Transient Customer Response to Data Breaches of Their Information
Sumit Agarwal, Pulak Ghosh, Tianyue Ruan, Yunqi Zhang
Abstract
Cybersecurity breaches pose a substantial concern in the digital era. We investigate how customers respond to multiple unexpected data breaches of their information in India. Difference-in-differences estimates show that digital payments declined by 9% relative to cash payments immediately after an unexpected data breach in a food delivery platform, but the gap disappeared three months later. Customer entry and exit also exhibit weak, short-lived changes. Additional analyses on bank and online grocery data breaches uncover even weaker effects of data breaches. Our findings imply that the perceived benefits of convenience outweigh the costs of payment security risks. This paper was accepted by David Sraer, finance. Funding: This work was supported by the MOE (Ministry of Education in China) Project of Humanities and Social Sciences [Project 20YJC790183], National University of Singapore [Start-Up Grant A-0003870-00-00], the National Natural Science Foundation of China [Grant 72150004], and the National Nature Science Foundation of China [Grant 72203112]. Supplemental Material: The online appendices and data are available at https://doi.org/10.1287/mnsc.2021.01335 .