Trust in financial services: Retrospect and prospect

Fostering and maintaining high levels of trust in the financial services sector is seen as crucial because of the characteristics of many financial service and in order to promote consumer engagement in the sector. In this article, we report evidence from a body of work and other commentary to provide an insight into trends in consumer trust in the sector as a whole, in comparison with other organisations and how different types of financial services provider have performed relative to each other. We show that the financial services sector as a whole is trusted more than some comparator institutions, and that aggregate levels of trust in the sector have fluctuated a relatively small amount subsequent to the financial crisis. However, important differences between provider types are apparent and these differences have become more profound in the recent past. We provide suggestions as to how trust in the sector may be improved and provider an analysis of current initiatives to improve trust levels in the sector in general and in banking in particular.     

Comparison websites in UK retail financial services

Comparison websites have become a fundamental part of UK retail financial services. These websites appeal to both buyers and sellers. They offer buyers the ability to enter their details once and then quickly compare a range of products, usually ordered by price. For sellers, they offer a supply of potential customers who have refined their needs through the comparison process, and are thus more likely to complete a purchase. This paper analyses the role of comparison websites, drawing on case studies from three major providers of UK financial services comparisons. The paper also analyses the criticisms made of comparison websites, draws out implications for practitioners and consumers and outlines areas for future research.     

The distance marketing of financial services — A UK overview

This paper begins with an analysis of how the Distance Marketing of Consumer Financial Services Directive has been implemented in the UK under English law and its key provisions. The paper then progresses into the fields of the E-Commerce Regulations, the Privacy and Electronic Communications (EC Directive) Regulations 2003 and data protection issues. Overall, the paper provides an overview of the legislative framework that must be complied with in order, successfully and legally, to market financial services to consumers at a distance.     

Interest rate clustering in UK financial services markets

This study forwards an explanation and empirical investigation of price clustering in retail banking markets. It is proposed that price or interest rate clustering forms in retail markets as firms wish to maximise returns from customers, some of whom have difficulties in recalling and processing price information. This theory is developed and tested using a dataset of retail interest rates from the UK which enables interest rate clustering to be viewed in both lending and investment markets, and at different levels of financial involvement. It is found that interest rate clustering occurs in a manner consistent with firms maximising returns from customers. These findings are viewed to be a key policy concern for financial regulators and firms concerned with consumer protection.     

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.     

Postcards from the Front: Changing narratives in UK financial services

This paper seeks to explore the methodological difficulties that confront those who would seek to explain, to account for and to intervene in social affairs. Noting the predominance of ‘behaviourist’ and ‘cognitivist’ accounts of the change process and the, recent, development of ‘narrative’ alternatives we reflect upon the craft of academic writing and upon the creative choices that fabricate our worlds and our understanding. Taking the Financial Services Authority (FSA) as our example we attempt to reveal the manner in which particular authorial strategies, that remain submerged with ‘behaviourist’ and ‘cognitivist’ accounts of change, precipitate distinctive forms of policy and action in the arena of financial services. Yet we also suggest that ‘narrative’ accounts of change, which base their authority on primary research, similarly, tend to downplay the political and poetical choices that shape their elaborations because they portray ‘context’ as natural and self-evident. By revealing the authorial strategies that shape our appreciation of ‘context’ and the organized world, more generally, we hope to encourage further reflection on the application of narrative approaches, and so, further discussion of the regulation of financial services. Through such analytical processes we aim to precipitate a ‘reciprocal’ appreciation of the problems associated with accounting for the lives and experiences of others.     

Brand positioning in financial services: A longitudinal test to find the best brand position

Brand positioning is a core activity of most marketing departments. In this paper, the relationship between six different positions and customer vulnerability is tested over time in the business financial services market. Two particular attributes relating to fees and charges and relationship/service were found to have strong relationships with customer vulnerability, both across brands and over time. This research suggests that the ’better‘ brand positions, as defined here, can be common across brands. Therefore, marketing managers of financial services should perhaps not be striving for a unique position for the brand, but aim for distinctiveness in the way the position is communicated. Research techniques to identify ’better‘ positions should also not assume that these ’better‘ positions will be those that differentiate between brands.     

Customer value analysis in financial services

This study investigates what creates value for customers and how providers can improve value for their customers. A comprehensive analytical model with a four-step approach is presented and applied in the field of financial services. In a first step, the main customer value drivers are identified and five value dimensions are derived, based on qualitative interviews with customers. These results are then compared to value assumptions made by customer-contact employees, and gaps between customer and employee perceptions are analysed. Based on these identified gaps, a multitude of implications for managing company customer value at the normative, strategic, and operational level of management are derived, and finally implications of findings for service marketing practice and research 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.     

Multiple channel structures in financial services: A framework

The use of multiple channels is probably the most common distribution strategy nowadays. Surprisingly, the determinants of this strategy remain largely unexplored. This paper aims to address the problem by elaborating on the configuration of a multiple channel strategy. A framework is proposed that attempts to elaborate on the entire channel mix decision starting with the factors that influence and constrain the choice of channels, and finishing with key outcomes of a channel mix. It is proposed that a multiple channel structure should be thought of along three dimensions or properties: number of channels; channel integration; and extent of customer contact afforded by the channel mix. The relationships between these properties of a mix of channels and the performance of the channel, measured by sales and costs, control and flexibility is discussed. It is hoped the framework will be useful to channel managers and researchers alike. Directions for future research are developed.     

The social scientific turn in UK financial accounting research: A philosophical and sociological analysis

The demise of the classical programme of financial accounting research is generally represented as a progressive development. This paper argues that the academy's abandonment of classical methods was justified neither by the fruitfulness of post‐classical programmes nor by their incontestable epistemological superiority. Rather, what occurred was a turn to mainstream social science, reflecting sociological characteristics of the UK financial accounting research community. The paper concludes with a call for a revival of the classical programme.     

An analysis of financial services brand marks

This study analyses brand mark clusters used by companies in the financial services categories of the Fortune 1000. The brand marks are assessed against the normative criteria for effective brand mark design found in the marketing literature. Despite the existence of several well-designed brand mark clusters within the sample, results show a low level of adherence to the normative criteria overall. A low proportion of the brand mark clusters exhibit symbols representative of brand benefits, integrative features such as interactive images, and benefit slogan taglines.     

Economies of scope in financial services: A DEA efficiency analysis of the US insurance industry

This paper investigates economies of scope in the US insurance industry over the period 1993–2006. We test the conglomeration hypothesis, which holds that firms can optimize by diversifying across businesses, versus the strategic focus hypothesis, which holds that firms optimize by focusing on core businesses. We analyze whether it is advantageous for insurers to offer both life-health and property-liability insurance or to specialize in one major industry segment. We estimate cost, revenue, and profit efficiency utilizing data envelopment analysis (DEA) and test for scope economies by regressing efficiency scores on control variables and an indicator for strategic focus. Property-liability insurers realize cost scope economies, but they are more than offset by revenue scope diseconomies. Life-health insurers realize both cost and revenue scope diseconomies. Hence, strategic focus is superior to conglomeration in the insurance industry.     

Earnings management and firm financial motives: A financial investigation of UK listed firms

This study focuses on the investigation of motives for and characteristics of UK firms that engage in earnings management activities. It concentrates particularly on the provision of voluntary accounting disclosures, the violation of debt covenants, management compensation, and on the equity and debt capital needs of firms and their relation with the use of earnings management. The study examines also the earnings management inclination of firms that seek to meet or exceed financial analysts' forecasts. The findings generally indicate that firms with low profitability and high leverage measures are likely to use earnings management. Also, firms that are in equity and debt capital need and are close to debt covenant violation also appear to be inclined to employ earnings management practices. Likewise, firms tend to use earnings management to improve their financial numbers and subsequently reinforce their compensation and meet and/or exceed financial analysts' earnings forecasts. In contrast, the study shows that firms that provide voluntary accounting disclosures appear to be less inclined to make use of earnings management.     

A content analysis of financial services magazine print ads: Are they reaching women?

The financial services industry has undergone what can only be called a ‘transformation’ over the last 25 years. Deregulation has increased competition in all sectors. Thus, firms must understand the needs of their customers. The number of women as financial services decision makers has been rapidly growing, and it is estimated that within 15 years women will represent over 65 per cent of top wealth-holders. This study looks at how the financial services industry communicates with potential women customers through print advertising. The most frequently used appeals when advertising in women's magazines are similar to those used in men's magazines, but they differ from those used in general magazines. Surprisingly, advertisers, however, do not seem to tailor their ads differently to women than to men, despite evidence that women respond to different approaches.     

International investment in financial services

This paper analyzes and models the significant components of international trade in financial services, namely, foreign direct investment in banking for the US, the UK and Germany. It distinguishes between banks' activities abroad and FDI in banking by banks and non-banks. A model for FDI in banking is proposed which contains certain explanatory variables peculiar to FDI in banking as compared to FDI in manufacturing. The components of the model of FDI in banking is different from those models designed to explain banks activities abroad. The empirical results of this study of FDI in banking indicate that bilateral trade, banks' foreign assets, the cost of capital, relative economic growth, exchange rates and FDI in non-finance industries are the major determinants of foreign investment in banking.     

E-business opportunities in financial services

Over many years, technological developments have enabled financial services products to be sold and administered via remote distribution channels. E-business is the latest channel whose potential is being explored by both traditional financial services players and new entrants alike. But, in their haste to ‘go online’, are organisations, new and old, falling into the ‘technology trap’ and ignoring the fundamentals underpinning financial services retailing and, perhaps, undermining some of their ‘segment-of-one’ strategies? This paper concludes that the key to successful e-financial services retailing is to take the nuances, attributes, techniques and skills that have accompanied financial services products in the physical world and reinvent them in an e-environment. Only by following this approach will e-business avoid being labelled as a solution looking for a problem. UK high street banks are continuing to extend the choice of channel through which customers can manage their money, eg e-banking. But it is suggested that channels such as e-banking potentially reduce the level of personal contact between bank and customer to the extent that a ‘virtual’ relationship develops. This paper concludes that, given the tendency towards ‘virtualisation’, it is inconceivable that bank–customer relationships will become any more intimate in the future. Indeed, a greater degree of personalisation in customer communication may be the very best that banks are able to offer.