Finance and Economics Discussion Series (FEDS)
October 2002
Household Switching Behavior at Depository Institutions: Evidence from Survey Data
Abstract:
Understanding household deposit relationships is central to the analysis of competition and the application of merger policy in banking. This article presents descriptive findings from new survey data on households' decisions to change or remain with their providers of checking or savings accounts. The data show that the distribution of household tenure is wide, and that about a third of households have never changed depository institutions. The primary reason reported for changing banks is a household relocation; other reasons are customer service and price factors. Customer service and location are the most frequently cited reasons for remaining with a bank. The importance of location and mobility supports previous survey evidence that the local area is the appropriate market for competitive analysis in banking. The findings presented here are consistent with earlier studies showing that population migration increases competitive pressure on firms and therefore should mitigate the anticompetitive effects of bank mergers.
Keywords: Switching costs, banking, mergers
PDF: Full Paper
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