Scandinavian Working Papers in Economics
Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance
No 19/4: The viability of the bank advisory service business model - effects of customers' trust, satisfaction and loyalty on client-level performance
Kent Eriksson (), Cecilia Hermansson () and Sara Jonsson ()
Additional contact information
Kent Eriksson: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden
Cecilia Hermansson: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Royal Institute of Technology, 100 44 Stockholm, Sweden
Sara Jonsson: Stockholm University, Postal: Stockholm School of Business, 106 91 Stockholm, Sweden
Abstract: This paper investigates the viability of the relationship-oriented business model of the bank advisory service function and tests its viability considering differences in clients’ risk tolerance and financial literacy. Specifically, it investigates the effects of bank customers’ satisfaction, loyalty, and trust in bank advisors on two client level performance measures; client level non-interest revenue and client-level revenue on net interest spread. It further investigates how effects are moderated by differences in clients’ risk tolerance and financial literacy. The findings are based on analyzes of a data set that combines survey data (collected from 13,525 bank clients in 2013) with bank record data from each respondent. The cross sectional data is analyzed using OLS- regression and structural equation modeling. Findings show that trust has a positive direct effect on client level non-interest revenue. Further, trust mediates the entire impact of satisfaction and loyalty on client-level non-interest revenue. Customer satisfaction and loyalty do not lead to enhanced client-level non-interest revenue if there is limited trust in bank advisors. Findings further show that the relevance of trust for non-interest revenue is higher for clients with high risk tolerance and high financial literacy. Satisfaction, loyalty, and trust have no effect, however, on client-level revenue on net interest rate spread.
Keywords: bank; revenue; trust; satisfaction; loyalty; financial literacy; financial risk tolerance
JEL-codes: G21; G41; G51; G53; M21
46 pages, October 18, 2019
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