Effect of digital banking-related customer experience on banks’ financial performance during Covid-19: a perspective from Vietnam
| DOI | https://doi.org/10.1108/JABS-09-2020-0366 |
| Published date | 17 August 2021 |
| Date | 17 August 2021 |
| Pages | 200-222 |
| Subject Matter | Strategy,International business |
| Author | Nhung Thi Hong Nguyen,Nguyen Kim-Duc,Teresa Lien Freiburghaus |
Effect of digital banking-related
customer experience on banks’
financial performance during Covid-19:
a perspective from Vietnam
Nhung Thi Hong Nguyen, Nguyen Kim-Duc and Teresa Lien Freiburghaus
Abstract
Purpose –This study aimsto investigate customer experience (CE)and its relationship with intermediate
variables to analyze the impact of digital banking (DB) on banks’ financial performance (FP) before
Covid-19and during the lockdown in Vietnam.
Design/methodology/approach –These research data are from a survey of Vietnamese customers.
The survey was deployedto a sample of 238 and 218 customers of 20 Vietnamesecommercial banks via
email in 2018Q4 and 2020Q2, respectively. FP is measured using banks’ quarterly financial statements
beforeCovid-19 and during the lockdown.
Findings –CE with DB had a significant and positive impact on FP via customer satisfaction before
Covid-19, while the other two intermediate variables (word-of-mouth [WoM] and trust) had no
considerable impact. During the lockdown, only WoM had a positive impact on FP. These findings
indicate that before Covid-19, when customers could easily interact with their bank through many
touchpoints,customer satisfaction with DB services created higherFP for the bank. However, during the
lockdown,DB became the customer’s main touchpointand WoM mediated the CE–FP relationship.
Originality/value –During the national lockdown from the beginning of the Covid-19 pandemic in
January 2020, customers in Vietnam may have had different experiences with DB when no alternate
modes of payment were available. The study uses Covid-19 as a moderator variable to offer different
viewpointsand findings related to CE with DBand its impact on FP.
Keywords Digital banking, Financial performance, Customer experience,Covid-19, Vietnam
Paper type Research paper
1. Introduction
The financial market has recently witnessed a soaring trend in the use of digital banking
(DB) (Barquin and Vinayak, 2015). According to Report: McKinsey & Company (2014),
consumers tend to use computers,smartphones and tablets to do business with their banks
rather than directly visiting a physical branch. This convenience would not be possible
without the development of the internet and mobile technologies, which are major DB
service channels (Daniel, 1999;Mols,2001;Sundarraj and Wu, 2005). The many benefits of
DB have led bank managers to prioritize investment in DB technology over that related to
conventional banking models. DB relates not only to applications but also to customer
experience (CE), internal control, professional standards andchanges in the organization of
each bank.
Most banks offer a wide range of services delivered throughtechnologies to meet the rising
expectations of consumers (Singh and Srivastava, 2018). DB has played a key role in
Nhung Thi Hong Nguyen is
based at the School of
Banking, University of
Economics Ho Chi Minh
City, Ho Chi Minh City,
Vietnam. Nguyen Kim-Duc
is based at the Department
of Valuation, School of
Economics, University of
Economics Ho Chi Minh
City, Ho Chi Minh City,
Vietnam.
Teresa Lien Freiburghaus is
based at the School of
Business, University of
Applied Sciences and Arts
Northwestern Switzerland,
Switzerland.
Received 19 September 2020
Revised 12 February 2021
1 June 2021
18 June 2021
Accepted 21 June 2021
The authors appreciate helpful
comments and suggestions
from two anonymous reviewers.
We also thank Liem Viet Ngo
and conference participants at
the 2nd Asia Conference on
Business and Economic
Studies (2019) and the SOB
International Conference
(2020) for valuable comments.
We sincerely appreciate Jason
Bednarz for his support in
language editing. This research
is funded by University of
Economics Ho Chi Minh City,
Vietnam. Any remaining errors
or omissions are solely the
responsibility of the authors.
PAGE 200 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 16 NO. 1 2022, pp. 200-222, ©Emerald Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-09-2020-0366
providing financial services to consumers (Cortin
˜as et al.,2010) and improving banks’
marketing strategies (Dootson et al.,2016). Regarding management overheads, banks can
reduce operating costs by at least 20% by changing the way they organize and provide
services (Olanrewaju, 2014). Moreover, increasing DB channels can help banks reduce the
number of branches necessary for their operations because of the decrease in face-to-face
transactions. Olanrewaju (2014) shows that a bank’s income can be boosted by 30% when
it introduces DB platforms. However, from a marketing perspective, DB transformation is
only effective if better CE with DB results.
CE has become increasingly essential for service organizations as a source of competitive
advantage (Teixeira et al.,2012). It is even more important for banks, as their monetary and
financial success depends on customers’ perceived service quality and CE (Andaleeb
et al.,2016
). Therefore, the positive influence of DB experience on a bank’s value and
financial performance (FP) has recently attracted increasing research attention in
developed countries (Patsiotis et al.,2012;Garg et al.,2014;Keisidou et al.,2013;Mbama
and Ezepue, 2018).
However, the novel coronavirus disease, known as Covid-19 and related social distancing
and self-quarantine measures have significantly affected the relation between CE and FP in
the use of digital payment tools. First, Covid-19 is considered a global phenomenon that
directly affects banks’ FP. More importantly, large-scale outbreaks may increase the
possibility of a collapse of the banking industry in a developing country (Lagoarde-Segot
and Leoni, 2013). On the contrary, the CE–FP relationship can be impacted by Covid-19
based on the motivation of consumers as service users and banks as service providers.
Indeed, “banks [...] by their nature are vulnerable in times of economic downturns because
of the likelihood of nonperforming loans and the possibility in extreme cases of bank runs”
(Goodell, 2020, p. 2). As the eventual scale of the pandemic is still unknown, DB could play
a significant role in improving a bank’s FP during an economic recession. Specifically, as
customers remain concerned about handling cash and interacting with large crowds in
banks and shopping malls, therehas been a shift in favor of digital payments (Jones, 2020).
DB plays a paramount role in the delivery and execution of online services because digital
payment is preferred to banknotes and coins, which may be suspected of carrying and
transmitting the virus (Gardner, 2020;Samantha, 2020). Moreover, banks are motivated to
update and upgrade their DB systems because of customer demands and DB has been
encouraged by governments; indeed, governments have used payment apps and digital
payment modes to provide the necessary aid to the individual and business customers
directly affected (Pandeyet al.,2020).
While previous studies have used cross-sectional data to test the impact of CE with DB on
FP, this study investigates the roleof Covid-19 in the CE–FP relationshipby applying pooled
cross-sectional data at different points in time, namely, before and during Covid-19. The
pandemic is offering banks the opportunity to challenge themselves and they have to make
efforts to improve the quality of their DB systems because DB is the best channel for
consumers in a pandemic situation. By contrast, consumers also have the opportunity to
fully experience the DB services provided by banks. The better the quality of the DB
service, the higher is the CE level. This may not have been true before the pandemic when
customers had many options for making transactions.
Vietnam provides a unique research setting to investigate the role of the pandemic in the
CE–FP relationship in relation to DB. First, Vietnam is an emerging market in which DB is
increasingly common and highly advantageous because of the large populations living in
remote areas. The percentage of mobile payments in Vietnam increased from 37% in 2018
to 61% in 2019, the highest increase in Southeast Asia. As of January2020, Vietnam, which
has a population of 96 million, had 145.8 million mobile subscribers, of which 93% use
smartphones. There are also 68 million household internet subscribers and 65 million
people use social networks (Kemp, 2020). However, even with that infrastructure in place,
VOL. 16 NO. 1 2022 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 201
To continue reading
Request your trial