Is Switching Banks Easy? Perception vs. Experience

Abstract

Attracting customers from other banks is important for banks in markets such as New Zealand, where there is a very small proportion of the population that is unbanked. However, limited research exists to understand the expectations and experiences of bank customers in relation to how easy switching banks is. This paper reports findings on these expectations and experiences drawn from a larger study that explored a range of issues related to switching banks, using a mail survey to 2983 people in New Zealand.

We find that, overall, switching is not expected to be either easy or difficult, although in practice it is found to be somewhat easy. Expectations related to how easy switching banks will be do not have any relationship to the likelihood of switching. Those who had switched recently were found to perceive switching costs to be lower than those who had not switched.

Keywords: Switching costs, Ease of switching, Banking, New Zealand

JEL Classification: D12, D14, G21, M31