Home Business & Industry Empathy Is Crucial for Banking Service Quality, Even with Digital Advancements – According to New Study

Empathy Is Crucial for Banking Service Quality, Even with Digital Advancements – According to New Study

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A recent study has shed light on the importance of empathy in the banking sector, particularly in Kerala, as it transitions towards a digital economy. The study, published in the International Journal of Religion, highlights the significance of human interaction in an era dominated by information and communication technology (ICT).

The Government of India (GOI) has been aggressively promoting ICT through initiatives like “Digital India” and schemes such as JAM (Jan Dhan, Aadhaar, Mobile). These initiatives aim to digitise the economy and improve service delivery across various sectors, including banking. In Kerala, which aspires to be a knowledge economy, these digital transformations are particularly impactful.

Despite the increasing reliance on digital tools, the study emphasises that human empathy remains a critical component of service quality in the banking sector. This is especially relevant in the housing finance segment, a national priority under the GOI’s “Housing for All” initiative​​.

The study aimed to evaluate the empathy aspect of service quality in the housing finance business of banks in Kerala. It also sought to understand the impact of ICT initiatives by the Indian and Kerala governments on banking services. The researchers collected empirical data from 600 housing loan customers of both public and private sector banks in Kerala​​.

Using the SERVQUAL model, the study focused on seven constructs to measure empathy: understanding needs, convenient location, suitable working hours, willingness to help, sincere concern, friendly approach, and handling emergency matters and situations​​.

The study found that empathy significantly influences customer satisfaction in the banking sector. Among the seven constructs, “willingness to help” was identified as the most vital factor affecting empathy, followed by “sincere concern” and “handling emergency matters and situations”​​. This indicates that customers highly value the supportive and caring attitudes of bank employees, particularly in times of need.

Interestingly, the study also revealed that despite the extensive use of ICT, customers still appreciate a human touch in their banking interactions. This aligns with previous research, which found that even in the digital era, the human factor remains crucial for customer satisfaction​​.

The findings suggest that banks need to balance their digital transformation efforts with initiatives that enhance the human aspects of their services. Training programmes that focus on developing empathy among bank staff can significantly improve service quality. Banks should also ensure that their employees are well-equipped to handle emergency situations and extend suitable working hours to better serve their customers​​.

Moreover, while digital tools like e-CRM (electronic customer relationship management) can enhance efficiency and service delivery, they should not replace personal interactions altogether. Instead, digital tools should be used to complement and enhance human interactions​​.

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