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Switching costs and the extent of potential competition in Brazilian banking

Author

Listed:
  • Mariana O. Silva

    (University of Sao Paulo, Brazil)

  • Claudio R. Lucinda

    (University of Sao Paulo, Brazil)

Abstract

Switching costs are a leading cause of customer lock-in in banking, reducing the extent of competition and increasing market power in this industry. This paper tries to estimate these costs using a methodology that does not require customer microdata. The estimates obtained here-using bank accounting information collected on a quarterly basis from 2009 to 2011-indicate substantial switching costs in the deposit market, and such costs tend to be lower for customers of larger banks. Additionally, there is some evidence that much of a bank's market share is due to its continued relationships with customers over time (a lock-in effect). Thus, the extent of potential competition in Brazilian banking could be severely limited by these costs

Suggested Citation

  • Mariana O. Silva & Claudio R. Lucinda, 2017. "Switching costs and the extent of potential competition in Brazilian banking," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(1), pages 117-128.
    • Handle: RePEc:anp:econom:v:18:y:2017:1:117_128
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    Cited by:

    1. Rizkiah, Siti K. & Disli, Mustafa & Salim, Kinan & Razak, Lutfi A., 2021. "Switching costs and bank competition: Evidence from dual banking economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    2. Miah, Mohammad Dulal & Kabir, Md. Nurul & Safiullah, Md, 2020. "Switching costs in Islamic banking: The impact on market power and financial stability," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).

    More about this item

    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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