Effect of Service Quality on Customer Satisfaction: An Empirical Study of Customers who have Bank Accounts in both Public and Private Banks in Sri Lanka

Along with globalization, new technologies are introduced to the banking sector in order to enhance service quality which is consequential to attract and retain rational customers. In the competitive market, banks in both public and private sectors apply different strategies to improve the quality of their services provided. However, there is a lack of recent evidence to show how the quality of these services affects customer satisfaction, leaving a significant hole in Sri Lankan literature. Therefore, this study attempted to explore the effect of service quality of commercial banks on customer satisfaction. Data were collected from 141 customers who maintain both public and private bank accounts in the Gampaha district. Convenient sampling method was used to select the sample. Data were collected through a structural questionnaire conducting face to face interviews and the collected data were analysed through Partial Least Square Structural Equation Model.

The study tested five hypothetical relationships between five dimensions of service quality of commercial banks and customer satisfaction. Results revealed a significant positive relationship between tangible and customer satisfaction as well as responsiveness and customer satisfaction of both public and private banks. It was also found that, assurance has a low positive relationship with customer satisfaction regarding private banks, while there was no relationship between assurance and customer satisfaction regarding public banks. Also, empathy and reliability indicated a low positive relationship between customer satisfaction regarding public banks while these two dimensions did not indicate any significant relationship with customer satisfaction regarding private banks. Therefore, this study found that customer satisfaction regarding the service quality of public banks is higher than that of private banks.