processes, technical capabilities mediated by hardware, software and communication .... of the account management and online transaction applications.
Quality Management of Internet Banking Services Jean-Michel Sahut Professor, Geneva School of Business Administration (Ch) & CEREGE EA 1722 - University of Poitiers (Fr)
Zuzana Kucerova University of Zilina (Slovakia)
Abstract Quality Function Deployment (QFD) is a product and service design technique primarily oriented to deliver the ‘voice of the customer’ throughout every single planning and design activity. QFD was successfully applied in almost every manufacturing industry, methodologically adapted and employed in the service industries and software development too. The electronic product and service delivery is nowadays a necessary part of a business strategy. By increasing the competitive pressure the electronic environment makes the service providers ‘listen’ to the voice of the customer more carefully, to refine it and deliver high quality products and services. This paper demonstrates the QFD application to Internet banking services, which led us to study the quality of online banking from both the customer’s and the provider’s perspective. It outlines the links between quality, quality management tools and Internet banking and discusses the complexity of a quality management system for electronic banking. Keywords: quality function deployment, Internet banking, service quality, information technology, information system JEL : G21, L86, M11
Introduction Internet banking represents a huge e-commerce industry and banks no longer differentiate themselves by merely having an Internet presence. The change shifting traditional banking into an electronic environment has strongly influenced different domains of banking services particularly the range of banking products and services, the mode of interaction with the services, the management of the service, and the quality criteria used to assess banking services [13]. An effective quality management system and quality itself stand at the centre of the delivery of high quality products and services. A bank’s understanding of the Internet as a strategic success mode means it has to focus its marginal initiatives in this channel and transform it into a true strategy. An Internet site demonstrates the quality level of a bank’s services as a whole, therefore improving the quality of Internet banking services and is particularly important since banks depend on customer satisfaction and loyalty for their survival. In France the first initiatives started in 1996 when BNP-Paribas, Crédit Agricole Ile de France, CCF and Crédit Lyonnais built information web sites presenting banks’ bulletins. The
1
Electronic copy available at: http://ssrn.com/abstract=1755497
content of the web sites has been gradually enriched and finally the banks allowed their customers to make transactions over the banking web sites. The development of online banking in Slovakia was very much the same. It was a spontaneous process of keeping up with world banking trends. In 1996, the first signals were sent out by Internet Info Banking web presentations reproducing bank business information. Gradually, Slovak banks changed to the transactional mode by installing Home banking systems and later introduced the first versions of their Internet Banking systems. The quality of Internet banking services depends essentially on the implemented information systems. A fast technological development and increasing customer demand for more sophisticated banking products and services forced the traditional banks in France to ‘pile up’ the disparate software and technology. In the early’90s Internet banking systems were added to the bank’s central systems for online data access, although they did not allow transaction processing. So these banks invested in a parallel information system in order to be able to offer on-line transactions as they did not wish to modify the heart of their information system which dated from ‘70s. However, the on-going technology and channel integration issues continuously decelerated the quality journey. On the other hand, with the Slovak bank chosen for our study, the integration of new technologies was not the major problem, because its information system was created in 1993 and it was the main reason for this choice. But a vision of the Internet as a high potential distribution channel and a customer relationship management tool was missing. In cooperation with the electronic banking team we adapted and implemented the Quality Function Deployment technique to improve the quality of the online banking services by formulating the customer quality requirements, translating them into the service specifications and deploying the customer focus through the process of the channel redesign. 1
Internet banking in the Context of Quality Management
The web and its related technologies have transformed the way in which financial transactions are processed. Finance has been eliminated from being the interface between organizations and customers, and customers are generating orders through the Internet sites, the delivery of the services automatically follows with no need for a personal contact or finance to be involved. Continuing technological innovations and globally increasing competitive pressure have affected all aspects of the banking business particularly the banking strategies. The strategic positioning decision of Internet banking operations must be clearly formulated [20] and technical and managerial objectives have to be analysed and taken into account [15]. Electronic banking increases the banks’ dependency on information technology thereby creating the need for the outsourcing arrangements with non-financial institutions such as Internet service providers, technology and telecommunications companies. The operational processes, technical capabilities mediated by hardware, software and communication infrastructure, and the software application create complex managerial challenges for banks. Internet banking, as all types of electronic business, faces the significant changes in service management brought by the cybernetic service encounters. As a banking and finance product, Internet banking belongs to the group of services explicitly characterized by intangible features, technology mediated customer contact fully supported by exchanging information and know-how between the bank and its client. It is a one-to-one service where every individual bank client happens to interact with a bank’s web presentation. Service quality in online environments has become recognized as an important factor in determining the success or failure of electronic commerce. E-service quality can potentially increase attractiveness, hit
2
Electronic copy available at: http://ssrn.com/abstract=1755497
rate, customer retention, and positive word-of-mouth, and can maximise the online competitive advantage of e-commerce [14]. A bank considering the Internet as a long term means to achieve the bank’s strategic goals, has to make commitments to improve perception and positioning of e-experiences in the customers’ minds while the interpersonal character of the delivery largely determines the perceived quality of the service [3]. Customers in the service sector are highly sensitive to service quality and service delivery while they are in contact with the front-line personnel or since the e-commerce revolution, in contact with the web site. It is the technology deciding whether the customer will come back or shift to the competitor next-door which assumes a high importance, particularly in the online industry where it takes a few seconds to switch to a competitor’s web site. For e-banking managers it should be a “must” to control the quality level of their Internet banking services in order to be ahead of the pure Internet players and competitors too. 2
The Perspectives of Quality Management of Internet Banking
Basically service quality is viewed from two perspectives. From the customer perspective, service quality means differentiating between the expected and perceived quality, the determination of the quality dimensions and the measurement of the customer’s satisfaction. The responsibility of the provider is to set up a quality management system, which will ensure that the customer’s requirements are understood and integrated into the service design and delivery. 2.1
Service Quality – the Customer Perspective
Quality in a service organization is a measure of the extension to which the service delivered meets the customer expectations. Gronroos (1984) defined the concept of perceived service quality as ‘the outcome of an evaluation process, where the customer compares his expectations with the service he perceives he has received’. Parasuraman et al. (1985) [10] agreed and defined service quality as ‘the comparison between customer expectations and perceptions of service’. The customer is the most important in designing, providing and evaluating the level of quality, particularly in service industries where they are very sensitive to its fluctuations. Expected quality is the level of quality customers explicitly or implicitly demand and expect from the service providers. Customer expectations were defined as the ‘desires and wants’ i.e. what they feel a service provider should offer rather than would offer (Parasuraman). Due to the fact that the service customers are present in the delivery process, perceived quality is formed through the comparison of prior expectations (personal needs, past experience, word-of-mouth, image of the organization etc.) with the actual service delivery process and service outcome. It is crucial that customer requirements are determined and service delivery and outcome designed to meet these requirements [4]. Perceived quality means the overall impression a customer has and experiences about the level of quality during the service provision; these are the service quality characteristics as the clients ‘feel’ them. Perceived quality is demonstrated by the expression of the customer’s satisfaction or dissatisfaction. The potential between expected and perceived quality enables the service provider to measure the satisfaction and service performance by formulating the precise and actual service quality criteria. The design of an e-service determines the qualities of the service experiences delivered through electronic channels. The objective of the design process is to reduce the difference between the expected and perceived quality during the phase of the product development and the delivery process [12]. The quality conceptualisations of traditional services were created
3
to capture the interpersonal nature of service encounters [17], [7] and so many e-services have been designed according to common sense or common practice [18], with little thought given to quality as defined by the customer. Currently the research on service quality in electronic environments is in the exploratory phase, though not proposing a universal formulation of the e-service quality dimensions. The academics either align their studies with the service quality dimensions of Parasuraman’s SERVQUAL instrument or use other methods such as focus group interviews, mail survey, the content analysis of compliments and complaints, etc., to define the e-quality dimensions and validate them. In order to effectively enhance online banking service quality, bankers are first required to understand the attributes customers use to judge service quality [9] fully satisfying online banking customers and moreover they need to be equipped to integrate them into e-service planning and design. The first step in our case study was to identify the quality criteria the customers were expecting from the service. The available data was a collection of the spontaneous suggestions and ideas about the online banking services clients were using over the Internet, which was initiated by the Internet banking manager. The data analysis showed that the bank’s clients were concerned with the functionality, ease of use and the added value features of the account management and online transaction applications. Eleven quality requirements were identified – response time, expanding functionality, communication, convenience, expanding the information availability, application modularity/personalization, reliability, informing the customer, security, ease of performance and navigation, design/aesthetics. The systematic and permanent provision of information to the clients and determining the customers’ requirements in the way they prefer. The customers highly appreciated the Communication interest of the bank in their opinion. A prompt response to their email requests was considered as an important quality factor. The possibility to adapt the service according to the individual customer requirements and Application modularity/Personalization store the customer settings to facilitate future interaction with the services. Response time (reasonable Technical aspect of the service. It is a measure of the accessibility of the information processing system, which the customers understand as the time interval between a webloading time) object-click and the request fulfilment. The structure of the online service is intuitive and with a reasonable number of actions to Ease of performance and achieve the result wanted. navigation Providing information (feedback) about the account balance and transactions by the different communication channels (SMS notification, e-mail notification, displaying Informing the customer message about /un/successful transaction realization etc.). Design/aesthetics of the site The appearance, transparency and graphical arrangement. The permanent, accurate and consistent performance of the promised service. Reliability The customer’s trust in the system’s possibilities to protect the transactions and Security information. The requirement to expand the services, adding value to the core services, the online access to all the financial products and services the bank was offering via a branch channel (e.g. Expanding functionality automatic transfers, application forms, savings management) and service and product cross-selling. Expanding the information The ability to provide information about past account transactions and scheduled/preplanned transactions; the application should provide the possibility of data filtration and availability summarization. Service accessibility from place, time and technology facilities point of view. Convenience
Table 1: The Customer Quality Requirements
The next step of the study was setting the priorities for the online banking quality dimensions. The results discovered that adaptability to the individual customer preferences and the personalized choice from the application settings, which gives the users the possibility to modify the user interface according to their present needs, was considered the most important criterion. Permanent communication with the customers and the provision of fast and easy
4
access to relevant information, in an appropriate format and at an appropriate descriptive level, were the next most important criteria. The lack of personal contact creates one of the most crucial elements in keeping customer satisfaction and loyalty in the online environment. As a communication channel between the bank and its clients, the Internet has to deliver complete and up-to-date information and also provide care and individualized attention to each of the customers. Enriching an interactive and relational-oriented platform is the way to offset the negative effect and even to strengthen customer loyalty [16]. 2.2
‘Quality of Conformance1’ - the Provider Perspective
The process (supply-led) quality is defined as ‘conformance to requirements’. It lays emphasis on the importance of the management and the supply-side quality and there is the important role of the process in determining the quality of outcome [4]. The clients have a global and intuitive vision of the level of the expected and perceived quality. While delivering high quality products and services, the task of every organization is to translate the customer’s quality requirements into the managerial, organizational and technical solutions. Target (planned) quality is the quality characteristics and performance which the organization wants to provide to the customers in order to answer to the expected level of quality. Delivered quality represents the quality characteristics achieved in reality. Ideally the planned and the delivered quality should be identical; however, it is difficult to achieve this due to the different dysfunctions and gaps in the prediction, planning and implementation process in general. Achieving the ‘quality of conformance’ depends on the quality management system in an organization. The quality system is a sub-system of the global organizational system controlling and ensuring the service quality and it embodies sub-elements of a different nature such as the objects (personnel or services), operational rules, performance logistics, communication network; it is the “nervous system” made up of all the functions of leadership, management, coordination, detection, regulation, control and its internal and external feedback. Electronic banking challenges can be classified into two groups – technical and managerial [15]. Technical challenges deal with hardware, software, and network problems; in addition, payment methods, security, and service support. The challenges related to management include staffing expertise, change of organizational structure, and management transition. Internet banking managers using the traditional management methods and techniques are not ready or equipped to deal with the fast changing competitive environment, market globalisation, technological advances, and the increasing sophistication of the customers. In order to satisfy customers, banks must understand the customer requirements in advance, and must then be able to ensure that the requirements will be delivered to the clients. They decide what kind of data will be collected about the customers, how it will be stored, managed and analysed so that they can be effectively used. In e-era quality management must be done with even greater accuracy and speed [19]. In response to the dramatic changes in the service environment, electronic banking managers have to change the recent approach to electronic service design planning, design and delivery process, e-service quality management and control. Establishing a system for measuring and monitoring the quality of the provided services is a critical issue for the organisation’s strategic activities [11]. First the quality strategy has to be redefined and a purely customer focused culture deployed across the working environment. Internet banking managers have to ensure that they do not lack e-commerce qualified and skilled personnel that is able to handle 1
Ensuring product or service produced according to design
5
the fast e-service innovations, new ways of delivering value to the bank clients and errorless communication in the online environment. Moreover, they are responsible for the content published on the web site and for its management. Quality of information is a necessary part of the Internet banking quality management system. The second part of the quality management systems concerns the domain technology packages, web components and network planning with regard to the customer quality requirements. The task of translating the ‘voice of the customer’ requires the definition and selection of comprehensive quality design techniques and their methodological modification for complex e-service systems, like online banking. 3
Service QFD – the Starting Point for Internet Banking Services
Quality Function Deployment (QFD) is one of the processes incorporated into the Total Quality Management (TQM) concept. QFD is not only a methodological and statistical tool designed for one use but an overall concept that provides a means of translating customer requirements for each stage of product development and production [1]. It is a coherent technique that analyses, prioritises, translates spoken and unspoken customer requirements and involves everyone in an organization. QFD is a comprehensive technique of knowledge processing that integrates all organizational know-how and even reveals internal company knowledge hidden and badly communicated through the organizational structure. QFD fundamentally supports decision making throughout an organizational structure. Once implemented QFD improves team cooperation and promotes teamwork particularly between research, development, and marketing/sales teams. By exploring the culture where teams must cooperate, by understanding the tasks and publishing responsibilities, QFD improves levels of trust and a pure and honest working environment in an organization. The name Quality Function Deployment expresses its true purpose, which is satisfying customers (Quality) by translating their needs into a design and ensuring that all organizational units (Function) work together to systematically break down their activities into finer and finer detail that can be quantified and controlled (Deployment) [8]. QFD dates from 1966 (Yoki Akao) and its penetration into service industries started in the early 1980s in Japanese companies. Quality Function Deployment (QFD) is a systematic matrix-based visual approach for designing quality products and services. The best-known matrix is the first in the QFD hierarchy, referred to as the House of Quality (HoQ). During the whole process, different size matrices are being constructed (planning matrix/HoQ, concept selection matrix, subsystem/assembly deployment matrix, process planning matrix).
Organizational goals & Customer segments
Voice of Customer analysis (Planning, definition, prioritisation)
Demanded qualities & Quality attributes
Functions & New concept
Quality attributes & Functions
Figure 1: The QFD Deployments applied to Internet Banking Services
6
From the system implementation point of view the following deployments (Figure 1) have be addressed and precisely analysed particularly in a service organization: Organizational Deployment:
To map the QFD steps to the different organizational functions; who is responsible for what activities and when during the service planning and development process; highly recommended that organizational deployment be done before QFD is applied to a specific service;
Customer Deployment:
The deployment of organizational goals into core competencies, into customer attributes, into target customer segments. This helps “tailor” the services to the needs of those customers who can best help achieve organization goals.
Voice of Customer Deployment (VOC):
VOC tables are used to record raw customer data, use characteristics for defining quality requirements, and so separate the different types of service attributes. In order to satisfy customers, it is important to understand how meeting their requirements affects satisfaction and other specific aspects such as customer involvement, customer preference, customer responsiveness, methodological items of processing and prioritising client requirements.
Quality Deployment: Function Deployment:
Customer-demanded quality and priorities into measurable service quality attributes. Used to identify functional areas of the organization, which are critical for performing tasks that must achieve the quality attribute targets.
New Concept Deployment: Task Deployment:
Used in conjunction with Quality Improvement Stories (a structured problemsolving approach), to select a new process that will best satisfy customers’ needs. Breaks down critical jobs into tasks and steps.
Reliability Deployment:
Identifies and prevents failures of critical customer requirements.
4
Case study
The QFD application was carried out in cooperation with the Electronic Banking and Development department of a Slovak bank in the period November 2002 - May 2003. The bank has been operating in the Slovak financial market since 1993 and is well recognized as a corporate and retail bank possessing an advanced technology platform, though not promoting the quality of online services to a sufficient level. The preparation process included a series of bank visits where the bank’s internal documents were provided. The deployment of the ‘Voice of the Customer’ and Quality Deployment (Marked in the Figure 1) were carried out in the following sub-steps. 4.1
‘Voice of the Customer’ Deployment
The first step of our case study was to identify the quality criteria the bank’s customers were expecting from the Internet banking services. The data was collected in the form of an unstructured customer survey, which included suggestions and ideas about the Internet banking services. They were analysed in several steps: § Iterative completion of a list of all the suggestions § Suggestions’ clustering according to their affinities (23 clusters, frequencies) § Definition of demanded quality criteria § Clusters allocated among the demanded qualities - each cluster could have shared more than one of the formulated service criteria allowing allocating frequencies for each of the service criteria
7
§ Prioritisation of service quality criteria Refining the voice of the customer is often a demanding task and requires a systematic way of data collection and analysis. The process itself must be precisely planned setting the goals and the purpose of the data collection and analysis. Quality management and QFD itself offer various analytical tools, such as brainstorming, affinity, tree and hierarchy diagrams, blueprinting, state transmission diagrams to define the deep structure of the customer requirements to check for missing data and to structure them. Though the preparation may be demanding in resources and take a long time, without a regular and systematic monitoring of the customer requirements, quality improvement cannot be carried out. 4.2
Quality Deployment
The second step included the construction of the House of Quality facilitating the translation of the customer quality criteria into the service technical characteristics. The House of Quality was: §
§ § § §
Determining the service quality attributes (the Internet banking team members consisting of the IB manager, technical and marketing personnel who worked out a set of the service attributes corresponding to the quality criteria demanded by the customers) Evaluating the relative relationships among the customer quality criteria and the service quality attributes Assessment of the implementation difficulty of the service quality attributes Calculating technical significances for each service quality attribute Competitive analysis based on the customer quality criteria and also on the service quality attributes
2
3 1. Customer demanded qualities
1
2. Weights 3. Service quality attributes 4. Relationship Matrix
4
5. Implementation difficulty 6. Technical significance
5 6 Figure 2: House of Quality – Quality Deployment for the Internet Banking 8
5
Conclusion
During the pilot Quality Function Deployment application in the bank, two of the proposed service QFD deployments were completed. Exploring the online banking services using this methodology allowed us to identify the service quality criteria leading to customer satisfaction. Constructing the House of Quality for Internet banking promoted team cooperation, communication and a customer-oriented culture while, at the same time, designing a new web interface. The immediate benefits of the QFD application were pointing out the critical technical attributes to be implemented, the comparison of the bank’s Internet services with the competitors and the positioning in the current market. Analysing the voice of the customer and building and putting into practice a transformation framework are the key features of the methodology and the most important factors in regulating the level of quality of Internet banking services. If not done precisely and correctly, the application of the methodology does not show its real value, does not bring the expected return of time and capital investments and data processing turns out to be a waste of resources. Only a systematic and permanent monitoring of the customer and their prioritisation will guarantee future benefits and will lead all business efforts to correspond to the real structure of the customers’ demands and needs. The quality of Internet banking embodies various quality management issues. It is an electronic service, which necessitates research into the e-service quality dimensions, customer satisfaction, trust and loyalty in the online environment. Internet banking is an e-business application that requires concept planning, web components and technological planning. Due to the fact that online banking depends fundamentally on the effective information exchange between the bank and its clients, the information quality covers a significant part of the online banking quality management. All these quality aspects together create a complex managerial challenge for e-banking managers who need to be skilled enough to handle them. QFD is a flexible methodology that needs to be adapted to incorporate these different quality aspects. The first initiatives of QFD projects have to start by acquiring top management commitment and the change in the overall organizational culture. By spreading a positive attitude towards quality techniques it will be easier for project leaders to motivate team members and achieve an adequate time commitment. Successful QFD realization requires a precise planning and preparation phase. In order to gain all QFD benefits, QFD application has to be preceded by a training period. Incorporating Quality Function Deployment into a bank’s philosophy as a common part of day-to-day management may be a difficult re-engineering task. QFD can be perceived as constraining and often requires additional resources especially at the starting level. By applying QFD we demonstrated the potential this technique has in defining customer expectations and the translation of these expectations into the design specifications, thus ensuring the customer’s satisfaction.
9
Bibliography [1] Chan L.-K., Wu M.-L. (2002). Quality function deployment: A literature review. European Journal of Operational Research, 143, 463-497. [2] Cruchant L. (2000). La Qualité. Presses Universitaires de France 2000, 5th édition. [3] Dholakia N, Pandya A. (2002). Conceptualising B2C Businesses as Services. Working Paper, RITIM Research Center, University of Rhode Island, Kingston, RI. [4] Ghobadian A. (1994). Service Quality: Concepts and Models. International Journal of Quality and Reliability Management, Vol. 11, No. 9, 1994, p. 43-66. [5] Ghobadian A., Speller S., Jones M. (1994). Service quality: concepts and models. International Journal of Quality and Reliability Management, Vol. 11, No. 9, 1994, p.43-66. [6] Krostie J. (1996). Using Quality Function Deployment in Software Requirements Specification. Andersen Consulting and IDI, NTNU, Oslo, Norway. [7] Liljander V., van Rien A., Pura M. (2002). Customer Satisfaction with e-Services: The case of an Online Recruitement Portal. Published in the Yearbook of Services Management 2002 – eServices. [8] Mazur G. H. (1993). QFD for Service Industries. The Fifth Symposium on QFD, Michigan. [9] Minjoon J., Shaohan C., DaeSoo K. (2002). The Linkage of Online Banking Service Quality Dimensions to Customer satisfaction. Decision Sciences Institute 2002 Annual Meeting proceeding. [10] Parasuraman, Zeithaml and Berry (1985). A conceptual model of service quality and its implications for future research. Journal of Marketing, fall 1985, p. 41-50. [11] Poulymenakou A., Tsironis L. (2003). Quality and electronic commerce: a partnership for growth. The TQM Magazine, Vol. 15, No. 3, 2003, p.137-151. [12] Qualité et systèmes de management ISO 9000 ; NF EN ISO 9001:2000 Guide pour l’identification des exigences des clients ; AFNOR, 2001. [13] Sahut J. M., Hrnciar M. (2003). Problématique de la Qualité des Services d’Internet banking. Gestion 2000, vol. 2, p. 69-86. [14] Santos J. (2003). E-service quality: a model of virtual service quality dimensions. Managing Service Quality, vol. 13, no. 3, p. 233-246. [15] Shaikh M.A., Whittaker J.A. & others (2001). E-Commerce Need Analysis via Quality Function Deployment. Change Management and the New Industrial Revolution 2001, 317-322. [16] Tam Ch.T.W., Leung T.K.P., Wong Y.H. (2003). An integrated model of online customer loyalty. Proceedings of ABAS International Conference 2003, July 11-13, Brussels, Belgium. [17] Van Riel A.C.R., Liljander V., Jurriens P. (2001). Exploring consumer evaluation of e-services: a portal site. International Journal of Service Industry Management, Vol. 12, No. 4, 2001, p. 359377. [18] Xue M., Harker P.T., Heim G.R.(2003). Incorporating the dual customer roles in e-service design. Working Paper January 2003, The Wharton Financial Institutions Centre at the Wharton School of the University of Pennsylvania. [19] Yang Ch.Ch. (2003). Quality management in the era of cybereconomy (e-QM). Proceedings of the International QMOD Conference 2003, October 1-3, Paris. [20] Yang J., Gibson Ch. (2003). E-banking – recent and development: a case study. Proceedings of 2003 Annual Meeting of the Southwest Decision Sciences Institute, Houston, Texas, March 5-8, 2002, pp; 429-433.
10
