Journal of Informatics Education and Research
ISSN: 1526-4726
Vol 4 Issue 2 (2024)
Examining Fintech Service Quality of Private Sector Banks in India: An
Empirical Study using Servqual Model
Dr. Anand Muley,
Dept. of Commerce,
J. M. Patel Arts, Commerce and Science, College Bhandara Maharashtra
Dr Jayaashish Sethi
Director, Training & Development
Trident Group Ludhiana
Ms. U Rajeswari
Assistant Professor,
Department of Business Administration,
Kalasalingam Academy of Research and Education (Deemed to be university), Krishnankoil, Virudhunagar, Tamil Nadu
Abstract
Banking is experiencing a transformation, shifting from traditional physical branches to leveraging information technology
and big data alongside specialized human capital. This shift includes utilizing technology for development of new services
and business models, represented by the growing influence of the FinTech sector, characterized by innovative information
and automation technology in financial services. Various factors influence users' adoption of financial technology, with
service quality being a key consideration. High-quality service is crucial for FinTech providers with the aim to attract and
retain customers. Service quality is regarded as a complete evaluation or perception of a service’s overall excellence or
superiority. In India, banking businesses increasingly rely on financial technology companies to extend their products and
services to a broader customer base. FinTech has enhanced service quality by minimizing the time and effort required for
customers to access banking services. Considering these factors, this study investigates and identifies new aspects of service
quality in the banking sector. A sample of 281 respondents was collected from users and employees of private banks. The
factors that identify the Fintech Service Quality of Private Sector Banks in India are Tangibility, Reliability,
Responsiveness, Empathy, and Assurance.
Keywords: service quality, private sector banks, customer satisfaction, SERVQUAL, security
Introduction
With the rising competition across industries, customer satisfaction and retention have become main objectives for all
business units, including service units. Therefore, the study of service quality remains a crucial point. Banking institutions,
playing a vital role, have seen service quality issues receive significant attention. The arrival of technology-oriented
financial services, or FinTech, has shifted the spotlight to a new paradigm of customer service in banking. The diversity of
banking services provided through technology needs customer willingness to use them, influenced by a multitude of factors,
including personal, social, and technology-related considerations. As financial technology-based services gain momentum,
it is essential to understand the factors that affect the preference for those services. The recognized factors are categorized
into seven elements, highlighting their importance in influencing satisfaction level of customer with FinTech services.
Though, the technical perception of customers and the ease of use of FinTech services has emerged as the main element
that determines satisfaction level of customers with those services (Saranya, Chandrasekaran & Ambika, 2023). Service
quality is playing an important role in shaping an overall positive experience for customers, development of trust, and
meeting customer expectations, which in turn improves their perception of usefulness of services. Maintaining high quality
of service assists in management of risks that are associated with AI, like bias and discrimination, thus developing trust of
customers in AI-driven financial services. Integration of AI and big data have empowered financial institutions for
enhancement of service quality while proactively managing AI-associated risks (Sharma et al. 2024). The adoption of
FinTech in the banking sector has resulted in higher customer satisfaction and improved service quality, creating a win-win
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Vol 4 Issue 2 (2024)
situation for both customers and banks. However, in order to remain competitive in the industry, it is crucial for banks to
continue investing in FinTech and staying current with the latest technology trends (Vijaya & Vetrivel, 2023). As
technology and innovation advance, the global economy is evolving constantly. The recent transformation in the banking
sector, which is driven by digital technology, has led banks to concentrate on strategies of business towards digital banking.
FinTech leverages technological advancements for creation of innovative business models based on a variety of creative
concepts. It has developed additional services to address demands of client more efficiently and at the most affordable
prices. FinTech provides users with a single platform to access various financial services, offering cutting-edge, reasonably
priced services and products. The role of FinTech in banking is crucial to meet the rising expectations of tech-savvy clients.
To satisfy the needs of all consumer groups, banks must enhance the utility of their services. FinTech enables process
automation, reduces human labour, and improves operational efficiency. Research on how FinTech impact profitability of
bank would help them in identifying the opportunities for streamlining the processes and cut costs. This information allows
banks to adapt, evolve, and maintain their competitiveness in an increasingly digitized financial sector. Significant changes
have occurred in the payments sector, particularly in payment methods, retail payments, and payment systems, driven by
technological innovation. These changes have notably decreased costs and improved service quality (Baliga & Goveas,
2023). FinTech, as a financial technology division within a company, enhances service quality and management efficiency
by leveraging new-generation information technology. Consumers adopt new technologies or services influenced by
government support, user innovativeness, and brand image. They evaluate the benefits and potential risks, which ultimately
shape their adoption attitude. Our findings provide a consumer assessment and empirical framework for banks to implement
new, user-centered services. It is found that users’ trust in FinTech services significantly influences their adoption attitudes.
Additionally, perceived ease of use and perceived risk do not significantly affect users’ attitudes toward adopting FinTech
services (Hu et al. 2019).
Literature Review
Saijd et al. (2023) stated that traditional banks have embraced FinTech products for retaining customers and stay
competitive in market. This adoption has enabled them to provide effective, reachable, and cost-effective services of finance
through technology. User experience of banking services is improved by FinTech and reduced costs by leveraging
technological advancements. Findings shows that banks initially adopting FinTech products experience increased risk-
taking behaviour, which subsequently decreases as their operating efficiency improves.
Raghuveer & Anand (2023) found that banks, leveraging customer awareness, establish a strong foundation for trust. As
brands, they possess a diverse customer base and multipurpose digital platforms, reinforced by data analytics and advanced
cybersecurity measures. With government support, the banking industry should prioritize enhancing digital literacy, shifting
customers' mindsets to embrace the modern banking system, and promoting nationwide financial inclusion. The aim of this
approach is to accelerate the adoption of Digital Banking Services among customers. The purpose of study is to highlight
the vital role of security in the Internet banking system for enhancement of service quality of online banking. The study
delves into the dual aspects of Internet banking: the convenience of accessing banking services from home, at the customers'
fingertips, and the significant concern regarding the security of customers' financial information.
Khan, Lima & Mahmud (2021) revealed that superior service quality is a crucial factor that can differentiate and enhance
an organization’s performance. This is particularly true for financial service providers who typically offer homogeneous
items. Customer satisfaction is directly linked to service quality, indicating a positive correlation between the quality of
products or services provided to customers and their satisfaction levels. Key dimensions such as tangibility, reliability,
responsiveness, empathy, and assurance significantly impact overall customer satisfaction in mobile banking. In summary,
this study demonstrates that all variables related to service quality in mobile banking have significant positive relationships
with customer satisfaction. Furthermore, the study indicates that while most variables significantly impact customer
satisfaction, tangibility has a minimal effect. This is because tangibility primarily involves technological and infrastructural
elements (such as physical facilities and equipment) that are not as crucial to customers. The researcher suggests that
reliability and responsiveness are the key dimensions of service quality that significantly influence customers' perceptions.
Basdekis, Christopoulos, Katsampoxakis & Vlachou (2022) studied that AI application offers numerous benefits across
various sectors. In banking industry, using AI and ML techniques enhances efficacy, lowers cost of transaction, improves
quality of service, offers intelligent solutions of investment, and boosts satisfaction level of customer. The rise of FinTech
is here to stay and is poised to bring about reform, particularly through technological intervention and increased
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competition. Consequently, some argue that traditional business activities are important for banking industry are being
challenged. Security, trust, and privacy protection are highly important elements that influence users' transactions and use
of new financial technologies, with a prevailing trust in traditional banks over non-financial institutions. The study shows
that customers across all age groups tend to trust traditional banks more than FinTech companies. However, the frequency
of mobile transactions varies based on age and education levels among consumers.
Hammoud, Bizri & Baba (2018) revealed a significant relationship between service quality and customer satisfaction
with E-Banking services, highlighting reliability as the most influential dimension. The research focused on assessing how
E-Banking service quality impacts customer satisfaction within the Lebanese banking sector. While similar studies have
been conducted in various countries and markets, the literature review indicated a gap in research specific to the Lebanese
banking sector. E-Banking has evolved into a crucial banking service that, if effectively implemented, can enhance
customer satisfaction and provide banks with a competitive edge. Understanding the relative significance of service quality
dimensions can assist the banking industry in prioritizing aspects that contribute most to customer satisfaction.
Kumar (2022) found that delivering excellent service quality to customers undoubtedly enhances satisfaction level of
customers. Constant delivery of high-quality products and services over time strengthens the customer's loyalty, leading to
mutual trust and commitment. Indian banks, especially private sector banks, must significantly enhance their services to
meet the evolving needs and challenges of the industry and banking environment. Customer loyalty is essential for business
sustainability, and service quality is paramount in today's competitive market. This study aimed to examine the relationship
between service quality dimensions and customer loyalty. The analysis revealed that all identified factors of service
quality—namely Assurance, Empathy, Reliability, Responsiveness, and Tangibility—have statistically significant but low
positive correlations with customer loyalty. Notably, Tangibility, Assurance, and Empathy exhibit high Pearson correlation
values with a significant impact.
Ashraf & Venugopalan (2018) studied that the revolution of Liberalization, Privatization, and Globalization has
uncovered service industry, including banking sector, to problems like competitions, quality of services, costs, and the
competitive atmosphere. This led to shift in behaviour of customers with regards to banking services. Indian banking sector
adhere to robust systems to uphold superior service quality, aiming to create satisfied customers and foster customer
retention and loyalty. These findings are invaluable for service providers seeking a competitive edge in the banking
business. They provide insights into the service quality perceptions of banking customers and guide improvements in
customer satisfaction, focusing on reliability, responsiveness, assurance, empathy, and tangibility aspects.
Aldaarmi (2024) stated that tangibles, reliability, and empathy in FinTech services have a significant impact on satisfaction
level of customers. Though, no significant influence of assurance and responsiveness is seen on customer satisfaction.
Additionally, outcome reveals that satisfaction level of customers with FinTech services has strongly correlation with the
re-use intention of those services, emphasizing its importance to sustain higher level of satisfaction for customer retention.
Interestingly, although the intention to re-use FinTech services directly affected the sustainable performance of banks, the
direct impact of digital transformation on performance was not found to be significant. Furthermore, a high level of digital
awareness regarding FinTech services has a significant and positive impact on sustainable bank performance.
Paul & Sharmila (2021) revealed that the significance of service quality in the banking industry is extensively discussed
in services marketing literature. It is closely associated with profitability, customer retention, loyalty, satisfaction, word-
of-mouth referrals, complaints, recommendations, and customer switching behaviour. Service quality is defined as the
customers' overall perception or attitude towards a specific service, representing their overall impression of the
organization's services as either inferior or superior. Any initiative related to service quality that a bank plans to undertake
must prioritize the most crucial aspect of customers' expectations. Service providers should consistently enhance both
service quality and perceived value. Managers need to establish quality standards that ensure the delivery of high-quality
services. The process of delivering services to customers should be continuously monitored to ensure that customers have
access to services at all times.
Alwi et al. (2019) found that the financial industry is highly competitive, with financial institutions offering similar
products and services, leading to competition primarily based on service quality. Moreover, the rapid evolution of
technology has led to the emergence of mobile Fintech applications. Financial services providers can improve security and
privacy levels by providing insights or explanations about security and privacy measures to their customers.
Kamboj, Bhatia & Bali (2022) Fintech has revolutionized traditional economic institutions, referring to the ongoing
technological advancements in the financial sector. It is increasingly influencing the economic landscape. A service refers
to intangible activities or a series thereof, typically occurring during interactions between customers and service providers'
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employees or systems, aimed at addressing customer needs. The notion of service quality has garnered significant attention
in sports and recreational literature in the past two decades. Service quality is a complex concept due to the intangible
nature of services, and its definition may vary depending on the individual and the context. It plays a crucial role in retaining
customers for an organization. Quality services not only satisfy customers but also foster loyalty towards the services.
Based on expected service quality, empathy indicators have the highest mean score, followed by tangibility, assurance,
responsiveness, and reliability.
Objective
To “Examine the Fintech Service Quality of Private Sector Banks in India”
Study’s Methodology
281 respondents are considered for this study which was collected from customers and employees of private banks. To collect
data Random sampling method was used and examined by “Explanatory Factor Analysis” for results.
Findings of the Study
Below table shows demographic details of participants it shows that 56.23% are male, and 43.77% are female participants.
Regarding respondent’s age, 34.52% are between 28 to 32 years, 42.35% are 32 to 38 years, and 23.13% are above 38 years
of age. About Educational level, 29.54% are uneducated, 38.08% are educated and 32.38% are professionals.
Details of Participants
Variable Participants % age
Gender of Participants
Male 158 56.23%
Female 123 43.77%
Total 281 100
Age in years
28 to 32 97 34.52%
32 to 38 119 42.35%
Above 38 65 23.13%
Total 281 100
Educational Level
Uneducated 83 29.54%
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Educated 107 38.08%
Professionals 91 32.38%
281
Total 100
“Factor Analysis”
“KMO and Bartlett's Test”
“Kaiser-Meyer-Olkin Measure of Sampling Adequacy” .832
“Approx. Chi-Square” 4870.402
“Bartlett's Test of
df 136
Sphericity”
Significance .000
“KMO and Bartlett's Test”, value of KMO is .832
“Total Variance Explained”
“Initial Eigenvalues” “Rotation Sums of Squared Loadings”
“Component” “% Of
“Total” “% Of Variance” “Cumulative %” “Total” “Cumulative %”
Variance”
1. 7.594 44.671 44.671 3.484 20.494 20.494
2. 2.136 12.563 57.234 3.481 20.479 40.973
3. 1.790 10.532 67.766 2.678 15.752 56.725
4. 1.773 10.428 78.194 2.519 14.819 71.543
5. 1.270 7.469 85.663 2.400 14.120 85.663
6. .503 2.961 88.625
7. .401 2.361 90.985
8. .297 1.748 92.734
9. .266 1.567 94.300
10. .201 1.180 95.481
11. .177 1.042 96.523
12. .151 .885 97.408
13. .137 .805 98.214
14. .105 .618 98.831
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15. .093 .546 99.377
16. .071 .418 99.795
17. .035 .205 100.000
All the five factors are making contribution in explaining total 85.663% of variance. The variance explained by Tangibility
is 20.494%, Reliability is 20.479%, Responsiveness is 15.752%, Empathy is 14.819%, and Assurance is 14.120%.
ScreePlot
“Rotated Component Matrix”
“Factor “Factor
Sr. No. Statements
Loading” Reliability”
Tangibility .944
1. The bank’s Fintech platforms are visually appealing and easy to
navigate .882
2. Fintech services of private banks offer modern and innovative
features .871
3. User interface of the Fintech platforms is user-friendly
.871
4. Provides clear user guides and tutorials for its Fintech services
.863
Reliability .957
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1. Fintech services provided by the bank are consistently reliable
.860
2. Transactions through Fintech platforms are processed accurately
.855
3. Fintech platforms of private banks ensure the security of
transactions .846
4. Fintech services are available without frequent outages
.834
Responsiveness .927
1. Bank addresses technical issues with its Fintech services timely
.924
2. Bank provides timely updates on the status of Fintech
transactions .895
3. Customer support team is readily available to assist with Fintech
service queries .869
Empathy .889
1. Fintech services are designed to meet personal financial needs
.878
2. Bank listens to feedback and incorporates it into Fintech service
improvements .857
3. Bank provides personalized support for issues related to its
Fintech services .827
Assurance .869
1. Fintech platforms are secure and protect user data
.892
2. Bank's staff is knowledgeable about Fintech services and provide
accurate information .853
3. Fintech services obey regulatory and security standards
.833
Factors and the associated variables
The first factor of the study is Tangibility, the variables included under this factor are the bank’s Fintech platforms are
visually appealing and easy to navigate, Fintech services of private banks offer modern and innovative features, User
interface of the Fintech platforms is user-friendly, and provides clear user guides and tutorials for its Fintech services.
Reliability is the second factor it includes variables like Fintech services provided by the bank are consistently reliable,
Transactions through Fintech platforms are processed accurately, Fintech platforms of private banks ensure the security of
transactions, and Fintech services are available without frequent outages. Third factor is Responsiveness, the variables it
includes like Bank addresses technical issues with its Fintech services timely, Bank provides timely updates on the status
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of Fintech transactions, and Customer support team is readily available to assist with Fintech service queries. Empathy is
the fourth factor of study, it includes variables like Fintech services are designed to meet personal financial needs, Bank
listens to feedback and incorporates it into Fintech service improvements, and Bank provides personalized support for
issues related to its Fintech services. Last and fifth factor is Assurance, it includes variables like Fintech platforms are
secure and protect user data, Bank's staff is knowledgeable about Fintech services and provide accurate information, and
Fintech services obey regulatory and security standards.
“Reliability Statistics”
“Cronbach's Alpha” “Number of Items”
.916 17
Total reliability of 17 items that includes variables for Examine the Fintech Service Quality of Private Sector Banks in
India is 0.916
Conclusion
The findings indicate a disparity in technology adoption between private and public banks, with private sector banks
demonstrating better technology adoption. Customers' overall perception also suggests a moderate satisfaction with their
banks' technological adoption compared to global standards. Regarding factors driving customers to adopt new technology,
Security is universally regarded as the primary reason for technology adoption among customers. In essence, "service
quality" refers to the holistic assessment representing long-term satisfaction. It is a critical requirement and a key factor in
competitiveness for building and maintaining harmonious relationships with customers. In phone banking, there appears
to be no difference in satisfaction levels between private and public sector banks. FINTECH has enhanced service quality
by streamlining the process, reducing the time and effort customers need to access banking services. For instance, digital
onboarding procedures have minimized the necessity for customers to visit a branch physically to open an account. The
factors that identify the Fintech Service Quality of Private Sector Banks in India are Tangibility, Reliability,
Responsiveness, Empathy, and Assurance.
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