Banking products: You can take them with you so why don't you?

Carin van der Cruijsen, Maaike Diepstraten

Research output: Working paperOther research output

Abstract

Policymakers around the world call for more competition in the banking sector. One barrier to achieving this goal is consumer inertia. Despite its policy relevance, there is surprisingly little known about consumers’ bank switching behaviour. By applying the switching costs typology developed by Burnham et al. (2003), we show that switching costs differ across banking products and therefore we posit that banking products should be studied separately. We show that the propensity to switch varies across banking products (i.e. main current account, savings account, mortgage loan and revolving credit). We find that the bank-customer relationship explains the propensity to switch main current and savings accounts best, while the switching experience is the most important explanatory factor for the propensity to switch mortgage loans. We also report
on perceived switching barriers and we test the effectiveness of policy initiatives to ease switching banks for current accounts. We find that the propensity to switch can be increased by introducing account number portability, whereas more knowledge of the switching service has no significant effect. Lastly we find that it will be especially difficult for foreign banks to attract customers.
Original languageEnglish
PublisherDNB
Pages38
Publication statusPublished - 17 Dec 2015

Publication series

NameDNB Working Paper
No.490

Fingerprint

Banking
Propensity
Switching costs
Current account
Mortgage loan
Savings
Inertia
Politicians
Switching barriers
Customer relationship
Foreign banks
Number portability
Factors
Switching behavior
Credit
Banking sector

Keywords

  • Banking products
  • switching behaviour
  • barriers
  • inertia
  • household survey
  • financial literacy
  • psychological factors
  • solidarity
  • bank competition
  • policy initiatives

Cite this

van der Cruijsen, C., & Diepstraten, M. (2015). Banking products: You can take them with you so why don't you? (pp. 38). (DNB Working Paper; No. 490). DNB.
van der Cruijsen, Carin ; Diepstraten, Maaike. / Banking products : You can take them with you so why don't you?. DNB, 2015. pp. 38 (DNB Working Paper; 490).
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van der Cruijsen, C & Diepstraten, M 2015 'Banking products: You can take them with you so why don't you?' DNB Working Paper, no. 490, DNB, pp. 38.

Banking products : You can take them with you so why don't you? / van der Cruijsen, Carin; Diepstraten, Maaike.

DNB, 2015. p. 38 (DNB Working Paper; No. 490).

Research output: Working paperOther research output

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T1 - Banking products

T2 - You can take them with you so why don't you?

AU - van der Cruijsen, Carin

AU - Diepstraten, Maaike

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N2 - Policymakers around the world call for more competition in the banking sector. One barrier to achieving this goal is consumer inertia. Despite its policy relevance, there is surprisingly little known about consumers’ bank switching behaviour. By applying the switching costs typology developed by Burnham et al. (2003), we show that switching costs differ across banking products and therefore we posit that banking products should be studied separately. We show that the propensity to switch varies across banking products (i.e. main current account, savings account, mortgage loan and revolving credit). We find that the bank-customer relationship explains the propensity to switch main current and savings accounts best, while the switching experience is the most important explanatory factor for the propensity to switch mortgage loans. We also reporton perceived switching barriers and we test the effectiveness of policy initiatives to ease switching banks for current accounts. We find that the propensity to switch can be increased by introducing account number portability, whereas more knowledge of the switching service has no significant effect. Lastly we find that it will be especially difficult for foreign banks to attract customers.

AB - Policymakers around the world call for more competition in the banking sector. One barrier to achieving this goal is consumer inertia. Despite its policy relevance, there is surprisingly little known about consumers’ bank switching behaviour. By applying the switching costs typology developed by Burnham et al. (2003), we show that switching costs differ across banking products and therefore we posit that banking products should be studied separately. We show that the propensity to switch varies across banking products (i.e. main current account, savings account, mortgage loan and revolving credit). We find that the bank-customer relationship explains the propensity to switch main current and savings accounts best, while the switching experience is the most important explanatory factor for the propensity to switch mortgage loans. We also reporton perceived switching barriers and we test the effectiveness of policy initiatives to ease switching banks for current accounts. We find that the propensity to switch can be increased by introducing account number portability, whereas more knowledge of the switching service has no significant effect. Lastly we find that it will be especially difficult for foreign banks to attract customers.

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ER -

van der Cruijsen C, Diepstraten M. Banking products: You can take them with you so why don't you? DNB. 2015 Dec 17, p. 38. (DNB Working Paper; 490).