The bank switching behaviour of Singapore’s graduates

The bank switching behaviour of Singapore’s graduates


The interest that academics and practitioners have shown in the theme of consumers and their bank switching behaviour grew during the 1990s. This interest has developed along various strands. Some researchers, such as Reichheld and Kenny (1990), Reichheld and Sasser (1990), Carroll (1991/92), Reichheld (1991/92), Carroll and Rose (1993), Reichheld and Aspinall (1993/94) and Colgate et al. (1996), have investigated the financial impact that switching has on the banks involved. Researchers, such as Bosch (1993), Colgate (1994), Siles et al. (1994), Reichheld (1996) and Colgate et al. (1996) have established the reasons that have caused a bank switch and/or could cause a future bank switch to take place. Lewis (1982), Fry et al. (1973), Lewis and Bingham (1991), Siles et al. (1994) and O’Dea (1995) have established which demographic sub-groups have switched to a greater extent than their counterparts. Stewart (1998) has designed a model of what she called ‘consumer exit in retail banking’. One component of her model relates to the reason or reasons that ‘precipitated’ a bank switch.

The study of Susan Keaveney (1995) is considered to be a major step forward in gaining an understanding of switching between service providers. This study investigated switching between an array of service providers and developed a general model of switching in the services industry.

The authors set out to develop a model of bank switching using the principles established by Keaveney (1995) in order to expand the knowledge of consumer switching between service providers. Banks were chosen as a specific type of service provider to study for a number of reasons, but mainly because most consumers, especially in the developed and newly industrialised countries, have a bank relationship. Graduates were chosen as the specific type of customer to study, as it is most likely that all of them would have a bank relationship. Furthermore, due to the meritocracy system that operates in Singapore, graduates tend to be better paid than non-graduates and have more progressive careers. As graduates pass through their life cycles, they should be seen as users of a relatively wider range of financial services in comparison with their non-graduate counterparts. If graduate customers were lost to competitor banks, the future interest and fee income they would have generated would also be lost. Knowing why graduate customers defect would enable banks to design appropriate marketing strategies which aim to retain such customers and benefit from the future income that they would generate.

The purpose of this study is to design and test a model of bank switching on a sample of Singapore’s graduates. The paper also seeks to establish if certain demographic characteristics of graduates distinguish those who have switched banks from their counterparts.

This paper first describes and appraises a general model of switching before illustrating how it was modified so that it was appropriate for bank switching. The research design illustrates how this study was carried out among Singapore’s graduates, while the results and implications highlight how the model might be used for further studies in the financial services sector.