QUALITY COST IN BANKING INDUSTRY

Abstract

The cost of quality is dynamic. The theoretical study results showed that the banking industry is closely related to the service, and the service is closely related to the physical facilities of the bank, employee competence, and service policies. The largest component of the cost of quality in the banking industry is included in operating expenses (i.e. Salaries and administrative expenses). In addition to these two components there are other quality costs, among other bonuses for outstanding employees, compensation for customers who experienced a service error, because the opportunity cost of lost customers, etc. So when the company decided to improve the quality through high technology implementation program, initially this will raise the cost of quality. But when the program has been executed in full, and evidence has shown that the cost of quality failure decreased (reduced customer complaints, reduced processing time cash deposit at the teller), the bank can reduce the kind of quality costs, e.g., compensation for customer complaints, reduce the level of activity unannounced inspections , etc. The effect is a reduction in all categories of quality costs and increase productivity. Six sigma concept can be applied to the banking industry to perform continuous quality improvement.