SCMS Journal of Indian Management, July-September 2023
5
Quality Delivery to Augment
Customer Contentment: An Empirical
Evidence of Co-Operative Bank of
Oromia, Ethiopia
Dr. P. Karthika
Associate Professor, College of Business and Economics,
Kebri Dehar University, Ethiopia.
Email: karthi.nathan21@gmail.com
Professor. Dr. M. Karthikeyan
Dept. of Cooperatives, College of Business & Economics,
Wollo University, Dessie, Ethiopia.
Email: mkeya2003@gmail.com
Mr. Abduselam A. Mohamed
Assistant Professor of Agricultural Economics
Vice President for Academic Affairs
Kebri Dehar University, Ethiopia.
Email: abdisalan654@gmail.com
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This research paper investigates the Fintech adoption by the Co-operative Bank of Oromia (CBO), handling risk and
cyber security issues in practicing Fintech applications, and the effect on service quality delivery to enhance customer
contentment. The CBO was selected purposively, and the survey method was adopted to elicit information on service
quality dimensions and customer contentment. Sixteen (16) employees from the Digital Banking Operations unit
were interviewed, and 600 customers from 10 branches of 5 operational districts were also the respondents.
Descriptive statistics and the econometric model Ordered Logit were employed to analyse the data collected using a
semi-structured questionnaire. The results indicate that the adoption of Fintech in banking operations and customer
services by the CBO, like mobile banking, ATM, internet banking, and, to some extent, online customer support
services, has improved the image of the CBO. Risks and cyber security issues are found, and the bank is trying to solve
them to the maximum extent possible. As for service quality delivery, there has been an improvement in all
dimensions of service quality compared to traditional banking, i.e., after the adoption of financial technology in
banking operations and customer services. The authors have advocated a “Banking Service Quality Recovery
Strategy Model” (BSQRSM) to deliver better services to augment customer contentment.
Keywords: Co-operative Bank of Oromia, Customer Contentment, Fintech, Ordered Logit, Service Quality
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SCMS Journal of Indian Management, July-September 2023
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1. Background of the Study
Fintech, a term combining financial services and digital
technology, refers to the rapid technological innovation that
has transformed the financial services industry with new
business models, products, services, and delivery channels
(Ascarya & Ali, 2022). Fintech is a significant innovation in
the financial sector and is quickly expanding, which is
widely acknowledged (Lee & Shin, 2018). This was due to a
decreased trust in traditional financial service providers,
which increased the market appetite for alternative financial
services. The majority of Fintech is being driven by
technological advances such as increased infrastructure
availability, accessibility, and affordability (Internet, mobile
technology, and sensor systems). According to Lee and Shin
(2018), payment, wealth creation and management,
crowdfunding, peer-to-peer (P2P) lending, insurance
services, and capital markets are among the six emerging
Fintech business models. Fintech and the Internet of Things
(IoT) are both widely recognized as examples of new
technology. Fintech is giving birth to a slew of new products
and services, such as accounting systems, that aim to
provide more efficient and user-friendly versions of existing
financial mechanisms (Nakashima, 2018). Fintech has
significantly increased financial inclusion globally (Smith,
2022). This has particularly benefited individuals in
developing countries who previously lacked access to basic
banking services (Jones, 2022). Fintech advancements have
revolutionised payment systems, making transactions more
efficient and secure for consumers and businesses (Brown,
2023). These findings underline the transformative impact
of fintech on the global economy and the need for traditional
financial institutions to continually adapt and embrace
technological advancements (Smith, 2022; Brown, 2023).
From online banking and mobile payment apps to roboadvisors and blockchain technology, Fintech has reshaped
the landscape of the financial industry. With its ability to
streamline processes, improve efficiency, and enhance user
experience, Fintech has become a driving force behind the
digital transformation of financial services. As a result,
traditional financial institutions are now faced with the
challenge of adapting to this rapidly evolving industry or
risk becoming obsolete.
The co-operative banking models of Germany, France, the
Netherlands, and Italy are representative models and played
a big role in pushing the development of trade, small
industries, and agricultural activities. Co-operative banks
act as co-operative and credit institutions which provide
financial services to their members. Its governance is based
on participatory and democratic decision-making by its
members. Co-operative banks connect with local producers,
customers, and economic agents and provide services to
specific sectors (European Association of Co-operative
Banks (EACB, 2004).
Co-operative banks follow the Specialist Banking model,
which provides the necessary functions to support the real
economy in a competitive and globalized environment.
These banks supply credit to small and medium-sized
enterprises (SMSEs) and households (International
Monetary Fund, 2010). Co-operative banks play a
significant role in the financial systems of various countries.
These banks are vital sources of credit intended for
individuals and small and medium-sized businesses, as well
as a secure place for deposits. A non-profit orientation
focuses on maximizing member benefits and the
sustainability of financial co-operatives. That was especially
true during the world economic crisis, when co-operative
banks continued to lend money to their members, whereas
many commercial banks limited credit to households and
businesses. The structural and behavioural characteristics of
financial co-operatives are the overarching themes of the
first part of this review. This section examines the origins and
spread of financial co-operatives, the business model,
network arrangements, relationship banking, tax treatment,
balancing member interests, and the regulatory framework.
The second part is about performance and contribution to the
real economy, and this part considers mergers, acquisitions,
benefits and failures, efficiency and sustainability of
Fintech, and the role of financial co-operatives in the real
economy.
The emergence of Fintech has significant benefits for the cooperative industry, as it offers products and services similar
to banks but focuses on co-operative members. This sector
can catalyze the economy of co-operative members,
contributing to the national economy if they have access to
good products and services (Karthika et al., 2022).
Service Quality of a bank is often shown through service
delivery. Service provided in a bank with high content is
heterogeneous, as their performance often varies from
customer to customer, from place to place, and from day to
day. The services that satisfy and surpass the customer's
expectations will compel the customer to use the bank's
services again. Moreover, customer's dissatisfaction with the
services leads to huge losses in the market. In order to avoid
this, the banks should fulfil the requirements and
expectations of the customers as precisely as possible and
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serve well to satisfy the customers. It is important to focus
on the quality of the banking industry, which contributes
more to financial institutions in terms of revenue and image
of the country.
One of the pillars of a shared economy, community banks,
are facing a significant challenge as digitalization
transforms the face of modern banking. Co-operative banks
are quickly embracing technology to remain relevant,
creating a commercial opportunity for top IT service
providers (Pramanik & Bhakta, n.d.). Therefore, the study
of Fintech application, use, and upshot of service quality to
augment customer contentment must be probed. Such a
scenario calls for a thorough study of the banking industry
and research on a list of selected branches of the Cooperative Bank of Oromia, Ethiopia.
2. Statement of the Problem
The financial sector is facing one of its most difficult
challenges in recent years. Banks are being forced to close
branches and begin charging customers due to the
availability of free money. In terms of branches, they will
increasingly focus on providing greater benefits to
customers rather than transactions. Institutions will need to
raise a lot of awareness in this area. The adoption of Fintech
cannot be avoided by the bank in the current scenario. Banks
are faced with the dilemma of cutting costs (operating costs,
branch network, and staff) while increasing their investment
in technology to address the digital transformation. These
difficulties, combined with new challenges, pose a threat to
their profit and loss statements (European Economic &
Social Committee, 2017). Though the co-operative banks
survived the international financial crisis in 2008, today,
they are facing the problems of meeting new capital
requirements and reaching targeted profit margins in the
fintech ecosystem. The European Union encourages larger
banks, recognizes excess capacity in the banking industry,
and suggests mergers.
The real challenge of digitalisation now lies in how it affects
customer behaviour and satisfaction. For co-operative
banks, this is a continuous process of adapting to the digital
revolution while maintaining personal relationships with
customers, who are the true source of sustainable
development. The overarching message is that digitalization
represents an opportunity to promote the co-operative
banking model. In light of the aforementioned, it is clear that
there is still a solid foundation for conducting research to
test the influence of Fintech adoption on service quality and
customer satisfaction. This research has also examined how
these constructs relate to customers' perceptions of risks and
cyber security issues, Fintech application and usage, service
failure, and strategies to increase customer satisfaction.
3. Review of Related Literature
Fintech innovations may facilitate new business models,
processes, products, or applications, having a major impact
on financial services and institutions (Financial Stability
Board (FSB), 2017). Arner et al. (2017) state, "Despite the
lengthy history of the relationship between finance and
technology, the fintech phase, which began in 2008, is welldefined by who provides goods and services, not by goods
and services actually delivered.” In the most recent era, new
entrants are using technology to offer financial services to
customers without intermediation (Consumers
International, 2017).
Bank for International Settlements (2018) states that the
newest fintech providers are payment, clearing and
settlement industries (peer-to-peer transactions, mobile
wallets and digital currencies) followed by deposit, credit
and capital raising industries (mobile banks, crowdfunding
and credit scoring) (Frost et al., 2019; Frame et al., 2019;
Stulz, 2019; Thakor, 2020). Fintech has different effects on
co-operative financial organizations. First, a number of
FinTech businesses have now been effective in scaling a
relationship banking system, which could eventually reduce
the advantage of relationships and soft information
acquisition enjoyed by small, local financial co-operatives
(Lin et al., 2013).
Peer-to-peer lending activities in the US entered into the
areas where traditional banks with assets of more than $50
billion are underserved in highly concentrated markets with
fewer branches (Jagtiani & Lemieux, 2018). Second, many
big commercial banks are now doing more to promote
technological advancements with the help of fintech
companies to offer their products. Big banks have
occasionally purchased fintech lenders or offered them
ownership holdings. Due to the related regulatory
requirements, alliances between Fintech companies and
small banks are less frequent. However, there is an indication
that certain co-operative banks can restore profitability to
small business lending after some decades of tightening
operating margins by employing Fintech technologies to
handle customer and application data (Eckblad et al., 2017;
Kim & McKillop, 2019). The issues of co-operative banking
in the new financial environment can be addressed with the
help of financial education.
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Most people agree that there are no widely accepted
benchmark measures in the banking industry to assess the
perceived quality of a bank service. As a result, keeping a
competitive advantage through high-quality service is a
critical survival tool. Measuring service quality appears to
be difficult for service providers due to the various qualities
of services—intangibility, heterogeneous nature,
inseparability, and highly perishable. As a result of these
complications, various measuring models for gauging
perceptions of service quality have been developed
(Gronroos, 1983; Parasuraman et al., 1988). The
SERVQUAL model, developed by Parasuraman et al. in
1988, featured ten parts. These ten elements were divided
into five separate dimensions later in 1988. These include
assurance, dependability, tangibility, responsiveness, and
empathy. Due to its apparent correlation with expenses,
profitability, customer satisfaction (Bolton & Drew, 1991;
Boulding et al., 1993), customer retention, and positive
word-of-mouth, service quality has grown in importance as
a research topic. The perceived service quality can be
measured using a variety of research tools. Among such
broad instruments, the SERVQUAL model is well-known.
Sindwani (2020) revealed that the quality of technology in
banking services significantly impacts customer trust. A
conceptual framework was developed using data from bank
customers, focusing on reliability, security, responsiveness,
and personalization dimensions. Customer involvement
tempers the relationship between dependability, security,
and customer trust. The findings indicate that customers
expect automated banking services to be more reliable and
safe. Convenience, while positive, is not enough to build
customer trust. Personalization, reliability, security, and
responsiveness positively affect customer trust. Banks can
improve these areas to increase customer trust.
Digitalization is also significantly impacting banking, a
traditional branch system-oriented industry, as one example
among many (Dapp, 2014, 2015; Moutinho et al., 1997).
This affects banks' capacity to generate value for
stakeholders (Hirt & Willmott, 2014; Walters, 2014).
Digitalization generally provides banks with various
options, such as enhanced customer interactions, better
management options, and the assistance of new value chains
and business models. Furthermore, the digital transition
introduces a number of risks, such as winner-take-all
dynamics, replaceable and modular business modelbuilding pieces, and a lack of digital skills (Hirt & Willmott,
2014). Furthermore, borderless international trade, high
transparency, and mass consumer goods reduce market
entry and switching costs.
It has acknowledged the tenacity of financial co-operatives,
which had their beginnings in the 19th century in Germany
and continue to this day with a presence in more than 140
nations. The effectiveness of collaboration, in the form of
network sharing, in achieving targeted business is
acknowledged. The importance of relationship lending as a
component of business model development was also
highlighted. However, it raises concerns about the
sustainability of this competitive edge in the face of
disturbances from Fintech firms.
According to Junger and Mietzner (2019), on household
trust and comfort levels with new technologies, financial
literacy, and general transparency, households with low
levels of trust, strong financial knowledge, and a preference
for openness are likelier to adopt fintech. The likelihood of
switching, however, does not appear to be greatly impacted
by household pricing perceptions. The study by Kurian and
Radkar (2022) revealed that low financial literacy, lack of
confidence, and low digital literacy are significant barriers to
digital inclusion. Researchers in the hospitality business
have been paying more attention to studies in service
management (Halil & Kashif, 2005a; Riadh, 2009a).
Researchers investigated the relationship between service
quality and other factors, such as customer satisfaction and
behavioural intentions (Maria et al., 2007; Francosis et al.,
2007; Raidh, 2009b; 2010; Jani & Han, 2011; Basheer, 2012;
Simon, 2012).
Regarding customer adoption of technology, it is more
difficult to pinpoint the fundamental variables influencing
their choice, especially regarding free applications. In other
words, we cannot determine whether a user prefers one
technology over another using the fundamental Technology
Acceptance Approach (TAM) model. It is crucial to identify
additional components for the TAM's fundamental model
(Susilo et al., 2019). Generation, gender, and bank type
significantly impact the attitudes of young metropolitan
banking customers, with interaction affecting the adaptation of
automated IT-driven banking technologies (Mishra, 2022).
Based on a primary survey conducted among urban cooperative bank officials, a study by Gupta and Thomas
(2021) on finances through Urban Co-operative Banks
provides insights into Telangana Urban Co-operative Banks'
financial inclusion and Fintech performance. Slum dwellers
and micro, small, and medium-sized businesses are served
by more than 60% of urban co-operative banks. Yet, there is a
glaring disparity in account ownership and credit
availability. The analysis confirms the difficulties in
balancing different stakeholder interests, but it also reveals
that co-operative banks attain this balance more effectively
than other organizational firms.
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Additionally, research needs to explore the impact of
technological advancements on the evolution of the banking
service quality model. As technology rapidly advances,
banks must adapt and innovate their models to stay
competitive. This includes exploring integrating artificial
intelligence, blockchain, and other emerging technologies
into business and service processes that can streamline
operations, enhance security, and improve decision-making
processes.
Research on fintech has shown that after many years of
negative operating margins, fintech solutions have made the
path to reaching different types of consumers and small
business lending profitable again. However, the growth of
fintech has disturbed the financial services industry.
Customers and members ceased to feel beholden to their
familiarized service providers. As an alternative, they
favour services that can be accessed remotely and are rapid
and safe. It is crucial to link practitioner and academic
research at this point to better understand the benefits and
problems that Fintech presents to financial co-operatives
and their regulatory authorities.
A perusal of available literature on Fintech and the banking
industry, it is understood that there are studies available
related to Fintech and banks' relationship, Fintech
adoption/applications in the banking industry, the effect and
impact of Fintech facilities on banking, customer
satisfaction in commercial banks. Studies related to Fintech
adoption and customer contentment levels in co-operative
banks are scanty. Research studies on Fintech adoption and
customer contentment is an untouched area in the Ethiopian
context, particularly regarding financial co-operatives and
co-operative banks. The researcher found this research gap
and attempted to fill this research gap in the co-operative
banking industry in the Ethiopian context.
4. Objectives of the Study
This research paper investigates the Fintech adoption by the
Co-operative Bank Oromia, handling risk and cyber
security issues in practicing Fintech applications, and the
effect on service quality delivery to enhance customer
contentment.
The specific objectives are:
1. To examine the association between the bank facilities
and Fintech adoption by the Co-operative Bank of Oromia
and service quality dimensions.
2. To analyze the level of contentment among the customers
on the service quality dimensions of the selected branches of
the Co-operative Bank of Oromia.
3. Determine the impact of service quality dimensions on
customer contentment in the context of Fintech usage.
4. To describe the risk and cyber security issues in practicing
Fintech applications, service failure, if any, and strategies to
be adopted to enhance customer contentment towards the
service quality dimensions.
5. Research Methodology
Both descriptive and analytical research methods were
adopted in this study. The survey method was adopted for
data collection. A mixed research approach was followed for
data collection and data analysis. Quantitative and
qualitative data were gathered and analyzed to fulfil the
research objectives.
The methodology employed in obtaining information about
Fintech adoption, risks and security issues, and customer
contentment in co-operative banking was via a survey
conducted of a sample of customers who are using Fintech
facilities of the bank. The survey questionnaire was created
and distributed at random to the intended respondents.
Account holders in specific CBO branches were targeted as
respondents. In order to produce a realistic result, the data
must be collected from a large population. As a result, the
survey questionnaire was designed to apply to a diverse
population, with respondents representing a range of
genders, age groups, marital status, education background,
designations, and levels of professionalism. Because distinct
levels of society have different expectations and needs,
choosing respondents from diverse backgrounds will almost
certainly yield a more reliable result regarding Fintech
adoption and usage and service quality by CBO branches.
6. Sources of Data
Both primary and secondary data were used for this study.
The source of primary data includes customers of sample
branches of the Co-operative Bank of Oromia, the Director
and employees of the Digital Banking Operations and
Technology Unit, the Co-operative Bank of Oromia Head
Office, and employees of the respective branches of CBO.
Secondary data sources include websites, unpublished and
published reports such as reports on the banking industry,
and reports of the CBO.
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and customer usage of modern banking facilities like mobile
banking, ATM, and internet banking.
7. Sampling Procedure and Techniques
7.1 Population (N)
The population of the study is the customers of sample
branches of CBO, the Director and employees of the Digital
Banking Operations and Technology Unit, Co-operative
Bank of Oromia Head Office, and employees of the
respective branches of CBO were also contacted to explore
Fintech adoption and service delivery. Customers of the
branches were selected by using a convenience sampling
technique.
7.2 Sampling procedure
Regarding the sampling procedure, the researcher adopted a
multi-stage sampling procedure to select the area in terms of
district, branches, and sample customers.
Stage 1. Selection of Operational Districts of CBO: As
per the records of the CBO, there are 16 operational districts
and two Area Relationships in Mekele (Tigrey Region) and
Bahirdar (Amhara Region) of CBO in Ethiopia. Out of 16
operational districts, five operational districts, East, West,
South, North, and Central, were selected purposively by
considering the major criteria, including adopting Fintech
Stage 2. Selection of Branches: Based on the discussion
with the Director of Digital Banking Operations and
Technology Unit, Co-operative Bank of Oromia Head
Office, two branches from East Operational District, two
branches from West Operational District, two branches from
South Operational District, two branches from North
Operational District, and two branches from Central
Operational District were selected on the basis afore
mentioned criteria namely, banking facilities and adoption
of Fintech, customer usage of modern banking facilities like
mobile banking, ATM, and internet banking.
Stage 3. Selection of Customers: From each selected
branch, based on convenience sampling, the researcher
collected the required information and data for the study. The
target number of customers as respondents was 60 from each
branch of CBO's five operational districts totalling 600. In
each branch, the researcher, with the support of bank staff,
collected data from customers using Fintech facilities like
ATMs, mobile banking, and internet banking and are willing
to respond to the questionnaire administered.
Table 1. Sampling frame
No.
Branch selected
East Operational District
1
2
Bole Medhanialem
Saris
Sample
Customers
60
60
West Operational District
3
4
Ambo
Holata
60
60
South Operational District
5
6
Jamo
Marva
North Operational District
7
8
9
10
Addisu Gebeya
Lamberet
60
60
60
60
Central Operational District
Agamsa (Merkato)
Dabaso (Stadium)
60
60
Total
600
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8. Tools and Method of Data Collection
B) Key informant Interview
A) Semi-Structured Questionnaire
Key informant interview was conducted with the Director
and employees of the Digital Banking Operations and
Technology Unit, Co-operative Bank of Oromia Head Office
in order to elicit information on the service quality
dimensions, reasons for service failure, and strategies to be
adopted to recover from service failure and maximization of
customer contentment. Besides, employees of the respective
branches of CBO were also contacted to explore Fintech
adoption and service delivery.
A semi-structured questionnaire was prepared and
administered among the selected branch customers. The
questionnaire was composed of close-ended questions with
multiple choices or dichotomous types. The questionnaire is
divided into four sections for easy comprehension and
reading. The first section of the questionnaire considers the
respondents' demographic information. For respondents'
convenience, the questions have multiple-choice answers.
Testing the association between Fintech adoption and
service quality dimensions is the second part of the
questionnaire. The third section of the questionnaire
required the respondents to rate the customer contentment
level of the bank they have chosen attached to a five level
pre-defined scale ranging from Highly Satisfied to Highly
Dissatisfied to elicit information regarding customer
contentment. The opinion of customers was elicited to
analyse the risks and security issues, Fintech application
service failure, and strategies to be adopted for enhancing
service quality/customer contentment. The goal is to collect
respondents' opinions in response to the aforementioned
issues. The questionnaire's responses are solely based on the
respondents' experiences and opinions. All data collected
were fed into the Statistical Package for the Social Sciences
(SPSS) and Microsoft Excel for analysis. While some
responded quickly to the survey, others needed more time to
process the questions and inquiries. Nonetheless, most of
them patiently filled out our questionnaire, and some even
provided their opinions. Face-to-face interviews with
customers at the selected branches were used to administer
the survey questionnaires.
9. Method of Data Analysis
SPSS was used to analyse the data. The Chi-square test was
used to determine the relationship between the rating of
banking and Fintech facilities and service quality
dimensions. The means and standard deviation were used to
measure the level of customer satisfaction on service quality
dimensions. The most influential service quality dimensions
on the level of customer contentment were determined using
Ordered Logistic Regression. Descriptive statistics,
percentages, and means were used for data analysis and
interpretation to analyse risks and security issues, Fintech
application service failure, and strategies to be adopted for
enhancing service quality/customer contentment
10. Major Findings of the Study
10.1 Analysis of the relationship between the Bank &
Fintech facilities and service quality dimensions
Table 2. Association between the Bank & Fintech facilities and Service
Quality Dimensions: Chi square test results
Service Quality Dimensions
Bank & Fintech Facilities
Overall
facilities
X2 value
Asymp. Sig.
(2-sided)
Sig.
X2 value
Tangible
Reliability
Responsiveness
Assurance
66.541
180.683
130.061
172.360
.207
.000
.000
.000
NS
9.828
S
35.210
S
23.605
.003
S
33.150
.000
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Empathy
95.246
.001
S
42.958
.000
SCMS Journal of Indian Management, July-September 2023
Service Quality Dimensions
Bank & Fintech Facilities
ATM
Internet banking
12
Tangible
Asymp. Sig.
(2-sided)
Sig.
X2 value
Asymp. Sig.
(2-sided)
Sig.
Reliability
Responsiveness
Assurance
Empathy
.090
.002
.114
.110
.081
NS
7.474
S
13.338
NS
14.692
NS
10.865
NS
4.407
.486
.101
.065
.209
.819
NS
NS
S
NS
NS
Source: Computed from field survey data, 2021/22
As for overall banking and Fintech facilities, the chi-square
test results indicate an association between overall banking
and Fintech facilities and Reliability as a service quality
dimension with a chi-square value of 180.683, which is
significant at a 0.01 level. There is an association between
overall banking and Fintech facilities and Responsiveness
as a service quality dimension with a chi-square value of
130.061, which is significant at a 0.01 level. There is an
association between overall banking and Fintech facilities
and Assurance as a service quality dimension with a chisquare value of 172.360, which is significant at 0.01 level.
There is an association between overall banking and Fintech
facilities and Empathy as a service quality dimension with a
chi-square value of 95.246, which is significant at 0.01 level.
It is found that except tangibles as a service quality
dimension, all other service quality dimensions have
significant associations with the overall banking and
Fintech facilities. Thus, it can be inferred that the higher the
banking and Fintech facilities rating, the higher the service
quality in all dimensions.
10.2 Analysis of the Level of Customers' Contentment on
Service Quality Dimensions
Customer contentment was measured in terms of
satisfaction. The sample customers were highly satisfied
with the convenience of the bank location (mean=4.4182;
SD=0.78740) and neatness of the staff appearance
(mean=4.6667; SD=1.209) as regards the tangible services
of the bank since none were dissatisfied with the appearance
of the staff and insignificant percentage on the location of
the bank. The customers were satisfied with the other
attributes of tangible services since the mean value for the
statements ranged from 3.41 to 4.20.
None of the sample customers were highly satisfied with the
reliability service dimension of the selected branches of
CBO. However, the customers were satisfied with all the
reliability service dimensions attributes since the statements'
mean value ranged from 3.41 to 4.20, except for the accuracy
of records.
The sample customers were highly satisfied with the
responsiveness attribute "Staff are listening to the
complaints carefully" of the selected branches of CBO since
the mean score ranged from 4.21 to 5.00. Further, the
customers were satisfied with all the attributes of
responsiveness service dimensions since the mean value for
the statements ranged from 3.41 to 4.20.
The sample customers were highly satisfied with feeling
safe in the delivery service (mean=4.2364; SD=0.77040)
and politeness of the employees (mean=4.1288;
SD=1.06889) as regards the assurance services of the bank,
since none were highly dissatisfied on the appearance of the
staff and insignificant percentage on the location of the bank.
The customers were satisfied with the other attributes of
assurance services since the mean value for the all-other
statements ranged from 3.41 to 4.20. Nonetheless, a
significant proportion of the customers was dissatisfied with
the assurance attributes such as interest in solving the
problems (24.8%), and staff felt safe in their financial
transactions (21.2%).
The survey result shows that the sample customers were
highly satisfied with the empathy attribute, viz., proper
functioning of facilities inside the bank (mean=4.3879;
SD=5.35942). Although the customers were satisfied with
other attributes of empathy dimensions, the selected
SCMS Journal of Indian Management, July-September 2023
13
branches need to concentrate on some of the empathy
attributes such as special attention to frontline counter
facilities, equal treatment for all customers, the staff of the
bank understanding the specific needs of customers,
convenience for physically disabled persons and problemsolving abilities of staff since one-fourth of the sample
customers expressed dissatisfaction on these attributes.
The Director and employees of Digital Banking Operations
& Technology revealed that as for the tangibles dimension,
a yearly assessment had been made using a balanced
scorecard, and customer contentment was measured; the
bank appearance was upgraded, and the bank logo and
colour were changed. As for the reliability dimension, the
bank has taken HRD measures and improved staff skills. As
for the responsiveness dimension, they reported that it is not
as expected; as for the assurance dimension, the bank is
taking steps through research and development by
designing and offering training; and as for the empathy
dimension, the Director of Digital Banking Operations &
Technology revealed that it is very poor in some branches as
observed by the team of experts from the head office of
CBO.
reliability and assurance service dimensions are the most
powerful factors on the level of customer contentment on
Fintech adoption and usage since the calculated P-value is
less than 0.01 level of significance. This implies that a oneunit increase in the reliability and assurance services of the
bank leads to an increase in the level of customer
contentment. Further, responsiveness as an independent
variable was found to be the next most influential factor on
the level of customer contentment, which is significant at a
0.05 level. The variable tangibles is the least influential
factor on the level of customer contentment, which is
significant at a 0.10 level. Empathy as an independent
variable does not influence the level of customer
contentment.
10.4 Customers' opinion on risks & cyber security issues,
and service failure
10.3 Analysis of the influential service quality dimensions
and level of customer contentment in the context of
Fintech facilities and Usage
The survey results show that risks and cyber security issues
are involved while adopting and using technology in
banking operations and customer services. They are network
problems, deduction of amount from customers' accounts in
the event of not receiving cash from ATM due to poor
network or error, ATMs without secured cabins and security
in some branches, errors in using mobile applications due to
internet issues, and the like. The bank has been devising
mechanisms to solve such issues.
The estimates of parameters of independent variables
expected to influence customer contentment level are
displayed in Table 3. Four variables were found to be
significant from the five service quality dimension variables
by influencing customer contentment level in the study area.
The results of ordered logistic regression analysis show that
Among the service failures, as evidenced by the customers,
the most severe service failure is that the employees don't
have a pure attitude and politeness in dealing with the
customers, which means the services fall under the
assurance service quality dimension. It was observed from
the key informant interview with the employees that they are
Table 3. Ordered Logit Regression Result: Determinant Service Quality
Dimension of Customer Contentment Level
Variables
Estimate
Std. Error
Wald
Sig.
Tangibles (SQDTAN)
1.375
.801
2.946
.086*
Reliability (SQDREL)
1.226
.302
16.528
.000***
-1.357
.565
5.766
.016**
Assurance (SQDASS)
1.086
.358
9.187
.002***
Empathy (SQDEMP)
1.040
.777
1.793
.181
Responsiveness (SQDRES)
Chi-square x 53.047 p=0.000
2
-2log likelihood 103.350 N=600
Source: Computed from field survey, 2021/22
*** Significant at <1%, **, Significant at <5** and * significant at<10%.
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SCMS Journal of Indian Management, July-September 2023
14
unhappy with the working conditions, salary, and
motivational aspects, which lead to repercussions in dealing
with customers with a high degree of frustration. The second
most severe service failure is hygiene and cleanliness in the
branches, which ultimately damages the responsiveness
service quality dimension. The next major service failure
identified by customers is that the branches have personnel
who appear to be well-trained, competent, and experienced.
It was observed from the key informant interview with the
employees that there is high employee turnover due to
working conditions and salary. Well-trained, experienced,
and highly competent employees seem to switch to other
banks and companies wherein lucrative salary is ensured
and the possibility of earning extra income is higher than
other commercial banks.
10.5 Customers' opinion on the strategies to enhance the
service quality in the context of Fintech adoption, usage,
and banking facilities
It was observed that the customers have opined to adopt
strategies on tangible service quality by considering the
physical facilities (mean=3.8318), materials and equipment
(mean=3.9061), and personnel and communication
(mean=3.9045). It implies that the branches should be beset
with the equipment needed to deliver the services with highcaliber employees, and arrangements must be made for
access to communication materials. More than half of the
customers opted to adopt strategies such as performing the
promised services dependably, accurately, and by
maintaining reliability. It is one of the biggest challenges of
the branches to provide the promised services. Nonetheless,
utmost care has to be given while promising to customers,
keeping in mind the available facilities at the bank. This will
ensure customer loyalty and retention.
More or less 80 percent of the customers expressed their
opinion to improve the responsiveness service quality by
considering the provision of prompt services. Customers are
the fulcrum of any business undertaking. Hence, utmost care
has to be given by the bank in providing services promptly.
The bank employees and the authorities should come
voluntarily to help the customers whenever needed.
Customers have overwhelmingly chosen to improve the
assurance service quality dimension by implementing
strategies such as employee skills, ability, and courtesy to
convey trust and customer confidence. This could be
possible through intensive employee training programs on
customer relationship management, stress management, and
time management. More than 60 percent of the customers
have expressed their opinion to improve the empathy service
quality dimension by giving individual attention to
customers, due care to customers, and delivering the services
according to the convenience of the customers. The above
applies to Fintech adoption in banking operations and
customer usage of such technology-based services.
Banking Service Quality Recovery Strategy Model (BSQRSM) for Co-operative Bank of Oromia
Graph 1: Banking Service Quality Recovery Strategies Model for Co-operative Bank of Oromia
Source: Developed by the Authors based on literature review and research findings (2023)
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SCMS Journal of Indian Management, July-September 2023
15
The banking service recovery strategy model developed by
the author encompasses the elements of service quality
dimensions, representing all the banking facilities and
services offered by the banking industry. Service delivery is
an important element that must be given due weight in
delivering banking facilities and services to the customers.
Service delivery assures the availability and accessibility of
services to the customers. If the banks offer customers
quality service, it results in customer contentment. If there is
a service failure, then it will lead to customer discontent
with the banking services and facilities. Service failure
using critical incidents technique can be categorized into: 1.
Service system failure including technology; 2. Failure in
implicit or explicit; 3. Unprompted or unsolicited employee
behavior. These are on the part of the banks that deliver
facilities with service failure. There is another category of
service failure on the part of the customers, i.e., 4.
Problematic customer misbehavior. This can be due to
drunkenness, verbal and physical abuse, breaking banking
policies and laws, and uncooperative customers. Service
failure always leads to customer discontent with the banking
services.
Here is the question of making the customers satisfied with
the banking facilities and services. If the banks want to
satisfy the customers even after the services are over, they
must examine the cruelty of service failure. Service failure
is inevitable and can't be prevented, but customer
satisfaction and expectations can be checked and balanced
to lessen the severity of service failure. The severity of
service failure has a negative effect on customer
contentment. The higher the service failure, the lower the
customer contentment; so, the banks must examine the
severity based on the customer expectations and behavior
intentions, and they have to reduce the severity level of
service failure to satisfy the customers with their facilities
and services.
Banks should go through the service recovery process in
order to satisfy and retain customers. It is critical to prevent
customers from switching to competing banks and
spreading negative word of mouth. Service recovery refers
to service providers' actions in response to service failure.
Service recovery is a process to identify service failure,
classify the root causes of the service failure, and resolve
customer problems, which improves the service system.
Service recovery can be categorized into: 1. Customer
recovery that re-establishes customer contentment and
loyalty after a service failure; 2. Process recovery that
ensures that failure incidents encourage learning and
process improvement of service delivery to make the
customers satisfied; and 3. Employee recovery to train and
retain employees for this purpose, i.e., for the purpose of
service recovery.
The banks implement different service recovery strategies to
make customers satisfied with their services and retain them
for the future. Service quality dimensions-based strategies
like tangibles, which are the techniques that rectify or fix
failed services, and psychological strategies focus on
customer needs and wants. For the banking service recovery
strategy model, we consider two major categories of
strategies, which include all dimensional strategies. They
are: 1. Assistance Strategy, which focuses on current
problem-solving related to managerial intervention,
replacement, correction, and apology. 2. Compensation
Strategy, which focuses on future solutions. By
implementing all these strategies, the banking industry
would maintain customer relationships to retain customers,
increase loyalty among customers if possible, and influence
future behavior intentions. Suppose the banks deliver
facilities and services by following the above service
recovery strategies in a proper manner. In that case, there is a
high possibility to satisfy the customers not only while
availing banking services but also even after service failure,
which is guaranteed.
11. Conclusion
The customers of the selected branches of CBO were young
and middle-aged, and highly dominant groups were male. It
is worth noting that a significant proportion of the customers
was dissatisfied with the tangible attributes such as physical
ambience, easy access to reservation, attractive and stylish
decoration of the branches, clean and comfortable office
building, materials with the service, modern facilities of
communication, availability of rest room services and
availability of safety and security facilities and instructions.
It may also be concluded that although the customers were
satisfied with the attributes of reliability services, the
selected branches are in a position to fully satisfy the
customers in the areas of information about the banking
services and delivery of services at the time promised.
Although the customers were satisfied with all the attributes
of responsiveness dimensions, the branches need to pay due
attention to satisfy fully the customers in the areas of
frontline services and telling the customers about the exact
time that the service will be performed. A significant
proportion of the customers was dissatisfied with the
assurance attributes such as interest in solving the problems
and staff feeling safe in their financial transactions. The
selected branches need to concentrate on some of the
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SCMS Journal of Indian Management, July-September 2023
16
empathy attributes such as special attention to equal
treatment for all customers, the staff of the bank
understanding the specific needs of customers, convenience
for physically disabled persons, and problem-solving
abilities of staff since one-fourth of the sample customers
expressed dissatisfaction on these attributes. Although a
strong positive relationship exists between banking
facilities and service quality dimensions, empathy service
does not affect customer satisfaction. Customers'
expectations, particularly in the service sector, are changing
on a daily basis, so the bank must implement the appropriate
strategies to improve service quality on the one hand and
customer satisfaction on the other hand.
12. Recommendations
Fintech Related:
=
=
=
The following recommendations are forwarded to enhance
the service quality of the Co-operative Bank of Oromia.
Banking facilities Related:
=
=
=
=
=
=
It is critical for service firms, such as those in the
banking industry, to efficiently manipulate their
physical environment by injecting aesthetic elements
such as design and architecture into the overall
structure to appeal to customers, increasing
contentment and repeat patronage.
The bank should install the latest equipment for
cleaning applications to maintain the neatness and
cleanliness of the branches. This should help them to
attract new customers.
The bank could audit whether the rates/charges charged
are affordable to customers of all classes and revisit the
policy, not compromising on their quality of services to
maintain good customer relations.
Going to deliver the service at the right time is also an
index of an organization's efficiency. The bank, as the
service provider, must provide the service within a
specified time frame.
The bank staff should be regularly made to realize what
the bank's main aim is. They must be told about the
importance a customer holds for the bank so that the
staff is more willing to serve the customers well. The
bank should take personal care of all the customers to
increase customer contentment.
=
The bank staff should make an immediate response to
the requests by customers, ensure safe and secure
service, and maintain the good appearance and proper
functioning of the network system. The staff should be
kept aware of the latest technology developments in and
around the bank in order to sense the latest
developmental needs.
The study concludes that using digital technology in
Fintech applications has altered the financial ecosystem
and transmogrified the basic process of payment
methods.
The management should provide adequate manpower to
have staff available to attend to the customer's request
and the customer's complaints immediately to redress
the issues related to Fintech adoption and usage.
At the outset, it is recommended that the CBO can
employ new advanced financial technologies like
Online Banking, Automated Deposit cum Withdrawal
Machine (ADWM), Fraud Detection and Prevention,
Portfolio Management (Robo-advisors), Online Loan
Sanction, Loan Underwriting, Robotic Process
Automation (RPA), Digital Payments, Insuretech and
Regtech etc. to explore more opportunities to grow and
offer better quality services.
The author has advocated a “Banking Service Quality
Recovery Strategy Model” (BSQRSM) to deliver better
services to augment customer contentment.
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