Identifying Service Quality Priority of Islamic Banks in Malaysia

Abstract

Service quality remains a focal issue in banking industry as banking institutions are providing heterogeneous products, including Islamic banks. Particularly when the competition becomes more intense, providing superior service quality provided competitive advantage to the organizations in order to remain relevant in the industry. Accordingly, the purpose of this paper is to identify not only the importance of service quality on customer satisfaction but also to examine the performance of each service quality dimensions in satisfying the customers. Using survey method, data of 413 respondents have been analysed using PLS-SEM. The study used PARKSEV model which is enhanced with “compliance†dimension to measure service quality as it is developed in a non-Western cultural context which better suits Malaysia environment. The result shows that the service quality dimensions that contribute significantly to customer
satisfaction are “reliabilityâ€, “sincerityâ€, “complianceâ€, “convenience†and “responsivenessâ€. In terms of performance, “compliance†and “sincerity†are well executed as they are classified in the first quadrant. However, another two dimensions which are “convenience†and “responsiveness†fell in the fourth quadrant which should be taken corrective actions as both dimensions are important but do not performing well. “Reliability†is nearing the third quadrant indicating that though it is significant, but the dimension is relatively less critical as it has been appropriately delivered. Using the Importance-Performance Matrix Analysis (IPMA), the findings provide insights to Islamic bank managers on resource allocation priority and further investment in technology to enhance service quality performance.