Assessing the impact of Core Banking &

Service Quality On Customer Satisfaction

In CBE (Bishoftu Branch)

By:
Endalkachew Abebe

Background of the Study

Banking industry is marked by aggressive competition and

ever-changing customer demands.

As a result, banks need to adopt themselves to the
changing environment.
the growth in ICT made the world banking industry enter
into new phenomena.
Application of ICT is a recent phenomena in Ethi.
Many banks use different ICT like ATM, Core Banking,
Mobile Banking, and etc that improve the service
quality in order to increase customer satisfaction.

Contd
Core

Banking is an integrated application that

supports real time multi-Banking and MultiChannel strategies
It enables customers to be a customer of the bank
rather than being a customer of a particular branch
enable banks to strengthen and extend their
relations with credit card providers
customers will enjoy reduced waiting time and a
greater choice of banking channels and services
currently there are 13 banks who have acquired
CORE banking application in Eth.

Contd
Berry et al., (1990), defined service quality as the

discrepancy between customers expectations or

desire and their perceptions.
Service quality is not objectively measured

according to some technical standards but is

subjectively felt by customers and measured
relative to customer-determined standards

Contd
Service quality is more difficult for

consumers to evaluate than product quality;

this is due to a lack of tangible evidence
associated with the service
According to Philip Kotler (2005),
customer satisfaction is a person's
judgments of a product's perceived
performance (or outcome) in relationship to
expectations.

Organizational Background
established in 1942
Pioneer to introduce modern service
first bank to introduce ATM in Ethiopia
has more than 4 million account holders
has12,800 talented and committed

employees
is the leading African bank with assets of
Birr 155 billion as of June 30th 2012

Statements of the Problem

Satisfying customers is the major mission.
As customers are satisfied - organizations

achieves higher sales, profit, market share ,

gain loyalty and vice versa
Nevertheless, banks in Ethiopia have little
care about their customers. They use more
obsolete and traditional technologies that
cause dissatisfaction

Contd
This is also true for CBE
Though CBE has been providing many kinds

of banking services since its establishment in

1942, it couldnt go further in satisfying its
customers until the last decade.
The bank applied core-banking technology in
2004 E.c to integrate the services delivered in
its all branch banks and to improve the quality
of its services.

Contd
The application of this technology is

believed to have many contributions for the

bank.
The purpose of this study was to examine
the impact of core banking and service
quality on customer satisfaction.

Significance of the study

important to the bank to assess whether its

application of core banking service enhance

the level of customer satisfaction and
identifies the position of service quality at
the bank.
Identifies issues related to the application of
core banking and service quality and thus
provide feedback to managers.

Contd...
Result of this research project can be used

as a base point for further studies in the

related issues.

Objectives of the study

1. General objective
To assess the impact of Core Banking
and service quality on Customer
Satisfaction in Commercial Bank of
Ethiopia Bishoftu Branch.

Contd
2. Specific objectives
To assess the changes that comes after the
application of core banking service
To identify the impact of core banking on
customer satisfaction in the banks
To identify the impact of service quality on
customer satisfaction in the banks
To analyze the customer satisfaction level in CBE
To provide some recommendation for the bank

Research questions
What are the changes that have come after the

application of core banking service?

How satisfied are customers with the application
of core banking service in CBE Bishoftu branch?
How satisfied customers are with service quality
in CBE Bishoftu branch?
What is the level of customer satisfaction in CBE
Bishoftu branch?
What must be done to further improve the services
in CBE Bishoftu branch?

Scope of the study

Delimited to the changes that come after the

introduction of core banking in the bank.

the project focus area is only CBE Bishoftu
branch.

Limitation of the study

Not be considered as a representative of the

whole service quality of CBE; that is the

generalizability of the finding and the
conclusion drawn will be limited to CBE
Bishoftu branch.
Moreover, since this project is designed to
be completed in four months time, it may
not present detailed data to the intended
level.

Conceptual framework for the impact of core

banking and service quality on customer
satisfaction

Reliability

Customer

Assurance
Responsiveness
Empathy
Tangibles
Core banking

satisfaction

Research methodology
A. Research design
Descriptive-correlational form of research

design to provide solutions to the research

problems
It involves gathering data that describe
events and then organizes, tabulates,
depicts, and describes the data collection.

B. Types of data
A. Primary data
information gathered from customers of the bank
Questionnaire that have both open end and
closed end question were prepared and delivered
to customers
B. Secondary Data
information gathered from websites, books, and
journals, periodicals released by the bank and
articles etc.

C. Population of the study

current account holder =5000
saving account holder=25,00

Sub total=30,000
all one time customers

D. Sample and sampling techniques

probability -stratified sampling techniques.
proportion allocation method was used to

determine the sample size

n0=n*p0/N,

Contd
Based on the above formula the researcher

took a sample of
20 customer from c/a =5000
100 customer from s/a=25,000
Sub total=30,000=120
all one time customers=average customer per
day=1000 customer (i.e. using 10 percent of
1000 customer per day) =100
total sample size= 220 customers.

E. Method of data collection

self-administered questionnaire

F. Reliability test
a questionnaire of 25 respondents was taken and

Cronbach alpha has been employed to evaluate the

reliability scale of construct and dimension of
each construct. Reliability scale of the overall
service quality was 0.842.this means that it has
high reliability

G. Method of data analysis

Descriptive statistics

- Frequency, Percentage, Mean, Standard

deviation

Inferential statistics

-correlation and regression

analysis of data was carried out using SPSS

version 20.0.

Data Analysis
Two Hundred Twenty questionnaires (220)

were distributed to the respondents and out

of these 210 of them were collected with a
response rate of 95.5 percent.
However, only 200 responses were valid

with complete answers.

Background information of Respondents

10 %
41.5 %

18 %
58.5 %

39 %

1.5 %

45 %

1.5 %
3.5 %
25 %

28.5 %

33 %

15.5 %

79.5 %

Mean & Standard deviation result

Pearson correlation
Customer satisfaction

Assurance

Pearson Correlation
Sig. (2-tailed)
N

.877**
.000
200

Responsiveness

Pearson Correlation
Sig. (2-tailed)
N

.349**
.000
200

Empathy

Pearson Correlation
Sig. (2-tailed)
N

.867**
.000
200

Tangibility

Pearson Correlation
Sig. (2-tailed)
N

.715**
.000
200

Reliability

Pearson Correlation
Sig. (2-tailed)
N

.850**
.000
200

Core banking

Pearson Correlation
Sig. (2-tailed)
N

.737**
.000
200

Correlation is significant at the 0.01 level (2-tailed)

Regression Analysis
Regression model for core banking
Model

R2

Adjusted R Square

Std. Error of the Est.

.737a

.543

.541

.296

Regression model for service quality model

Impact of service quality & core banking on

customer satisfaction
1. Impact of core banking on customer satisfaction

Model

(Constant)
Core
banking

Unstandardized
Coefficients

Standardized
Coefficients

Std. Error

Beta

1.239
.719

.202
.047

.737

Dependent Variable: customer satisfaction

Source: own survey, 2013

Sig.

6.143
15.337

.000
.000

2. Impact of service quality on customer satisfaction

Model

Unstandardized
Coefficients
B

Standardized
Coefficients

Std. Error

(Constant)

.110

.117

Reliability

.311

.042

Assurance

.437

Sig.

Beta

.936

.351

.325

7.425

.000

.053

.459

8.177

.000

-.004

.021

-.006

-.202

.840

Empathy

.300

.057

.302

5.275

.000

Tangibles

-.072

.043

-.084 -1.687

.093

responsiveness

Dependent Variable: customer satisfaction

Source: own survey, 2013

Analysis of open ended question

Majority of the respondent states their

opinion regarding core banking service.

From their suggestion it can be inferred that
network problem is the big issues.
It is a major obstacle in the check clearing
operations, quick transfer of fund, cash
withdrawal and etc.
Temporary failures in core banking
services are not corrected immediately.

Finding, Conclusion and

Recommendations
1. Discussion of findings
. Majority (58.5 percent) are male,
. Majority (39 percent) aged in the range of

18-30 years,
. Majority (45 percent) are degree holders,&
. Majority (79.5 percent) of the respondents
visits the bank once in a month.

Contd
The results of the descriptive statistical

analysis
customers were most satisfied with the
assurance (Mean=4.34) followed by reliability
(Mean=4.32), empathy (Mean=4.29) and
tangibility (Mean=4.26)

customers were less satisfied with

responsiveness (Mean=3.83)
customers are satisfied with the application of
core banking (Mean=4.28)

Correlation result
there is a positive and sig. r/s b/n:

Ass. and customer satisfaction(.877**),

Resp. customer satisfaction(.349**) and
Emp. and customer satisfaction(.867**),
Tan. and customer satisfaction(.715**),
Rel. and customer satisfaction(.850**),
Core banking and customer satisfaction(.737**).
Correlation is significant at the 0.01 level (2-tailed)

Contd
Highest relationship

Ass. and customer satisfaction (.877**),

Lowest relationship
Resp. and customer satisfaction (.349**)

Regression result
Reliability has a positive and significant effect

on customer satisfaction
Assurance has a positive and significant effect
on customer satisfaction
Responsiveness has a negative & insignificant
effect on customer satisfaction.

Contd
empathy has a positive and significant

effect on customer satisfaction

tangibility has a negative and insignificant
effect on customer satisfaction
core banking has a positive and significant
effect on customer satisfaction

Overall regression results

Coefficient of determination-R2 is the measure of

proportion of the variance of dependent variable

about its mean that is explained by the
independent or predictor variables
The independent variables (ser. Qual.)

accounted for 87.9 percent of the variance

in customer satisfaction (R2 = 0.879)
The independent variable (core banking)
accounted for 54.3 percent of the variance
in customer satisfaction (r2 =0.543)

Conclusion
customers of bank were satisfied by core

banking and the five service quality

dimensions
customers were most satisfied with the
assurance dimensions of service quality
customers were less satisfied by
responsiveness dimensions of service
quality

Contd
correlation result shows positive and

significant relation ship between

core banking and customer satisfaction
all service quality dimensions and
customer satisfaction

Contd
Regression results shows that
Reliability , Assurance and Empathy

have positive and significant impact

on customer satisfaction
Tangibility and Responsiveness has no
positive and significant impact on customer
satisfaction
core banking has positive and significant
relationship with customer satisfaction

Recommendations
Reliability
The bank managers should enhance reliability on

the bank by:

fulfilling the service as promised,
performing the service exactly at the first
time,
showing a keen interest in solving
customers problems,
providing the service at the promised
time and
by insisting on error free record.

Contd
Empathy

One way of addressing this could be by:

treating customer with great respect,
giving individual attention to customers,
serving customers based on their specific
needs and treating customers in a friendly
manner

Contd
The bank should create some mechanism to

minimize the network problem or to find

other techniques that unstop the service at
the time of disconnection of the network.

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