The selection of a banking service provider by retail customers : the role of family influence

Abstract

Increasing competition for banks has made it even more important for such financial institutions to better understand and acknowledge what influences current and potential future consumers in making finance-related decisions, in particular the factors that influence the choice of a bank. This empirical study investigates whether family advice and recommendations influence bank selection and ultimately aims to answer the question: “To what degree is an individual inclined to select the same financial services provider as his family, close relative and friends, given their personal characteristics and preferences?”. Thus, this study sheds light on the importance of family influence in finance-related decisions by considering the responses of a sample of citizens over the age of 18 that employ the services of a local bank in Malta. Additionally, this study takes this research a step further and investigates whether there is a difference in personal preferences in bank-selection determinants (such as convenience, word of mouth, service quality etc.), between those individuals that emphasize family recommendations and those that do not. These aspects are tackled through a quantitative approach, where over two hundred responses to a circulated survey are analyzed. The findings of this study show that around 80% of respondents actually do have the same bank as their families and the most important characteristic that seems to explain this tendency is family orientation, that is how independent or not so independent an individual is in making finance-related decisions. Additionally, it transpired that the most important determinant in bank selection was convenience and technology. Having said this, there weren’t any discrepancies in determinants between those that selected the same bank as their family and those that did not. Given these results, it is suggested that banks take such aspects into consideration and apply them in future strategies so as to gain a competitive edge over other competing banks.