Munich Personal RePEc Archive

Building a Habit: How Initial Saving Activity Predicts Long-term Account Engagement

Mirpourian, Mehrdad (2020): Building a Habit: How Initial Saving Activity Predicts Long-term Account Engagement.

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Abstract

In this paper, time-to-event analysis is used to predict the risk of dormancy within financial institution accounts. The hypothesis tested was that a customer’s behavior in the first month of account ownership holds clues to future dormancy, an idea supported by behavioral science literature. In many situations, the initial behavior of an individual can predict future behavior. Individual-level transaction data on a group of customers from one of the largest microfinance banks in Mexico was used to conduct a survival analysis using the Stratified Cox model. While adjusting for two other financial indicators, the team studied frequency of account usage during the first month after account opening and found that customers who use their account more often during that first month have a significantly lower risk of account dormancy than their counterparts.

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