Influence of Behavioural Finance, Customer Satisfaction, and Service Quality on Bank-Switching Behavior

Abstract

As banking clients and depositors became more service- and price-conscious in their purchasing behavior of financial services, their banking behavior was increasingly prone to change. Thus, bank customers tend to switch banks due to underlying factors that influence their behavior. However, banks strive to retain and attract more clients as this may increase their future income and reduce the risk of liquidation. The banking industry of South Africa is characterized by a concentration of dominance by fewer large banks. Hence, this study used a self-administered questionnaire in the economic hub of South Africa where most bank customers reside, Gauteng, South Africa. Customer satisfaction has been recognized to play a crucial role in success in a competitive banking environment. Thus, this paper investigated the influence of customer satisfaction on bank-switching behavior in a South African context using structural equation modeling. The findings show that customer satisfaction and bank reliability and empathy significantly influence depositors’ behavior to switch between banks. It was also found that a relationship exists between behavioral finance biases and the bank-switching behavior of depositors. The novelty of this paper is that understanding how depositors make their financial decisions and how they form their risk perceptions will contribute to managing banking risks. It may also advise banks on what will cause bank customers to switch from their bank to another. Keywords: bank switching, customer satisfaction, service quality, depositors. DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.60.21