Why Exporting SMEs Switch Banks?

Abstract

Indian banking sector has been facing intense competition due to economic reforms carried out during the last two decades. Customer loyalty towards banks is decreasing. To survive in this highly competitive environment, banks need to focus on customer retention as cost of acquiring a new customer is more than that of retaining an existing one. For developing effective customer retention strategies, banks should understand the reasons behind switching behaviour of customers. Small and medium enterprises (SMEs) have been found as very important segment of banks’ market because of the profit and revenue opportunities presented by them. Moreover, their involvement in export enhances their importance to banks. Banks’ ability to understand the antecedents of SMEs’ banking disloyalty would help them to develop effective retention strategies for SMEs. Hence, efforts have been made in this study to explore the antecedents of exporting SMEs’ banking disloyalty. The research resulted in the development of a reliable and valid instrument for measuring antecedents of exporting SMEs’ banking disloyalty. The study also provides directions to commercial banks as to which particular antecedent requires attention in terms of importance. This would enable them to focus resources in accordance with the contribution of antecedents in exporting SMEs’ switching behaviour.