Academic journal article Global Business and Management Research: An International Journal

Determinants Affecting Relationship Banking in Malaysian Commercial Banks

Academic journal article Global Business and Management Research: An International Journal

Determinants Affecting Relationship Banking in Malaysian Commercial Banks

Article excerpt

Introduction

Relationship banking, as exemplified by commercial banks, is a valuable enabling strategy to promote competitiveness and provide sustainable success to the organization (Bedi, 2010). As a customized business strategy to increase customer retention, relationship banking was started in western companies in the 1980s (Parasuraman, Berry, & Zeithaml, 1988). As the success of financial institutions relies on the success of commercial banks in building strong affiliation with their customers, it is extremely important for commercial banks to develop close relationships with their customers. Customer loyalty is a good measure of the quality of relationships between commercial banks and customers is loyalty (Everett, 2015). True loyalty is based on a partnership, which evolves from mutual interest and shared goals between financial institutions and customer (Everett, 2015). Loyalty ensures that a sustainable customer relationship is retained during the best of times as well as the worst. Loyalty is not only related to how a commercial bank keep their customers, but how many satisfied customers a commercial bank retains (Boot & Thakor, 2000). Strong relationship between bankers and customers facilitates the process of offering a bundle of personalized financial information to the customers (Boot, 2000). Banks needs relationship banking to retain customers in order to survive in a hyper-competitive business environment. According to Boot (2000), as the living standard in Malaysia become better, more bank customers are demanding for better quality of banking services. Merge and acquisition among commercial banks has intensified the competition in the banking industry and accelerated the implementation of relationship banking (Hainz & Wiegand, 2013). Thus, it is important for commercial banks in Malaysia to strategize their relationships with the customers in order to supply top quality merchandise and financial services to satisfy their customers. Due to the urgency of relationship banking implementation in the domestic banking sector, this study is therefore carried out to explore key factors affecting customer satisfaction in relationship banking in Malaysian commercial banks.

How a commercial financial institution views and organizes its banking and marketing efforts shapes the practice of relationship banking in Malaysian commercial banks (Mukherjee & Nath, 2003). Relationship banking is important in creating new opportunities for effective customer loyalty building. Despite the fact that Malaysian commercial financial institutions are currently exposed to a vast number of opportunities of open direct competition in the era of globalization, little has been done on the factors affecting customer satisfaction in relationship banking amid information technological advancements.

Due to the inseparability and intangibility nature of services, previous studies in relationship management mainly focused in manufacturing and insurance companies (Parasuraman et al., 1988; 1993). Some insurers introduced a variety of products to meet the need of each customer in the effort to serve them better. Many others have taken a more focused approach, introducing selected products that hold market potential and market share (Kang et al., 2013). Multiple touch points such as emails, websites and call centres have emerged in manufacturing and insurance companies to enable the customer to get in touch with the companies swiftly, easily and directly (Everett, 2015). As a result, customer response time has been reduced drastically and information availability has become spontaneous (Everett, 2015). In the banking sector, however, there is currently still a lack of study on relationship banking despite the fact that improved technologies are resulting in customer service breakthroughs that significantly alter customer expectations. Consumers in commercial financial institutions are becoming more sophisticated in their requirements and are increasingly demanding higher standards of service. …

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