Trust: A Major Factor Driving Consumer Decisions

Can I trust the world? It is an existential question. It is also a subject of theory and ongoing research in the social sciences. The development of trust is the first stage of psychosocial development, occurring or failing during the first two years of life. It affects everyone 24/7, 365 days a year. Trusting other people is necessary for survival, and it keeps societies and economies functioning efficiently.

Trust has emerged in news stories and social media throughout the pandemic. Internationally recognized trust researcher Sandra J. Sucher discussed it in an interview for her book The Power of Trust: How Companies Build It, Lose It, Regain It. Researcher and storyteller Brené Brown hosted podcasts on how to approach the topic of trust in a way that is productive and actionable. Posting on LinkedIn, Brown included a quote card that went viral and read, “Trust is not built in big, sweeping moments. It’s built in tiny moments every day.”

Fortune dedicated a special report to the theme of trust. In “Trust and Consequences,” the magazine focused on trust and business ethics, presenting a collection of stories that make a compelling case for “why it’s time for a new era of accountability in business.” The takeaway: Trust has the potential to create exceptional success if developed, yet it can destroy the most successful business.

In the financial industry, trust is a major factor in driving consumer decisions. Trust enables the financial services sector to provide products and services to clients. Understanding how to build and sustain trust-based relationships is fundamental to connecting with consumers. Trust also is pervasive — it is relevant at every level within financial institutions, regardless of job title and seniority. We see this encapsulated in the words of the late Professor John O. Whitney of Columbia University Business School, who said, “An enterprise that is at war with itself [misaligned] will not have the strength or focus to survive and thrive in today’s competitive environment.”

A Signature Theme

Trust is a signature theme for The American College Cary M. Maguire Center for Ethics. We believe building trust-based relationships can serve as a strategic asset for financial institutions.

We have been studying trust in financial services systematically and objectively for the past year to develop insights and strategies that can help financial services leaders manage this vital topic.
Our multi-method research tackles some functional challenges in the financial industry. For example, we know that there are disparities in the access of underrepresented groups to capital and banking services, but what actions can financial institutions take to stand out as trustworthy to historically underrepresented groups and those with low trust? Our research can help leaders better understand how trust expectations, and the factors that influence those expectations, affect the development and success of products, services and relationships.

A Nuanced View

Our findings provide a nuanced view of trust in the financial industry. Interestingly, while existing survey results from Edelman showed that financial services remains one of the least-trusted sectors in business, we found that when we examine trust in the context of service industries such as health care, education, telecommunications, state/local government, media/entertainment and the federal government, financial services comes out right in the middle. Another notable finding is that among types of financial services providers, consumers particularly trust community banks and credit unions. When we looked at generational differences, we found that millennials have the highest levels of trust across service industries, including financial services.

Household income also affects trust level. This is important because it helps build a business case for financial inclusion. As income increases, so does trust in all services. While low-trust consumers are more likely to be low income and high-trust consumers are more likely to be high income, both seek value from the financial institutions with which they engage, and both aspire to build wealth. This is a timely finding, as demands for business leadership to narrow the wealth gap and promote economic empowerment in the U.S. persist. Thought-provoking analyses that stimulate further consideration include a working paper from the National Bureau of Economic Research, an article in Fortune that questions the existence of a financial literacy gap and a framework for collective impact from The American College Center for Economic Empowerment and Equality.

Contrary to what most people believe, trust is not a fuzzy feeling or a quality that is either present or absent. Trust is actionable. As a key leadership competency of the global economy, trust is muscle that leaders can exercise by developing strategies to create, grow, extend and restore it among stakeholders. We aim to empower financial leaders and institutions with the necessary stakeholder perspectives and leadership toolkits in the journey to build trust and thereby advance business ethics.

Domarina Oshana, Ph.D., is a social scientist and research development professional. She is the research director for corporate programs for The American College Cary M. Maguire Center for Ethics in Financial Services. She may be contacted at [email protected].