Trust in UK financial services: A longitudinal analysis

The role and importance of trust for the development and maintenance of relationships in the financial services sector cannot be disputed. In a business to consumer context, this article presents a model for measuring trust for financial services organisations and positions trustworthiness as its key antecedent. The work also presents five important determinants of trustworthiness and ultimately trust. Our work is based on 5 years’ data before and during the ‘credit crunch’, and across the seven main types of product provider in the United Kingdom. The findings show that the overall trust rating for financial services has remained remarkably stable throughout the period of the study. The research also reveals that trust ratings are highest in relation to consumers who are older and that consumers are typically more trusting of brokers than any other type of product provider.     

Trust in financial services: the influence of demographics and dispositional characteristics

So far, very little attention has been paid to examining consumer perceptions of trust from an interdisciplinary perspective. The purpose of this study is to examine how consumer trusting belief and disposition to trust within the financial services sector vary on the basis of individual demographic differences in trust. The research provides new insights into how consumers with higher dispositional trust have higher institutional trust and higher trusting belief and how consumers’ trusting belief significantly differs according to their demographic background in terms of age, marital status, ethnicity and gross annual income. The findings offer useful insights for the managers in financial institutions to carefully consider the impact of the influence of these individual differences on consumer behaviour in order to serve the needs of consumers in their target market and be able to design financial products and develop trust building strategies to attract and retain them. They also call for the action of the regulators and the financial institutions to play their part in building strong institutional systems that contribute to engendering higher levels of consumer trust.     

The magic of branding: The role of ‘pledge’, ‘turn’ and ‘prestige’ in fostering consumer trust in financial services

The purpose of this article is to study the impact of brand image on consumer trust through empirical investigation in the context of the financial services sector. While trust helps to bind consumers to brands, a strong brand image works like magic in reducing consumers’ risk perception and promoting trust. This study analyses how brand image influences consumers’ trusting intention through operationalising an interdisciplinary brand-trust model. Constructs and measures were drawn from interdisciplinary brand and trust literature and tested through employing EFA, CFA and structural equation modelling. Data were collected through a quantitative survey of 300 financial services consumers. Using the analogy of a magic trick, the study unveils the key role of financial services branding in engendering consumer trust in the ‘pledge’ or ‘prestige’ parts of the trick but not in the ‘turn’. The research contributes to the convergent and mutually inclusive theories of trust and branding as well as services marketing literature. For managers and policymakers in the financial services sector the findings will help them to effectively manage brand image and foster consumers’ trusting intention.     

Cognitive catalysts for distrust in financial services markets: An integrative review

The growing recognition for the role of trust in financial services transactions has become more evident since the global financial crisis. A dominant perspective arising from this recognition has been regarding the responsibility of financial services providers for the depletion of consumer trust in the financial services sector. However, the loss of trust that may result in many financial transactions can also be attributed to consumers’ own lack of discipline and poor knowledge of financial matters. In this article four cognitive phenomena that inhibit consumers’ information processing abilities and contribute to the depletion of trust in financial services transactions will be discussed. The responsibilities of marketers, regulators and educators in equipping consumers with the means to overcome these cognitive limitations in order to improve their financial decision quality are discussed.     

Trust in financial services: Impact of institutional trust and dispositional trust on trusting belief

Trust is important in strengthening the relationship bond between firms (trustees) and customers (trustors) generally and has been identified as having a particularly crucial role to play in the financial services sector given the damaging impact of recent turbulence and uncertainty on consumer confidence. This article reports on the findings of a study, which draws from the interdisciplinary convergent theories of trust to examine how two key constructs from this literature (that is, institutional trust and dispositional trust) influence consumers’ trusting belief about their main bank. Data was gathered through a survey distributed to a convenience sample of UK-based employees working for a large corporation. The findings highlight the importance of structural assurance and to a lesser extent situation normality on trust. Nevertheless consumers remain unconvinced that their main banks share the same values as their own and that their communications are absolutely transparent.     

Keeping informed during times of economic downturn: the trusted amateur as a preferred source of financial information

Service providers need to understand financial capability from the perspective of the older client, in order to deliver services best suited for this age group. This article explores how older people perceive one dimension of their financial capability—their ability to stay financially informed. Older people were found to be accessing less traditional sources of financial information: they are either selfreliant for information, researching on the internet or using the media, or they tap into existing sources of social capital found within their social networks. Trusted public and voluntary sector service providers are preferred information resources over and above professionals in financial services. These findings suggest financial services need to build trust and/or form partnerships with other trusted voluntary or public sector services.     

Relationship building in the financial services marketplace: The importance of personal selling

Radical changes have resulted in heightened consumer mobility and intense competition in the financial services industry. In order to create and maintain a competitive edge, today’s financial service firms must establish and maintain a highly integrative, customer-oriented sales culture based on building trust and relationship enhancement. Importantly, in the twenty-first century, financial service firms have to utilize technology effectively so as to provide easily understandable and usable employee and customer information. In this article, we suggest that traditional and non-traditional financial services firms will benefit from adopting technological methods from the direct selling industry. To this end, we offer managerial implications for successful implementation of technologically astute personal selling processes in the financial services marketplace.     

Online relationship marketing and affective customer commitment – The mediating role of trust

The pervasive use of information technology has implications for consumer relationship management among financial services organisations. There is a need for increased understanding of how digital channels might influence the development and maintenance of firm–customer relationships and in particular the role of the Internet upon commitment and trust outcomes. Thus, this research aims to determine the relationship between online relationship marketing practices and affective customer commitment, and how this relationship is mediated by online channel trust. Data were collected from 200 online retail bank customers and Structural Equation Modelling was used to test the impact of five key online relationship marketing practices on affective commitment, and how trust mediates these relationships. We found that advocacy and collaboration have a direct relationship with affective commitment, while trust mediates the influence of engagement and personalisation on affective commitment. The article highlights the significance of trust in technology when using online channels to build customer relationships.     

Electronic Finance: Reshaping the Financial Landscape Around the World

In recent years, the emergence of electronic finance—especially online banking and brokerage services, and new trading systems—has reshaped the financial landscape around the world. This paper reviews these developments and finds that they are greatly impacting the structure of and competition in financial services industries and will have a large impact on incumbents. Its assessment of how e-finance, and globalization more generally, affects countries highlights the need for changes in four financial sector policy areas—safety and soundness, competition policy, consumer and investor protection, and global public policies—to mitigate risks and reap as much as possible the potential benefits of e-finance.     

Consumer responses to dissatisfaction with financial service providers: An exploration of why some stay while others switch

In spite of research suggesting that services elicit greater dissatisfaction than products, service dissatisfaction has been less widely researched than product dissatisfaction. Although responses to dissatisfaction such as exit and voice have been investigated, the loyalty response to dissatisfaction has been largely overlooked. To begin to address this discrepancy, this paper relates a preliminary research study into customer dissatisfaction and loyalty with financial services. Research was conducted in two phases to explore dissatisfying experiences and consumer decisions to switch or stay with the current provider. The study finds that the most commonly cited reason for staying with a financial services provider is the perceived costs involved in switching or, putting it more colloquially, ‘the hassle factor’. Differences between customers who stay and switch are also revealed in the study.     

‘On-brand banking’: An examination of the factors contributing to effective branding and brand development through direct marketing in the consumer financial services sector

The services sector now accounts for more than two-thirds of GNP in the UK and yet much of the work on branding is based on fast-moving consumer goods. This paper presents key factors for effective brand and brand loyalty building in financial services direct marketing and examines why these success factors may be missing from most financial services direct mail. The issues are examined here from a direct marketing (DM) agency and DM brand experts' perspective. Key objectives for successful branding in financial services direct marketing emerge. Barriers believed to be preventing the consumer financial services sector from using the direct marketing medium to its full brand-building potential are reported and recommendations are made for overcoming some of these problems.     

Consumer trust and confidence in the compliance of Islamic banks

Islamic banks compete with traditional (non-Islamic) banks for customers. This article aims to provide insight into why some Muslims choose to bank with Islamic banks in Pakistan, while others do not. Specifically, it addresses the questions: to what extent are trust and confidence active influencers in the decision-making process, are they differentiated or are they one of the same? Also how does the Pakistani collective cultural context further complicate the application of these concepts? For the purposes of this article trust refers to people and their interpersonal or social relations whereas confidence concerns institutions such as banks. Drawing on interviews with Muslim consumers in Pakistan, this study provides further insight into consumer behaviour within financial services and specifically Islamic banking and contributes to our theoretical understanding of the concepts of trust and confidence.     

The influence of marketing communications strategy on consumer purchasing behaviour in the financial services industry in an emerging economy

The financial services sector is characterised by a high level of consumer perceived risk and irrational behaviour in decision-making, which is predominantly influenced by the effect of communication and the application of heuristics as a function of communication in consumer decision-making. This situation promotes marketing communication as one of the most essential activities that financial institutions rely on to mitigate the perceived risks and to satisfy consumers’ quest in understanding financial products. Hence the importance of this research is to establish the effects of marketing communication on consumer purchasing behaviour in emerging economies that are experiencing expanded financial markets but limited corresponding research insight. To achieve the aim of this study, the research uses data from 360 customers of selected financial institutions in Ghana. The hypotheses are tested using the structural equations modelling technique. The results of the study reveal marketing communication strategies evaluated have positive and significant impacts on consumer purchase behaviour. However, amongst the marketing communication strategies tested advertising and celebrity endorsement were found to have an insignificant relationship with consumer purchase behaviour. The study offers practical and theoretical insights into understanding the dynamics and nuances of the integrated marketing communication mix and how they influence the purchase behaviours of consumers.

     

An integrative model of installed online trust in the financial services industry

Trust is crucial for any long-term consumer–vendor relationship. It is a central component in many traditional and electronic commercial activities. Studies to date have mostly examined the antecedents that influence initial online trust (new customers), neglecting installed trust in the online company. Thus, the purpose of this article is to test an integrative model of installed online trust in the financial services industry. An online survey conducted with 476 panel members reveals that three website features, namely, design, perceived security/privacy and information quality, as well as quality of support (relationship characteristic), positively affect installed online trust. Findings show that unlike for initial online trust, reputation (company characteristic) does not influence installed online trust. The study also confirmed that installed online trust influences the four levels of loyalty (cognitive, affective, conative and behavioural). Some practical implications are provided.     

Electronic banking in Finland: Consumer beliefs and reactions to a new delivery channel

The increasing turbulence in the financial service industry sector since the mid-1990s has created a whole new delivery channel for banking: Internet banking. The purpose of this paper is to describe the current state of Internet banking in Finland and to study consumer perceptions, beliefs and reactions to electronic banking in general and Internet banking in particular. The results of this study indicate that bank managers can, by knowing the basic beliefs consumers hold about Internet banking, create more effective customer communication, improve software and target prospects better concerning Internet banking. There is wide agreement that Internet banking will on the one hand have a great impact on the whole bank market, and on the other hand will be considered the most important retail banking delivery channel in the near future. A total of 3,000 questionnaires was prepared and sent to MeritaNordbanken customers in Finland. Using a mailed questionnaire with a response rate of 38.9 per cent, it was found that 40 per cent of the Finnish consumers who responded to this survey were already using Internet banking services. The results of this study provide interesting additions to knowledge of electronic banking and consumer behaviour.     

IMF-related announcements and stock market returns: Evidence from financial and non-financial sectors in Indonesia,Korea, and Thailand

We examine the changes in daily financial sector stock returns in Indonesia, Korea, and Thailand in response to IMF-related news during the Asian crisis and compare them with those in non-financial sectors. We find that news of both program negotiations and approval increased financial sector returns in Indonesia and Korea, whereas only program approval is associated with higher returns in the financial sector in Thailand. Sectors such as cyclical consumer goods and non-cyclical services experienced higher returns in Thailand and Indonesia, while almost all sectors enjoyed higher returns in South Korea. We interpret the empirical results based on the characteristics of corporate governance and industrial development policies in these countries.     

The location of financial sector FDI: Tax and regulation policy

This paper analyzes how corporate taxation and regulatory requirements affect the location of financial sector FDI. We use novel information on new financial services entities established by multinational firms in 83 host countries. We find a negative effect of host country taxes on the probability of choosing a particular host location. We can also confirm a significant influence of the regulatory environment. For example, stricter (equity) capital requirements negatively affect location probabilities. Our empirical approach allows us to provide new insight in how a policy measure of a given country affects other countries by estimating cross-country tax and regulation elasticities.     

Should a financial service provider care about trust? An empirical study of retail saving and investment allocations

Motivated by evidence of low trust for financial service providers, this study turns to scholarship on trust, which suggests that trust influences individuals' risk-taking. The study asks whether a financial service provider that is highly trusted, and with saving propositions across the risk continuum, has more success with risk-based savings than risk-free savings compared to an industry average, or overall situation? A number of theoretical expectations are empirically confirmed. Findings indicate that a provider not perceived as highly trusted may have difficulty selling risk-based products. Secondly, trust appears to be a form of competitive advantage in that it encourages more assets in risk-based products on which higher fees are earned. This highlights the importance of qualitative factors both in profitability and as unique selling points, and suggests possible strategic pathways for managers when allocating scarce resources to build firm strengths.     

The distance marketing of consumer financial services directive

The EU directive on the distance marketing of consumer financial services (the DMD) was adopted in September 2002 bringing financial services in line with other retail sectors. This paper begins with an analysis of the principal substantive provisions of the DMD before considering the obligations it places on member states to ensure its substantive provisions are enforceable in national law and that an adequate system of redress is available to consumers. The paper then summarises the path taken by the DMD through the European legislative machine and analyses how the DMD will facilitate the integration of a European single market in financial services while striking an essential balance between the rights of the consumer and the rights of financial services providers. In the final part, consideration is given to how the DMD will be implemented by member states. In particular, attention is directed to the overall impact the DMD is likely to have on the marketing of financial services in the UK and how HM Treasury and the Financial Services Authority aim to harmonise domestic law with the DMD.     

General insurance marketing: A review and future research agenda

The financial services sector is a huge and diverse industry comprising many different forms of organisations and product offerings. Yet, a review of past papers in the Journal of Financial Services Marketing (JFSM) reveals a heavy bias towards articles on banking, to the neglect of other equally important financial services categories. The purpose of this article is to address this imbalance and to call for more research to be conducted in a wider range of financial services categories. In particular, general insurance is singled out as a category worthy of further research. Looking to the past, this article reviews research published to-date on general insurance in the JFSM to establish a benchmark and explore theoretical contributions. Attention is then turned to the future to identify a research agenda for the general insurance sector going forward. Five important themes are identified: trust, transparency and simplification, technology, HNW, and Takaful.