An efficient market relies on rational customers being willing to change suppliers when there’s good reason to do so. But what happens when customers stay put regardless? This issue is particularly acute in the banking industry.
Even when bank customers have a very good reason to switch, behavioural economics research shows they’re often reluctant to make the move. For example, big scandals that affect banks have a weak impact on consumer behaviour. However, there is a greater propensity to act among customers who are directly impacted.
Behavioural economics also shows bank customers are often slow to switch to take advantage of better offers from competitors. In 2016, the UK’s Competition and Markets Authority lamented that only “3% of personal and 4% of business customers switch to a different bank in any year” in the country. In 2013, Canstar suggested the figure is slightly higher in Australia at 5%.
For more on this story visit the following link: If scandals don’t make us switch banks, financial technology might