Banking system trust, bank trust, and bank loyalty

Abstract

Purpose

The purpose of this paper is to test a model of banking system trust as an antecedent of bank trust and bank loyalty. Six determinants of trust and loyalty are included: competence, stability, integrity, customer orientation, transparency, and value congruence. The study provides insights which determinants are crucial for explaining bank trust and bank loyalty, and thus for rebuilding trust and loyalty.

Design/methodology/approach

Survey among 1,079 respondents of 18 years and older in The Netherlands on person trust, system trust, bank trust, and their scores on determinants of trust and loyalty. Structural equations modeling (AMOS) has been performed to provide insights into the relationships between concepts such as person trust, system trust, bank trust, and bank loyalty. The importance of determinants to explain bank trust and bank loyalty has been assessed as well.

Findings

Integrity is the most important determinant of bank trust. Transparency, customer orientation, and competence are also significant. Trust is a strong predictor of loyalty. Determinants explaining bank loyalty are: competence, stability, transparency, and value congruence. System trust is also a determinant of bank trust. The meaning of these results is discussed in the paper, as well as the managerial implications of these findings.

Research limitations/implications

Data were collected in May 2014 with a large sample, when the financial crisis came to an end. Distrust still remained as a consequence of the crisis. Banks are now rebuilding trust and loyalty. This research provides indications which determinants of trust and loyalty are important in this process and should be focused upon. A longitudinal study how trust and loyalty are developing would give insights and feedback on managerial actions.

Practical implications

Results provide insights into the causes and reasons of (dis)trust. From this study, banks get insights with a priority matrix which determinants are below par but important for specific banks and should be focused on and improved at the short term.

Social implications

Trust in banks and other financial institutions is crucial for the functioning of the banking system and for society at large. Restoring trust is a matter of fundamental changes of the bank-customer relationships, not only by communication but by sincere behavior (integrity) and benevolence in the customer interest.

Originality/value

The authors are not aware of research using all six determinants (competence, stability, integrity, customer orientation, transparency, and value congruence) to explain and predict bank trust and bank loyalty, and their implications for trust and loyalty in banks.

Full text

Banking System Trust, Bank Trust, and Bank Loyalty
Pauline W.J. van Esterik-Plasmeijer, independent researcher,
and W. Fred van Raaij, Tilburg University, The Netherlands
Abstract
In this study, we test a model of banking system trust as an antecedent of bank trust and bank loyalty. A
model on trust in the banking system, bank trust, and bank loyalty has been developed including six determinants
or drivers of trust and loyalty: competence, stability, integrity, customer orientation, transparency, and value
congruence.
This bank trust-loyalty model has been tested with data collected in The Netherlands. In this paper, we
focus on the determinants of bank trust and bank loyalty. Integrity is the most important determinant of bank trust;
transparency, customer orientation, and competence are also important determinants of bank trust. Bank loyalty is
determined by competence, stability, transparency, and value congruence.
The most feasible causal ‘path’ in a structural equations model is from banking system trust to bank trust,
and from bank trust to bank loyalty. Banking system trust is also determining the six drivers of bank trust and
bank loyalty.
The results and conclusions are relevant both from a theoretical and a practitioners’ perspective, and
provide indications to which determinants should be focused on in (re)building trust and loyalty in banks.
Keywords: banking system trust, bank trust, bank loyalty, competence, stability, integrity, customer orientation,
transparency, value congruence.
Concept of trust
Trust is important for customer-bank relationships and for customer relationships in general, for quite a
number of reasons. Trust facilitates transactions with customers. Customers do not have to worry about their
personal interests being taken care of, their savings with the bank, and the financial products they have bought or
plan to purchase from the bank, which include insurance policies and mortgages. With a high level of trust,
customers feel confident that their interests are well served by the bank. To a certain degree, a high level of trust is
a buffer against negative experiences which can arise amongst customers. Customers tend to “forgive” a negative
experience and perceive it as an exception if they trust the bank. With a low level of trust, however, a negative
experience may be perceived as a “proof” that the bank cannot be trusted.
Due to the financial crisis, trust in the banking system, trust in banks, and trust in financial institutions
such as insurance companies and pension funds, has declined in many countries (Hurley, Gong, & Wagar 2014;
Järvinen 2014). The crisis has also brought to light the essential role of trust in banks (Shim, Serido, & Tang
2013). The banking system and specific banks are perceived as being a part of or even the origin of the financial
crisis. Thus, trust has been breached and must be considered from both broad scope as well as narrow-scope
perspective (Gillespie & Hurley 2013; Grayson, Johnson, & Chen 2008).
Trust has an object (person, system, institution) that can be trusted (or not). Person trust is the trust we
have in other persons. In a high-trust country (Fukuyama 1995), trust in other persons, even persons outside the
clan, village or group of relatives, is high. Trusting another person is a kind of “default” (standard) in a high-trust
country. You trust another person, unless there is evidence that the other person cannot be trusted. System trust is
trust in banks in general, the national or international banking system, and the transfer of money. Trust within the
banking network (between banks and other financial institutions) is also relevant here (Bülbül 2013). System trust
is also referred to as broad-scope trust, and may be defined as “the expectation held by consumers that companies

within a particular business type are generally dependable and can be relied on to deliver on their promises.”
(Sirdeshmukh, Singh, & Sabol 2002). System trust includes interbank operations such as money transfer (for
instance, PayPal). Institution trust is the trust in an organization or institution (bank) to keep its promises and to
act according to the agreed promises, procedures and outcomes. This is also referred to as narrow-scope trust,
defined by Sirdeshmukh et al. (2002) as “the expectation held by customers that the service provider, in this case
the bank, is dependable and can be relied on to deliver its promises.”
The future behavior of institutions cannot be predicted with certainty. Consumers with a certain level of
trust expect that financial institutions will not behave opportunistically at their expense, even if there is interest
and opportunity to do so (Nooteboom 1996). In other words, consumers trust in the intentions of financial
institutions not to cheat them and to perform adequately over and above their intentions (Gambetta 2000).
Institution trust is thus the belief in the benevolence and good intentions of an institution.
Ennew & Sekhon (2007) studied trust in financial services. Their definition of trust is “an individual’s
willingness to accept vulnerability on the grounds of positive expectations about intentions or behavior of another
in a situation characterized by interdependence and risk.” In this definition, trust is situated in a context of the
interdependence of two parties (customer and bank) and perceived risk. Customers and banks have to rely on each
other, because they cannot be certain in advance, how the other party will behave. Thus behaving according to the
explicit and implicit agreements and keeping promises. Risk in this context means that both parties perceive a risk
that the other party will behave in a way that is not favorable to them and can therefore be potentially harmful.
Sheppard & Sherman (1998) stated that there are five key themes that are relevant to the concept of trust.
(1) Trust depends on the existence of risk and uncertainty of outcomes. (2) Trust depends on the interdependence
between actors. (3) Trust is associated with the vulnerability of actors. (4) Trust involves confident expectations
about future behavior of the other party. (5) Some form of trust is likely to be inherent in most relationships. Berry
(1995) also stated that there is a role for trust because there is vulnerability, risk and interdependence associated
with the purchase of financial services.
In our research, we focus on (banking) system trust, (bank) institution trust, and (bank) institution loyalty.
Person trust has been included as a benchmark or reference value to be compared with system and institution
trust. We define institution trust as: The expectation of a customer that an institution (a specific bank) will keep
explicitly or implicitly made promises and behave in a favorable or, at least, not unfavorable way for the customer
(Gambetta 2000). If trust is high, the customer expects that his/her interests are served well by the institution, in
this case the bank. System trust is the expectation that the banking system and banks in general, in a specific
country or internationally, will keep explicitly or implicitly made promises and behave in a favorable or, at least,
not unfavorable way for the customer.
Determinants of trust
Trust can be based on several aspects or characteristics of the trusted system or institution. In the
literature, quite a number of determinants of trust are distinguished. Doney & Cannon (1997) distinguish
credibility and benevolence. Credibility is the expectancy that the word or written statement of the institution can
be relied on and that promises will be kept. Benevolence is the extent to which the institution is genuinely
interested in the customer’s welfare. Hurley (2006, 2012) identifies six dimensions of trustworthiness: (1)
similarities / shared values, beliefs or identity, (2) aligned interests, (3) benevolent intentions, (4) capability, (5)
predictability and integrity, and (6) open and transparent communication. According to Järvinen (2014) consumer
trust in a banking context is based on consumer experience and dependent on the ability of banks to behave in a
reliable way, observe rules and regulations, work well and serve the general interest.
Customers, as stakeholders of an institution, focus on determinants that are relevant to them. These
determinants may be different from other stakeholders, such as shareholders and the personnel of an institution. In
this study, we focus on determinants that are relevant for customers. Pirson & Malhotra (2008) distinguish
competence, integrity, and transparency as determinants of customer trust. Competence includes technical and

managerial competence to innovate, to provide financial services and relevant information, to assist customers
with their decisions, and to handle problems and complaints. It is clear that no one will trust an incompetent
institution. However, being competent is not enough to be trusted. Integrity is honesty of employees, fairness in
rules, procedures and conditions, and an equal and fair treatment of customers. Note that integrity is different
from benevolence, caring for the customers’ interest and wellbeing. Transparency is openness and disclosure of
information to customers, not only about the benefits but also about the costs and risks of financial products and
services. Transparency is also about informing customers about changing fiscal and other conditions that may
influence their financial outcomes and security. More transparency may have negative consequences for trust,
because negative aspects of products are also communicated.
Ennew & Sekhon (2007) distinguish five determinants of trustworthiness of financial services: (1)
benevolence (customer orientation), (2) integrity (fairness), (3) ability/expertise (competence), (4) shared values,
and (5) communications (transparency). They found that shared values (value congruence) is an area of weakness
in the relationship with customers. To a lesser extent, this is also true for benevolence. Another finding is that
customers who bought more financial products, have higher trust and trustworthiness scores. A third conclusion
from their study is that customers who have longer relationships (higher loyalty) with a financial services
provider, report higher levels of trust. The causal interpretation of the second and third result is not clear. Buying
more products and being more loyal to a bank, may lead to higher trust, as a rationalization of this behavior. The
reverse may also be true. If trust is higher, it is more likely that customers buy more products with a bank and are
more loyal to a bank.
Sekhon, Ennew, Kharouf, & Devlin (2014) distinguish five determinants of trust: (1) expertise and
competence, (2) integrity and consistency, (3) communications, (4) shared values, and (5) concern and
benevolence. Sekhon et al. (2014) also make a distinction between trustworthiness and trust. Trustworthiness is a
characteristic of the object of trust: the trustee, the person, system, or institution to be trusted. Trust is the
willingness of consumers as trustors to depend on the trustee, to cooperate with the trustee, and, more generally,
the adoption of trusting behavior. Trustors make an assessment of the trustworthiness of the trustee, based on the
drivers of trust as mentioned above. Trust may be either cognitive, based on reasoning and assessment of the
trustworthiness of the trustee, or affective, based on care, concern, empathy, and other emotional elements in the
relationship of trustor and trustee.
Schumann et al (2010) distinguish four determinants of trust in service providers: (1) ability
(competence), (2) benevolence (customer orientation), (3) predictability, and (4) integrity. Predictability is based
on what to expect, no surprises, thus the predictability of the institution’s behavior and the continuity or stability
of the institution.
Thus, four determinants of institution trust are confirmed by earlier research; competence, integrity,
customer orientation, and transparency. These trust drivers are often supervised by governmental authorities and
relate to the bank’s behavior and servicing of customers. These determinants may also be applied to system trust,
although there is no empirical evidence for this yet. Shared values or value congruence is a determinant of trust
following an individual consumer’s values framework. This has been confirmed by Ennew & Sekhon (2007).
Value congruence refers to a shared framework of common values, such as sustainability, openness, or “simple
products.”
Stability is a determinant of (system) trust and supervised by the Central Bank. Stability has not been
included in institution trust by consumers, but it is a measure of central banks towards the financial stability of
specific banks and the banking system. Due to financial crisis, consumers may also be aware of the possibility that
a bank may collapse and that their savings may be in danger. Stability is also related to the predictability of the
bank’s behavior. Stability is thus also a determinant of institution (bank) trust.
Based on Ennew & Sekhon (2007), Pirson & Malhotra (2008), Schumann et al. (2010), and Sekhon et al.
(2014), six determinants of institution and system trust may be distinguished (Van Raaij 2009):
1. Competence, ability, expertise.

2. Stability, predictability.
3. Integrity, fairness, credibility, honesty, (consistency).
4. Customer orientation, benevolence, concern about customers.
5. Transparency, open and clear communications.
6. Value congruence, shared values.
Person, system and institution trust
Person trust is a benchmark or reference value for system and institution trust. The Netherlands is a high-
trust country (Fukuyama 1995) and we expect that person trust will be high. Due to the financial crisis, banking
system trust and bank trust decreased, and are expected to be lower than person trust. Thus, the first two
hypotheses are:
H1a: Person trust is higher than institution (bank) trust.
H1b: Person trust is higher than (banking) system trust.
System and institution trust are not independent of each other. It is likely that system trust influences
institution trust. If people trust the banking system, it is likely that they will trust (most) banks as well. Hansen
(2012) found that broad-scope trust (system trust) positively affects narrow-scope trust (institution trust). System
trust seems to spill over to the institutions that constitute the system (institutional theory). Functionalist theory,
however, predicts that institution trust will only develop if and where needed. If system trust is low, institutions
compensate for this by developing institution trust. This suggests a negative correlation between system trust and
institution trust. Hansen (2012) finds a positive relationship of system trust and institution trust, and an effect of
system trust on institution trust. This supports institutional theory rather than functionalist theory. If system trust
affects institution trust, the direction of causality is from system to institution trust. There are also arguments for
the reverse causality, from institution to system trust. Positive personal experiences, satisfaction, and trust with
regard to a specific bank may be generalized to banks in general, assuming that banks are not that different from
each other after all. It is an empirical question which direction of causality is stronger.
Hansen (2012, Figure 1) also finds that system trust has a moderation effect on the relationships between
three independent customer variables “financial healthiness,” ”financial knowledge,” and “satisfaction with bank
services” with the dependent variable “institution trust.” Financial healthiness, financial knowledge, and
satisfaction have positive effects on institution trust. See also Van Raaij (2016). People with a high level of
financial healthiness and knowledge, and a high level of satisfaction, trust banks more than people with a low
level of financial healthiness and knowledge, and a low level of satisfaction. The moderation effect of system trust
is negative and implies that financial healthiness has a greater positive effect on institution trust when system trust
is low rather than high. It also implies that financial knowledge has a greater positive effect on institution trust
when system trust is low rather than high. And it also implies that satisfaction has a greater positive effect on
institution trust when system trust is low rather than high. Hansen’s (2012) findings lead to the conclusion that if
trust in the banking system is high, people also trust banks. However, if trust in the banking system is low, bank
trust depends on personal (customer) characteristics such as financial healthiness, financial knowledge, and
satisfaction with bank services.
Another distinction between system trust and institution trust is related to the source of information.
Information about the banking system is usually obtained from the mass media. Mass media often reports on
incidents regarding the financial crisis and the role of banks in the financial crisis in a negative way. Information
about a specific bank, however, is usually obtained from personal experience with the website, employees,
products and services of this bank. Personal experiences and satisfaction with bank services are often positive.
Many customers seem to conclude and believe that that their personal bank is an exception to the rule that banks
cannot be trusted.

People may have purposefully selected their bank based on preference and comparisons with other banks.
They selected the bank they liked best and trusted most. After this selection, customers are biased, and rate the
bank they selected and have a relationship with as more trustworthy than other banks. This is a justification of
their choice and a reduction of their cognitive dissonance.
Based on these three reasons (source of information, positive selection, and dissonance reduction), we
expect that institution (bank) trust will be higher than (banking) system trust. Thus, we state the following two
hypotheses:
H2: Institution (bank) trust is higher than (banking) system trust.
H3: Banking system trust has a positive relationship with institution (bank) trust.
Combining hypotheses H1a, H1b and H2, we expect the following order of trust levels: person trust >
(bank) institution trust > (banking) system trust.
Determinants of trust and loyalty
In this study, six determinants of trust and loyalty are investigated. In this section we give a description of
the content and meaning of these determinants.
Competence (ability, expertise) pertains to several areas of knowledge of institutions, as perceived by
customers and other stakeholders. It is required for the bank to deliver on commitments and promises made
(Sitkin & Roth 1993; Lieberman 1981). Product competence is about the knowledge of and experience with
products, services, innovation, quality, research, and technical product development. Managerial competence is
the knowledge of internal and external organization (retail channels). Social and marketing competence is the
knowledge about customers (e.g., risk profiles, financial literacy, know-your-customer policy), markets, PR, and
public affairs. For customers, technical and marketing competence is the most important.
Integrity is the fairness, morality, honesty, and ‘good character’ of the institution. Does the institution treat
its customers in a fair and equal way? Professional codes of self-regulation and governmental regulation pertain a
large extent to integrity. Absence of corruption, bribery and nepotism are also part of integrity. Thus, integrity is
important, but customers and employees do not want integrity to lead to formal and bureaucratic rules and
processes. Integrity may be too bureaucratic (too slow and too much paperwork). Therefore, it is necessary but not
enough. Customers instead prefer the company to care for their personal interests and welfare.
Customer orientation (benevolence) means that the institution is acting from the customer perspective and
not (only) from self-interest. This includes customer care, customer empowerment, and pro-active behavior in the
customer’s present and future best interests, and finding solutions for customer problems. In fact, for customer
orientation, the central focus is the present and long-term welfare and well-being of customers. Thus, customers
will be more disposed to place trust in banks which they feel care about their welfare (Hurley et al. 2014).
Transparency is the information provision, the disclosure of rules, regulations and processes. The ease and
comprehensibility of products and services, and the accessibility for questions and complaints also belong to
transparency. Transparency is an overvalued determinant of trust. More transparency about products and services,
including negative aspects such as risks and costs, does not lead to more trust, especially not in the short term.
Transparency about bonuses is done in a preventive way to counteract large bonuses, but may result in lower trust
in financial institutions.
Value congruence is the congruence or sharing of values and norms between customers and the bank. A
bank with values similar to its customers, for instance sustainability or financial inclusion, creates more
satisfaction, trust, identification, bonding and loyalty of its customers. Value congruence is an undervalued
determinant of trust. People trust other people and institutions that have similar values to themselves (Rousseau,
Sitkin, Burt, & Camerer 1998; Gaertner, Dovidio, & Bachman 1996; Brewer 1979). Based on Hurley et al. (2014),

value congruence provides comfort to the customer that the bank will act according to their values. All
stakeholders are motivated to associate with an organization which they recognize as a value match. Examples are
banks with sustainability, openness, or simplicity values that appeal to consumer segments in the market.
Stability takes the long-term perspective, the size, strength, and predictability of the institution/company.
Will the bank still exist at the end of the contract period, and will the bank be solvent and able to execute the
contract (mortgage, pension plan)? Consumers cannot evaluate the stability of a bank. They rely on cues,
heuristics, partial and incomplete information, and suggestions in the media. They also have to rely on the Central
Bank or other supervisors of the stability of financial institutions.
Based on the above arguments on the (six) determinants of trust and loyalty, the following two hypotheses
can be stated:
H4: System trust has positive relationships with the six determinants of trust and loyalty.
H5: The six determinants of trust and loyalty have positive relationships with institution (bank) trust.
Loyalty
Bank loyalty is also part of our research model. We expect a positive relationship between bank trust and
bank loyalty. Customers will be more loyal to a bank they trust than to a bank they do not trust. Bank loyalty may
be attitudinal or behavioral (Dick & Basu 1994). Attitudinal loyalty is based on favorable evaluation and
preference for a bank. Behavioral loyalty is based on staying with the bank, even after an unfavorable evaluation
or decreased preference. This is because changing banks is difficult and effortful (new account number and
another website for transactions) and may cause a risk of financial mistakes and discontinuity. Behavioral loyalty
may imply a kind of inertia; staying with the bank because it is effortful and difficult to change. Customer loyalty
is also beneficial for the bank in the sense that a loyal customer base (franchise) contributes to the continuity of
the bank. Continuously attracting new customers while present customers are leaving is more costly than a stable
customer franchise.
A loyalty measure has been developed based on the net promoter score (NPS, Reichheld, 2003, 2006).
Loyalty is defined by Reichheld (2003) as the willingness of someone – a customer, an employee, a friend – to
make an investment or personal sacrifice to strengthen a relationship. The NPS question is: “How likely it is that
you will recommend bank X to a friend, colleague or relative?” The response has been measured on an 11-point
scale (0-10) from “extremely unlikely” to “extremely likely.” The NPS question is not without criticism, including
the scaling applied. See, for instance, Grisaffe (2007) and Mandal (2014). In our study we use all responses on
this 11-point scale, also the scores 7 and 8. We do not distinguish between “promoters” (scores of 9 and 10),
“passives” (scores of 7 and 8) and “distractors” (scores between 0 and 6), and the proportion of distractors is not
subtracted from the proportion of promoters, as is done in the NPS.
H6: The six determinants of trust and loyalty have positive relationships with (bank) loyalty.
Conceptual model
Our theoretical framework and conceptual model is shown in Figure 1. We include person trust, banking
system trust, bank trust, bank loyalty, and the six determinants of trust and loyalty. Based on the literature, we
assume that the effect of banking system trust on bank trust is stronger than the reverse causality of bank trust on
banking system trust. Since banking system trust mainly depends on (usually unfavorable) information from the
mass media, banking system trust will have a negative effect on bank trust. Bank trust mainly depends on (usually
favorable) personal experience with the bank. Bank trust is expected to be higher than banking system trust
(hypothesis H2).

- Insert Figure 1 about here
Survey research
In order to test the hypotheses, a survey has been done in The Netherlands in May 2014 using a
representative sample of 1079 respondents of 18 years and older from the online consumer panel of market
research company GfK, The Netherlands. This panel consists of approximately 110,000 Dutch consumers. In this
survey, respondents rated their personal (primary) bank and another bank they are familiar with. A questionnaire
has been developed to measure banking system trust, bank trust (trust in a specific bank), bank loyalty, and the six
determinants of bank trust and loyalty. See Appendix 1 for a translation of the survey questions.
Trust measures
The trust scores were measured on 10-point scales (1-10) from no trust at all to complete trust.
Respondents are familiar with these 10-points scales, because these rating scales (grades) are used in schools.
Respondents rated person trust, and rated trust in two banks they are familiar with. The total number of banks
rated is 1,961. A total of 197 ratings are missing because 197 respondents did not know a second bank well
enough to rate this bank. The mean for persons in general (person trust) is 7.02 (1.03). The mean for banks in
general (system trust) is 6.13 (1.51) and for the personal bank is 6.35 (1.62). The standard deviations are given
between brackets. Note that the standard deviation of person trust is smaller than the standard deviations of
system trust and institution trust. Respondents agree more on the notion that other persons can be trusted rather
than trust in the banking system and banks. The means are tested with paired samples t-tests. In hypothesis 1a, it is
expected that person trust is higher than institution (bank) trust. In hypothesis 1b, it is expected that person trust is
higher than banking system trust. The mean of person trust (7.02) is significantly higher than the means of
institution trust (6.35) and system trust (6.13). Hypotheses 1a and 1b cannot be rejected (are supported). In
hypothesis H2, it is expected that institution trust is higher than system trust. The mean of institution trust (6.35) is
significantly higher than the mean of system trust (6.13), and thus hypothesis 2 cannot be rejected (is supported).
Indeed, the following order of trust levels has been obtained: person trust > bank trust > banking system trust.
Determinants of bank trust and loyalty
The six determinants of bank trust and loyalty are assessed with 23 statements with 5-point Likert scales
from completely disagree (1) to completely agree (5). The means vary between a high score of 3.57 for ‘X is
competent’ (statement 4) and a low score of 2.93 for ‘X puts the interest of the customer first’ (statement 15). See
Appendix 1 for these 23 statements measuring the determinants of trust and loyalty.
Reliability of the six determinants of trust
The three or four statements that measure a specific determinant should be reliable and should have high
intercorrelations in order to measure the ‘same’ concept. To assess the reliability, Cronbach’s alphas have been
computed. The results are shown in Table 1. All Cronbach’s alphas are satisfactory and larger than .79. Omitting
statement 22 (.84) improves the reliability of measuring value congruence. Indexes have been formed of the
statements belonging to each determinant. An index variable replaces the three or four original statements
(variables) of a specific determinant, resulting in six index variables.
-Insert Table 1 about here
Structural equations analysis
In a structural equations analysis (AMOS), the complete model of Figure 1 can be estimated. The
complete model includes the six determinants of trust and loyalty, person trust, (banking) system trust, institution

(bank) trust, and (bank) loyalty. The structural equations (AMOS) model with the best fitting results is given in
Figure 2. Chi-square of this model is 13.4; the degrees of freedom are 55 – 44 = 11, and the probability level is
0.27.
-Insert Figure 2 about here
With the AMOS model, we find that banking system trust has a positive relationship (.32) with bank trust.
Hypotheses H3 is supported. System trust (trust in banks in general) is positively correlated with and has strong
direct effects on bank trust and the six determinants of trust. The effects on the six determinants of trust are:
competence (.29), stability (.32), integrity (.32), customer orientation (.32), transparency (.29), and value
congruence (.19). Hypotheses H3 and H4 are supported with these results.
The significant determinants of bank trust are: competence (.10), integrity (.31), customer orientation
(.11), and transparency (.14). Integrity is the most important determinant of bank trust. Competence, customer
orientation and transparency play a secondary role. Stability and value congruence play no role in explaining bank
trust. A total of 62 percent of the variance in bank trust can be explained with this model. Hypothesis H5 is
supported for four (integrity, transparency, customer orientation, competence) of the six determinants of trust.
Integrity seems to be the most fundamental basis of trust in an institution because integrity, honesty and fairness
are the foundation for trustworthy behavior of people and institutions becoming manifested in a varying number
of bank services such as advice and recommendation. Competence, customer orientation and transparency are
more applied and practical determinants of bank trust. Integrity may be perceived as the basic determinant
working ‘through’ these more applied determinants to elicit trust.
The significant determinants of bank loyalty are: competence (.11), stability (.10), transparency (.10), and
value congruence (.10). Integrity and customer orientation play no role in explaining bank loyalty. A total of 57
percent of the variance in loyalty can be explained with this model. Hypothesis H6 is supported for four
(competence, stability, transparency, value congruence) of the six determinants of loyalty. Loyalty, as a long-term
relationship of customers with a bank, is determined by practical drivers such as stability, also a long-term
determinant and characteristic of a bank. Competence and transparency are operational and practical drivers of
trust, related to the effectiveness and efficiency of bank transactions. Value congruence is more fundamental;
people feel ‘at home’ and understood in an institution with shared values. Customers may purposefully have
chosen a particular bank to reach personal goals, for instance a bank that employs their savings and insurance
premiums to invest in a “better world.”
Note that banking system trust has a negative effect (-.12) on bank loyalty. If system trust is high, bank
loyalty tend to be low. This means that with a high banking system trust, people may perceive less differences
between banks and thus loyalty with a specific bank is less needed. Therefore, individuals are less likely to stay
with a particular preferred bank, and more churning and switching to other banks will occur.
It can be concluded that the strongest logical ‘path’ in the model of Figure 2 leads from person trust to
system trust (trust in banks in general and the banking system), from system trust to institution trust (trust in
specific banks), and from institution (bank) trust to (bank) loyalty.
Conclusions
The levels of institution and system trust are lower than the level of person trust. Person trust, institution
trust and system trust are positively correlated. Consumers who trust other persons, also trust banks and the
banking system. Consumers have more trust in their personal bank (institution trust) than in banks in general
(system trust).

The structural model shows that banking system trust has strong positive effects on the six determinants
of bank trust. Although consumers trust their own bank more than banks in general, specific banks are strongly
influenced by system trust and the trust in banks in general through the six determinants of trust.
The determinants of bank trust are: integrity, transparency, customer orientation, and competence.
Integrity of institutions and persons is the most fundamental driver of trust, working “through” the more practical
determinants transparency, customer orientation, and competence.
The determinants of bank loyalty are: competence, stability, transparency, and value congruence. These
four determinants are important for remaining loyal to a bank. Stability is a long-term concept, as is loyalty. Value
congruence is an affiliation concept: feeling at home and appreciated by an institution with similar values and
similar customers. Competence and transparency are more practical, related to efficient and effective services and
thus satisfaction over time.
In this study, we developed a conceptual model of bank trust and bank loyalty including six determinants
of trust and loyalty, which have been studied by other scholars but have not been integrated into one single model.
The strongest logical ‘path’ in the structural equations model of Figures 1 and 2 is: from system trust (trust in
banks in general) to institution trust (trust in a specific bank) to (bank) loyalty. Four determinants play a role in
this model in predicting/explaining bank trust, and four determinants play a role in predicting/explaining bank
loyalty.
In building trust, banks should focus on improving their performance on these important determinants of
bank trust and bank loyalty. These efforts are likely to result in a higher trust in and a higher loyalty of customers
with their bank.
Managerial implications
Trust can be strengthened by focusing customer policy on the determinants of trust on which a specific
bank has a below-benchmark performance, for instance below the average level of trust for several banks. The
focus should also be on determinants/drivers, which are important for regaining trust. This can be done with a
priority matrix plotting the relative contributions of the determinants of trust against the performance of banks on
these determinants of trust. The priority matrix shows the importance of determinants of trust versus the level of
the determinants of a specific bank or banks in general (system). It is important for banks, when trying to regain
trust, to focus primarily on the important determinants of trust on which the specific bank has a low score. At the
same time, banks should put effort in maintaining the trust level of drivers on which these banks already have a
high score.
The data show that institution trust and determinants of trust are likely to improve when system trust
improves. This is according to institutional theory. This means that there is a need for collective action of the
banking industry to improve trust in the banking system. All specific banks are likely to benefit from this
collective action of improving system trust in banks in general, although bank loyalty may decrease somewhat
due to this collective effort. Research should be done on the impact of collective action of the banking industry
aimed at improving system trust.
Future Research
Having institution trust higher than system trust may be due to different sources of information. Trust in
banks in general is mainly based on information from the mass media. Trust in one’s own bank is mainly based on
personal experiences. Consumer trust in banks is subject to the availability heuristic (Tversky & Kahneman
1974). The extent of media coverage determines the ease with which consumers can retrieve information (cases
and examples) from memory about the trustworthiness of banks. Trust in the own bank is mainly based on
(satisfaction with) personal experiences, which is a more personal, vivid, and more easily available type of

information. More research should be done on the relative importance and trade-off of information on the banking
system and banks obtained from the mass media, social media, and personal experience.
In the foregoing, the determinants of trust are related to characteristics of the trusted banks or banking
system. Trust may also be related to characteristics of the trustor, the person who trusts the banking system and
banks. Hansen (2012) found that financial healthiness, financial knowledge, satisfaction, and system trust
contribute to institution trust. Consumers who are healthier financially, have more financial knowledge, are more
satisfied with their relationship with the bank, and have a high trust in the banking system, are more likely to trust
specific banks. Thus, financial education of consumers may contribute to trust in the banking system and banks.
Satisfaction here is a cumulative relationship experience, based on satisfaction with specific bank encounters,
products and services.
Determinants of trust may be considered as dissatisfiers or satisfiers (Herzberg, Mausner, & Snyderman
1959). A dissatisfier or hygiene factor is a determinant that requires a certain level, otherwise no trust can be
generated. A deficiency or below-par dissatisfier cannot be compensated by high levels on other determinants. It is
clear that these dissatisfiers have to be improved first to remove distrust. A satisfier or enhancer is a determinant
on which a higher score leads to higher trust. Banks may differentiate themselves from other banks by higher
scores on satisfiers or enhancers (positioning). A determinant may be a dissatisfier if it falls below a certain level,
and a satisfier, if above a certain level. Take for instance competence. If competence is below a certain level, no
trust can be generated, and high scores on integrity or customer orientation cannot compensate for this lack of
competence. If competence is above a certain level, competence may become a characteristic that differentiates
the bank from other banks that have lower levels of competence, and this will contribute to increasing trust. The
level of a determinant that separates a dissatisfier from a satisfier function, is not constant, but instead depends on
expectations and norms in a market. If the expectations and norms go up, determinants may no longer be satisfiers
and may become neutral or even dissatisfiers. More research is needed on the (dis)satisfier function of
determinants of trust and loyalty.
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Footnote
Pauline van Esterik-Plasmeijer is an independent researcher in the area of trust and financial behavior. Fred van
Raaij is Emeritus Professor of Economic Psychology at Tilburg University, The Netherlands. The authors thank
Peter Mulder of marketing research agency GfK, Hilversum, The Netherlands, for his contribution to data
collection and data analysis. They also thank the editor and reviewers of IJBM for their insightful and constructive
comments.

Appendix 1. Questionnaire (translated from Dutch)
X is a bank with which the respondent is familiar, for instance where the respondent is a customer.
Person trust, system trust and bank trust are measured with 10-point scales (grades) from 1 (no trust at all) to 10
(complete trust).
Person trust: To what extent do you trust people in general? Please give a grade.
System trust: If you had to express your trust in banks with a grade, what grade would you give?
Bank trust: If you had to express your trust in bank X at this moment, what grade would you give?
To what extent do you agree with the following 23 statements?
These statements have Likert scales from 1 (completely disagree) to 5 (completely agree).
Four statements measuring competence on a 5-point Likert scale:
Bank X knows exactly what is happening in the market.
Bank X knows her clients and their financial needs.
Bank X selects the rights products for clients.
Bank X is competent.
Four statements measuring stability on a 5-point Likert scale:
Bank X is there for clients when they need X.
Bank X will not go bankrupt.
Bank X is financially solid.
Bank X is large and strong.
Four statements measuring integrity on a 5-point Likert scale:
Bank X does not stay away when clients have problems.
Bank X treats clients in a fair manner.
Bank X abides by the law and regulations.
Bank X has integrity.
Three statements measuring client orientation on a 5-point Likert scale:
Bank X responses quickly to questions asked by clients.
Bank X warns clients for wrong decisions.
Bank X puts the interest of the customer first.
Four statements measuring transparency on a 5-point Likert scale:
Bank X is open about costs and risks of products and services.
Bank X is open about procedures.
Bank X communicates clearly.
Bank X is transparent.
Four statements measuring value congruence on a 5-point Likert scale:
Bank X is involved with society.
Bank X is involved in local activities.
Bank X is active in the field of sponsorship such as sports or culture.
Bank X contributes to a sustainable society.
Loyalty is measured by one question with an 11-point scale from 0 (extremely unlikely) to 10 (extremely likely)
How likely is it that you will recommend bank X to a friend, relative or colleague?

Figure 1. Conceptual model of antecedents and determinants of institution trust.

Figure 2. Structural equations model (AMOS) with six drivers
Person
Trust
Banking
System
Trust
Bank/Instituti
on Trust
Competence
Stability
Bank/Instituti
on Loyalty
.00 .06
.24*
.62
.32 .54
.57
.09**
.10
Integrity
Customer orientation
.10
.10
Transparency
Value congruence
.08
.03
.14
.11
.31
.10
-.12
.29
.32
.19
.29
.32
.32
* Standardized regression weights. **Squared multiple correlation estimates.
.10
.10
.10
.07
.11

Table 1. Reliability analysis of the determinants of trust and loyalty.
Determinants (statements) Cronbach’s alpha
1. Competence (1, 2, 3, 4) .86
2. Stability (5, 6, 7, 8) .79
3. Integrity (9, 10, 11, 12) .86
4. Customer orientation (13, 14, 15) .83
5. Transparency (16, 17, 18, 19) .88
6. Value congruence (20, 21, 22, 23) .83 or .84, after omitting statement 22.
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