highlighted as of prime importance.

Proximity to workplace/residence: This underscores the importance of intelligent locations.

Technology, speed of service: With better technology, amenities like ATMs and internet banking
go a long way in roping in customers. Also, the speed & quality of service in the branch
improves too, leading to better consumer satisfaction.

Personalized Attention: Use of technologies like CRM can also help the bank to maintain more
personalized relations with the customers. Also, ingraining the customer service culture in
employees goes a long way in customer retention & customer delight

Infrastructure: Though less important than Service quality and Comfort levels of customer, the
infrastructure of the bank can still play the differentiator. The brand perception of a bank is
largely based on the type of buildings it maintains and the type of rush it can handle.

Banks can thus further work on creating awareness regarding their strategies for new services
and overall perception of bank brand. Also attitude of staff and crowd & rush at bank/branch also
have a bearing on customer decision.

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 Recommendations

On the basis of above study following recommendations should be can be given:

 Situate the branches near corporate offices and residential townships.

 State of art technology should be used to provide various services
 Smallest personalized attention has a great impact on customer so banks should try to
improve on this
 Infrastructure, Sufficient space and brand perception can be differentiating factors in
close competition

References

 http://www.bancon2007.com
 http://www.iba.org.in
 http://en.wikipedia.org/wiki/framework of research

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 Annexure -1

(Questionnaire)

Instructions:

1. Please rate your answers with a value between 1-5 for each of the questions given below

1. Not considered at all

2. Not considered very relevant
3. Important but only slightly
4. Considered fairly important
5. Given paramount importance

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SL No. Rating ( 1-5)
Parameters

1. Proximity to your residence

Proximity to your work place

2.

Immediate surroundings of the branch( Cleanliness, locality)

3.

4. Friends / Relatives recommendation

Infrastructure of the bank (Building, décor, furniture etc)

5.

Whether the bank is technologically savvy

6.

Low charges piled by bank for their services

7.

The crowd and rush in the bank

8.

Speed of service at branch

9.

Number of ATMs of the bank

10.

Attitude of bank-staf
11.

Whether you get personalized attention

12.

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 Knowledge of banks future strategies
13.

14. Type of crowd that frequents the bank

15. Brand Perception of the bank

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