MANAGING SERVICE SHORTCOMINGS IN BANKING: IMPLICATIONS FOR CUSTOMER LOYALTY AND RELATIONAL COMPETITIVE ADVANTAGE

Abstract

Abstract

             In recent years, the banking sector has been shaped by major changes generated by digital transformation, evolving customer expectations and intensified competition. In this context, maintaining strong customer relationships has become increasingly important for banks seeking long-term competitiveness. At the same time, service shortcomings and poorly managed complaints continue to represent significant challenges, as negative customer experiences can quickly affect satisfaction, trust and loyalty.

            This paper examines the role of complaint management and service recovery practices in strengthening customer loyalty in banking services. The discussion focuses on several factors that influence customer perceptions after a service failure, particularly responsiveness, communication quality, empathy and perceived fairness in the resolution process. In addition, the study considers the growing use of digital technologies and artificial intelligence in customer relationship management and complaint handling activities.

            The research is based on a review of specialised literature from the fields of relationship marketing, banking services and complaint management. Both foundational contributions and more recent studies published in journals indexed in Web of Science and Scopus were considered in order to identify the main approaches regarding customer satisfaction, loyalty and digitalisation in banking services.

            The literature reviewed suggests that customers are more likely to remain loyal when banks respond promptly, communicate transparently and demonstrate genuine concern in resolving complaints. Effective service recovery may therefore contribute not only to customer retention, but also to the development of stronger relational competitive advantages. Furthermore, digital communication channels and AI-based tools appear to improve the speed and efficiency of complaint management processes, while also creating new possibilities for personalised customer interaction.

            By bringing together perspectives from relationship marketing and digital banking, this paper highlights the strategic importance of managing service shortcomings in an increasingly competitive and technology-driven banking environment.