Retail Banking Research Articles

Discovering Latent Macroeconomic Effects in Peer-to-Peer Lending Data

Peer-to-peer (P2P) lending is a fast growing financial technology (FinTech) trend that is displacing traditional retail banking. Studies on P2P lending have focused on predicting individual interest rates or default probabilities. However, the relationship between aggregated P2P interest rates and the general economy will be of interest to investors and borrowers as the P2P credit market matures. We show that the variation in P2P interest rates across grade types is determined by three macroeconomic latent factors formed by Canonical Correlation Analysis (CCA)—macro default, investor uncertainty, and the fundamental value of the market. However, the variation in P2P interest rates across term types cannot be explained by the general economy.

The moderating role of high- and low-involvement product types on customer loyalty and satisfaction in banking: an Australian perspective

PurposeThe study aims to develop a holistic model identifying the constructs that impact customer loyalty in retail banking and introduce product type as a moderating variable to the model.Design/methodology/approachA conceptual model of customer loyalty is introduced and empirically tested with 416 valid samples obtained from Australian retail banking customers. The data were analysed using partial least squares structural equation modelling and multigroup analysis.FindingsThis study confirms the moderating effect of high- and low-involvement products on the relationship between customer loyalty and satisfaction, trust, service quality, commitment and perceived value. Surprisingly, the effect of satisfaction on loyalty was much stronger with low-involvement product types and the effect of commitment on loyalty was much stronger with customers who utilise high-involvement products.Research limitations/implicationsThe study uses a sample population in Australia who utilise one of the top four banks and investigates three product types. Further research could expand the product selection and include customers who use credit unions and other banks not in the top four categories.Originality/valueThis study is the first to confirm the moderating effect product type has on the customer loyalty relationship in retail banking in regard to high- and low-involvement product categories. The research provides a deeper understanding of the factors that influence customer loyalty and identifies which types of products influences customer loyalty the most. Additionally, this study highlights the importance of understanding the different needs and priorities of customers using different product types in order to effectively influence their loyalty.

Retail banking closures in the United Kingdom. Are neighbourhood characteristics associated with retail bank branch closures?

AbstractThe United Kingdom retail banking sector has been through many changes over the past decade, driven by economic, technological and pandemic factors. This is perhaps most evident through the rationalisation of the branch networks, primarily through branch closures. There is a concern that these closures can have differential effects on certain sections of society, reducing or eliminating their access to cash and financial services. In this study we utilise comprehensive branch‐level data and a discrete time‐hazard model to identify whether certain neighbourhood types have been disproportionally affected by these closures during the period 2015 to 2021. We find that building society branches are least likely to close, and that competition and the presence of alternative banking facilities (including Post Office branches) influence likelihood of closure. Crucially, neighbourhood type matters, with rural communities continuing to be most impacted, along with those where the predominant work activities are less concentrated, or largely absent. However, in contrast to earlier studies, we find that affluent neighbourhoods were more at risk of branch closure than more diverse and economically challenged neighbourhoods. We conclude by considering these findings in the context of recently introduced legislation to protect access to basic banking and cash withdrawal and deposit facilities.

The role of perceived quality of personal service in influencing trust and satisfaction with banks

Trust is of paramount importance to banks. Previous research has shown that trust increases with repeated personal contacts. We investigate if this applies to the customer-employee relationship in banks. Data from an on-line survey of 293 customers of Swedish retail banks are used to construct indicator measures. By means of structural equation modeling we find that trust in the bank is influenced by perceived quality of personal service through employees’ perceived competence, perceived benevolence, and perceived transparency, and that satisfaction with the bank is influenced by perceived quality of personal service through perceived competence, perceived benevolence, perceived transparency, and trust.

How do customer-related characteristics influence frontline bank employees' boundary spanning behaviors?

PurposeThis study investigated the influence of ambiguous customer expectations and customer demandingness, which reflect hindrance and challenge demands, on the boundary spanning behaviors (BSBs) of frontline bank employees (FBEs) through person-job fit and work engagement. It also examined the moderating effect of customer stewardship between job demands and work engagement.Design/methodology/approachData of 296 FBEs in the retail banking industry in the Republic of Korea were collected through an online survey and analyzed.FindingsAmbiguous customer expectations acted as hindrance demands and negatively affected FBEs' psychological process. Additionally, customer demandingness positively affected FBEs' psychological process as challenge demands. Moreover, person-job fit and work engagement improved the BSBs of FBEs as a psychological motivation process. Lastly, customer stewardship buffered the negative influence of ambiguous customer expectations on work engagement while strengthening the positive influence of customer demandingness on work engagement.Originality/valueThis study contributes to the marketing literature by presenting customer-related characteristics influencing the BSBs of FBEs and exploring the psychological response processes. First, this study presents empirical evidence that ambiguous customer expectations and customer demandingness play the role of hindrance and challenge demands, respectively. Second, it confirms that customer-related characteristics affect the BSBs of FBEs through psychological processes. Finally, it enriches the authors' understanding of customer stewardship as a job resource by exploring the role of customer stewardship in moderating the relationship between different types of job demands and work engagement.

Gender and bankarization in Spain, 1949–1970

This article analyzes an unexplored register of Spanish banks’ marketing material to document the access of women to the retail banking sector. In 1949 the Franco dictatorship deployed a Censorship Bureau to supervise all retail bank marketing. Initially this office was part of the Finance Ministry but in 1962 it was relocated to the Central Bank. Examination of this printed material allowed us to map a shift in bank strategies towards large-scale consumer banking, which we labelled ‘bankarization’. We identified three stages in this shift: (1) women appeared as passive clients; (2) steps taken by the banks to attract women as active customers, (3) the banks actively engaged in the recruitment of female customers. This research contributes to the history of marketing and the business history of banking, and sheds light on the intricate connection of the feminisation of retail banking.

Marketing During a Global Crisis in an Emerging Market: A Study of the Response to the COVID-19 Pandemic in the Retail Banking Sector

ABSTRACT This article investigates the challenges and opportunities for banks during the unexpected global crisis of the coronavirus pandemic and how they have developed innovative marketing strategies to retain existing customers while attracting new ones. It features a meticulous synthesis of primary and secondary data. Specifically, 24 semi-structured interviews and 1 focus group discussion were conducted, on the perspectives of both customers and banks. These were supported by data from Bloomberg and other secondary data. This article establishes that the COVID-19 pandemic has provided unique opportunities for banks to retain existing customers while attracting new ones. It highlights various activities that have helped banks improve their brand image, growth, profitability, and sustainability during the disaster. It identifies the critical elements of sustainability during the pandemic from the banks’ perspectives. It also demonstrates different customer expectations, including further reduction of interest rates on loans, extending loan repayment periods and implementing a COVID-19 sensitization campaign among the public. The study offers novel insights on the topic by demonstrating that there are inherent opportunities in such a global crisis, despite the associated challenges. In such a situation, banks must reposition their strategies to survive the crisis while supporting and attracting existing and prospective customers.

Phát triển dịch vụ ngân hàng bán lẻ tại Ngân hàng Nông nghiệp và Phát triển nông thôn - Chi nhánh tỉnh Đồng Nai

Based on the secondary data source collected from the State Bank of Agriculture and Rural Development - Dong Nai branch and based on the criteria for evaluating the development of retail banking services. The article assesses the current situation of developing retail banking services at Bank for Agriculture and Rural Development - branch in Dong Nai province. Research results show that in the period of 2020-2022, retail banking services at Dong Nai Bank for Agriculture and Rural Development’s branch have achieved certain results. Specifically, capital mobilization, retail lending and other retail activities such as card services, e-banking services, remittance services, domestic payment services, E-banking services, agency entrustment services have remarkable growth. Although certain results have been achieved, the development of retail banking services at the State Bank of Agriculture and Rural Development - Dong Nai branch still has certain limitations. On that basis, the article proposes some recommendations to contribute to the development of retail banking services at Bank of Agriculture and Rural Development - Dong Nai province branch.

Predicting the Use of Chatbots for Consumer Channel Selection in Multichannel Environments: An Exploratory Study

Online consumers are increasingly looking for more convenient ways to purchase products and services, and chatbots are becoming increasingly popular in multichannel environments due to their ability to provide an efficient service. In this context, managing digital complexity with the help of artificial intelligence and supporting decisions in a multichannel context is an appealing perspective for the retailer, who must find the right strategy to win and keep customers online. The present empirical study aims to better understand consumer behaviour in the multichannel environment in the context of four categories of products and services (retail banking, mobile communications, fashion, and consumer electronics) from the perspective of identifying determinants of channel selection when the consumer uses chatbots. Data were collected from 936 respondents with multichannel retail experience to conduct an empirical investigation on social media platforms, including Twitter, Facebook, and Instagram; these data were then analysed using structural equation modelling (SEM). We found that the online consumer’s multichannel behaviour was not only a reality in the field of broad purchasing decisions but already a norm, and consumers had good reasons to use more channels in the context of chatbots. Research results suggest that chatbots can represent a decision-making aid for managers in retail companies who want to develop an efficient and optimal logistics service strategy in multichannel environments.

Transitions of value creation from traditional media to social media architecture

This study aims to assess the relationship between service value (SV), interactive value (IV), customer experience (CX), customer engagement (CE), and customer loyalty (CL) in the context of social media (SM) for domestic retail bank customers in Malaysia. The value-attitude-behavior model was used as the theoretical framework. To test this hypothesis, a partial least square structural equation model was used to analyze data from 181 active customers of domestic retail banks’ SM platforms. The results of the analysis indicate that CX and CE have a direct effect on CL. The study also found that CX and CE mediate the relationship between IV and CL, as well as SV and CL. The results highlight the importance of using SM platforms for value creation beyond just social interaction and the significance of IV, CX, and CE in digital platforms. Results also suggest that additional resources should be allocated to manage activities on these platforms to ensure that bank personnel can effectively design their SM strategies.

Business model and ESG pillars: The impacts on banking default risk

The recent banks' failures have highlighted the importance of improving banking sector supervision, emphasizing the need to adopt a holistic approach to risk assessment based on an evaluation of a bank's business model (BBM) that combines financial (e.g., bank's balance data) and non-financial information (e.g., bank's ESG performance). In this study, we explore the joint effect of BBM and their environmental (ENV), social (SOC), and governance (GOV) pillars performance on banks' riskiness profile. The study uses a sample of 639 EU banks from 2013 to 2022 and applied a random effects model. Our findings suggest wholesale and retail banks could mitigate default risk, enhancing their ENV pillar performance. Differently, investment banks are encouraged to improve their governance best practices and structure to take advantage in terms of riskiness reduction. These results remain consistent after a series of robustness tests, including the 2SLS model and the Arellano coefficient estimation. Our paper offers practical implications for banking supervisory authorities and practitioners, encouraging to adopt a diversified ESG investment strategy according to bank-specific business models.

Digital Transformation in the New Zealand Retail Banking Sector: Challenges and Opportunities for Elderly Customers

<p style="text-align: justify;"><span style="font-family: 'times new roman', times, serif; font-size: 14pt;">This research focuses on the digital transformation of retail banking in New Zealand, focusing on the challenges and opportunities elderly customers face. The banking industry is undergoing unprecedented change as technology evolves and customer needs change. However, elderly customers face physical and security challenges associated with digital transformation and lower acceptance of new technologies. This paper analyses the characteristics and needs of elderly customers, investigates the different needs of elderly and young customers, and recommends relevant solutions and suggestions. This investigation is based on secondary data, and recently published articles from various sources were used to collect information. In the wave of digital transformation, banks not only need to strive to provide convenient, safe, and high-quality services, but also need to innovate continuously to meet the needs of all customers and enhance their trust and satisfaction. This report provides exclusive digital service suggestions and solutions to help banks better meet the needs of elderly customers.</span></p>

The effects of the theory of planned behaviour on the switching propensity of retail banking customers at different critical switching incidents

PurposeThe paper aims to explore the effects of the behavioural antecedents suggested by the theory of planned behaviour (TPB) (i.e. positive subjective norms, high perceived behavioural control and positive attitudes towards switching) on the switching propensity of retail banking customers at several critical switching incidents (CSIs) (i.e. events of unfavourable reputation concerning their current bank or favourable reputation concerning competitor banks, service failures, problems with charges and interest rates, herding behaviour, inconvenience, alternative banks' attractiveness and unethical bank practices).Design/methodology/approachA self-completed online survey was conducted among 324 Cypriot retail banking customers. For the data analysis, the researchers used principal component analysis (PCA), confirmatory factor analysis (CFA) and structural equation modelling (SEM).FindingsThe study revealed that the behavioural antecedents specified by TPB play different roles in various CSIs. Positive subjective norms may drive bank customers to switch at critical incidents such as: service failure, unfavourable bank reputation, alternative banks' attractiveness, inconvenience, favourable reputation of other banks and herding behaviour. High perceived behavioural control can lead to switching, only in the case of other banks' favourable reputation. Finally, positive attitudes towards switching may affect bank clients to switch in cases of service failure, unfavourable bank reputation, alternative attractiveness and inconvenience.Originality/valueTo the best of the authors' knowledge, no other previous research work has examined the interaction between the antecedents of switching behaviour (as specified by TPB) and switching propensity at different CSIs. The study addresses the gap of explaining the reasons for which, at similar incidents, some bank customers choose to switch to other banks, whereas others do not.

Emotional brand communication on social media to foster financial well-being

Through the lens of the emotional contagion theory, it is argued in this paper that retail banks’ brand communication strategies must enhance customers’ financial well-being in a bid to foster more engagement and create more trust. Financial well-being is even more important when customers experience hard economic times, as was the case during the period under review. To engage emotionally with customers in a digital environment devoid of real interaction, retail banks must be more aware of their emotional tone on social media by implementing a brand communication strategy that is more empathetic. Adopting an inductive qualitative research approach, this study assessed the emotional tone most evident in the Twitter corpora of seven South African retail banks’ social media brand communication during a pandemic, from a financial content marketing perspective. These banks were selected because they supply banking services to the general public, as opposed to corporations or other banks. In doing so, several data analysis tools were used to understand the context and the emotional tone characteristics embedded in the corpus, namely linguistic inquiry and word count, NVivo, and the social media analytics tool, Mention. While the retail banks’ financial content marketing initiatives focused on educating consumers about the banks’ products and services and how these may assist them to accomplish their financial objectives, the banks did so with an empathic approach and a positive emotional tone. This study contributes to the literature by highlighting the need for financial brands, particularly retail banks, to focus on a positive emotional tone in their social media brand communication strategies to enhance customers’ financial well-being, especially in developing countries. The findings also accentuate importance of understanding emotional contagion for effective financial content marketing.

A Model of Risk Management Strategy at Banks in their Operational Activities

By partnering with the business, the operational-risk discipline can create a more secure and profitable institution. Successful banks embrace risks while developing powerful mechanisms to prevent or manage risk and stay ahead. This study is devoted to the problems of improving the banking risk management, taking into account the new regulatory and technological requirements based on the use of modern technology and combining the latest achievements in numerical mathematics, statistics and information technology. Focusing on literature and by conducting a case study on operational risk management on one of largest retail banks, this paper aims on answering how operational risk management can be improved by implicating risk governance and internal control frameworks. It was concluded that although improvements have taken place in how operational risks are being managed, there is still room for improvements. An intersection of risk type and business/functional area of focus, prioritized based on the business environment is critical when fulfilling this life cycle of risk management activities. When too linear, the steps are not agile enough, so the cycle needs to be performed on a micro-level and aggregated for macro-level insights/risk decision-making. The suggested model outlines the understanding of the safe and prudent management of risks under the current prudential framework. It also demonstrates the ability of appropriate operations management techniques to reduce operational risk losses in the banking industry significantly.

Customers Loyalty in Malaysian Retail Bank Sector from the Perspective of Equity Theory and Expectation-Confirmation Model: A PLS-SEM and NCA Approach

Purpose: The retail banking market has witnessed substantial changes over the years due to new technological advancements, increased regulations, and the rise of digital channels. Meeting customer expectations stands out as a key challenge for sustainable growth of the industry. This examines the impact of service quality, customer knowledge management, and confirmation on customer satisfaction within the domestic retail banking sector. Furthermore, it seeks to explore the association between customer satisfaction and customer loyalty in retail banking.
 Design/Methodology/Approach: Self-administered questionnaires were distributed to retail banking customers in the Klang Valley using convenience and purposive sampling techniques. A total of 268 samples were obtained for data analysis with the Structural Equation Modelling (SEM) and Necessary Condition Analysis (NCA).
 Findings: The study’s results validated the strong connection between service quality, customer knowledge management, and confirmation with customer satisfaction in Malaysian retail banks. Additionally, customer satisfaction has significant impact on customer loyalty. The NCA outcomes further substantiate these findings, highlighting the significant role of customer knowledge management, service quality, and confirmation as significant factors affecting customer satisfaction in Malaysian retail banks.
 Implications/Originality/Value: This study offers valuable insights for academia to better understand this area as well as allows sector stakeholders to improve and sharpen their competitive edge in the market.

A Study on Customers Awareness about Retail Banking in Covid -19 Pandemic in Gujarat

The research is carried out to examine the customers’ awareness about banking during Covid -19 pandemic. Major three statements are insured to them in form of pilot study of the research. Whether the customers are ensuring better quality services and paying higher charges of banking during Covid -19 by the banks, they are supporting with computerised banking and do they believe in brand name of the banks they are banking with. An application of chi-square test is used to examine the results.

Banking in the metaverse: a new frontier for financial institutions

PurposeTechnological advancements have catalyzed disruption in the banking sector. The impact of the metaverse on the banking sector is no exception. In view of this, the current paper aims to provide valuable insights into four key areas (i.e. corporate banking, retail banking, banking employees and public policy) that the metaverse could significantly disrupt.Design/methodology/approachInsights into four key areas of the banking sector that the metaverse could significantly impact were gathered from various invited contributors.FindingsThe invited contributors first introduce the association between their respective key areas with the metaverse. Subsequently, the opportunities and challenges relevant to the key areas were identified. Finally, future research agendas were proposed for the attention of all relevant stakeholders.Originality/valueThe metaverse's impact on key areas of the banking sector is discussed in this paper. Following the metaverse's potentially wide application in the banking sector, insights from the invited contributions offer great value to the relevant stakeholders.

The impact of sales environment competitiveness on salespeople’s inclination towards unethical sales practices: The mediating role of self-control depletion and the moderating role of ethical leadership

The study aims to explore the relationship between the sales environment competitiveness and the tendency towards unethical sales practices among salespeople who work in a demanding sales environment. Drawing on the conservation of resources (COR) theory, this study proposes that the perceived sales environment competition leads to self-control depletion, which, in turn, increases the likelihood of unfair sales practices. The study also suggests that ethical leadership can mitigate the aforementioned relationships. Data were collected through self-reported questionnaires from 379 salespeople working in the retail banking sector of Pakistan, using a time-lagged research design and structural equation modelling for analysis. Findings reveal that an increase in perceived sales environment competition leads to a higher probability of unethical sales practices due to self-control depletion. Ethical leadership plays a crucial role in constraining the influence of the perceived sales environment competition on self-control depletion. The study contributes to the sales ethics literature by investigating unethical sales practices from the perspective of sales environment competitiveness in contrast to the prevailing research that largely emphasizes on organizational or individual-level factors. Practically, this study suggests organizational decision makers and managers to consider the influence of a demanding sales environment and the psychological mechanisms that incline salespeople towards unethical sales practices; they should then design the appropriate mechanisms to control this behaviour. For instance, this can be achieved by incentivizing ethical sales practices or fostering a strong ethical culture within the organization to internalize sales ethics. Moreover, this study recommends sales manager to maintain high ethical standards to prevent the negative effect of a competitive sales environment on the ethical behaviour of salespeople. JEL Classification: M50

Retail Banking Service Quality and Customer Loyalty: The Role of Trust and Commitment as Mediators

This research examines how service quality, trust, commitment, and loyalty are related in retail banking. The study proposes a model that includes trust and commitment as mediating factors between service quality, and bank loyalty. The researchers collected data from 271 participants and used a descriptive design and quantitative approach to analyse the data. The study utilized the PROCESS macro-Version 3.5 to conduct the mediation analysis. The results indicate that service quality in retail banking has a positive impact on customer trust and commitment, which, in turn, predict customer loyalty. The mediation analysis reveals that trust and commitment play a significant role in mediating the relationship between service quality and customer loyalty. Since the direct effect of service quality on loyalty remained significant after the intervention/mediation of trust and commitment in the model, the mediation is interpreted as partial mediation. Findings of the study do provide a marketing guide to banking professionals who design and implement banking solutions in the retail banking environment.