A comparison of service quality in the banking industry

Purpose To analyze and compare service quality in the commercial banking sector of a small island economy – Cyprus and to investigate the relationship between overall bank customer satisfaction in the Turkish‐ and Greek‐speaking areas of Cyprus and positive word‐of‐mouth about their banks. Design/methodology/approach A total of 268 commercial bank customers responded to a Greek and Turkish translated version of the SERVQUAL instrument. After descriptive and factor analysis, multivariate regression was used to estimate the impact of service quality dimensions on overall customer satisfaction and word of mouth. Findings The responsiveness dimension failed to load and thus the SERVQUAL scale proved to be of a four‐dimensional structure in this study. Research results revealed that the expectations of bank customers in both areas were not met and that the largest gap was found in the empathy dimension. The assurance dimension had the largest influence on customer satisfaction and overall satisfaction of bank customers in both areas of Cyprus had a positive effect on their word‐of‐mouth. Research limitations/implications There were some difficulties in conducting interviews in the Greek‐speaking area of Cyprus and this may have limited the potential sample size. Future research could test the generalizability of findings in other small island economies and look at how the service is delivered by frontline employees. Practical implications Helps banks in both areas of Cyprus to redefine their corporate image to one that is customer‐focused and driven by service quality. Findings are also significant for the Turkish‐speaking area which is not at the same level of economic development as its neighbours in the south and needs to restructure its banking system before accession to the EU. Originality/value This study investigates service quality in a small island economy. There is disparity in the banking sector of a divided Cyprus, where banks in the South have undergone significant restructuring before EU accession and banks in the North are affected by the economic crisis and need to restructure if they want to join the EU.