Switching costs and the extent of potential competition in Brazilian banking

Switching Costs in the Finnish Retail Deposit Market

“…However, since I do not know the distribution of customers across different service packages, the "average fee" assumption used in this study is a natural starting point. Furthermore, switching costs per account balance reported in this study are in line with the ones in Shy (2002) and lower than in Silva and Lucinda (2017), supporting the meaningfulness of the estimated costs. Also, it is comforting that the increase in switching costs appears to be matched by an equal reduction in the average mortgage margin.…”

“…Silva and Lucinda (2017) use a different method -the one developed by Kim et al (2003) -to estimate switching costs in the Brazilian deposit markets. In the most comparable set up to mine, Silva and Lucinda (2017) report that switching costs faced by the depositors of the largest Brazilian banks range from 26% to 30% relative to average deposit account balance, which is even a higher figure than here.…”

“…Their method uses bank accounting data, and is applied to deposit markets at least by Silva and Lucinda (2017). Silva and Lucinda (2017) report even higher estimates of switching costs relative to deposit account balance than in this study.…”

The impact of the financial transaction tax on the liquidity premium of retail customers’ bank deposits

“…According to the traditional view, the analytical methods created for corporate clients based on symmetric information focusing on the effi ciency of production may also be applied to the banking sector. Whereas in models focusing on bank's market position, banks intentionally keep the transfer costs at a relatively high level distorting the savings and investment decision of the lenders and creditors [Várhegyi, 2003;Silva, Lucindab, 2017]. Costs deriving from the lack of competition emerge as social (welfare) loss, which may add up to a considerable amount [Oxenstiema, 1999].…”