Consumer Banking Research Articles

Machine learning methods application for consumer banking

Machine learning (ML) methods are effective tools for analysis of many actual problems in modern banking. Increasing growth of data and rapid digitalization underpin the acceleration of ML implementation. These processes are especially noticeable in consumer banking because banks have millions of the retail customers. The first goal of our research is to form an extended review ML application in consumer banking. From one side we have identified the most developed ML methods, which are applied in this segment (for example different types of regressions, fuzzy clustering, neural network, principal component analysis etc.). From the other side, we point out two multi-purpose tools used by banks in consumer segment intensively, namely scoring and clustering. Secondly, our goal is to present some innovative applications of ML methods to the analysis of each task. This includes several applications for scoring models and fuzzy clustering application. All applications are oriented to make banks business processes more effective. Considered applications were realised on real data from the Ukrainian banking industry.

Struktura potrošačkih kredita, njihovi korisnici i motivacije za zaduživanje kod banaka u Republici Srpskoj

In the research, we started from the fact that consumer loans are the most common type of credits offered by the commercial banking sector to the public of Bosnia and Herzegovina (B&H). The initial goal of the research was to look at the current structure of loans taken by citizens from banks (loan size, loan maturity, use goal, etc.) and to look at the structure of credit users in terms of their educational, income and age status. We started from the assumption that citizens or households use bank consumer credits predominantly to finance current consumption and compensate for insufficient current income to finance basic living needs. We made such assumptions based on the fact of low general income per capita, low average wages and high unemployment rates in B&H. The research is based on a comprehensive survey that we conducted on a large number of participants, users of bank consumer loans. We concluded: relatively most of the credit beneficiaries are from the category of educated and highly educated citizens and the relatively largest number of beneficiaries are those with low-income status and young people. The loans used are mostly non-purpose cash credits. Longer loan maturities are reserved mainly for middle aged and older people with higher income status. Long-term loans were mostly used to finance the purchase and construction of apartments and houses. Average loan amounts per user are relatively low, which is to be expected given their income position. The motives, life requirements and expectations of the borrower usually move within a modest radius of providing basic living needs therefore, loans are mostly aimed at financing current consumption. For some users, there is a noticeable preference for higher consumption that goes beyond the actual borrowing potential of these households.

Legal status of subjects of consumer banking legal relations

Legal status of subjects of consumer banking legal relations

Securing Open Banking with Model‐View‐Controller Architecture and OWASP

In 2015, the European Union passed the PSD2 regulation, with the aim of transferring ownership of bank accounts to the private person. As a result, Open Banking has become an emerging concept, which provides third‐party financial service providers open access to bank APIs, including consumer banking, transaction, and other financial data. However, such openness may also incur many security issues, especially when the data can be exposed by an API to a third party. Focused on this challenge, the primary goal of this work is to develop one innovative web solution to the market. We advocate that the solution should be able to trigger transactions based on goals and actions, allowing users to save up money while encouraging positive habits. In particular, we propose a solution with an architectural model that ensures clear separation of concern and easy integration with Nordea’s (the largest bank in the Nordics) Open Banking APIs (sandbox version), and a technological stack with the microframework Flask, the cloud application platform Heroku, and persistent data storage layer using Postgres. We analyze and map the web application’s security threats and determine whether or not the technological frame can provide suitable security level, based on the OWASP Top 10 threats and threat modelling methodology. The results indicate that many of these security measures are either handled automatically by the components offered by the technical stack or are easily preventable through included packages of the Flask Framework. Our findings can support future developers and industries working with web applications for Open Banking towards improving security by choosing the right frameworks and considering the most important vulnerabilities.

Social well-being as an instrument of value creation and sustainable development on the example of the Santander Health Academy project – case study

The aim of this study is to analyze the case of creating value for the bank’s stakeholders and brand reputation management by corporate social responsibility on the example of lasting for four-year Santander Consumer Bank project called the Santander Health Academy, based on the assumed goals, mission and marketing strategy of the bank in 2016-2019.

Consumer adoption of interactive teller machines: evidence from the Arabian Gulf

With the rise of technology, banks have been seeking strategies to retain consumer loyalty. This increases customer's share of the wallet. Offering unified experience across banking channel touchpoints increases customer loyalty. Recently, banks have been executing branch transformation initiatives, utilising new technologies such as interactive teller machines (ITMs). This study investigated the factors that influence banking consumers to adopt the ITMs in the Arabian Gulf region. It combined variables from research related to consumer adoption of digital e-banking services, effects of retail banking services staff, and design of branches. A model based on previous studies and subject matter expert opinions was proposed. Quantitative research was conducted targeting consumers in the Arabian Gulf. Responses were analysed using Pearson's correlation, hierarchical regression analysis, and other statistical analysis tools. The findings of the research suggest that convenience, security, and social influence were the factors that significantly impacted consumer intention to adopt the ITM.

Change Back Feature for Consumer Accounts

The aim of this paper is to propose a new feature called Change Back for consumer accounts, which minimizes the use of cash coins by retail consumer outlets and eliminates the need of carrying the same for banks’ consumer customers. Once implemented in consumer banking applications and point-of-sale devices, the feature will minimize the wastage of coins by shoppers, commission charges incurred by retail vendors on coins, improve money retention by banks in their consumer accounts and minimize of the spread of pandemics. Discussed in detail are how the Cash Back transaction takes place and what needs to be implemented by different parties involved in making it a success. A step-by-step flow of the transaction is pictorially described from a point-of-sale device at a retail cash counter to a bank’s payment processing application.

Os bancos virtuais e avaliação do risco percebido e das expectativas de desempenho e de esforço na intenção comportamental

Objetivo: O objetivo do artigo consiste em entender como é o processo de adoção de bancos virtuais por parte dos consumidores e analisar o impacto do risco percebido na intenção comportamental de adoção.Método: O método de pesquisa adotado é dividido em duas fases, sendo primeira de natureza qualitativa e caráter exploratório, e a segunda com direcionamento quantitativo e caráter descritivo, substanciada no desenvolvimento de hipóteses e na análise estatística realizada com modelagem de equações estruturais (MEE).Originalidade/Relevância: O comportamento do consumidor de serviços bancários influencia as instituições financeiras e implica em adoção de inovações nos serviços prestados. O artigo apresenta os aspectos que influenciam na intenção de adoção de inovação representada pela Fintech.Resultados: A fase exploratória revelou que a falta de interesse em migrar para conta virtual é relacionada com insegurança por falta de uma comunicação adequada. Na fase descritiva foi possível afirmar que a Expectativa de Desempenho e a Expectativa de Esforço têm influência positiva na Intenção Comportamental, mas o maior receio dos consumidores é o risco de perda financeira ou roubo de dados.Contribuições teórico/metodológicas: o uso de variação do modelo UTUAT, propiciou o entendimento do processo de adoção de tecnologia em um novo tipo de serviço bancário bem como a utilização de MEE para avaliar a relação entre as variáveis independente e dependente do modelo UTUAT.Contribuições sociais/gerenciais: a pesquisa mostra a importância da comunicação mercadológica para as Start-ups, pois somente uma comunicação focada no público alvo irá gerar expectativa, de desempenho e de esforço, bem como reduzir o risco percebido.

OPTIMIZATION OF BANK CONSUMER LENDING MANAGEMENT ON THE BASIS OF QUALITY ASSESSMENT OF ITS LOAN PORTFOLIO

Introduction. Ukrainian banking institutions are constantly faced with the problem of non-repayment of consumer loans received by individuals. The reasons for this need to be identified, classified and assessed, which is primarily the object of credit risk management of banking institutions. The lack of effective methods for assessing and managing risks in the provision of consumer loans can ultimately lead to significant problems in the efficient operation and financial stability of banks. Despite the existing scientific and practical achievements, the issue of assessment and management of consumer lending risks remains underdeveloped, their implementation in the activities of banking institutions is quite theoretically loaded, which causes problems in real life. The purpose of the article is to assess the current state of bank consumer lending in Ukraine and develop recommendations for optimizing the management of the loan portfolio of individuals in banking institutions. Results. An analysis of the current state of lending to individuals in Ukraine by banking institutions has been done. The dynamics of consumer lending was assessed in terms of loans to individuals and businesses, the volume of loans and reserves for active operations. The methodological approach to the calculation of the integrated ratio is proposed to assess the quality of the loan portfolio of individuals, which is based on the qualimetric method, where each class of credit debt is assigned a corresponding rank value. The condition of the loan portfolio of Ukrainian banks was assessed according to the proposed qualimetric ratio. The distribution of commercial banks by the share of the loan portfolio of individuals and the qualimetric ratio is given. The average value of the qualimetric coefficient for the debt of individuals throughout the banking system is calculated and analyzed. It is proved that the use of the proposed qualimetric quality factor of the loan portfolio of individuals allows to conduct a static assessment of its condition within the above ranges, and monitor its dynamics during monitoring. The recommendations for the active use of credit risk management methods in lending to individuals have been developed based on the proposed methodological approach. Key words: banks, consumer lending, credit risk, risk management, risk assessment.

The role of consumer innovativeness in consumer desire to try the transactions with sharia banking

The study attempts to shed light on factors driving people to turn to sharia banks. The study focuses on consumer innovativeness with alternative capacity and value attractiveness as antecedents. The respondents are sharia banking consumers in Makassar. The sample size follows Malhotra 2007 formula. Respondents are reached through on-line interaction and offline contact on the spot of sharia banks. It applies the PLS tool for data analysis. It conceives that alternative seeking and innovativeness have significant effects on consumer innovativeness and desire to try the transactions with sharia banking, and consumer innovativeness has a significant effect on the desire to try the transactions with sharia banks. In this way, it explores the mediating role of consumer innovativeness in the relationship between alternative capacity and desire and that between value attractiveness and desire. Thus, the study has several novelties. It brings up new constructs such as alternative capacity, value attractiveness, and desire to try the transactions with sharia banking. The results would be that consumer innovativeness serves as a partial mediator in the relationship between alternative capacity and the desire, and a full mediator in that between value attractiveness and the desire.

ДЕТЕРМІНАНТИ КОНКУРЕНТОСПРОМОЖНОСТІ БАНКІВСЬКОГО СЕКТОРУ ПОЛЬЩІ ТА УКРАЇНИ

Анотація. Присвячено дослідженню детермінант конкурентоспроможності банківського сектору національної економіки на основі порівняльного аналізу функціонування банківських систем України і Польщі. Проведено дослідження, використовуючи таку методику: порівняльний аналіз інституціональної ефективності банківського сектору України і Польщі; порівняльний аналіз рівня концентрації банківського сектору України і Польщі; порівняльний аналіз мікроекономічної та макроекономічної ефективності банківського сектору України і Польщі; порівняльний аналіз соціальної ефективності банківських секторів обох країн щодо їхньої фінансової інклюзії. Результати дослідження засвідчили вищий рівень конкурентоспроможності польської банківської системи, що відображається у її стабільному функціонуванні протягом тривалого періоду часу, стійкості до криз і надмірних ризиків, ефективній системі пруденційного нагляду, розвиненій інституційній структурі, близькій до потреб ринку, а також динамічному зростанні банківського фінансування національної економіки та доступності банківських послуг для бізнесу і домогосподарств. На відміну від польської банківської системи, українська банківська система в останні роки пережила глибоку кризу і значну кількість банкрутств банків, високу частку непрацюючих кредитів, проблеми з ліквідністю тощо, а тому з метою її порятунку значної концентрації державного капіталу в банківській системі, високих процентних ставок і як наслідок значного зменшення частки банківського фінансування національної економіки і наявність значних бар’єрів для доступності банківських продуктів для споживачів. Визначено, що ключовими детермінантами конкурентоспроможності національного банківського сектору є такі: наявність розвиненої інституційної структури банківської системи; запобігання монополізації та надмірній концентрації банківського сектору; наявність ефективно функціонуючої національної системи банківського нагляду і регулювання; формування державної стратегії розвитку банківського сектору на засадах ключового гравця національної фінансової екосистеми і забезпечення виконання банківською системою її основних функцій в економіці та суспільстві. Ключові слова: банківський сектор, банківська система, конкурентоспроможність, інституційна структура, концентрація, фінансова стабільність, макроекономічна та мікроекономічна ефективність, соціальна ефективність, фінансова інклюзія. Формул: 0; рис.: 10; табл.: 0; бібл.: 27.

The impact of COVID-19 on consumer behavior in retail banking. Evidence from Romania

Abstract The pandemic COVID-19 has severely affected the global economy. The strict lockdown measures have also changed the daily live, including consumer behavior in retail banking. In this context, the purpose of this paper is to investigate the impact of the COVID-19 crisis on consumer behavior in retail banking, with a special focus on the Romanian banking sector. To achieve our goal, we performed a survey among the Romanian consumers in retail banking, using as research method the field survey based on questionnaire. The final sample comprised 738 valid responses from the metropolitan area retail banking consumers. The research brings a fresh insight on retail banking services consumption during the pandemic and validates a conceptual model regarding the internet and mobile banking services acceptance. The research’ results highlighted, among others, that the variable concerning the perception of the COVID-19 pandemic effect on consumers’ lifestyle has a direct and positive influence on the variable regarding the attitude toward internet and mobile banking services, mediated by other variables like safety of internet and mobile banking use and trust in banks. Several social and managerial implications are also discussed, because it is possible that the tendency to use internet and mobile banking services will prevail even after the post pandemic stage, as new consumption behavior models are developing. Banks in Romania should increase their initiatives to offer financial education courses and online tutorials to familiarize customers with the use of digital channels. Banks should also improve communication with clients and design new products and services to increase the attractiveness of saving process. They should demonstrate flexibility in negotiating lending and refinancing conditions as well.

Expanding TAM and Investigating the Factors that Effect Consumer Intention to Adopt Mobile Banking in Palestine

Abstract Purpose The main objective of this study is to expand the technology acceptance model (TAM) by examining the factors affecting the adoption of mobile banking services by the customers of Palestinian banks and to design a comprehensive model based on TAM and TPB and additional constructs. Design/methodology/approach This study used the quantitative approach with cross sectional research design and a questionnaire as a data tool. From the six big cities in Palestine, we surveyed 1000 banking consumers. The samples include different characteristics. For construct relationship analysis this study applied partial least squares (PLS). Findings The study framework provides a complete view of mobile banking services. This framework takes into consideration more determinants for prediction than other studies on the adoption of innovations. The results of using this model managed to clarify nearly 77.4 percent of the dependent variable (intention to adopt mobile banking service) variation. This is a much greater value than those of the previous studies. Moreover, this study found that the perceived risk has a negative effect on consumers’ intention to use mobile banking services. Attitude, facilitating conditions, perceived ease of use, website usability, and perceived trust were identified as the important variables that have a significant positive effect on the consumers’ intention to use mobile banking services in Palestine. Originality/value – the findings can be used by financial institutions and banks to enhance the usage rate of consumers’ adoption and to develop their strategies.

Effects of Perceived Risk and Subjective Norms on Internet Banking Adoption Amongst the Students of University of Kelaniya: A Multilevel Linear Model Analysis

Challenging technology advancements necessitate robust macroeconomic performance to support overall economic development. Within the service sector of the economy, one of the broadly studied areas of technological transformation is retail financial services; particularly consumer banking activities. Internet banking enables customers to experience a vast array of financial services through e-banking websites. Nonetheless, in practice; this phenomenon is contingent on the particular context. Hence, this research addresses the significance of subjective norms and perceived risk towards acceptance of consumer internet banking in the Sri Lankan context with special reference to private commercial banks. The sample was drawn from the students of the University of Kelaniya those who are participating in the weekend study programs. The students of the Doctor of Business Administration Course attached to the university were selected as enumerators for data collection. Data collected through self-administered questionnaires from the respondents. Initially, 400 questionnaires were distributed and 287 duly completed questionnaires were considered for the final data analysis. TAM has been extended using the subjective norms and perceived risk variables and dimensions of the variables were measured by a five-point Likert scale. Cronbach’s alpha was used to check reliability. To test the hypotheses, ANOVA, ANCOVA, and multilevel linear models were used. The empirical evidence supported three hypotheses indicating the significance of the variables/constructs on the adoption of internet banking. In conclusion, the authors have presented several suggestions for research studies, in time to come.

The Intention of Indonesian Muslims in Using Islamic Bank Based on Consumer Psychology Perspective

Islamic banking was born in Indonesia as a solution for the Indonesian Muslims to avoid the practice of interest in banking world. Seeing the number of Muslim which dominates by 82% in Indonesia while funding nominal of Islamic bank is still low when compared to conventional bank, through this research, the author raises the theme consumer psychology to analyze its influence on the intention of Indonesian Muslims to use Islamic bank funding product. Respondents in this research are Indonesian Muslims who are not customer of Islamic bank with a total of 450 respondents. Then the data collected was analyzed using Multiple Linear Regression model. The result shows that motivation, perception, learning, beliefe and attitude partially have an influence on the intention to use Islamic bank funding product, and then motivation, perception, learning, beliefe and attitude simultaneously have a significant influence on the intention to use Islamic bank funding product. The ability of independent variables in explaining dependent variable is equal to 69.7%. The conclusion of this research is in understanding banking consumer behavior, it can not only be seen from an economic perspective, but another perspective that needs to be directly targeted at feelings that will shape the patterns of consumer behavior, namely consumer psychology. Islamic banking must pay attention to consumer policies both in conducting products and in marketing their products. In addition, regulators also need to prioritize consumer psychology in policy making.

Digitalization of banking activities in the E-COMMERCE market: new opportunities for the development of the credit and financial sector at the present stage

The article analyzes the changed consumer preferences in the conditions of COVID-2019 coronavirus disease, and also defines the prospects and directions for further development of digital banking services in the e-commerce market. Proposals are formulated to increase the level of user satisfaction with digital banking services in the conditions of self-isolation in the e-commerce market. The social consequences in the banking sector should be reflected, accompanying the digital transformation, in the shifting points of consumer preference and banking services aimed at providing services. Ignoring these changes will inevitably lead to lost financial benefits for Russian banks in the e-commerce market, as well as the emergence of new non-banking players. The practical value lies in offering new niches for using digital banking services within the framework of changing customer preferences.

An Assessment of Consumer's Trust on Intention to Use Banking Services: The Moderating Role of Cultural Belief

The banking system played a crucial role in the economic growth. All sectors of any economies have grown under a solid banking system. However, the banking system in Yemen is facing many challenges that are hampering the country's development. This study attempts to discover the important factors that are influencing Yemenis to use the banking system’s services by investigating the relationship between the intention to use banking services and consumer’s trust, while cultural beliefs played moderator role between IV and DV. Questionnaire distributed to part time university students in seven cities in the country. Data was analysed by SmartPLS3, and the results showed trust significantly and positively influences university student's behavioral intention to use banking services. On the other hand, cultural belief was significant but in the negative direction. The study had a significant contribution to the academic understanding of the consumer's behavioral intention in the banking system in Yemen.

Актуальные проблемы рынка потребительского кредитования в России

The analysis of the development of the consumer credit market has shown that there are a number of problems associated with the growth of borrowers debt among the population. Accelerated growth in lending and reduced solvency of borrowers led to a steady decline in real incomes of citizens and the development of the non-banking financial sector. The authors set a goal to conduct a study of the relationship between the development of the consumer banking lending market and the solvency of the population. Based on the conducted research, the main factors influencing the growth of retail consumer lending and the solvency of citizens were identified. These factors include the development of the MFI market, the lack of credit monitoring by the banking sector, inappropriate provision of credit resources, and a steady decline in real incomes of the population. On the basis of comparative analysis, statistical, economic and mathematical methods, the dependencies between the current macroeconomic indicators were determined, which confirmed the assumptions about the falling solvency of Russian citizens and the unstable state of the banking sector. Applying the results of the current study will be effective for carrying out reforms in the field of monetary policy of the state and changes in the legislation regulating the activities of commercial banks and microfinance organization.

Cashless Policy and Consumer Protection: A Critical Appraisal of the Nigerian Cyber Laws

This article in discussing the transitioning of Nigeria to a cashless economy, considers the regulatory framework in place to protect consumers from cybercrimes that surfaced with the policy. A critical appraisal of the existing cyber laws in Nigeria showed consumers have been left in the loop, whilst the law has failed to effectively protect bank consumers from the onslaught of cybercrimes which accompanied the cashless policy. An analysis of the consumer protection framework especially those issued by the Central Bank of Nigeria revealed inadequate protective mechanism for consumers whilst the required standard for compliance by banks has been evasive. Amongst the recommendations given is the need to specify the standards required for banks for effective consumer protection while a specified body should be created to ensure strict compliance. This article concludes by emphasizing that even though a cashless economy is of immense benefit, there is need for banks to put appropriate infrastructures in place that will shield its consumers from cybercrimes and enhance consumer confidence in financial institutions generally. Keywords : Cashless Economy, Bank Customers, Cybercrimes, Cyber laws, Central Bank of Nigeria, Consumer Protection. DOI: 10.7176/JLPG/100-02 Publication date: August 31 st 2020

FATORES INFLUENCIADORES DO COMPORTAMENTO DO CONSUMIDOR DE MOBILE BANKING

Objetiva-se, neste artigo, analisar qual fator norteia o comportamento dos consumidores dos serviços de mobille banking. Dessa forma, o problema da pesquisa é: Qual fator norteador do comportamento do consumidor é mais visível nos usuários do serviço de mobile banking? Para isso foi necessário avaliar os fatores influenciadores do comportamento dos consumidores de mobile banking, os quais são: atitude comportamental, norma subjetiva e controle percebido que fazem parte da TCP decomposto. Ao desenvolver essa pesquisa fez-se a aplicação de questionários por meio do Microsoft formulários, com 167 usuários do mobile. O método de pesquisa utilizado foi dedutivo, de abordagem qualitativa e quantitativa, e aplicada pelo uso da escala Likert. A partir da pesquisa foi possível analisar informações dos respondentes com relação aos constructos aqui estudados, com isso observou-se que o fator atitude foi o que mais se destacou na intenção comportamental com relação aos outros fatores. Conclui-se que as pessoas são regidas por premissas que contribuem ao seu favorecimento, ou seja, ao seu desempenho e com base naquilo que irá reduzir seus esforços.