Bank's service failures and bank customers' switching behavior: does bank reputation matter?

Abstract

Purpose

Banks' service failures are a major determinant of bank customers' switching behavior, which ultimately affects the profitability and stability of banks. Guided by the expectancy violation theory (EVT), this study aims to examine whether and how bank reputation influences the relationship between service failure and customers' switching behavior in the Malaysian banking industry.

Design/methodology/approach

By distributing questionnaires to Malaysian bank account holders, the authors gathered 320 usable responses, which were subsequently subjected to explanatory factor analysis, confirmatory factor analysis, Logit regression, Probit regression and independent-variables T-test to identify and elucidate the relationship existent between the dependent and independent variables.

Findings

This study discovered that bank reputation affects the bank customers' switching behavior directly and indirectly via banks' service failure, thereby verifying the application of EVT in the context of customer management.

Research limitations/implications

Although the profile of respondents in this study presents a reasonable representation of the Malaysian population, the use of convenience (non-probability) sampling method via online survey may not provide generalizable results.

Originality/value

This study empirically revealed that bank reputation plays a moderator role between service failure in banks and customers' bank-switching behavior. This observation offers useful insights to bank managers into the role of bank reputation in managing customers' switching behavior.

Citation

Zhao, C., Noman, A.H.M. and Hassan, M.K. (2023), "Bank's service failures and bank customers' switching behavior: does bank reputation matter?", International Journal of Bank Marketing, Vol. 41 No. 3, pp. 550-571. https://doi.org/10.1108/IJBM-07-2022-0287