Service quality and customer satisfaction: Empirical evidence from the Nepalese banking industry

This study aims to explore the application of the SERVQUAL (service quality) model in Nepal’s banking sector, focusing on how its five measurements – tangibility, reliability, responsiveness, assurance, and empathy – affect customer satisfaction. A descriptive research design was employed, utilizing a stratified random sample of 384 customers from various banks in Nepal. Data were gathered through a structured questionnaire based on the SERVQUAL model, complemented by semi-structured interviews to capture both quantitative and qualitative insights into service quality measurements and overall satisfaction. The result of the study is that customer satisfaction was significantly high, with 77.4% of respondents indicating satisfaction with banking services, particularly appreciating the clarity of forms at 82.6%. The regression analysis revealed that tangibility, reliability, and responsiveness were the main factors influencing customer satisfaction, with coefficients of 0.335, 0.204, and 0.281, respectively. The findings indicate that tangibility, reliability, and responsiveness are the most influential factors affecting customer satisfaction in Nepalese banks, with significant positive relationships confirmed through regression analysis. While assurance and empathy also contribute positively, their impact is comparatively weaker, highlighting the critical areas for banks to focus on to enrich overall customer satisfaction and commitment. The study concluded that customer satisfaction is generally positive, especially in areas like the ease of understanding processes and online services. Significant opportunities for improvement exist in ATM services and overall banking operations. This underscores the necessity for banks to adapt and enhance their offerings to cultivate greater customer loyalty and retention in a competitive market.