2018 Innovation Service Baking

International Journal of Bank Marketing
Service innovation, service delivery and customer satisfaction and loyalty in the
banking sector of Ghana
Kong YuSheng, Masud Ibrahim,
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The banking
Service innovation, service sector of
delivery and customer Ghana
satisfaction and loyalty in the

banking sector of Ghana
Kong YuSheng and Masud Ibrahim Received 8 June 2018
Revised 11 August 2018
School of Finance and Economics, Jiangsu University, Zhenjiang, China
11 October 2018
Accepted 5 November 2018
Abstract
Purpose – The concept of innovation is gaining ground steadily in the context of an increasingly competitive
and highly volatile banking sector. The purpose of this paper is to find out the role of service innovation (SI) in
the relationship between service delivery (SERVD), customer satisfaction (CSAT) and loyalty in the banking
sector of Ghana.
Design/methodology/approach – Drawing from banking and marketing literature, a conceptual
framework was developed and tested using data from 450 sampled customers of commercial banks in Ghana.
The data were analyzed using partial least squares structural equation modeling.
Findings – The findings indicate that SI has direct influence on SERVD and CSAT. Again the findings
revealed a positive relationship between SERVD, CSAT and bank customer loyalty.
Research limitations/implications – This study offers theoretical support for the adoption of innovative
techniques in service provision and delivery.
Originality/value – This paper provides an initial study into innovation management in financial services
context in an emerging economy.
Keywords Innovation, Ghana, Service innovation, Customer satisfaction, Service delivery,
Customer loyalty
Paper type Research paper
Introduction
The recent ever-increasing intensity of competition in world markets, speed of globalization
and rapid development of technology has led innovation to be taken into account as an
inevitable necessity for any firm’s survival. The increasing attention of firms to innovate
stems from the critical role innovation plays in acquiring the stable competitive advantage
in the ever-increasing intensity of competitive business environment (Gürol and Atsan,
2006; Liao et al., 2010). These competitive pressures cause organizations to continuously
search for new product offerings and enhance existing ones (Shqipe et al., 2013).
Businesses operate in dynamic environments “where customers’ tastes, product-service
technologies, and competitive weapons often change unpredictability” (Miller, 1983, p. 775).
Therefore, for businesses to be successful and to obtain stability in performance, they
should not only seek for new opportunities, but also be highly innovative (Tajeddini et al.,
2006). According to Kim and Mauborgne (2005), the most feasible solution to survival in
connected and competitive markets is innovation. Innovation is increasingly considered to
be one of the key drivers of the long-term success of a firm in today’s competitive markets
(Greco et al., 2015; Baker and Sinkula, 2002). The reason being that companies with the
capacity to innovate will be able to respond to environmental challenges faster and better
than non-innovative companies (Cingöz and Akdogan, 2013; Brown and Eisenhard, 1995;
Miles and Snow, 1978).
The concept of innovation is gaining ground steadily in the context of an increasingly
competitive and highly volatile banking sector which is subject to the pressures of rapidly International Journal of Bank
Marketing
changing customer needs and desires. Rogers (2003) defined innovation as an idea, practice © Emerald Publishing Limited
0265-2323
or object that is perceived as new by an individual or other unit of adoption. Innovation sets DOI 10.1108/IJBM-06-2018-0142
IJBM successful businesses apart from the competition. Financial innovation is crucial as the
retail banking sector is a significant part of the overall economy and, therefore, needs to
continually evolve to meet customers changing needs (Mullan et al., 2017).
Innovation plays a significant role in the highly competitive banking industry. Despite
this industry volatility in the banking sector, banks have a responsibility of maximizing
profitability and shareholders’ wealth. The only way for banks to achieve this desired result
is through innovation. In the words of Prahalad and Hamel (1990), innovation entails doing
something different than competitors and beating competitors’ offerings.
In today’s highly technological world, banks are not left out on the technological
adoption and are currently investing in information and communication technologies (ICT)
to enhance their service delivery (SERVD) and improve efficiency in their operations.
Technology innovations have been a major force driving changes within distribution in
banking sector. This could be traced to innovative products including the introduction of
ATMs, telephone banking, internet banking and mobile banking (Ameme and Wireko, 2016;
Devlin, 1995; Hoehle et al., 2012).
With the introduction of innovation in the banking service, customers no longer need to
be physically present at the banking halls to transact banking services. All these can be
done within the innovative platforms created by the banks to enhance the delivery of these
banking services. It is like taking banking to the people whenever and wherever at their
convenience. The introduction of these new electronic channels has provided an alternative
means of providing banking services more conveniently (Hway-Boon and Ming Yu, 2003).
Despite the importance of new technology utilization in the improvement of business
processes, these innovative solutions come with their own attendant problems. As Domeher
et al. (2015) explained, “While the vital importance of innovation in today’s competitive
climate has been widely proclaimed, innovation is not without its challenges” (p. 89). Some of
these challenges include periodic system failures, network problems, malfunctioning ATMs,
etc., which results in customer churn, dissatisfaction and customer disloyalty. It is, therefore,
imperative for banks to identify relevant innovation needed to deliver effective service to
customers and also seek ways and strategies by which these innovations can be managed
effectively to achieve the desired goals and objectives.
The banking industry in Ghana has witnessed significant changes over the past two
decades following the liberalization of the financial services sector. The intense competitive
pressures in the banking industry have raised the competitive landscape to unimaginable
heights. The number of banks operating in Ghana as at January 2018 stood at 34
(Bank of Ghana, 2018). With all banks set on expanding their branch networks, the
competitive landscape is becoming more alarming every passing moment.
The competition in the industry has assumed such an alarming dimension that the very
survival of individual banks has come under serious threat. What is more, with growing
customer acquisition costs, increased customer expectations and high rate of customer
defection, banks have realized the need to utilize technology in a way of adopting innovative
banking solutions first as a response to increasing competitive pressure and second to
enhance their SERVD by reducing the cost of operations and also developing stronger
relationship with customers in order to ensure customer loyalty (CLTY) and retention.
Innovation is very important to the survival of banks in Ghana, without which could
result in poor performance and collapse of the sector. The banking sector is very competitive
with similar products and service offerings to the same target market. Prior to the opening
up of the banking sector and reforms in the sector, there were only a handful of banks
operating in the country. Today, there are over 30 banks operating as universal banks in
Ghana as well as some rural and community banks that have led to intense competition in
the industry. The only way to succeed is to be innovative in providing better offers to the
market for their continuous survival and profitability.
Second, due to the similarity of products and service offerings in the banking sector, it is The banking
very difficult to compete on core products/service offerings. The only way to compete, sector of
therefore, is to be different from the market. Thus, individual banks must look at ways of Ghana
creating unique solutions and offer something different from the competition. A bank that
wants to survive in this competitive industry needs to look for innovative ways of
competing else, it risks being overtaken by competitors.
Third, in Ghana it is estimated that only about 30 percent of the population operate a
bank account (Bank of Ghana, 2018). The central bank’s macroeconomic and financial data
for 2017 indicates an increasing growth rate of currency outside the banking system from
15.2 percent in 2016 to 22.30 percent in 2017 (Bank of Ghana, 2018). This is a setback for the
banks in creating credit in the economy as one of their roles. The only way out is to find
innovative ways of getting the unbanked consumers to start patronizing banking and
financial services. Innovation, therefore, plays a crucial role in determining the success or
otherwise of banks in Ghana.
There have been some research studies conducted to explore the adoption of
innovation in the banking sector. However, research on innovation in financial services
has lagged behind investigation in manufacturing sectors (Drew, 1995). Nguyen et al.
(2014) investigated customer satisfaction (CSAT) toward bank payment card service
quality in China. Hilal (2015) investigated the technological transition of banks and ICT
and its impact on the banking sector in Lebanon. Uzkurt et al. (2013) examined the
mediating role of innovation on the relationship between organizational culture and firm
performance in Turkey. Berraies and Hamouda (2018) examined the effect of customer
empowerment on financial performance, and the role of innovation and CSAT as
mediating variables in Tunisia.
In Ghana, Baba (2012) investigated different types of innovation in the banking sector in
Ghana to ascertain the types of innovation needed to achieve performance for the adopting
banks. Angko (2013) investigated the effect of innovation in bank payment systems and
related services among commercial banks in Ghana; Domeher et al. (2015) explored the
adoption of financial innovation in the Ghanaian banking industry; Ameme and Wireko
(2016) also explored the impact of technological innovations on customers in the banking
industry in Ghana. There appears, however, to be inadequate empirical research on
innovation adoption in the banking sector from developing economies like Ghana. This
study, therefore, aims at contributing to the literature on innovation adoption in the banking
sector in Ghana.
This paper, therefore, sought to find out the role of service innovation (SI) in the
relationship between SERVD and CSAT and loyalty in the banking sector of Ghana. From
the foregoing, these objectives were explored:
(1) examine the effect of SERVD on CSAT and loyalty in the banking sector in Ghana; and
(2) assess the effect of SI on SERVD and CSAT and loyalty in the banking sector in Ghana.
Review of related literature

The concept of innovation
According to Schumpeter (1934), innovation is the action of innovating and creating
processes which promote the disruption of the economic system while allowing the
emergence of novelties. Drucker (1988) also viewed innovation in terms of a determined and
dedicated work to realize organizational change in economic or social potential. The author
emphasized that innovation is a process of developing organizational growth. Growth can
occur in a number of ways, such as better service quality and shorter lead times in
non-profit organizations, cost reduction, cost avoidance and increased turnover in profit-
focused organizations. According to Al-Otaibi and Al-Zahrani (2009), innovation refers to
IJBM the process of developing and releasing a new or essentially altered version of a product or
service into the market to meet customers’ needs and wants. Also, Crossan and Apaydin
(2010) defined innovation as the production or adoption, assimilation and exploitation of
value added novelty in economic social spheres; renewal and enlargement of products,
services and markets; development of new methods of production, and establishment of new
management systems (Zainal Abidin et al., 2011).
Innovation has also been defined as anything such as technical (product and service) or
administrative (process) that assists firms to identify the needs and wants of customers or
potential customers and satisfies them at a profit (Škerlavaj et al., 2010; Gopalakrishnan and
Damanpour, 1997). According to Hurley and Hult (1998), innovation is an aspect of a firm’s
philosophy and openness toward new ideas. They introduced in their model the capacity to
innovate, which is defined as “the ability of the organization to adopt or implement new
ideas, processes or products successfully.” Lundvall (1985) argued that innovation comes
from accumulated knowledge and experience, and can be an incremental technical change
or an upsurge in technical opportunities (Prifti and Alimehmeti, 2017).
In this paper, we define innovation as the search for and the discovery, development,
improvement and adoption of new processes, new products and new organizational
structures and procedures.
Dimensions of innovation
Innovation has been classified under four main dimensions which are: product/service
innovation, process innovation, market innovation and organizational innovation
(Rajapathirana and Hui, 2018; Karabulut, 2015). These are discussed next.
Product innovation
Product innovation is the introduction of new product or service which is significantly
improved with respect to features, performance and quality. Product innovation is the input
process adopted to improve the production of a standardized product (Abernathy and
Utterback, 1978) and is defined as the one used in different sectors (Pavitt, 1984). Despite the
importance of innovation, not all organizations are capable of adopting or utilizing it.
The European Union estimates that only about 53 percent of companies have been able to
implement innovation successfully from 2008 to 2010 (European Union, 2013 in Ganzer et al.,
2017). OECD (2005) mentioned that the product innovation involves a significant
improvement in technical specification, features, component and material, inculcated
software, user friendliness, portability, durability and other significant characteristics.
This means that changes in the quality, features and performance of a product is called
product innovation (Atuahene-Gima, 2001).
Atuahene-Gima (2001) examined product innovation process among four groups of firms
on six critical antecedents of new product performance. These are timing of market entry,
product quality, marketing synergy, proficiency of market launch, top management support
for innovation and external environment (Atuahene-Gima, 1996; Zahra, 1993).
Timing of market entry refers to the firm’s strategic choice as to whether to be “first to
market,” “early follower,” “late follower” or “late entrant” with respect to new product
introductions (Ansoff and Stewart, 1967). Product quality on the other hand refers to the
perceived superiority of the new product over the competition and captures the competitive
advantage of the new product in terms of cost saving, quality and performance. Marketing
synergy also refers to the extent to which the resources and skills required for a new
product development project fit the current marketing resources and skills of the firm
(Atuahene-Gima, 2001). Proficiency of market launch on the other hand captures the
effectiveness of the firm in commercializing its new products. It represents the firm’s effort
at getting customers to adopt its new product. Finally, management support for innovation
refers to the degree of support that top managers give to product innovation activities in the The banking
firm (Atuahene-Gima, 2001). sector of
These constructs represent an aspect of innovativeness of firms with regards to new Ghana
product introduction. Firms’ timing of new product introductions not only matches their
market as well as competitive environments, but also their internal capabilities to deal
with market and technological uncertainties associated with their entry strategies
(Atuahene-Gima, 2001).
Banks can utilize technology to introduce and offer new products/services to customers.
Some of these innovative solutions include mobile banking, electronic banking and mobile
commerce. This would also serve as a way of attracting the unbanked populace to patronize
the banking products/services. It would also attract the confident, busy and younger
professional individuals that the banks need for their survival and growth. These new
innovative banking products are far more convenient than the conventional face-to‐face help
provided by bank tellers, usually only after a long queue in the banking halls ( Johne, 1999).
Process innovation
Process innovation is the introduction of new and improved way of production or method
of SERVD by an enterprise that includes significant changes in techniques, equipment,
tool and machine, etc. (OECD, 2005). This is how organizations improve the process by
which they create superior customer value for clients. Process innovation often entails
small incremental improvements coming from the people in the trenches, not from the
managers. According to Oslo Manual (2005), simple organizational and managerial
changes shall not be included in the process innovation. However, the European Union
(2013) stated that the outcome of process innovation should be significant with respect to
the level of output as the increasing quality of product or decreasing cost of production or
distribution. Process innovation organization is any organization that implements a new
or significant improvement process of production during the period of organizational
review (OECD, 2005).
To achieve productivity in the banking sector, banks need to constantly search for ways
of reducing or lowering operational costs. This could be done by using such innovative
technologies like ATM, internet banking, mobile banking as well as personal banking which
have the ability to reduce operational cost over time and also increase service quality
through process innovation. Such cost may, or may not, be passed on to customers in the
form of lower prices ( Johne, 1999).
Organizational innovation
Organizational innovation refers to the degree of adoption of change in the organization. As
Rajapathirana and Hui (2018) explained, organizational innovation is the “implementation of
a new organisational method in the firm’s business practice, organisation or external
relations” (p. 46). Organizational innovation can enhance a firm’s performance by reducing
administrative and transaction cost, but its intended purpose is to improve the workplace
satisfaction. Gopalakrishnan and Damanpour (1997) in Zainal Abidin et al. (2011) explained
organizational innovation as a process of organizational change that directly affects the
technical and social systems of an organization. This stage consists of two phases: initiation
and implementation. Initiation stage is characterized by three sub-stages: awareness of
innovation, formation of attitude toward it and evaluation from organizational standpoint.
The implementation stage also includes two sub-stages: trial implementation and sustained
implementation (Gopalakrishnan and Damanpour, 1997).
Considerable amount of research has indicated that organizational innovation is
positively associated with innovation performance (Chiang and Hung, 2010; Reed et al.,
2012), and helps to better understand the types of capabilities that can result in a
IJBM competitive advantage or generate economic rent (Camisón and Villar-López, 2012).
Yavarzadeh et al. (2015) also investigated the relationship between organizational
innovation and performance in tax affair general administration of Iran. Their results show
that innovation (product, process, administrative/organizational) has a positive and
significant effect on organizational performance in terms of financial, growth, customer and
internal process (Rajapathirana and Hui, 2018).
Market innovation
According to Johne (1999), market innovation deals with the market mix and market
selection in order to meet a customer’s buying preference. Marketing innovation generates
significant improvements in some of the marketing elements, including product, price,

promotion and distribution (Ganzer et al., 2017). It may be based on product differentiation,
promotion, distribution, market or costs, in this case, the price (Higgins, 1995). Thus,
marketing innovation addresses the implementation of new methods, with significant
changes in product development, packaging, promotion, positioning and even in pricing.
Marketing innovation also seeks to address the consumers’ needs, by the way new markets
are opening, the product repositioning of a company within the market, aiming to increase
sales (OECD, 2005).
Polder et al. (2010) believed that marketing innovation is a non-technological innovation that
firms adopt to increase their efficiency. In his opinion, Karabulut (2015) stated that marketing
innovation can be easier and cheaper compared to product innovation for a firm. In the case of
banks, this could be true since they are service-oriented businesses and deal more with services
than tangible products. Continual market innovation needs to be done by a firm because state-
of-the-art marketing tools, particularly through the internet, make it possible for other
competitors to reach potential customers across the globe at light speed ( Johne, 1999).
Rodriguez Cano et al. (2004) also asserted that market innovation plays a crucial role in
fulfilling market needs and responding to market opportunities. In this respect, any market
innovation has to be directed at meeting customers’ demand and satisfaction (Appiah-Adu and
Satyendra, 1998). Banks, therefore, need to focus on exploring innovative ways of utilizing their
marketing activities to achieve growth and increased market performance.
Service innovation
There appears to be little attention to what constitutes SI. Berry et al. (2006) posited that the
definition of innovation in service organizations is more difficult than for physical products.
A majority of definitions distinguish between “product” and “process” for both service and
manufacturing industries (Tether et al., 2002). Some researchers, however, have tried to
provide definition of this term. Flikkema et al. (2010) defined SI as a multidisciplinary
process of designing, realizing and marketing combinations of existing and/or new services
and products with the final attempt to create valuable customer experiences (Flikkema et al.,
2010). Innovations in services are a mix of reproduced innovations and “small”
non-reproduced changes to solve single customers’ problems (Sunbo and Gallouj, 2000).
Toivonen and Tuominen (2006) also summed up the definition of SI as a new service or
renewal of an existing service that is put into practice and provides benefit to the
organization. They added that to be an innovation the renewal must be new not only to its
developer, but in a broader context, and it must involve some element that can be repeated
in new situations (Vos, 2010).
SI approaches
Generally, there are three main approaches to understanding SI due to the difficulty in
arriving at an agreed definition. Scholars employed at least three approaches to describe,
analyze and explain innovation in service (Flikkema et al., 2007; Flikkema, 2008; Chamberlin The banking
et al., 2010). These approaches are: assimilation approach, demarcation approach and sector of
synthesis approach (Vos, 2010; Leich et al., 2010). Ghana
The assimilation approach focuses on technological change. Innovation in services is
seen as fundamentally similar to innovation in manufacturing, that is, the production and
the use of technologically advanced artifacts (Tether, 2005 in Flikkema, 2008), and should,
therefore, be studied using the methods and constructs of manufacturing.
Second, the demarcation approach (also referred to “service-oriented approach”) views SI
as substantially different from manufacturing, and new theories, instruments and indicators
have to be designed to understand innovation in service contexts. Scholars following this
approach claim that traditional measurement of activities such as R&D staff and spending
lead to an underestimation of innovation activities in the service sector (Hanusch and Pyka,
2007 in Leich et al., 2010).
Finally, the synthesis approach (also known as “integrative approach”) recognizes that
there is a convergence between services and tangible products (Gallouj and Savona, 2009).
This means that tangible products gain importance in the service sector; intangible items on
the other hand become important feature of manufactured goods (Miles, 2007, p. 263;
Dolfsma, 2004, p. 320; Shelton, 2009, p. 38).
The latter two approaches emphasize the relevance of non-technological aspects of
innovation. In this respect, what matters most from a global economic point of view is the
impact of the use of innovative services on manufacturing productivity rather than the
impact of innovation on the production and development of those services (Chamberlin
et al., 2010). The dilemma, therefore, is “Which is the right approach?” and “Is there a
wrong or right approach?” (Vos, 2010). The assimilation approach seems relevant since
services make intensive use of technology. The distinguishing factor, however, is the fact
that service firms use these techniques in a more creative way than the manufacturing
firms. Based on these two reasoning, it is most relevant to follow the synthesis approach.
Banks can synthesize their innovations by focusing on the tangible aspect of their
products, e.g., ATM cards, debit and credit cards, and leverage on this to gain superior
market advantage in the industry.
SERVD, CSAT and loyalty

CSAT also refers to the customer’s overall evaluation of the product or service after its
consumption (Choi et al., 2013). CSAT with banking service is the extent to which customers
are satisfied with the overall service experience including SERVD, quality of service as well
as waiting time in a banking hall (Palawatta, 2015). CSAT as such is the result of customer’s
experiences in the buying process (Pham and Ahammad, 2017).
Davis and Heineke (1998) and Kanning and Bergmann (2009) stated that in the classical
“confirmation/disconfirmation” model of satisfaction, customer’s level of satisfaction is
evaluated by determining the difference between customer’s expectation of service and
customer’s perception of actual performance. Nefat et al. (2012) argued that satisfaction
can be understood at different levels. They contended that from the customer’s
perspective it can be transaction specific in respect of one service experience and
cumulative satisfaction resulting from accumulated experience with service provider
(Ibrahim and Abdallahamed, 2014).
The measurement of CSAT itself is not effective if it is not related to CLTY or any other
variables (Erjavec et al., 2016). According to Oliver (1999), CLTY is “a deeply held
commitment to rebuy or repatronize a preferred product/service consistently in the future,
thereby causing repetitive same-brand or same-brand-set purchasing, despite situational
influences and marketing efforts having the potential to cause switching behaviour” (p. 34).
Loyalty is perceived as a consumer’s response to a company’s management strategy and,
IJBM therefore, described as an outcome (Caruana, 2004). Loyalty is an indicator of customers’
willingness and determination to remain with a service provider and keep a long
relationship with the company (Nimako and Mensah, 2013). As a result, one of the major
goals of developing effective waiting time strategies by service firms is to achieve
customers’ positive service quality perception of service firms, and influence their loyalty to
service providers (Lin et al., 2015; Palawatta, 2015). Bank customers remain loyal to their
service providers when they perceive satisfaction with their service experiences. On the
other hand, unsatisfied customers would become disloyal and consider other banks that
could provide them with their level of satisfaction.
Relationship between SI, SERVD and CSAT and loyalty

The relationship between innovation and CSAT has received little empirical evidence in
the developing economy banking service context (Ameme and Wireko, 2016; Nguyen et al.,
2014; Musara and Fatoki, 2010). Ameme and Wireko (2016) found a significant
relationship between CSAT and technological innovations in the Ghanaian banking
industry. However, their study also revealed that the costs associated with technological
innovations in banking sector have increased transactions costs to the disadvantages of
customers. Again, a study by Nguyen et al. (2014) found that the application of technology
to banking service is a good way of enhancing SERVD. Musara and Fatoki (2010) also
argued that technological innovations play a significant role in improving the efficiency of
the banking sector as well as reducing the costs of banking transactions for customers
(Ameme and Wireko, 2016). Hilal (2015) asserted that innovation and the introduction of
new technologies are privileged means for improving banks productivity. Angko (2013)
concluded that one of the benefits of electronic innovations in banking is cost saving to
both banks and customers. This suggests that banks need to ensure innovative products
and services that are appropriately priced to attract and provide satisfaction to customers.
Mahmoud et al. (2018) explored the relationships between SI, customer value creation and
CSAT in the telecommunication sector in Ghana. Their findings revealed that a service
firm’s ability to achieve CSAT is dependent on how the firm harnesses and deploys its
SI activities. Additionally, their study showed that customer value creation mediates the
relationship between SI and CSAT. Thus, SI must create value for customers in order to
enhance CSAT.
Conceptual framework
Based on the review of existing literature, this study developed a conceptual framework
designed to help understand the study as shown in Figure 1. This study focuses on the
extent to which SI improves SERVD which also influences CSAT and then CLTY in the
context of banking service.
Hypothesis development
Based on the research model developed, the study sought to test six hypotheses for the main
proposition that:
H1. SI will have significant positive direct effect on SERVD.
H2. SI will have significant positive effect on bank customers’ satisfaction.
H3. SERVD will have significantly positive effect on bank customers’ satisfaction.
H4. SI will have significant positive direct effect on CLTY.
H5. CSAT will have significant and positive direct effect on bank CLTY.
H6. SERVD will have significantly positive direct effect on bank CLTY.
The banking
Service
innovation (SI) sector of
H4+ Ghana
H2+
Customer
Customer loyalty
H1+ Satisfaction (CSAT) H5+ (CLTY)
H3+ H6+ Figure 1.

Conceptual framework
Service Delivery and hypotheses
(SERVD) for the study
Methodology
The focus of this study is to establish a relationship between SI, CSAT, SERVD and CLTY
in the banking sector of Ghana. Bank customers constituted the study population.
A convenient sampling method was used to select the bank customers. This was done
by randomly selecting respondents who operated bank accounts. In total, 600 respondents
were selected, however, 450 responses were found to be useable after the initial screening
and data cleaning.
A Likert scale that ranged from 1 ¼ strongly disagree to 5 ¼ strongly agree was used.
The questions were adapted from the researchers who either used the questions in similar
studies (see Table I).
The questionnaire was in three sections. The first (Section A) part measured the
demographic characteristics of the respondents, the second (Section B) and the third (Section
C) measured the other constructs, i.e., the independent variables (CSAT, SERVD and CLTY)
and dependent variable (SI).
The data collected was analyzed with the help of SPSS version 22 and SmartPLS 3.2.4.
The data were coded and screened for outliers or any other variation in the data set.
Descriptive analysis was used for demographic variables and hypotheses were tested using
structural equation modeling.
Validations were performed through content and construct validations. Confirmatory
factor analysis was also used to purify the measures, assess the unidimensionality of the
scale items and assess discriminant validity among the constructs.
Demographics characteristics of respondents

Some demographic variables were collected in this study: gender, age, level of education,
type of accounts and average income per year, and these results are summarized in Table II.
In terms of gender, 63.6 percent of the respondents were males and 36.4 percent were
females. In terms of age, 43.3 percent of the respondents were less than 30 years; 30.2 percent
Constructs Label Cronbach’s α No. of items Source
Service innovation SI 0.908 4 Mahmoud et al. (2018)

Service delivery SERVD 0.884 3 Ibrahim and Abdallahamed (2014) Table I.
Customer satisfaction CSAT 0.870 3 Nguyen et al. (2014), Nefat et al. (2012) Constructs and
Customer loyalty CLTY 0.835 3 Oliver (1999) measurement items
IJBM Variable Category Frequency %
Gender Male 286 63.6

Female 164 36.4
Age (years) Less than 30 195 43.3
30–35 136 30.2
36–45 91 20.2
46+ 28 6.2
Level of education Senior high/vocational 60 13.3
Diploma level 118 26.2
Tertiary 214 47.6
Post-graduate degree 58 12.9
Type of account Savings account 351 78.2

Current account 98 21.8
Average income earned (monthly) Below GHC 2,250 284 63.2
Table II. GHC 2,250 and above 110 24.4
Demographics No monthly income 55.4 12.3
of respondents Notes: n ¼ 450. GHC 1 ¼ $0.2 (currency exchanger, July 24, 2018)
were between 30 and 35 years; 20.2 percent were between the ages of 36 and 45 years while
6.3 percent were 46 years and above. In terms of education, about 13.3 percent of them had
lower than senior high/vocational levels of education, 26.2 percent had diploma level
education; 47.6 percent had tertiary degree; and 12.9 percent had post-graduate degree level of
education. About 63.2 percent of the respondents earned a monthly income below GHC 2,250;
24.4 percent of the respondents earned monthly income above GHC 2,250, while the rest
(12.3 percent) were non-income earners. Also, 78.2 percent of the respondents operated savings
accounts, while 21.8 percent operated current accounts (see Table II).
Measurement model reliability and validity

Construct reliability measures the extent of internal consistency of measures used, and it is
assessed through the item factor loadings with acceptable value of 0.70 and through
Cronbach’s α with the acceptable level of 0.7 (Ringle et al., 2015; Hair et al., 2011, p. 144).
From Table III, all of the constructs have item loadings higher than the recommended 0.70.
Moreover, in Table III, all the variables returned Cronbach’s αs above 0.70, indicating
that these multiple measures are highly reliable for the measurement of each construct.
FL VIF CA CR AVE
SI 1 0.865 2.557 0.908 0.935 0.784

SI 2 0.874
SI 3 0.904
SI 4 0.896
SERVD1 0.906 2.744 0.884 0.928 0.812
SERVD 2 0.868
SERVD 3 0.929
CSAT 1 0.901 2.565 0.870 0.921 0.794
CSAT 2 0.868
CSAT 3 0.908
CLTY 1 0.901 2.409 0.835 0.901 0.753
Table III.
Item loading, CLTY 2 0.908
construct CLTY 3 0.901
reliability and Notes: FL, item loadings; SI, service innovation; SERVD, service delivery; CSAT, customer satisfaction;
discriminant validity CLTY, customer loyalty; AVE, average variance extracted; CR, composite reliability; CA, Cronbach’s α
Construct validity assesses the degree to which a measurement represents and logically The banking
connects the observed phenomenon to the construct through the fundamental theory sector of
(Fornell and Larcker, 1981). It is assessed through convergent validity and discriminant Ghana
validity (Ringle et al., 2015). Convergent validity was considered adequate since the average
variance extracted (AVE) and composite reliability (CR) satisfied the minimum of 0.50 and
0.70, respectively (Fornell and Larcker, 1981; Ringle et al., 2015).
Results and findings

Results of structural model
The structural model was assessed through the regression weights, t-values and p-values
for the significance of t-statistics (Chin, 2010; Ringle et al., 2015). The results of structural
model for testing the research hypotheses are presented in Table IV.
The results in Table IV show that all the six hypotheses proposed in this study are
supported. First, H1 shows a direct effect of SI on SERVD (β ¼ 0.0663, t ¼ 45.84, p o0.000).
The β-value 0.0663 indicates that SI influences the dependent variable SERVD by about
7 percent. The t-value (t ¼ 45.84) and p-value (p o0.000) show that there is a positive and
direct relationship between SI and SERVD.
The second hypothesis, the effect of SI on CSAT, was also supported
(β ¼ 1.191, t ¼ 45.06, p o0.000). The β-value 1.191 indicates that SI influences the
dependent variable CSAT by about 119 percent. This means that a 1 percent increase in SI
would result in 119 percent improvement in CSAT. The t-value (t ¼ 45.06) and p-value
(p o0.000) also show that there is a positive and direct relationship between SI and CSAT.
The third hypothesis, the direct effect of SERVD on CSAT, was also supported (β ¼ 0.864,
t ¼ 43.44, po0.000). The β-value 0.864 indicates that SERVD influences the dependent
variable CSAT by about 86 percent. This means that a 1 percent improvement in SERVD
would result in 86 percent rise in CSAT. The t-value (t ¼ 43.44) and p-value (po0.000) also
show that there is a positive and direct relationship between SERVD and CSAT.
The fourth hypothesis also revealed a significant positive relationship between SI and
CLTY (β ¼ 1.056, t ¼ 40.22, p o0.000). The β score (1.056) indicates that SI influences the
dependent variable CLTY by about 105 percent. This means that a 1 percent increase in SI
would result in 105 percent rise in CLTY. The t-value (t ¼ 40.22) and p-value (p o0.000) also
indicate a positive and direct relationship between SI and CLTY.
Also, the fifth hypothesis, the effect of CSAT on CLTY, was also supported (β ¼ 0.783,
t ¼ 35.98, p o0.000). The β score (0.783) indicates that CSAT influences the dependent
variable CLTY by about 78 percent. This means that a 1 percent increase in CSAT would
lead to 78 percent increase in CLTY. Also, the t-value (t ¼ 35.98) and p-value (p o0.000)
indicate a positive and direct relationship between CSAT and CLTY.
Direct effect Indirect effect

Hypothesis Relationship Weight SD t-Stat p-value Weight Sig.
H1 SI–SERVD 0.907 0.145 45.84 0.000***

H2 SI–CSAT 0.288 0.026 45.06 0.000*** 0.531 0.000***
H3 SERVD–CSAT 0.586 0.019 43.44 0.000*** 0.006**
H4 SI–CLTY 0.490 0.026 40.22 0.000*** 0.373
H5 CSAT–CLTY 0.262 0.022 35.98 0.000***
H6 SERVD–CLTY 0.174 0.021 36.75 0.000*** 0.154 0.002**
R2 (LTY) 0.782
Adj. R2 (LTY) 0.780 Table IV.
Notes: SI, service innovation; SERVD, service delivery; CSAT, customer satisfaction; CLTY, customer Results of
loyalty. **,***Significant at 0.01 and 0.001, respectively structural model
IJBM Finally, the sixth hypothesis, the effect of SERVD on CLTY, was also supported (β ¼ 0.757,
t ¼ 36.75, p o0.000). The β score (0.757) indicates that SERVD influences the dependent
variable CLTY by about 76 percent. This means that a 1 percent improvement in SERVD
would result in 76 percent increase in CLTY. Also, the t-value (t ¼ 36.75) and p-value
(p o0.000) indicate a positive and direct relationship between SERVD and CLTY.
The R2 score (78.2) indicates that, overall, the independent variables, SI, SERVD and
CSAT predicted the dependent variable (CLTY) by 78 percent (Figure 2).
Discussion
First, this study found that SI has a significant positive and direct influence on SERVD and
CSAT. This result confirms previous studies findings (e.g. Ameme and Wireko, 2016;
Nguyen et al., 2014; Musara and Fatoki, 2010) that innovation adoption in the banking sector
could effectively influence customers’ satisfaction and loyalty.
Second, this study found that SERVD has significantly positive and strong indirect
influence on CSAT and CLTY. This is a new finding which this study adds to existing
literature. This finding is in line with Naveed et al. (2012) which reported that there is a
significant relationship between innovation and CSAT. This finding is important as the
aim of innovation adoption by banks is to offer quality SERVD to customers and by
extension create a positive relationship between the bank and its customers. Failure to
satisfy customers only creates customer disloyalty to their service providers which is not
in the best interest of the latter. Once customers perceive or receive unsatisfactory service,
the only likely behavior is to consider alternate service provider that would satisfy their
needs appropriately. CSAT, therefore, is crucial to the survival of any service
organization. It also allows the retention of customers and employees, thus reducing
turnover rates (Gera et al., 2017).
Third, this study found that SI mediates the relationship between SERVD and CSAT and
loyalty. This is also a new finding which adds to the existing literature on innovation
adoption in the banking sector. This study is also consistent with the findings of Ameme
and Wireko (2016) who found a positive and significant relationship between CSAT and
technological innovations in the Ghanaian banking industry. The finding is also consistent
with the findings of Naveed et al. (2012) who reported a significant relationship between
innovation and CSAT.
Fourth, this study found a significant indirect relationship between SI and CLTY
through SERVD. This implies that although SI can positively influence CLTY, it can only do
so indirectly through SERVD and CSAT (Ameme and Wireko, 2016; Nguyen et al., 2014).
SI1
CSAT1 CSAT2 CSAT3
0.865
SI2
0.874
0.904
SI3 0.901 0.865 0.908
0.896
0.288 0.490
SI4 SI CLTY1
0.901
0.907 0.262 0.782 0.878 CLTY2
0.731
0.822
0.586 0.174
CLTY3
SERVD1 CLTY
CSAT
0.906
SERVD2 0.868 0.823
Figure 2. 0.929
Structural model SERVD3
SERVD
This finding further suggests that for bank customers in Ghana, innovation adoption alone The banking
might not be enough to influence their satisfaction and loyalty, unless it could enhance sector of
SERVD by providing them adequate service. Ghana
Theoretical contribution
The findings add to empirical studies on innovation adoption and its effect on customers’
satisfaction and loyalty in developing countries’ context. Also, as discussed earlier, this
study supports the findings of previous studies that innovation adoption by banks could
enhance SERVD significantly and contribute to CSAT and loyalty. This study further offers
theoretical support for the adoption of innovative techniques in service provision and
delivery. It means that bank customers’ loyalty can be managed by business organization
directly and indirectly through the effective use of innovative platforms to deliver excellent
services to customers to achieve sustainable business growth (Taylor, 1994; Bae and
Kim, 2014; Lee et al., 2012; Lin et al., 2015).
Managerial contribution
Based on the findings of this study, the researchers propose the following contributions to
bank management. First and foremost, management should increase their investment in
technology to reduce incidents of technology breakdown during service operations to ensure
unrestricted SERVD and access 24/7.
Another important issue worthy of attention by management is to engage in constant
training for their staff engaged in providing technical assistant to customers to be informed
of the needed solutions during SERVD failures in order to respond and address customer
complaints adequately and satisfactorily.
Furthermore, since technology innovation entails teaming up with other players like
telecommunication companies and other internet service providers, management of banks
should draw up plan to constantly get feedback and also establish regular meetings to
effectively enhance service provision by these third parties.
Finally, management should invest in modern ICT to enhance their operations and
ensure efficient and effective SERVD. This could result in the removal of time-consuming
business processes, and the use of information and self-service technologies to reduce the
duplication of human effort in SERVD. It could also help ensure that business processes are
relatively short, easy and simple to follow by customers.
Conclusion
This study examined the effect of SERVD on CSAT and loyalty through the adoption of
relevant SI. Using data from a survey of 450 bank customers in Ghana, the results shows a
positive relationship between SI, SERVD and CSAT and loyalty in the banking sector of
Ghana. This study provides empirical knowledge for financial service managers in
enhancing their SERVD by adopting innovative SERVD strategies that would enhance their
relationship with customers.
Limitation
While this study makes contribution to extant literature on innovation in the banking
sector of Ghana, the study, however, is limited in terms of generalizability of the findings
across the financial sector. It will, therefore, be instructive to carry out similar
investigations across different contexts in order to strengthen the nuances of such
constructs in the financial sector adoption literature. Additionally, the effects tested in this
current study center on relationships and not causalities; on the basis of this, a
IJBM cross-sectional research design was used. The study acknowledges that some dynamism
in the tested relationships may have been ignored.
For instance, the outcome variable, i.e., CLTY might not necessarily be influenced by
only the tested independent variables (i.e. SI, SERVD and CSAT); there could be other
variables that might influence the outcome variables which have not been captured in this
study. Future studies could, therefore, also consider other likely variables that might
influence CLTY aside these variables observed in this current study. Also, future studies
could test for the correlation among the independent variables observed to ascertain the
strength of their association with each other in the model, and the extent of their effect on
the outcome variable.
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About the authors

Kong YuSheng is Professor and Dean of the School of Finance and Economics at Jiangsu University,
China. He has vast experience in teaching and consultancy work. He has published extensively in
top journals in China and outside China. His research field and interests include: financial
management, accounting control and decision making, industrial economy and accounting and
corporate social responsibility.
Masud Ibrahim is currently PhD Candidate at the School of Finance and Economics, Jiangsu
University, China. He has published in top journals including International Journal of Bank Marketing,
Information Development, Journal of African Business and Communication: South African Journal for
Communication Theory and Research. His research interests include: digital marketing, innovation
management, entrepreneurship, financial services marketing and corporate social responsibility.
Masud Ibrahim is the corresponding author and can be contacted at: imasud10@gmail.com
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satisfaction and loyalty in the

Review of related literature

significant improvements in some of the marketing elements, including product, price,

SERVD, CSAT and loyalty

Relationship between SI, SERVD and CSAT and loyalty

H3+ H6+ Figure 1.

Demographics characteristics of respondents

Constructs Label Cronbach’s α No. of items Source

Service innovation SI 0.908 4 Mahmoud et al. (2018)

Gender Male 286 63.6

Type of account Savings account 351 78.2

Measurement model reliability and validity

SI 1 0.865 2.557 0.908 0.935 0.784

Results and findings

Direct effect Indirect effect

H1 SI–SERVD 0.907 0.145 45.84 0.000***

Vol. 40 No. 3, pp. 292-299.

sociology and technology management”, Omega, Vol. 25 No. 1, pp. 15-28.

Vol. 12 No. 3, pp. 214-223.

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