Customer switching behaviour in the Chinese retail banking industry

Abstract

PurposeThere is intense competition and increasing globalisation in financial markets. Bank management must develop customer‐oriented strategies in order to compete successfully in the competitive retail banking environment. The longer a bank can retain a customer, the greater revenue and cost savings from that customer. China's accession to the World Trade Organisation (WTO) has resulted in the liberalisation and deregulation of China's financial services market. Chinese customers now have greater choices between domestic and foreign banks. This study aims to identify and analyse the factors that influence bank customers' switching behaviour in the Chinese retail banking industry.Design/methodology/approachThe data for this analysis was obtained using a convenience sample of 421 bank customers in Jiaozuo City, Henan Province, China. The decision to switch banks is hypothesised to be a function of price, reputation, service quality, effective advertising competition, involuntary switching, distance, switching costs, distance, and demographic characteristics. Factor analysis and logistic regression are used to analyse the data and identify and rank the factors that impact on the bank switching behaviour of customers.FindingsThe research findings reveal that price, reputation, service quality, effective advertising, involuntary switching, distance, and switching costs impact on customers' bank switching behaviour. The findings also reveal that the young and high‐income groups are more likely to switch banks.Practical implicationsThe results of this research allow service marketers and practitioners to develop and implement service marketing strategies to decrease customer defection rates, and in turn, increase bank profits. Furthermore, this research provides useful information for future researchers investigating customer switching behaviour in the retail banking industry.Originality/valueThis paper provides an empirical analysis of Chinese bank switching behaviour and provides a framework for future studies on the behaviour of bank customers.