Bank customers who experience fraud are more likely to stay with their institutions if the bank is able to identify the perpetrator, according to a recent study by researchers from Notre Dame and Carnegie Mellon universities.
The researchers examined customer data from a major U.S. bank over five years. They found that a lack of clear answers from the bank about the fraud made victims much more likely to leave the institution than customers who did not experience fraud, according to a Notre Dame press release. However, when a bank identifies the fraudster, 62% fewer victims leave compared to customers who never experienced fraud.
Vamsi Kanuri, co-author of the paper and an associate professor of marketing at Notre Dame, said the researchers initially suspected that fraud would harm a customer’s relationship with the bank even if the fraud was resolved.
“After all, fraud is a serious violation of trust, and you would think it would automatically push customers closer to the exit,” he said. “Yet we show the opposite in cases of correct attribution: Not only do customers stay, but they also display higher levels of loyalty than those untouched by fraud. This is a real-world demonstration of the service recovery paradox, where effective handling of a failure can make customers more loyal than if no problem had occurred.”
