Service Quality and Its Impact on Customer Satisfaction in Retail Banks of Malaysia: An Empirical Study

Abstract

In an increasingly competitive, post-consumption business environment, service quality has become a primary determinant of organizational success and survival, particularly for financial institutions that continuously introduce new products and services to retain customers. This study examined the impact of service quality on customer satisfaction in Malaysian retail banks using the five dimensions of the SERVQUAL model, namely tangibility, reliability, responsiveness, assurance, and empathy. A structured, web-based self-administered questionnaire employing a five-point Likert scale was distributed to 250 randomly targeted retail banking customers in the Klang Valley on a convenience sampling basis, yielding 200 usable responses (an 80% response rate). Data were analysed using SPSS AMOS version 25, including factor analysis, reliability testing, Pearson correlation, and multiple linear regression. The questionnaire demonstrated strong validity (KMO = 0.946, Bartlett's test significant at p < 0.001) and reliability (overall Cronbach's alpha = 0.962). All five SERVQUAL dimensions were found to have a statistically significant positive relationship with customer satisfaction at the 0.01 level, with correlation coefficients ranging from 0.274 (responsiveness) to 0.345 (reliability and empathy). Regression analysis indicated that the five dimensions jointly explained 15.9% of the variance in customer satisfaction (R = 0.399, R² = 0.159, adjusted R² = 0.138, F significant at p = 0.001). All five hypotheses were accepted. The findings offer Malaysian retail banks empirical guidance for prioritizing service quality investments, particularly in reliability and empathy, to strengthen customer satisfaction and long-term customer retention.