Exploring the reasons for bank-switching behavior in retail banking

Abstract

PurposeThe development and maintenance of a long-term relationship with customers are essential for banks to bolster their profits and thrive in a competitive environment. This study aims to explore the key factors that influence individuals' bank-switching behavior in the Malaysian retail banking industry to provide insights to bank managers to develop effective customer retention strategies.Design/methodology/approachA convenient sampling technique was used to distribute questionnaires to bank customers in Malaysia. A total of 312 utilizable questionnaires were obtained for further analysis. For the data analysis, the authors used explanatory factor analysis (EFA), confirmatory factor analysis (CFA) and logit and probit models to identify the determinants of bank-switching behavior of bank customers in Malaysia.FindingsThis study revealed that switching costs, effective advertising from competitors, inconvenience, price factor and service failures significantly influence customers' retail bank-switching behavior in the Malaysian context. The findings bring some significant policy implications for bank management decisions.Research limitations/implicationsThe non-probability, convenience online sampling method may not be generalized to the population. However, the descriptive demographic statistics show that the findings provide a reasonable representation of the Malaysian population.Originality/valueThis study empirically investigates the determinants of individual customers' retail bank-switching behavior in the Malaysian context. This study is the first of its kind to observe the unique feature of price factor as a determinant of individual customers' switching behavior in the Malaysian retail banking industry, contrasting previous similar studies in different countries.