Impact of customers' digital banking adoption on hidden defection: A combined analytical–empirical approach

Abstract

The implementation of digital channels as avenues for economic transactions (e.g., online and mobile banking/FinTech) has shifted the paradigm of customer–bank interactions, providing unprecedented opportunities for both parties. The prevailing belief is that digital banking has several advantages, such as lower costs and higher information transferability for customers. These benefits can also promote competition between banks given customers' predilection for “multi‐homing,” or engagement with multiple banks. This study investigated the impact of customers' digital banking adoption on hidden defection, in which customers purchase financial products from competing banks instead of their primary banks. To this end, we developed an analytical model to provide insights into the effects of digital banking adoption while taking customers' multi‐homing behaviors into consideration. We then conducted a series of empirical analyses using comprehensive individual‐level transaction data to provide evidence of hidden defection. Our findings indicate that customers with higher loyalty exhibit greater hidden defection after digital banking adoption. Customers who engage primarily with personal‐service channels (e.g., branches) show stronger hidden defection than do self‐service channel (e.g., ATMs) users, and this effect is more prevalent among loyal customers. Our results provide valuable implications for omni‐channel services in a market characterized by multi‐homing behavior of customers.

Internet and mobile banking: the role of engagement and experience on satisfaction and loyalty

“…New communication technologies allowed for the rapid advancement of digital banking service channels and became responsible for the emergence of new products and services, benefiting banks and customers with agility, ease and cost reduction (Romanova et al, 2018;Son et al, 2019). These same new technologies have made it easier for customers to access new banking service providers, and it is now more common to have relationships with more than one bank, being able to easily choose where to execute their financial transactions (Son et al, 2019).…”

Mobile banking services quality and its impact on customer satisfaction of Indonesian Islamic banks

“…Consequently, the above phenomenon forms an intense competition among Islamic bank institutions (Suhartanto et al, 2019), and changes customers' points of view of service quality presented by banks (Son et al, 2019). Moreover, Saptasari & Aji (2020) discovered that perceived quality play a prominent role in shaping customer satisfaction towards Islamic bank in Indonesia.…”

Satisfying consumers all around: a multidisciplinary view of omnichannel retail

“…branch visits) users, compared with self-service channel (e.g. ATM, phone banking) users (Son et al, 2020). Second, omnichannel retail indirectly improves consumer loyalty through increasing product satisfaction (Gallino et al, 2017).…”

“…Current studies have suggested some opportunities regarding marketing in omnichannel research (Fisher et al, 2019;Luo et al, 2020;Son et al, 2020;Song et al, 2020;Valentini et al, 2020). The first direction is to use data at a finer level to understand the mechanisms of omnichannel consumer behaviors induced by omnichannel practices.…”

“…For example, Song et al (2020) calls for further examination into how the BOPS usage leads to an increase in online and offline spending based on richer dataset. Son et al (2020) pointed that finer level data would explain how hidden defection happens after digital banking adoption. Fisher et al (2019) proposed that incorporating social network data would allow examination on how the open of a distribution center for the online channel increases offline sales.…”