Bank-client Relationship Research Articles

Artificial Intelligence (AI) in the Banking Industry: A Review of Service Areas and Customer Service Journeys in Emerging Economies

The banking industry's shift towards digitalization, particularly Web 2.0 banking, signifies a profound change in the bank-client relationship. This transformation integrates digital elements into consumers' lives, digitising everyday activities and highlighting the importance of online social platforms and digital business operations. AI's growing interest in academia and commerce underscores its significant role in customer service. The study examines AI strategies in the banking industry, focusing on service areas and adaptation to the evolving technological landscape, particularly in customer service in developing economies. By adopting an interpretivist philosophy emphasising practicality, a qualitative approach was employed through a systematic literature review of 90 articles using thematic analysis. The research highlights AI's growing use in process automation, customer experience, stock market trend prediction, credit risk management, online banking, marketing management, and auditing. It concludes AI's positive impact on banking operational efficiency and customer service by recommending ethical AI usage, stakeholder collaboration, trust in data handling, and robust internal control systems. Additionally, it suggests exploring the association between organisational culture, leadership, and AI integration in developing economies. The research contributes to the theoretical and empirical frameworks that explain how AI is optimally integrated into banking operations, guiding policymakers and practitioners in leveraging AI to foster financial inclusion and economic growth. Future researchers should include non-profit institutions and non-financial performance metrics to gain insights into AI’s sustainability implications in banks beyond financial metrics.

A Statutory Analysis of the Role of the Courts in Protecting Financial Consumers' Rights in the Zimbabwean Banking Sector: The Penelope Case in Context

Abstract The Zimbabwean banking sector has experienced several tumultuous challenges since 2000. This is owing chiefly to the political and economic challenges the country has experienced. Poorly conceived and ill-timed policies have also wreaked havoc in the Zimbabwean banking sector. Financial consumers have sometimes lost their savings to hyper-inflation or overnight policy changes in Zimbabwe. The change in currencies is a good example of how financial consumers have seen their deposits and savings at banks and other related financial institutions eroded to nothing. In 2018, the Reserve Bank of Zimbabwe (RBZ) issued a directive for all banks to convert all deposits made prior to October 2018 from the United States (US) dollar denomination to the Zimbabwean dollar (bond notes and coins). This was done on an exchange rate of one US dollar as to one Zimbabwean dollar, yet in reality, the local currency had been devalued. The RBZ directive left individuals and corporates reeling from exchange losses. The directive was akin to a heist and many people lost trust and confidence in the Zimbabwean banking sector. While many financial consumers suffered in silence, some decided to take their banks to court, demanding a reimbursement of their deposits in the currency in which they deposited or alternatively, the equivalent of the original deposit using the correct exchange rate. This article examines the role of the courts in upholding the rights of financial consumers in the Zimbabwean banking sector in the light of the Penelope case. It also discusses how the Zimbabwean courts could assist in preserving the sanctity of the bank-client relationship among banks and financial customers. In addition, the article explores the role of the courts in challenging unjust laws that affect financial consumers' investments in banks. The strengths and weaknesses of the Zimbabwean banking regulatory framework are further discussed to assess if it is robust enough to protect financial consumers. The article recommends that the courts should objectively set aside unjust laws in the interest of justice to enable banks and other financial institutions to honour their contractual obligations. Policymakers should not adopt poor policies that infringe upon financial consumers' rights. Keywords: Banking sector; consumer protection; financial consumer; deposits; exchange rate; courts.

Factors Influencing Customer Loyalty in the Retail Banking Sector: A Study of Financial-Banking Services in the Republic of Moldova

Purpose of this research is to identify the nature of loyalty, the valence/dimensionality of this concept, and the factors that determine customers of banking products/services in the Republic of Moldova to establish long-term relationships with the bank and remain loyal to it, thereby proposing targeted measures the banks could take to keep their customers. Online survey data of 363 customers of financial-banking products/services in the country was extracted, counted, and analyzed, and the statistical results reveal that loyalty to a banking service is similar to that in interpersonal relationships, and bank-client relationships can generate friendships or even lasting partnerships over time due to proper behavior. Based on analysis results, this paper identifies manifestations of loyalty, figures out factors for developing loyalty and trusting relationships and for improving customer attitude, and innovatively proposes a few suggestions for financial institutions to formulate customer loyalty problems and develop long-term relationships with their customers, including measuring customer loyalty level to identify genuinely loyal customers, ensuring the bank’s efforts to build customer loyalty is recognized in the entire institution, relating the value of each customer to the value of rewards provided in the loyalty program, and rewarding customer loyalty according to customer priorities. Research results attained in the paper could assist bank managers in the Republic of Moldova in making managerial decisions to prevent customers from migrating to competitors and establish long-term relationships with them, and the conclusions and suggestions might be applicable to banks in other counties with similar problems around the globe.

E-banking: Conceptual framework

The banking business model globally is undergoing a paradigm shift. As India increasingly integrates with global financial markets, the winds of change are sweeping the Indian banking industry. From an era dominated by mass banking, The thrust now- a -days is on E-Banking i.e. Banking that is technology driven. Rapid computerization awareness of customer needs & competition are galvanizing Indian banks into making banking more convenient each day. E-banking has moved real banking behaviour closer to neoclassical economic theories of market functioning. Due to the absolute transparency of the market, clients (both business as well as retail) can compare the services of various banks mor easily. For instance, on the internet, competitors are only one click away. If clients are not happy with the products, prices or services offered by a particular bank, they are able to change their banking partner much more easily than in the physical or real bank-client relationship. From the banks’ point of view, use of the internet has significantly reduced the physical costs of banking operations. This paper focus on evolution of e-banking, need for e-banking, e-banking channels, e-banking scenario &e-banking key issues and solutions.

Green lending and stock price crash risk: Evidence from the green credit reform in China

Extant literature has under-theorized the equity market consequences of green credit reform. Our study addresses this gap by investigating the impact of green credit reform on stock price crash risk. Using the promulgation of the 2012 Green Credit Guidelines (GCGs) as a quasi-natural experimental setting, our results show that green lending significantly reduces high-polluting firms’ stock price crash risk; and that the enhanced bank monitoring which green credit brings, both of accounting information quality and of corporate capital structure, serves as the mechanism underlying this causal effect. Cross-sectional analyses reveal that the reduction is more pronounced when banks face greater competition, and for firms without bank-client relationships or political connections. Overall, our study contributes to a finer-grained understanding of the equity market consequences of green lending and sheds new light on the determinants of stock price crash risk.

The Nexus between Bank Foreign Expansion and Efficiency: The Moderating Effects of Host Country Regulation and Competition

ABSTRACT Does Chinese bank efficiency benefit or suffer from foreign expansion? To investigate the causal relationship between banks foreign expansion and efficiency, we analyze 431 overseas branches of Chinese banks from 2007 to 2020. After decomposing the efficiency, we find strong, consistent evidence that such foreign expansion reduces cost efficiency due to the agency problem, while improving profit efficiency to retain the long-term bank–client relationship. Furthermore, to examine moderating effects, we consider regulations and competition among host countries. Ultimately, stringent regulations and less competition are found to be key factors impacting the loss and gain of cost and profit efficiency.

Wiarygodność informacyjna banku – perspektywa seniora korzystającego z usług na rynku bankowym

The purpose of the article/hypothesis: The aim of the article is to present the essence of a bank's information reliability and its assessment by a selected group of stakeholders, which are seniors. The conducted study allowed for the positive verification of the following research hypothesis: the bank's information reliability is an important factor that influences the bank's assessment by seniors.
 Methodology: The text has been divided into three parts. Two of them are theoretical and the authors focused here on a critical analysis of the literature on the subject. The first one describes the problem of trust in banks and public guarantees as factors influencing the shape of the sector. The second part focuses on presenting important issues related to the broadly understood information in the bank–client relationship. In the empirical part of the article, a questionnaire study was conducted in which the information reliability was assessed from the perspective of seniors using banking services.
 Results of the research: The research showed that 75% of the respondents had in practice encountered a situation in which the bank provided incomplete or false information. Two-thirds of the respondents also emphasized that information credibility is an important element of building trust in a bank. On the other hand, less than half of them indicated that the bank's information message was legible. Keywords: public trust, public guarantees, information reliability, banking sector, senior on the banking services market.

The asymmetrical bank-client relationship Case of Algerian public banks

Asymmetric information remains one of the most crucial problems in finance, though many works have been produced since the first writings of Akerloff, Spence and Stiglitz and many others. The inequality of getting information causes many problems to entreprises, because the responsible needs all information to solve these problems and decides what solution should fulfil the purpose in vew. In this context, the information and communication technologies (ICT) play a dominant role for the spreading of information to different users and researchers. The present work is articulated around two main parts. The first deals with the theoretical aspects of asymmetric information. The second is an empirical approach realised using a sample of questions in Algerian public Banks. All the questions deal with the impact of asymmetric information on the banking activity.

ПЕРЕВАГИ ТА РИЗИКИ РОЗВИТКУ НОВІТНІХ ТЕХНОЛОГІЙ У БАНКІВСЬКІЙ ДІЯЛЬНОСТІ

The basic tendencies of development of modern technologies of banking services and innovations are defined and considered, problems of their introduction and prospects of use are highlighted. The necessity and implementation of modern technologies of customer service are identified and substantiated and the positive consequences of their application are revealed in order to gain competitive advantages in the banking services market. Any business strives for development. If a business stops to spend efforts to improve its product or service, then on the competitive market inevitably fails. Today, the banking market is a space for innovation. With this in mind, banks need to constantly monitor new ideas for the implementation of products and services that competitors do not yet have. The banking sector is particularly sensitive to changing demand from its customers, and the competition in the banking market is quite fierce and high. Therefore, the desire to win in this fight and retain customers is a top priority. That is why maximum satisfaction of customer needs comes to the fore. In a bank-client relationship, innovation is the first and the ability to offer something that competitors cannot yet, or to attract potential customers in a new way, becomes extremely important. Thus, banking innovation is a vital necessity for the efficient functioning of the bank and its competitiveness. In general, innovation acts as a certain engine for the development of the entire banking sector, as it forms the strategic directions of banking institutions. Modern technologies provide new opportunities for banks to increase their customer base and reduce costs while offering customers more convenient access to their products and services. The introduction of the latest service technologies will increase the level of comfort for bank customers, and will provide quality and in-demand financial services. Today, the banking market is a space for innovation. With this in mind, banks need to constantly monitor new ideas for the implementation of products and services that competitors do not yet have. Today, the innovative activity of banks remains one of the most effective methods of competition in the financial services market. At the same time, it should be borne in mind that the process of innovation in the banking sector is associated with certain risks, so it is important for banks to pay attention to the economic feasibility of innovation and its usefulness to customers, and banking market regulators must ensure instruments arising from the development of the latest banking technologies.

The termination of the bank-client relationship in South African banking law

The termination of the bank-client relationship in South African banking law

Earnings quality and internal control in bank-dominated corporate governance

This study examines the relationship between internal governance and earnings management in Japanese listed firms. Following recent accounting fraud in large companies, Japanese internal governance systems have been widely criticized. Japan has a bank-dominated corporate governance system. This study predicts that the bank–client relationship mitigates opportunistic earnings management by reducing the degree of information asymmetry. The results show that bank-appointed audit board members mitigate managerial earnings management. Neither outside directors nor audit committees help reduce opportunistic managerial earnings management. The findings imply that a lender monitoring system can substitute the monitoring role of outside directors and audit committees.

Deposit withdrawals from distressed banks: Client relationships matter

We study retail deposit withdrawals from commercial banks that were differentially exposed to distress during the 2007–2009 financial crisis. We show that the propensity of clients to withdraw deposits increases with the severity of bank distress. However, an exclusive pre-crisis bank-client relationship eliminates withdrawal risk. The mechanism through which strong bank-client relationships mitigate withdrawal risk relates to the transaction costs of switching accounts rather than informational rents or differentiated services. Our findings provide empirical support to the Basel III liquidity regulations that emphasize the role of well-established client relationships for the stability of bank funding.

Usage of e-Devices in Banking Sector for Promoting Relationships between Bankers and Customers: A Case Study

The objective of this study is to find out the influence of the usage of electronic devices on the relationships between bankers and the customers. This study has been done mainly based on primary and secondary sources of data. Primary data has been collected from respondents through a structured questionnaire. To conduct this research, interviewing approach has been used on clients of Dutch-Bangla Bank Limited (DBBL) Bangladesh, particularly who avail the electronic banking services. The sources of secondary data were collected from different publications and annual reports of DBBL for the year of 2011 to 2017. Simple descriptive statistics were used and two hypotheses were developed and tested by using one sample t-test to evaluate the effectiveness of using electronic devices in improving bank-client relationship. The results show that the usage of e- devices in banking sector has positive impact an improving service quality and client commitment that eventually strengthen life-time relationships between bank and its clients. Likewise, the findings of the study were as analogous with some other studies where researchers found similar and or different economic characteristics. Hence, it can be beneficial for the policy makers of DBBL as well as other stakeholders of bank.

Banks as Tax Planning Intermediaries

We provide the first large-sample evidence of banks playing an important role in facilitating tax planning by client firms. Banks could be associated with client tax avoidance through two separate mechanisms. First, banks may act as tax planning intermediaries by developing and implementing tax strategies for corporate clients or by spreading tax strategies across clients. Second, banks may select borrowers in part based on their tax avoidance. Capturing bank-client relationships using lending contracts, we find that a borrower’s own tax avoidance is strongly associated with the average tax avoidance of its bank’s other borrowers. Further tests are consistent with this result being driven in part by banks acting as tax planning intermediaries. Finally, we find that borrowers experience meaningful increases in tax avoidance when they begin a new relationship with a bank whose existing borrowers are substantial tax avoiders. Overall, our results suggest that banks, in addition to being financial intermediaries, also act as tax planning intermediaries in facilitating corporate tax planning.

Regulatory Influence on Market Conditions in the Banking Union: the Cases of Macro-Prudential Instruments and the Bail-in Tool

This paper looks into the specific influence that the European banking union will have on (future) bank-client relationships. It shows that the intended regulatory influence on market conditions in principle serves as a powerful governance tool to achieve financial stability objectives. From this vantage, it analyses macro-prudential instruments with a particular view to mortgage lending markets; the latter have been critical in the emergence of many modern financial crises. In gauging the impact of the new European supervisory framework, the paper finds that the ECB will lack influence on key macro-prudential tools to push through more rigid supervisory policies vis-à-vis forbearing national authorities. Furthermore, this paper points out that the current design of the European bail-in tool supplies resolution authorities with undue discretion. This feature, which also afflicts the SRM, imperils the key policy objective to re-instill market discipline in banks’ debt financing operations. This goal is also called into question because the nested regulatory technique that aims at preventing bail-outs unintendedly provides additional manoeuvring space to political decision-makers.

The Banking Union Translated into (Private Law) Duties: Infrastructure and Rulebook

This article starts out from the general question of how fields of regulation have impacted on the private law relationships between individuals, i.e., in competition law and capital market law. It states that the impact is sometimes more direct, as in capital market law, sometimes less direct and felt only after much more time, like in competition law, but that it is always present. Hence, the first result is obvious: the new Banking Union scheme will impact also on private law relationships. While this is already discussed in some specific areas—namely organisation of banks and recovery and resolution of banks (with the bail-in mechanism)—and while these areas are addressed in this article as well, the question most thoroughly dealt with here is whether such impact will be felt more generally and how it should be shaped. It concerns all bank-client relationships—mostly contract law—, the question of how much influence is welcome, and in which ways it can be channelled. The article provides ample material as to where similar questions have already been discussed in neighbouring fields of law and sees the regulatory package introduced under the term ‘Banking Union’ as one which will have a considerable amount of private law repercussions.

Regulatory Influence on Market Conditions in the Banking Union

This paper looks into the specific influence that the European banking union will have on (future) bank client relationships. It shows that the intended regulatory influence on market conditions in principle serves as a powerful governance tool to achieve financial stability objectives.From this vantage, it analyzes macro-prudential instruments with a particular view to mortgage lending markets – the latter have been critical in the emergence of many modern financial crises. In gauging the impact of the new European supervisory framework, it finds that the ECB will lack influence on key macro-prudential tools to push through more rigid supervisory policies vis-a-vis forbearing national authorities.Furthermore, this paper points out that the current design of the European bail-in tool supplies resolution authorities with undue discretion. This feature which also afflicts the SRM imperils the key policy objective to re-instill market discipline on banks’ debt financing operations. The latter is also called into question because the nested regulatory technique that aims at preventing bail-outs unintendedly opens additional maneuvering space for political decision makers.

The financial crisis and bank–client relationships: Foreign ownership, transparency, and portfolio selection

Using a unique dataset that matches banks with their client firms, we investigate the differences between foreign and domestic banks in a developing country. In particular, we are interested in examining how foreign banks solve the information asymmetries that characterize lending relationships and whether those relationships have changed since the financial crisis of 2008. Foreign banks are likely to limit their lending activity to larger firms or more transparent firms because they are at an informational disadvantage relative to domestic banks. We find that foreign banks focus on relationships with foreign, listed, and larger firms. In addition, their portfolio is more heavily weighted towards firms in less competitive industries and exporting firms. Comparing outcomes for 2006 and 2009, we find that banks are more concerned with leverage in 2009 and have reduced the number of firms in their portfolio post-crisis.

Dealing on Own Account in Swaps

Swaps are financial instruments which aim is to reduce risk to interest rate fluctuations. They come up as a result of market evolution. They are spreading out in an uncontrolled manner. They are not bad or good. Interest rate hedging products can protect against the risk of interest rate movements and be appropriate when properly sold to clients and fit their needs. Though, the facts shows that most of the swaps are complex products, distributed to “non-sophisticated” customers which do not have specific expertise and understanding on in this area. Swaps are hazardous and hard to understand for these clients, considering their complexity and difficult follow up. Its evolution, with multiple forms, went beyond the legal culture. They are high-risk juridical contracts, which include articles imported from the Anglo-Saxon Law as opposed to continental law. Their volume finally affected market stability, resulting in a systemic risk. This paper describes the characteristics of these products and the poor sales practices during the commercial offer and the execution of the agreement, including the lack of information on the risk involving the products. The paper focus on the appropriateness of include in a catalogue of investment services the negotiation of OTC derivatives and reinforce in these cases information to client and prevention of conflicts of interest, leading to the designation of an independent calculation agent.As a result of the financial crisis, financial regulation was reviewed, and in particular, control on derivatives. The paper concludes that model of the bank-client relationship moves towards the client as a vulnerable party. The gravity center shifts from the traded product to the quality of the service supplied to the client. But considering other financial supervisors, in Spain, CNMV and Banco de Espana swimming against the tide, they tend to exclude swaps from the application of the business conduct rules of the securities market with groundless arguments.

The influence of demographic variables on relationship banking: an international study

The purpose of this study was to conduct an empirical investigation among clients and managers to identify the influence of demographic variables on relationship banking. Primary data was collected from respondents in South Africa, Canada and the UK. Convenient snowball sampling was used to select the sample which comprised 637 banking clients and 67 bank managers. The two research instruments were structured seven-point Likert-type scale questionnaires, one distributed to clients and the other to managers. Quantitative statistical data analyses were conducted as descriptive statistics, reliability tests and linear modelling were performed. The empirical results show that, in addition to the bank-related aspects of personalisation and fees, various demographic characteristics of clients influence a bank’s relationship marketing. This study could be of significant value to South African retail banks in order to consider the relationship marketing strategies of Canadian and UK banks. In terms of practical banking strategies, the study adds value in respect of personalised offerings and the development and implementation of fair fee structures relating to different client categories, which would ultimately improve bank-client relationships.