:Abstract
We utilize the universe of consumer bank accounts in Israel and a unique nationwide digital reform that substantially reduced the time and effort required for some customers to transfer their financial activity between banks. Employing a difference-in-differences methodology, we find that this reduction in switching costs led to a significant increase in customer mobility. The reform more than doubled the annual probability of bank switching, increasing it from 0.6% to approximately 1.4%. The effect is persistent and cannot be attributed to a temporary increase in customer attention. These findings provide new evidence on switching frictions in retail banking and highlight how digital transformation can reshape customer behavior, with important implications for competition, financial stability, and bank business models.
JEL Classification Codes: G21, G28, G51
Keywords: bank switching, switching costs, regulatory reform, digital banking, deposits.