Impact of Security Events and Fraudulent Transactions on Customer Loyalty: A Field Study

Security and Privacy has become a dominant issue for both consumers and corporations. In this paper, we investigate how customer behavior is affected after they have been a victim of financial fraud. Our analysis provides insights into how security concerns affect the continuation of the existing relationship of the customers depending on kind of fraudulent transactions. With the data from one of the largest banks in the US, we show that the probability of ending the relationship in the next six months increases significantly after a fraudulent transaction. Furthermore, these results are validated by an increase in rate of terminating the relationship after a fraudulent event. We provide results with a detailed analysis including the kind of fraudulent transaction, tenure and location.