Many studies have analyzed the determinants of customer choice of a bank from a bank’s perspective and also from a customer perspective. But the most emphasized is the customer perspective, as business/service is all about satisfying customers rather generating profits. The recent global emergence of banking in business industry has revolutionized the concept of business operations. The banking industry has helped every individual by strengthening his/her financial value, providing the best financial services. Even, in Pakistan, people are getting more well-aware of the economic scenario and based on their evaluations, they chose a bank to help them and assist them in financial services. Nowadays, banks are more customer-oriented than they were in the past. The mere reason for this is the importance of a customer and his value. To strengthen its financial system, Pakistan, went through liberalization and financial sector deregulation in 1990’s for the implementation of structural reforms agenda. From then, the sector is becoming competitive day by day, and it has becoming very important for a financial institution to know and analyze the determinants that help in increasing customer database.

 

Hafeez ur Rehman and Saima Ahmed (2008), in their study in Lahore, Pakistan, found that the four most important factors for customers, while selecting a bank were customer services, convenience, online banking facilities and overall bank environment. Even profit rates and accessibility were also considered important while bank service charges were found to be irrelevant. The purpose of the study was to help a bank in designing their future plans.

 

Safiek Mokhlis, Hayatul Safrah Salleh, and Nik Hazimah Nik Mat (2009), conducted a survey of commercial bank selection, and comparing single users with multiple bank users in Malaysia. Out of 350 questionnaires, only 281 were used which indicated that the selection factors of single and multiple bank users had differences in attractiveness of a bank, its branch locations, the ATM services provided, the financial benefits and secure feeling. They developed nine major factors after running 29 bank attributes from factor analysis approach and evaluated nine most important selection factors for their research. Another survey was conducted by Safiek Mokhlis (2009) in Malaysia while determining the choice criteria of retail banking customers compared to their gender, his findings revealed similar results as the previous research, emphasizing the most important nine factors that played a vital role for a customer while choosing a bank.

 

Mohammad Hanif Akhtar (2002) analyzed the x-efficiencies of commercial banks in Pakistan by studying the two components of x-efficiency, technical efficiency and allocative efficiency. He carried out the Data Envelopment Analysis (DEA), rather than the traditional financial ratio analysis. He concluded that Pakistani banks need to improve their input productivity by justifying their operational overheads. The banks need to be consistent while utilizing inputs (deposits and capital) and outputs (loans and advances). But he clearly mentioned that the Private banks are emerging efficient on both components compared to the public and foreign banks operating in Pakistan, the most important reason being the extensive branch network, private banks have and their distribution power.

 

Studies have shown that service quality and branch network along with customer services are the most important factors for the western people while selecting a bank and as globalization has made world a village, so as Pakistani customer tend to be more attracted toward service satisfaction. Ahmad Jamal and Kamal Naser (2003) cited customer satisfaction as customer selection factor and studied service quality and its two components, core and relational. He compared the effect of service quality (core and relational) and tangible aspects of service environment with customer satisfaction in Pakistan. He mentioned customer satisfaction as an important theoretical as well as practical issue for most marketers. He concluded that core service quality was as similar as the first expression and relational service quality was to make sure that the existing customer is well taken care of and that there was no significant relation between customer satisfaction and tangible aspects of service environment. He was the one who clearly mentioned that there exist a relation in banking industries of west and east irrespective of educational levels, culture, and economies.

 

Banks nowadays are more like brand names, and to evaluate consumer preference of a specific brand, Russell G. Wahlers (2001) conducted a quantitative study on the effect of choice alternatives and product characteristics on evaluation strategy for selecting that specific preference. He examined six different evaluation process models to differently evaluate the strategy involved. He concluded that consumers are highly adaptive to their task environment.

 

As banks are considered to be brands than the element of loyalty should hold existence because brands are all about loyal customers. Alina Filip and Laurentiu-Dan Anghel (2009) did a quantitative study on 1010 respondents, in Romania and cited customer loyalty as another perspective of customer selection of a bank because loyal customers bring more customers through their references and recommendations. They analyzed the effects on customer loyalty from a high level of satisfaction with products and services, their quality, contractual bonds, friendship relationship with certain bank’s employees, habit and other factors. They concluded that loyalty or dis-loyalty in banking customer behavior can emerge from the interaction of employees and customers, the marketing campaigns and the customer services offered by the bank to the new and existing customers.

 

Safiek Mokhlis (2009) also researched on determinants of Malaysian’s choice criteria of retail banking and comparing it with gender-based choice decisions. His methodology was quantitative and he analyzed 368 Malaysian’s undergraduate’s responses. The factors he emphasized on were attractiveness, ATM service, marketing promotions, proximity, people influences and financial benefits. He advised the banking management to make different strategies for both male and female for better attraction with the customer. The reason for conducting research on undergraduates’ students was that, Malaysian financial institution had seen the would-be of these students as a new specific target market. He concluded his results, while mentioning that this research implies students, not the general consumers of banking industry, so, on the basis of psychographics and demographics being different, the criteria of choice can also vary. ‘Secure feeling’ and ‘ATM service’ were the most important factors, while selecting a bank for the students. The difference of choice criteria among males and female explains the need of understanding them as different target markets, when bankers are designing new marketing strategies.

 

Pakistanis and Indians have a lot of common interests and behavior, especially when it comes to banking industry. N. Kamakodi and Basheer Ahmed. Khan (2008) studied 292 clients for determining the factors which influenced them in selection decision for the bank. They lacked factor analysis, so they had 50 bank attributes as their independent variable but their research did gave extensive result and showed that there are ten most important factors, when it to comes to bank selection for Indian customers including safety of funds ranked as the most important, and secured ATMs, their availability, reputation and etc. following it. They concluded that for a bank to excel, it should emphasize its future strategies on the top most ten important factors described in their research.

 

Goddard, John A., Molyneux, Philip. And John O. S (2004) emphasized that for banks to grow in future should make better customer services and customer relations to satisfy customers as much as possible. They studied previous literature from European Union countries during mid-1990s. They mentioned that banks that have higher capital-assets are relatively growing slow as compared to those who have less capital-asset and bank level including with x-efficiency helps a bank to achieve higher profits but customer satisfaction was the main point in their discussion and analysis as bank is a service industry and the main task is to tender the customer as much as it is possible. People do get attracted to bigger banks as compared to small banks but it also depends on the purpose of their choice.

 

Berger, Allen N (2003) conducted a study on economic effects of technological progress from the banking industry by analyzing the effects on technological progress from bank size, its geographic location and expansion, and consolidation process. He suggested banks which want to grow should invest on new technology as technology at the back will have effect on technology on front, and that will nourish the customer in front of the management, resulting better customer satisfaction. Technology has been the benchmark for every industry because of its revolutionary less time consuming processes and accurate results with efficiency and effectiveness. So as the case in banking industry, as the technology has advanced, new services and methods of banking are emerging. The bank that offers the latest technology in its customer services attracts a lot of customers. In his research he has mentioned the size of customer database being increased with the introduction of new technology. In Pakistan, when Standard Chartered Bank for the first time introduced Cash Deposit machines along with the regular ATM machines, they captured a lot of market, due to the convenience and ease of accessibility of the service because customer needs convenience and ease.

 

A review of literature indicated that studies carried out related to bank selection from customers’ perspective have been carried out in Pakistan or developing countries. These studies have contributed to the main attributes of customer choice of a bank and their findings will help in designing the framework for the current research. Studies have shown that the most important factors for the customer selection criteria are ATM services, safety of funds, profit rates and proximity of the bank. Pakistan being a developing country has a competitive banking industry and financial institutions.