Cross-Selling in Bank-Household Relationships: Mechanisms and Implications for Pricing

54 Pages Posted: 1 Sep 2022 Last revised: 26 Apr 2023

See all articles by Christoph Basten

Christoph Basten

University of Zurich; Swiss Finance Institute; CESifo (Center for Economic Studies and Ifo Institute)

Ragnar Juelsrud

Norges Bank

Date Written: August 29, 2022

Abstract

We show that banks cross-sell future deposits and loans to existing household depositors. A bank is 20 percentage points more likely to sell a loan to an existing depositor than to an otherwise comparable household. Existing depositors pay a premium when borrowing and we find no indication that banks obtain an informational advantage on such borrowers, suggesting that the cross-selling is driven more by demand than by supply complementarities. This household inaction is driven more by switching costs than by search costs or unobserved persistent preferences. Finally, banks internalize future cross-selling potential when setting deposit rates.

Keywords: cross-selling, customer lifetime value (clv), relationship banking, switching costs, supply complementarities, demand complementarities, deposit pricing, loan pricing, deposit channel of monetary policy

JEL Classification: D14, D43, E52, E58, G12, G21, G51

Suggested Citation

Basten, Christoph and Juelsrud, Ragnar, Cross-Selling in Bank-Household Relationships: Mechanisms and Implications for Pricing (August 29, 2022). Swiss Finance Institute Research Paper No. 22-65, Available at SSRN: https://ssrn.com/abstract=4204984 or http://dx.doi.org/10.2139/ssrn.4204984

Christoph Basten (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute

c/o University of Geneva
40 Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Ragnar Juelsrud

Norges Bank ( email )

Bankplassen 2
Oslo, 0151
Norway

HOME PAGE: http://ragnar.juelsrud.no

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