Factors influencing customer switching behavior in Islamic banks: evidence from Kuwait

Abstract

Purpose

With increasing competition, Islamic banks in Kuwait are currently facing difficulties in retaining their customers as customers now have the option to switch from one bank to another. As the banking industry offers almost identical products and services, customers are more likely to change their bank when they get a better offer from another bank, especially if the customer is dissatisfied with the current bank. Thus, this study aims at identifying the most significant factors that make Islamic bank customers switch their bank.

Design/methodology/approach

The data for this study was collected through a survey with a response rate of 25.5%. Logistic regression was used to analyze the collected data and examine the effect of each factor on the customer switching behavior.

Findings

The results of empirical analysis reveal that the service convenience, service reliability, level of technology and Sharia compliance are the most significant factors influencing the customer switching behavior in Kuwaiti Islamic banks. Thus, Islamic bank managers should focus on these factors when building their strategies to increase their customer’s satisfaction and loyalty. Loyal customers are more profitable than new customers as they are more likely to use more services, spread a positive word of mouth and, more importantly, they are more likely to resist competitors’ offers.

Practical implications

Identifying and understanding these factors will enable Islamic bank managers to direct their efforts and resources to the most cost-effective ways that help them to retain their customers, and accordingly, increase bank profits.

Originality/value

To the best of the authors’ knowledge, this is the first study to examine the customer switching behavior in Kuwait, and one of the few to present a model that explains the stages through which customers pass until they reach the switching decision.

Citation

Ghamry, S. and Shamma, H.M. (2022), "Factors influencing customer switching behavior in Islamic banks: evidence from Kuwait", Journal of Islamic Marketing, Vol. 13 No. 3, pp. 688-716. https://doi.org/10.1108/JIMA-01-2020-0021