How to Create Customer Loyalty in the New Era of Open Banking and PSD2: A Case Study of Sparebanken Møre

Abstract

The purpose of this thesis is to investigate how banks can create customer loyalty in the new market context of Open Banking and PSD2.

Open Banking and PSD2 bring some fundamental changes to the industry, increasing competition by enabling new players to establish themselves and let customers share their account information. Consumers can freely choose to use third party suppliers to manage their finances or share bank information with competitive banks. The bank is therefore at risk of losing market share and seeing reduced profit margins. To address this issue, this thesis is built on a case study of Sparebanken Møre, a Norwegian savings bank that might soon be facing fierce competition from other actors in the Norwegian banking industry. By identifying adjustable variables decisive for customer loyalty creation, the paper may give managers at the bank insights regarding resource allocation to activities of great importance for future bank loyalty.

Based on previous theory, a loyalty model is developed. While Customer Loyalty is the ultimate dependent variable, Customer Satisfaction, Bank Image, Trust and Switching Costs act as loyalty drivers. Price and Service Quality act as antecedents of bank image and customer satisfaction. To capture the customers bank switching intention, two variables covering customers attitude towards PSD2 and Open Banking are included. Several control variables are also covered.

The findings of this thesis suggest customers’ perceptions of satisfaction and bank image to be the most important loyalty drivers for future bank loyalty. While customer satisfaction act as a fundamental foundation, bank image is important due to the opportunity of differentiation. Service quality, price and trust are important drivers with respect to satisfaction creation. For Bank image building, service quality seems the most important factor. However, also price should be considered. The creation of switching costs should be avoided. Further, we find trust to be the variable to receive the greatest negative impact from PSD2. The bank must therefore protect their customer relationships by providing a trusted bank experience also in the future.

By treating the now presented variables as a key success factors for the coming period of time, customer retention for the bank may be obtained, thus obtaining long-term goals.