Effects Of Innovation Towards Meeting Customer Satisfaction In Nigeria Banking Sector

Project and Seminar Topics with material for Banking and Finance

Effects Of Innovation Towards Meeting Customer Satisfaction In Nigeria Banking Sector


Abstract


This research examined the effect of motivation in meeting customer’s satisfaction in the banking sector. The research adopted survey research design. Data were gathered through primary source with the aid of a well-structured questionnaire. Simple random sampling technique was adopted in the selection of sample; this was used to eliminate biasness in the selection process of the respondents.

Data garnered were presented on table using percentage and the formulated hypotheses were analysed with the used of Chi-square statistical method. The result of the analysis shows that Lack of modern innovation by Nigerian banks, and also shows a positive response of innovation to customer’s satisfaction.


Chapter One


Introduction

1.1 Background of the Study

The Nigerian banking sector, which plays the intermediation role between the surplus and deficit sectors of the economy, propels the development and growth of the economy. Soludo (2004), proposes the reform of the banking sector with the sole objective of moving the economy forward and to re-position the banking system to a sound and reliable catalyst of development and to compete favorably with its counterpart globally.

Prior to the 2005 banking reforms in Nigeria, congestion and long queues were the order of the day in the banks, leaving the banking hall stuffy, untidy and choking as the air conditioners are rendered ineffective. Most times, the queue extends outside the banking hall. Most of the banks have realized the negative effects of this and have worked on them by developing products and services that reduce the inflow of people into the banks, expanding the banking halls and opening up new branches all over the country. This congestion also has to do with the parking spaces of some banks prior to consolidation. Some banks‟ buildings were more or less cubicles or cash centers where customers cannot conveniently park their vehicles or motorcycles to walk in and do transactions, but the recapitalized banks have drastically ensured that the banking premises is such that existing and prospective customers have access to park their vehicles.

Service innovation has been described as something which is carried into practice. These innovations usually have an impact of the customers perception of the organization and the service based on the satisfaction they derive from it (Schumpeter, 1947).There have been considerable changes in banking in recent years so as to become competitive. The development of information technology and the use of the computer have changed the nature of clerical operations. The posting of ledger accounts and customers statements by hand are now almost forgotten tasks. The pace of change is likely to continue (Patel,

1995; Shoemaker, 1995; Perez et.al, 1988; Lall, 2001; Nelson; 1993). Loyal customers are valuable to a businesses (Kaganzi, 2003; Agwu et.al, 2008; Hall, 2005; Lundvall, 1992). Therefore creating and maintaining loyalty should be a major goal for businesses. Banks should continuously engage in creating products and services that meet the requirements of their clients to ensure retention of their customers.

Satisfying the ever changing customer needs has become a major concern for most organizations due to the liberalization of the market. Organizations therefore are looking for innovative ways to satisfy customer needs in order to retain them and to maintain competitive advantage. The business environment in which Kenyan firms operate became turbulent in the 1900s due to unfamiliar changes that exerted heavy pressure on the organization (Mulaa, 2004). Some of the changes include the accelerated implementation of economic reforms, the liberalization of the economy, discontinuation of price controls, privatization and commercialization of public sector and increased competition. In this changing environment, organizations have constantly adapted their activities and internal configuration to reflect the new external realities. Failure to do this may put the future success of the organization in jeopardy (Murage, 2001).

The demand for better-quality services, competitiveness, cost reduction and flexibility seems to be faced by Nigerian banks. The Nigeria Banking Industry has witnessed an amazing growth in terms of number of branches, total asset, deposit base and volume of loans and advances, especially since the deregulation of the sector in the recent past years. In a relatively new delivery channel application with the platforms geared towards overcoming challenges in the traditional banking system. In the Nigerian banking industry today, only sixteen commercial banks meet up with the central banks directives. Therefore these sixteen branches are operating in Asaba, Delta State excluding the micro finance banks.

While addressing these demands, banks seem to be experiencing unprecedented advances in technology, a changing population workforce, new skills requirements, enhanced capabilities for partnerships and new lines of communication. As a result, these banks have been involved in a fundamental restructuring. The banking sector has already begun implementing new approaches to doing business. They appear to have devised alternative means of service delivery. As a matter of fact, vital lessons could be learned from their experiences.

Riding on the bank of the ever evolving technological advancements to address these services challenges, banks developed and adopted the use of electronic service delivery channels for efficient delivery of their various services. Mwangi (2007), stated that alternative service delivery is changing the way companies work. It seems to open up a vast array of new solutions to service delivery issues. By using electronic service delivery channels, business organizations especially banks appear to be realizing the benefits of focusing their businesses on the things they do best while allowing other firms to deliver other activities and functions they could not do best. Electronic service delivery channels could be a way in which the organizations achieve their objectives of business renewal and providing effective and efficient services. According to Ovum Analyst Findings (2013), alternative service delivery could also be a means of continuing to provide some services or products, which have been provided traditionally by the other firms through or in partnership with organizations outside the organization. These products or services may be provided either to the public or to users within the organization. The banking business in Nigeria today has gone beyond armchair banking era where the customers had to look for the banker to transact business. It is now the era of highly competitive business among banks. It is against this backdrop that the study is conducted, to assess the impact of banking reforms on service delivery after the reform exercise using variables such as customers‟ deposits, profitability, productivity and viability of service, time taken to open accounts, speed of withdrawal and depositing money, quality and quantity of products as indicators of services measured among others. Therefore, this study focus on the Effects of innovation towards meeting customer satisfaction in Nigeria Banking sector.


1.2 Statement of the Problem

All the banks in Kenya have realized that their market environment is rapidly changing and so are the customer needs, tastes and preferences. The quality of the service the banks render is one of the few variables that distinguish them from the competition (Gavigan et. al, 2001). If the customers do not derive maximum utility from the service rendered they will not be satisfied. The customer is regarded as the most important factor in the banking industry and other industries in the economy. Lall, (2001), report that successful organizations are obsessed by service quality. This has become a critically important factor in the buying decision of the customer. An organizations strategy can be described as its overall plan or policy to achieve its goals, amongst them being to satisfy customers, (Georgantzas et. al, 1995).

Service innovation is among the many strategies organizations use to achieve customer satisfaction, retention and increased sales. Innovation has been attributed to the dynamic changes in customer needs and has been attributed as one of the key factors in the success of companies as it involves conversion of an idea into a product or a service (Georgehiou et. al, 2006).

A service cannot be seen, touched, tested or smelled, nor can it be possessed. The intangible process characteristics that define services such as reliability, personal care, attentiveness of staff and their friendliness can only be verified once a service has been bought and consumed. People do not always perform consistently and thus variations from one service to another within the same organization (Dattakumar et. al, 2003).

Organizations can attempt to reduce their inconsistencies through standardization and training, (Kemmis et.al, 1988). Schumpeter (2002) describes service innovation as a service product or service process that is based on some technology or systematic method that is carried into practice to provide benefit to its developer. Service innovations can for instance be new solutions in the customer interface, new distribution methods, application of technology in the service process, new forms of operation with the supply chain or new ways to organize and manage services.

The attitude of the staff of the banks towards the customers is also an important measure of service deliverables. The fact remains that no bank can expect to meet global service delivery standard unless it has the best human capital and promotes its competent staff to pivotal positions. Staffing in most banks before the reforms was inadequate and, often times, a staff may be over-loaded with jobs meant for three staff or more. This becomes so obvious when the same staff is called upon to attend to a customer at a point of delivering a service on another product to a different customer. Closely related to the inadequate staff situation was the shortage of experienced staff as most banks preferred cheap labor in the name of “contract staff”. As a result, the quality of their job output in terms of service delivery is sub-standard and customers‟ expectations are not met.


1.3 Objectives of the Study

The study is tailored towards the achievement of three main objectives, namely:

  1. Evaluate the innovations used by banks in Lagos metropolis and thereby determine its effect on bank performances pre and post consolidation.
  2. Identify the possible reasons for increase in demand for banking services in Lagos metropolis and high chase for the “new generation banking” services
  3. Recommend appropriate strategies for continue improvement of banking services in the Banking Industry.
  4. Assemblage of storage document authentic enough for scholars and researchers for reference for the ultimate aim of improvement of customer satisfaction in order to increase profitability.

1.4 Research Question

  1. Which are the most important preferences of customers in order of merit?
  2. Do innovations in banks in these areas affect demand for banking services?
  3. Do innovative services by various banks account to reasons for customer preference?
  4. Does accessibility to this bank branches influence customers‟ preference for their services in Lagos and Abuja. Is response time to customers‟ inquiries and transaction important factor?

1.5 Statement of Hypothesis

  1. Ho: Customers do not have services preference in major cities
    Ha: Customers have services preference
  2. Ho: Customers preferences for services are not continuously increasing
    Ha: Customers preferences for services are continuously increasing
  3. Ho: Response time to customers‟ inquiries and transaction is not an Attraction.
    Ha: Response time to customers‟ inquiries and transaction is an Attraction.
  4. Ho: Innovation is not an important factor-affecting customers‟ Preference for service
    Ho: Innovation is an important factor-affecting customers‟ preference for Service

1.6 Significance of Study

This research study is useful to the banks and banking scholars as a means of identifying and utilizing effectively the factors affecting innovations in relation to customers‟ preference in their demand for the services.

The research therefore aims at assisting management of banks in determining their product package, pricing, promotion and customer relation policies in order to attract and sustain customers that will ultimately lead to higher profitability.


1.7 Scope and Limitation of Study

This study is restricted to Lagos (Lagos Mainland and Lagos Island) banking business environment, and the Federal capital city, Abuja. The reasons for chosen these cities are as follows because:

  1. The Head offices of about 95 percent of banks are in Lagos.
  2. The Bank that does not have their Head Office in Lagos; will probably have it in Abuja and a regional office or head office annexes in these cities.
  3. Lagos is the nation‟s most industrialized state. Over 70% of the industrial base of the nation is in Lagos and that has led to high demand for banking services.

However, due to economic and time constraints in terms of the huge amount involved in carrying out the study extensively, plus the time frame for submission, the study has been limited to Wema Bank Plc, First Bank Nig. Plc and Guaranty Trust Bank Plc, Diamond Bank Plc, and Oceanic International Bank.

The project was also limited by the constraint of servicing premium data from the public sector/conglomerates attitude of some respondents who had to be persuaded to complete and return questionnaires on time.


1.8 Organization of the Study

The study comprises of five chapters.

  • Chapter one consists of the background to the study, statement of the problem, purpose of the study, objectives, research questions, significance, limitation of the study, delimitation of the study, basic assumptions, definitions of key terms and organization of the study.
  • Chapter two comprises of literature review theoretical and conceptual frameworks.
  • Chapter three deals with research methodology, covering research sampling, procedures, research instruments and their validity and reliability, procedures for data collection and data analysis.
  • Chapter four comprises of findings and discussions which were generated by the study.
  • Chapter five presents summary, conclusions and recommendations.

Chapter Five


Summary of Finding, Conclusions and Recommendation

5.1 Summary of Findings

With the help of various literatures effectively reviewed and research findings through the use of questionnaire and personal interviews, it had been established that there is effective demand for banking services in major city like Lagos and Abuja. Through this research, it has been established that obtaining of facility, business advice, and accessibility of Banks (i.e. convenient location of bank branches), conducive Banking environment, branch Network, the usage of modern Innovation, highly innovative Banking, asset base and prompt and courteous services are some of the basic factors affecting customers‟ preference for banking service in Lagos and Abuja.

Moreso, through personal interview it was discovered that apart from the conventional services of accepting deposit, honouring customers‟ cheque and safe keeping, the banking service that are highly in demand are:

  1. Credit facility (ie. Overdraft for working capital purposes)
  2. Locally trade finances
  3. Fund transfer (locally and internationally)
  4. Purchase of foreign exchange
  5. International tradefinance
  6. Leasing
  7. Consumers loan (for purchase of household items)

However, some of the interviewees complained of the difficulties experienced getting some of these services easily and promptly; even when they are got, the cost of obtaining them is high.


5.2 Conclusion

In conclusion, banks exist for the purpose of providing services to its customers. These customers are the boss- they are the reason for the existence of any bank. As a result, banking services of any type must be packaged putting the customers into consideration in terms of the springing up; it becomes paramount for banks to understand what their customers‟ needs are and provide them.

Banks should understand their customers; provide them with conducive banking environment and staff who demonstrate a true desire to satisfy them.

It is necessary for banks to listen to complain and suggestion of their customers; for them to know the factors affecting their (customers) preference in this competitive banking environment.

Management should also leave no stone unturned to ensure that the legitimate needs and aspirations of their staff are met to the best of their ability and without undue friction. It is only when the staff are contended that they can be relied upon to attain a high level of efficiency and effectiveness. Improved and contended workforce will enhance good service delivery and eliminate poor counter service. For other measures which are capable of generating improvements, let us examine recent developments in the industry elsewhere in the world.

Those who are familiar with innovations in developed countries will testify to continuing improvements in banking practices. The cash point facility for instance, which enables customers to slot in a micro-sensitive disc into a computer or cash dispenser and obtain virgin currency notes. Most of the banking transactions can be done without visiting the banking hall. British banking transaction can be referred to as 24/7. Internet banking is widely used by almost all cadres of customers unlike Nigeria where it is exclusively for the elite and the rich.

It is a fairly widespread practice in the United Kingdom that cheques of certain customers are not referred before they are paid over the counter, while the market is virtually becoming cashless with the use of various credit cards. British banks are also agents of one another for purpose of cash withdrawals (made possible by the cheque – cards facility) and cash lodgments are made into one bank for credit on an account in another bank (through the bank giro system) but these are still foreign to us.

To the vast majority of bank customers the most important single reason for patronizing the bank is the hope of receiving financial assistance from the bank to take care of their difficulties and promote their business. Banks on the other hand, thrive on the interests and charges derived from loans and facilities granted to their customers. It is to their mutual benefit, therefore, the process of obtaining and granting loans and credits should be smooth and prompt. Businessmen are in competition with another and many good deals could be lost to competitors if banks are unable to give prompt attention to their customers needs.

Admittedly banks are subject to many controls and constraints through Central Bank guidelines and the banking Decree. Whatever the problem is, the customer is entitled to prompt attention, and if for any reason his request is to be declined, this should be done as tactfully as possible to leave him in no doubt the his bank has done the best for him.


5.3 Recommendation

In attempt to make my recommendation, it will be essential to quote Mr. Sola Salako CEO of Purples consult, he said‟ Consumers are usually wary of financial products because they are not always what they seem. Almost all these products are perceived to have hidden clauses that make it more difficult to buy than its communication lets on. Though the interest rate was reasonable to me, when I considered buying, I was immediately put off by use of conditions and „extra cost‟ I had to meet. I was required to find a vendor for the generator I wanted to finance, secure a one year guarantee from that vendor, take out an insurance policy at my own expenses on the generator which the bank as the beneficiary and of course, not to forget the legal fees. All of these conditions translated to extra cost, time wasting and of bureaucracy to me. So where is the convenience of buying this product when I could easily raise N160k by over draft at the same conditions (with collateral of course)?

The experience of MrSalako is similar to the responses of some people interviewed. As a result, I recommend that banking services should be convenient for the customer to patronize, affordable in terms of cost, must be well communicated to the customers. Bank must Endeavour to live up to their promises to their customers. Customers get disappointed when they spend more time than necessary when cashing a cheque drawn on a sister branch of the same bank either as a result of V-sat not working or on-line processing not fully in place or faulty.

Furthermore, banks should improve to be more innovative, e.g, opening an account with a bank in the web site and withdrawing cash via internet without necessary going to theBank.

The management of the bank has to be more customers focused. Branches should be fully staffed to avoid congestion of customers questing and sitting and waiting to be attended to.

Banks in order to sustain and gain more customers should imbibe human relation culture. Customers should be treated as kings and not as people seeking for assistance.

I should hasten to add that the customers themselves sometimes contribute to some of their difficulties by submitting hastily prepared and ill-digested proposal for support. Nevertheless, it is the bank‟s duty to be patient with its customers and give them all the necessary advice and guidance. As much as possible, banks should support viable proposals subject only to lay down guidelines, the customer record, and the availability of resources.

It is pertinent to emphasize here that the processing of loans and advances is an aspect of bank‟s operation that demands the highest level of integrity. Banks are therefore advised to ensure that in the interest of their image, staff charged with responsibility for this vital function is seen to demonstrate the highest degree of integrity and professionalism.

Banks must make reference to the complaint of their customers, such as failure to issue statements of accounts to customers on regular basis. They should also endeavour to review the procedures for opening accounts, which are in some cases cumbersome. The minimum amount fixed for opening accounts may also need to be reviewed if prospective customers with limited resources are to be encouraged to inculcate good banking habits.

The bank‟s marketing plan should include proper identification of what really motivates the customer. A survey was carried out in 1971 by Mark Alpert of USA tagged „identity‟ and compare attributes that features conspicuously which include bank‟s reputation, location, availability of credit, friendliness, service charged, full service, offering of special service, parking space, premium or gift, convenience of services, influence of friend & etc. An overall market plan should take all these into account. Marketing efforts should take due cognizance of the need to improve the quality of service that people get. the delayed in affecting simple bank transactions, poor counter service, poor skill, skill and attitude of staff and tendency of most bank employees to feel that they are doing the long delayed and neglected customer some favour must be greatly discouraged.

Also the marketing efforts call for the need to adopt modern techniques to assist in services delivery. Advancement in innovation has reached a stage where there is no area of banking operation where computer cannot be helpful.

The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Co- operation (NDIC) should initiate and review laws and regulation to

  1. Enhancing payment mechanism
  2. Improve on monitory technique. CBN and NDIC should ensure regular and close monitor of banks to see that customers‟ deposits are safe at alltimes.
  3. They should also educate the banks on their services, services innovation and delivery.

Their corrections should be corrective most times instead of punitive to be able to create good mutual atmospheres for consultation between the banks and the regulatory bodies. The banks regulatory bodies should encourage improve interbank relationship in bodies exchanging instrument and obtaining value. The customers should be able to suggest to their banker‟s areas they need improvement and motivations. They should also be educated in what it takes to enjoy any bank‟s services especially when if come to credit facility

Furthermore, I recommend that while care must be taken in some areas of decision taking in dealing with customers, banks should eliminate bureaucratic approaches in order to encourage promptly and rapid responses to customers‟ inquires. Few banks are moving towards this in the area of account opening, cash withdrawals, and overdraft facilities are becoming less cumbersome and quickly perfected.

A good example is the ability of customers who is an executive director of a reputable organization to secure credit facility to the tune of N1million from Ecobank Nigeria within 48 hours.

Although a lot have been covered in this work, the topic under research still has room for researchers to carrying on further research; especially as a result of rapid advancement in innovation, kin competition among banks (Foreign Banks inclusive) and various innovations of banks. I would also recommend that research to carry on how banks can create niche for themselves in terms of service delivery.


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