Literature Reviews

constructed and perceived trust in a financial services

business-to-business context. Our interviewees defined trust

according to need, context and socialisation. Their conceptualisations and expectations of trust varied, as did

their level of service satisfaction, especially when analysed

from the perspectives of either the banks or their clients, and the market segment and turnover of the client company. “Money destroys many relationships between employee and

manager, and manager and businessman . . . so trust is very important”. This statement, from one of our respondents,

demonstrates that corporate banking services, perhaps

because of their direct link to money, are perceived, on both sides of exchange, as fraught with risk, despite the rigorous

regulatory framework in which financial services operates.

However, when considering the role of trust in financial services business markets, it is vital to recognise that corporate

banking engenders particular concerns for both bankers and

their clients, the most marked being a pervasive sense of risk and uncertainty.

Literature review

Over the last 20 years, trust has received increasing,

multidisciplinary attention. A substantial portion of this literature considers the role of trust in commercial exchange,

marketing, supplier-buyer and partner relationships (see

reviews by Blois, 1999; Coulter and Coulter, 2002). This attention is merited. Exchange involves non-simultaneous

actions by interacting parties. This creates inherent risk and

uncertainty, which trust helps to manage. As such, trust has a fundamental and ubiquitous role in exchange, a role that

cannot be substituted fully by other control mechanisms

(Andaleeb, 1992). This is especially true for services, which are high in credence and search qualities, and whose outcomes,

being largely, and sometimes wholly, experiential, are difficult

to measure in terms of service quality and added value. The continued study of trust from a marketing perspective

is further recommended because trust is a source of

competitive advantage (Barney and Hansen, 1994). Trust reduces transaction costs (Andaleeb, 1992), limits uncertainty

and opportunism (Achrol, 1997; Busch and Hantusch, 2000)

and creates flexibility (Nooteboom et al., 1997). Trust binds relationships (Ring, 1996) and builds commitment

(Warrington et al., 2000). It improves communication (Anderson and Narus, 1989), enables risk taking (Wetzels et al., 1998) and facilitates co-operation and mutual adaptation (Hewett and Bearden, 2001; Mayer et al., 1995). Trust increases satisfaction with interaction (Geyskens et al., 1998; Wetzels et al., 1998; Zand, 1972).

Definitions of trust

However, if the ubiquity and importance of trust is established by the literature, its exact effect and meaning is

not. A number of studies argue that the importance of trust

has been overstated, especially in the extent to which it predicts/directs action (Achrol, 1997; Grayson and Ambler,

1999). There is no agreed definition of trust, which is a source

of anxiety within the literature (O’Mally and Tynan, 1999). Trust has, broadly, been defined in five ways within the

marketing literature: 1 As a cognitive or affective belief held by one party that its

partner will not exploit their vulnerability: perceived

trustworthiness (Anderson and Weitz, 1990).

2 As a behaviour or behavioural intention of a party to act in a way that inclines it towards risk, uncertainty or increases its vulnerability to another: trusting behaviour (Zand, 1972).

3 As developed by Moorman et al. (1993), who define trust as a “willingness to rely on a partner in whom one has confidence”; a synthesis of the belief and behaviour components of trust.

4 As developed by Mayer et al. (1995), who recognise the importance and interconnection of the belief component (perceived trustworthiness) and behavioural component (trusting behaviour) of trust, but maintains that these are distinct phenomena.

5 As a broad, socially-defined phenomenon relating to the management and atmosphere of effective interaction as a whole. A central approach within sociological perspectives, in the marketing literature this approach is particularly important in business markets and is central to the work of the IMP group (Håkansson, 1982; Easton, 1989). However, it must be noted that the treatment of business-to-business services in the IMP literature is implicit and not explicit (Håkansson, 1982; Easton, 1989; Ford, 2002).

All of these definitions view the key function of trust as the management of risk, uncertainty and vulnerability associated with exchange. This rationale is reflected in the central components of trust. These include: reliability (Andaleeb, 1996; Dwyer et al., 1987; Morgan and Hunt, 1994); honesty (Bonoma, 1976; Morgan and Hunt, 1994); predictability (Busch and Hantusch, 2000); mutuality, an expectation a partner is equally committed, and will act reciprocally to mutual advantage (Barney and Hansen, 1994; Dwyer et al., 1987); benevolence (Doney and Cannon, 1997) and forbearance from opportunism (Barney and Hansen, 1994; Bradrach and Eccles, 1989).

Typology of trust

Different forms, or types, of trust have also been described. Most simply, trust between individuals, between organisations and within organisations has been seen to differ, even if there are interconnections between each: interconnections mediated and facilitated by individuals holding key organisational or relational roles (Grönroos, 1990). Similarly, research suggests that the context of interaction, both in terms of the immediate exchange context and the wider cultural environment, contributes to the creation of different “types” of trust in response to different exchange situations (Barney and Hansen, 1994; Bonoma, 1976; Hagen and Choe, 1998; Sheppard and Sherman, 1998).

Calculative and affective trust

Further distinctions of approach and analysis arise from the discontinuous identification and evaluation of the processes underlying trust. Most important is the distinction between calculative (rational or cognitive) trust and affective (or knowledge based or irrational) trust (Ring, 1996). Calculative trust is based upon the rational evaluation of risks, rewards, controls and information derived from beyond the exchange interface (frequently connected to reputation), leading to a conclusion that it would be detrimental for a partner organisation to act opportunistically. Affective trust, in contrast, is based on personal experience and rests, to far greater extent, upon emotional inputs and information

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

335Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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derived within a relationship (Warrington et al., 2000).

Researchers have also identified further distinct approaches

centred on the institutional, personality, cognitive, or societal/

cultural/environmental bases of trust development (Doney

and Cannon, 1997; Doney et al., 1998; McKnight et al.,

1998).

Power dependence and trust

Unsurprisingly, these differences of approach are reflected in

divergent research findings; a number highlighted by Coulter

and Coulter (2002). One important area of disagreement is in

relation to the question of the interrelationship of trust and

power/dependence. One of the key functions of trust is to

moderate and control uncertainty and conflict associated with

power imbalance/dependence (Hewett and Bearden, 2001).

Similarly, it has been established that the power/dependence

context influences trust development (Bonoma, 1976;

Sheppard and Sherman, 1998). However, the nature of the relationship between power,

dependence and trust remains disputed. Some research

suggests that power imbalance/high dependency situations

inhibit trust (Anderson and Weitz, 1990), while others (for

example, Moorman et al., 1993) contradict this finding. The relationship between trust and power/dependence

appears complex and conditional, based on subjective,

perceptual elements. Mutual trust is more common in

interdependent relations with less powerful companies less

confident in the trustworthiness of partners (Young and

Wilkinson, 1989). The expression of coercive power by one

party inhibits trust (Geyskens et al., 1998). However,

Andaleeb (1996) notes that high dependence does not limit

trust per se. Rather it is actors’ subjective reactions to the

power structure which are critical. Geyskens et al. (1998,

p. 242) note that:

[R]elationships are not the prisoner of the environment and power structure . . . whether trust develops depends on how parties feel and behave.

This perceptual element of trust is not necessarily a positive

factor. An individual with an untrusting outlook will interpret

trusting behaviours undertaken by a partner negatively (Zand,

1972). Similar disagreements exist in connection with the question

of the effect of control mechanisms on trust. There is a

tradition in the literature which associates calculative trust,

named “deterrence based trust” by Rousseau et al. (1998), to

the organisation of effective control, monitoring and

punishment systems which make opportunism economically

detrimental. Achrol (1997), however, argues that trust thrives

best outside a context of control. Organisationally

bureaucratic systems of control have been observed to

impede trust development (Dwyer et al., 1987; Moorman

et al., 1993). Other researchers go further, arguing that control and monitoring systems obviate the need for trust:

trust that must be constantly tested and guaranteed by

sanctions, which contains no element of “faith”, is not trust at

all (Wicks, 1999).

Complexity and importance of context

One reason for this lack of consistency is that different

epistemological positions make different assumptions about

the world, which, in turn, shape the understanding of trust

and its development (Doney et al., 1998; Mayer et al., 1995).

A further cause of inconsistency is the complexity of trust,

and the importance of context. However, the range of results found in the literature should

not simply be seen as reflecting the inability of researchers to

encapsulate the full complexity of trust. Trust is a universal,

but heterogeneous, phenomenon shaped by subjective

processes. It is constructed and operationalised in markedly

different ways, in different contexts, by different actors,

with different needs. Ganesan (1994) establishes, for

example, that different cues are used to assess

trustworthiness across purchaser/vendor dyads. Moreover,

individuals are able to construct and sustain highly complex

and contextually apposite conceptualisations of trust, for

example to reconcile simultaneous feelings of trust and

mistrust in partners (Lewicki et al., 1998; Wicks, 1999).

Interpersonal trust and inter-organisational trust can vary

independently (Lipset and Schneider, 1983). Further complexity arises from the fact that trust is

dynamic. Actors reassess and adapt trust behaviours as

relationships develop (Coulter and Coulter, 2002; Gounaris

and Venetis, 2002). This dynamic is reflected in iterative,

longitudinal models of trust development as positive

experience, affective links and norms of interaction are

established (Dwyer et al., 1987; Harris and Dibben, 1999). This dynamic development need not be positive, and can

lead to spiralling distrust and relationship failure (Morgan

and Hunt, 1994; Zand, 1972). Indeed, the literature has

underlined the vulnerability of trust, which can be destabilised

easily by unsatisfactory exchange encounters or an inequality

of trust between parties, leading the more trusting partner to

feel “violated” (Harris and Dibben, 1999). Negative

experiences have a greater influence on actors’ perceptions

of trust than positive evaluations (Busch and Hantusch,

2000). However, a reduction of trust need not be associated

to explicit exchange failures. The normal movement of key

relationship management personnel, for example, can lead to

a diminution of trust (Brock-Smith and Barclay, 1997).

Similarly, increasing expectations in long-term relationships

are associated to trust decay (Grayson and Ambler, 1999). Faced with such complexity, dynamism and subjectivity, it

is unsurprising that the literature, as a whole, is so broad in

focus and conclusion. Many authors argue that this breadth is

a source of strength: even apparently contradictory findings

are complimentary, helping to elucidate a complicated and

important subject (Doney et al., 1998; Rousseau et al., 1998). However, the literature has also established the context

specificity of trust. Trust is constructed in different ways in

different cultures (Friman et al., 2002; Hewett and Bearden,

2001), in different power/dependence and control systems

(Bonoma, 1976; Sheppard and Sherman, 1998), in different

types of relationship (Cannon and Perreault, 1999; Naude

and Buttle, 2000) and in different markets (Cannon and

Perreault, 1999; Singh and Sirdeshmukh, 2000; Knights et al.,

2001; Young and Wilkinson, 1989). Certain authors,

observing this context specificity, have questioned the cross-

contextual applicability of trust research (Bonoma, 1976;

Singh and Sirdeshmukh, 2000). Whether one accepts the

rigidity of this position or not, it is clearly the case that trust

should be examined and understood within the settings in

which it operates (Bonoma, 1976; Plank et al., 1999). That is

the intention here, in this exploratory research into trust in

business-to-business bank markets.

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

336Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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Trust in financial services

The role and development of trust in banking has been observed to be contiguous with its function in other markets.

Trust is seen as a response to uncertainty, risk and

dependence (Zineldin, 1995). It is also apparent that its

development and criteria for evaluation are shared with other

markets (even if these elements are often examined in their own right, rather than as components of trust per se). The centrality of reliability in corporate bank relations has been

stressed repeatedly (Paulin et al., 1998; Smith, 1989; Turnbull and Moustakatos, 1996). The seminal importance

of honesty (Haubrich, 1989; Moriarty et al., 1983), mutuality (Crane and Eccles, 1993), benevolence (Turnbull and

Moustakatos, 1996), forbearance from opportunism

(Turnbull and Gibbs, 1987; Zineldin, 1995), and faith

(Smith, 1989; Turnbull and Moustakatos, 1996) in bank-

corporate relationships have similarly been highlighted. These relationally-grounded expressions of trust beliefs and

behaviours are underpinned by trust derived from the highly

organised regulatory framework surrounding the bank market

(Morgan and Knights, 1997). These findings suggest that financial services business

markets are characterised by high levels of trust, affective and

calculative, at both an interpersonal, organisational and inter-

organisational level. It is also clearly a context where trust is

deeply important. Zineldin (1995, p. 33) notes:

Trustworthiness dominates in banking . . . [because] Banking services may involve more risk and uncertainty than other businesses.

Knights et al. (2001, p. 318), go further to argue that:

[F]inancial services can be said to be in, or even to be, the business of trust. The creation and maintenance of trust relations is a fundamental condition of their existence.

However, despite the identified centrality of trust to bank-

corporate relationships, the evidence of the importance and

operation of trust components in these relationships, and the

existence of a strong regulatory framework, the literature raises doubts about the expression of trust in corporate bank

markets. Sheedy (1997) suggests that there are, in certain

circumstances, shortfalls or failures of trust. This conclusion

is also implied in studies that suggest that relationship

strategies have failed to be implemented properly, especially among smaller companies (Chaston, 1994; Paulin et al., 1998). This research investigated these doubts and discovered

how trust, a concept conceived differently on each side of

bank-corporate dyads (Crane and Eccles, 1993), is

constructed and used in business-to-business bank markets, and whether it is really as strong, healthy and fundamental in

financial services business markets as its perceived centrality

to the operation of banking would suggest, and how it is

operationalised.

Methodology

This research is based on qualitative data collected through

147 face-to-face, in-depth interviews with UK corporate

bankers and their clients, which took place in their offices

between 1999 and 2005. This was not designed as a longitudinal study. The lengthy period of data collection

reflects difficulty of access and time restraints of interviewees

and researchers. Data were cross-checked to determine

whether this influenced results and there was no significance

between earlier and later interviews. Of these, 53 were corporate bankers and 94 were senior personnel from companies with responsibility for banking relationships; 27 were dyads (a total of 54 interviewees) and 93 were singletons. All interviews were tape recorded and transcribed.

Interviews lasted from 40 minutes to 90 minutes. Many interviewees were interviewed more than once for purposes of clarification and triangulation. A grounded theory based approach was used for data collection and analysis, with some modifications: An interview protocol was used to guide the first series of questions to ensure that all relationship variables were covered with each interviewee. In addition, due to the lengthy data collection process, data collection and data analysis were not integrated and did not occur simultaneously (Glaser, 1978, 1992, 1993, 1994; Glaser and Strauss, 1967). These financial services business relationships were socially

constructed, that is, individual behaviours were enacted within the context of the social relationship between the corporate banker and his client, cultural idioms, and institutions that these actors create continuously. The power asymmetry between the banker and his client contributes to this social construction, as Berger and Luckman put it:

He who has the bigger stick has the better chance of imposing his definitions of reality (Berger and Luckman, 1966, p. 109).

Results

The overwhelming majority of respondents identified trust as critically import within their bank relationships. Across the entire sample, only four interviewees, on the client side, believed that other control systems obviated the need for trust. A significant cohort argued that without trust there could be no relationship, while most stated that a significant failure of trust would lead them to exit a relationship. That the majority of our sample was engaged in long-term

relationships suggests that there was some mechanism (levels of trust?) sufficient to maintain the exchange relationships that typify the UK business-to-business bank market. However, serious failures of trust were not unknown. Moreover, numerous bank clients were less than completely satisfied, even if this had not led them to rethink their financial services purchasing and switch banks. This dissatisfaction was particularly marked among SMEs. Results will be presented in three sections:

1 From a holistic perspective. 2 By relationship context perspective, business bankers and

their clients. 3 By customer market segment, large companies and

SME’s.

Trust is a complex construct incorporating a number of elements and functions that exist severally, but not necessarily interdependently nor constantly. There was no common understanding of, nor response to, trust. Even interviewees sharing many characteristics, for example, managers from the same bank, conceptualised trust differently. For this reason, we offer no single definition of trust, but Håkansson (1982) and Young and Wilkinson (1989) use respondents’ understanding of trust as the basis of analysis (see Szmigin, 1993). However, even if interviewees conceptualised trust

subjectively, marked similarities existed between the

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

337Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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interviewees’ perceptions of trust. For all, trust was a system

by which to control or limit risk (although perceptions of risk differed). There was a general appreciation that trust must be mutual. All the interviewees understood the difference between interpersonal, organisational and inter-

organisational trust. In general, interpersonal trust was viewed as more critical to relationship success than inter- organisational trust, and was interpreted more positively. As predicted in the literature (Brock-Smith and Barclay, 1997), periods of staff turnover were perceived as periods of

relationship instability on the client side. Within interpersonal relationships, both bankers and their

clients commonly saw honesty, integrity, discretion,

mutuality, predictability and ability as essential components of perceived partner trustworthiness. In addition, all clients were concerned with bank manager

and bank reliability. The central component of reliability was

“doing what was agreed”. As one respondent stated:

You’re totally reliant on . . . a verbal “OK” from a bank. . . we’re sitting down writing-out salary cheques on the basis of that “OK”.

Trust in partner reliability created a sense of “confidence” and “comfort”. It reduced uncertainty. If bankers failed to complete actions as agreed (this applied equally to

dispatching a chequebook as providing finance), or worse, promised actions that were subsequently not approved, trust swiftly turned to mistrust. Bankers understood this danger:

It’s very important . . . that the Relationship Manager of the clearing bank doesn’t say things that he can’t deliver.

Failures of this type were comparatively rare. Most respondents acknowledged that banks have become

increasingly reliable. However, this development has gone hand-in-hand with less well-received changes. Those with a longer experience of bank markets, on both sides, felt the nature of trust in banking had changed significantly in recent years. In particular, there has been a reduction in the

expression of trusting behaviours by banks, connected to increasing use of technology, a proliferation of paperwork, bank centralisation and impersonal call centres, especially in relation to specialist product generation and key decision making. Company and bank respondents with experience of “old

style” account management, expressed disquiet with this change. An experienced banker noted:

It has long been my view . . . that the bank in it’s training programme and certainly the fast track training programme trains people to be very good money lenders, but there is a lot further to go in developing bankers.

This quote encapsulated awareness that trust, and by extension “good banking”, were products of more than simple service satisfaction. However, only a minority of

interviewees (mostly bankers) had considered trust development and maintenance in a sophisticated way, despite the widespread acknowledgement of its importance. Most respondents understood trust as the product of positive experience. Others described trust development as a function

of the “chemistry” between individuals. In both cases, trust was seen as something that emerged, almost inadvertently, with time, contact and satisfactory experience, as opposed to being developed strategically and consciously through the adoption of behaviours likely to encourage trusting. A number

even argued that there was little they could do to develop trust. Only a minority displayed evidence of having thought

about trust in the structured way in which they would

consider other important elements of their business practice.

Business bankers

Business bankers perceived themselves as inherently

trustworthy. One noted: “bankers are honest people”. Relationship managers idealised mutual trust between

themselves and dyad partners. They prized their integrity and understood its importance to their customers – even

when this involved telling difficult truths. All recognised the

importance of confidentiality and discretion in handling sensitive company information. They appreciated the

importance of reliable service. They took a long-term view and would not risk extended relationships and future business

for short-term gains – they did not act opportunistically. However, if bankers perceived themselves as trustworthy,

they themselves were hesitant to trust their clients, especially

in relation to risky exchanges, certainly to enact trusting behaviours. The only exception to this was in connection with what we

term “short-cutting”. This is an in vivo code that emerged

from the data (Glaser, 1992; Glaser and Strauss, 1967). This involved the informal approval of actions by bank staff, often

over the phone, before formal paperwork was completed, based on experience and knowledge of a partner, i.e. as an ad hoc operationalisation of trust. “Short-cutting”, which ranged from recognising a voice on

the phone to facilitating quick responses to critical

contingencies, was a feature of interpersonal trust which allowed normal bank procedures, developed primarily to

protect the banks, to be set aside temporarily. Relationship managers needed to trust that companies were making

suitable requests, and that companies were not attempting to

exploit the bank, before the managers would engage in “short- cutting”. “Short-cutting” was critical to perceived relationship

quality and service satisfaction for companies. Even bankers

acknowledged that bank red-tape was bureaucratic and slow. “Short-cutting” enabled timely response by the relationship

manager to their clients’ critical contingencies. The failure to institute shortcuts, especially if the failure led to increased

complication for the clients, was taken to demonstrate a

shortage of trust and was greatly resented by banks’ client companies. “Short-cutting” was not achieved by bankers “wing[ing]

it”, nor exceeded the limit of risk assumption demanded by

central bank strategies. However, shortcuts were deviations from normal procedure, required greater human capital input,

had a cost implication, and contained a degree of risk

assumption by the banks. “Short-cutting” therefore represented a trusting behaviour as understood by the

literature. However, it was not official, sanctioned bank policy and represented ad hoc, personal operationalisation of trust on the part of the bank relationship manager. However, “short cutting” was only approved by bankers in

low risk, low uncertainty scenarios. Where risk and uncertainty were greater, especially in connection to the

arrangement of new credit lines, trusting behaviours were not

instituted. Instead, risk was confronted by extensive bureaucratic controls. These systems were never abbreviated

on the basis of trust in a client organisation or individual. This is not to say that belief in a partner’s trustworthiness

was not significant during borrowing exchanges. The decision

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

338Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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to lend was made on the basis of information supplied by a

business customer. This led bankers to emphasise trust in the

“honesty” of their clients, both in terms of the accuracy and

completeness of supplied information. In similar vein,

bankers needed to trust in the competence of their business

customers, both on a personal and organisational level. If a

banker did not trust a customer’s institutional or individual

honesty and competence, no actions inclining the bank to risk

would be taken. However, if trust were a prerequisite to the approval of

actions inclining the bank towards risk, these were not

trusting behaviours as described in the literature. Trust was

not used by banks as an alternative to other control

mechanisms. Instead, trust acted as part of control

mechanisms to make them more effective and secure. As such, if trust were not directly decisive in deciding which

resources to allocate, it was a prerequisite to any such decision

being made. Most bankers were clear that without trust there

would be no interaction; “no relationship”. This demand was

ruthlessly policed. One banker had systematically cancelled all

business and removed those clients from his portfolio who he

felt to be less than completely honest. Another stated:

One suspicion of a less than honest disclosure, or withholding information, that’s it. One mistake and you are out.

Others acknowledged that small inaccuracies must be

tolerated, but confirmed that relationships suffered with

even small deviations from full disclosure. As an extension to this, bankers were unwilling to assume

the honesty of clients. Indeed, there was a pervasive fear that

companies and individuals might attempt to mislead banks for

their own advantage:

If you get into problem situations some people will still come clean with you, others will try and bury it so that you can’t see it, and the skill in this job is trying to determine when they’re doing it. . .because again of the role you’re in, you’re always naturally cynical. So I’m not overly sure whether you ever fully trust your customers in this job.

Another banker even acknowledged:

I never accept what I’m told at face value.

This hesitance reflected the banks’ risk-disinclined

organisational culture, which was reinforced by a pervasive

fear among relationship managers of being “frauded [sic]” or

supporting the provision of credit that subsequently “went

bad”. This would hamper a relationship manager’s career

development. A small company respondent noted of his bank

relationship manager:

He doesn’t want to blot his copy book within the bank.

This encouraged bank relationship managers to be

particularly careful to establish the bone fides of company

partners. In effect, bank relationship managers were

encouraged not to trust. Even when trust developed, it had little direct impact on the

services that a bank would deliver for a client company if these

inclined the bank towards risk. Banks did not act benevolently

on the basis of trust. They did not incline themselves towards

risk on the basis of trust. Trust seldom led to co-operation or

adaptation and contained no element of faith. Despite

stressing the importance of mutual trust, the bank

conceptualisation of trust was calculative, non-negotiable

and rigorously policed; it was connected principally to the

minimisation of bank risk.

Large company customers

Respondents from larger companies presumed that the banks were trustworthy, and that the banks were “competent and

regulated businesses” with an “interest in maintaining good practice”. As a result, organisational trust was invested in

them almost without question (despite a number of recent high-profile scandals). Bankers themselves, however, were not

given the same predetermined trust as the banks. Risk, for larger companies, was associated primarily to human failures.

It was important that they could trust in the “ability” and “reliability” of their banking team. This was established by the

experience of bank staff “getting things right”, “putting things right”, and “doing what was agreed”. Smaller companies had

a similar conceptualisation, but tended to invest the concern totally in their manager. Larger companies focussed on the

ability of the entire banking team, although the relationship manager was of primary importance. Larger companies were concerned greatly also that their

bankers would handle information given to them in strictest

confidence, while this was less of a concern among small companies. Larger companies understood the delivery of

sensitive information to be a trust behaviour predicated on a confidence that the information would be treated correctly by

bank staff. This trust developed with experience. However, as none of those interviewed gave examples of confidentiality having been breached, it appears that the extent of this fear

among respondents was out of proportion to the actual risk. Larger companies did not have a developed expectation of

trusting behaviours from their banks. In particular, there was no expectation of bank benevolence or decision making on the

basis of affective sentiment. Larger companies accepted that banks had responsibilities to shareholders that they were

obliged to fulfil. Larger companies accepted that this primary responsibility shaped bank policy and would, at times, make

certain actions impossible. Larger companies were not entirely sanguine about this

status quo. They believed that banks overestimated the extent of the risks confronting the banks:

[T]hey’re in a no risk scenario, we’re in the risk side of it.

This led larger companies to question the extent of the

paperwork, information and guarantees demanded by banks. However, larger companies did not feel powerless in the

face of these risks, uncertainties and perceived inefficiencies – indeed, they appreciated a “degree of distance” from their

banks. They were confident of their own ability to manage uncertainties and risks connected to their bank relationships,

without needing to rely on the trust of banks. This was a function of three factors. First, larger companies multi-

banked. Risks and uncertainties connected to one bank contact were moderated by the possession of alternative

suppliers. Second, the value of their banking business was considerable, giving confidence that banks would wish to

maintain relationships with them. This could be described as a form of calculative trust, although our respondents did not interpret it in this way. Third, larger companies usually

possessed significant human resources and financial expertise. They could devise and manage complex banking systems to

resolve problems autonomously. If the expectations of larger companies were breached, they

took action to resolve, or retreat from, associated risks. Larger companies complained about, and if necessary withdrew,

from unsatisfactory relationships:

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

339Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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When the crash happened, irrespective of the fact that they saw and had no risk to their position, they asked if we would, firstly, secure the unsecured portion, and then increase the security on the secured portion. We felt that broke the trusted relationship we had with the bank and we lifted the positions and didn’t do any more business with them.

Against expectations in the literature, the availability of sanctions and alternatives did not promote the perception of trust by larger companies in their banks, or vice versa (Cannon and Perreault, 1999). Nor did they appear to

encourage the banks to enact trusting behaviours more frequently. However, they did mitigate dissatisfaction, reducing large companies’ perception of uncertainty, while allowing them to feel that they could, to an extent, pressure banks to give them the level of service they idealised.

SMEs

SME respondents had the most complex and varied approach to trust. All, however, emphasised trust in the ability and reliability of their bank relationship manager. This interpersonal trust was frequently very strong, and the heart of a relationship which was considered to be of overwhelming importance by the vast majority of respondents. The period of

relationship manager hand-over was greatly feared by small companies. However, despite this emphasis on trust, small companies,

as a group, were more dissatisfied with trust levels than their larger counterparts. This dissatisfaction was connected largely

to small company anxieties surrounding borrowing exchanges and doubts over bank support during inevitable downturns. In response to these fears, many smaller companies idealised trust, after Moorman et al. (1993), as involving trust beliefs leading to trust behaviours – notably the adoption of risk by a partner. They wanted bank support to be reliable and predictable, predicated on affective as opposed to calculative assessments. They wanted their bank to manifest “faith” in

them. Unsurprisingly, as for banks, trust was calculative not

affective; bank relationship managers, and the banks themselves, were unprepared to fulfil this expectation. The

outcome was a sense of insecurity, even resentment, among many small company respondents, focussed towards the banks as organisations, especially their credit committees. This organisational mistrust was exacerbated because small company respondents knew little of the processes by which central bank bodies made credit decisions. This lack of knowledge led them to perceive the credit process as capricious. Even successfully accessing capital did not moderate this

sense of insecurity. There was a pervasive fear among many small corporate borrowers that credit lines, once given, might be withdrawn. The many levels of security that the banks insisted upon during credit agreements reinforced a belief that

credit was never given on the basis of trust:

We have substantial overdraft facilities and every time I sign the letter each year renewing those facilities one of the clauses in the letter is “the overdraft is repayable in full immediately on demand” for almost any reason. Now that is not displaying any trust by the bank in the client at all.

This perception encouraged many smaller companies to exhibit a wider negative reaction to the banks as organisations. The banks were seen by some as “dangerous”. The “endless” demands for information by the banks were taken to

demonstrate that banks were “bottom-line driven” (most saw communication with the bank as a response to bank

demands, not an expression of their trust in their bank). This

led smaller companies to conclude that banks lacked faith in

the companies’ future success, that the banks did not act

mutually or benevolently. A number of small companies felt,

perhaps fairly, that the banks were reluctant to trust

information they provided. Bank personnel had not, as yet, been tarnished by this

perception; bank relationship managers were perceived as

trustworthy by the huge majority of small company

respondents – supporting the thesis that inter-organisational

and interpersonal trust can vary independently (Lipset and

Schneider, 1983). Indeed, mistrust of the banks as

organisations led some small companies to place greater

emphasis on trust in bank staff: The hope that a trusted

relationship manager would extract resources from a

mistrusted bank organisation. This was not the case. Bank relationship managers invested

more effort supporting finance requests from companies with

which they had a close relationship. However, there was little

evidence that this had a decisive impact on credit committees.

This was recognised by a significant cohort of small

companies, who accepted that, as the “discretion” of

managers was curtailed, so their ability to access bank

resources was reduced:

The old style bank manager was making his recommendations as to what facilities to approve. I think his decision . . . was, to a certain extent, based on the personal relationship and on the trust that he might have built up with the client. Today, I feel it’s just figures.

Significantly, it was not only smaller companies that expressed

concern with the centralised decision making processes

adopted by the banks. Larger companies also worried that

credit committees, with which they had no direct relationship,

made decisions critical to their business. However, their

concerns did not engender the same sense of organisational

mistrust as it did among the SMEs. The negative reactions of small companies cannot be linked

solely to a different experience of banking. Small companies

do have some disadvantages. Managers have large portfolios

and focussed greater effort towards more valuable accounts.

Contact, through which trust develops, was denser between

large companies with complex banking requirements than

small ones with more simple needs. Larger companies found

it less taxing to meet the banks’ stringent demands for

information. A company with a large turnover could access

finance more readily than a smaller counterpart. However,

fundamentally, banks did not treat small firms more

mistrustfully than large companies – no company would be

approved significant new credit lines without fulfilling all the

bank’s information demands and satisfying oversight. What marked out smaller companies was not only their

treatment, but also their response to it. While larger

companies accepted that bank policy reflected a primary

and legitimate focus on the interests of shareholders, many

small companies interpreted bank procedures as manifesting

mistrust in them. In addition, small companies most readily

saw trust in the breach. A case in point is related to what we

have described as “short-cutting”, which smaller companies

often failed to acknowledge was a means of the bank

relationship manager manifesting trust in them. In contrast,

when shortcuts were not approved, this was invariably

understood as indicative of mistrust. As predicted in the

literature, negative experiences had a more profound effect on

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

340Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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reactions than positive experiences (Busch and Hantusch,

2000). These perceptions (which were not universal – a significant

minority of small companies, especially those working in

financial services themselves, were both realistic and positive

about their banks) were shaped by smaller companies’ sense

of their own vulnerability. This encouraged them to place

great emphasis on bank trust in the absence of real confidence

that they could expect their banks to support them. Mistrust

of banks reflected small companies’ own sense of

vulnerability. Compounding this, most smaller companies did not

emulate the strategies deployed by larger companies to

militate the refusal of the banks to enact trusting behaviours.

Few multi-banked. Most were hesitant to take actions to

switch banks in any but the gravest situations. In addition,

they saw bank policy as ubiquitous across all the banks, and

therefore little point in switching suppliers (Grayson and

Ambler, 1999; Harris and Dibben, 1999).

Conclusions

Companies trust in the reliability, efficiency and honesty of

their bankers. However, it is apparent that trusting

behaviours, those which incline banks towards risk, are

seldom enacted by bankers. While this is in line with bank

policy, and appeared not to have an overly negative impact

upon larger companies (turnover over £30 million), many

smaller companies demonstrated marked organisational

mistrust of the banks as a result, even if interpersonal trust

in their bank managers remained strong (cf. Lowe and

Kuusisto, 1999). This negative interpretation reflected the vulnerability of

small companies, rather than an objective disadvantage in

their bank relationships (although the meaning of trust in

corporate banking has clearly changed in recent times).

Larger companies, corporates and multinationals,

experienced certain advantages over smaller companies on

account of their size, security and importance to their banks.

However, their relative satisfaction was connected primarily to

the ability to militate dissatisfaction through the adoption of

purchase strategies that allowed them to limit perceived risks

and uncertainties autonomously. Most smaller companies lacked this ability, which was the

root cause of their mistrust of banks as organisations. While

smaller companies may be unable to replicate all the strategies

used by larger ones to control this dissatisfaction, smaller

companies could moderate perceived mistrust by adopting

less passive financial services purchase strategies, better suited

to the current business-to-business bank market. Trust is operationalised asymmetrically by bankers and

their clients, and is also dependent on the context (Szmigin,

1993). Bank trust is calculative, non-negotiable and

rigorously policed. It is more based on risk containment and

control than on customer relationship management, customer

service, or quality. The larger companies trusted the banks

because of their institutional stature, but not bankers, and

worried about human failure. While the SMEs wanted

affective trust, organizational bank trust was always

calculative, unless affective trust was a personal behaviour of

the bank relationship manager, operationalised in an ad hoc

manner. Interorganisational and interpersonal trust varied

independently, according to the personal interactions and

relationships involved. While bankers view themselves and their institutions as

“trustworthy”, they are not trusting of their clients, and the

banks’ increasing use of technology, which largely distances

themselves from their clients, means that the institutionalized

myth of bank stature is eroding (see Lowe and Kuusisto,

1999; UNCTAD, 1993).

Asymmetrical trust perspectives

Banks’ understanding and use of trust is not explicitly

addressed. The conservative, risk-averse bank position is

based on calculative trust, the rational evaluation of risks,

rewards, controls and information derived from exchange

interface and beyond – such as reputation and credit rating

(Ring, 1996). Client companies, especially SME’s, approach the banking

relationship from the position of affective trust, based on their

personal experience of the service process, which is derived

from emotional inputs and information derived from the

relationship and the relational experiences they perceive

during the service process (Warrington et al., 2000). The asymmetrical approach to, and operationalisation of,

trust is an important factor in the perceived unease on both

sides. Captive customers, in an oligopoly market, who are not

switching because “they [banks] are all the same”, are not a

sound basis for the industry. Banks and their customers,

especially SMEs, build and maintain long-term relationships

by default and trial-and-error.

Managerial implications

Although trust is foundational to establishing relationships at

a personal, organizational and interorganizational level and an

essential element of customer service and service quality,

banks and bankers have no explicit strategy or staff guidelines

for developing trust. The banks have no generally-recognized

and accepted definitions of trust, trusting behaviours, or how

trust should be operationalised. As an important

underpinning element of customer service, service quality

and relationship building and maintenance, trust should be

developed explicitly, strategically and consciously through the

adoption of behaviours likely to encourage trusting. Banks should think about and approach trust in the

structured way in which they would consider other important

elements of their business practice. Trust building behaviours

and the operationalisation of trust is currently done through

the informal and unscripted informal approval of actions by

bank staff, often over the telephone, before the formal

paperwork has been completed. This is usually based on the

experience and knowledge of the client, and is an ad hoc

operationalisation of trust. It was not official, sanctioned bank

policy. This is a costly, trial-and-error approach. Neither side has explicitly addressed or understood the

fundamental role of trust in providing a basis for service

satisfaction, service quality, and relationship building. Both

sides have left this completely to chance and individual

idiosyncrasy. Both sides refer to the importance of

“chemistry”, a blanket term for the ability to achieve a

mutually beneficial, reciprocal trusting relationship, which is

also profitable. This has also been the case in the global

market in international equity securities, where “chemistry” is

essential for business relationships and firms mix and match

The role of trust in financial services business relationships

Katherine Tyler and Edmund Stanley

Journal of Services Marketing

Volume 21 · Number 5 · 2007 · 334–344

341Tyler, K., Patton, M., Mongiello, M., & Meyer, D. (Eds.). (2007). Business to business services - multiple markets and multi-disciplinary perspectives for the twenty-first century : Multiple markets and multi-disciplinary perspectives for the twenty-first century. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from harrisburg-ebooks on 2020-11-24 13:06:00.

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