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The performance generating limitations of the relationship-banking model in the digital era – effects of customers' trust, satisfaction, and loyalty on client-level performance

Kent Eriksson (Royal Institute of Technology, Stockholm, Sweden)
Cecilia Hermansson (Royal Institute of Technology, Stockholm, Sweden)
Sara Jonsson (Stockholm University School of Business, Stockholm, Sweden)

International Journal of Bank Marketing

ISSN: 0265-2323

Article publication date: 25 February 2020

Issue publication date: 2 June 2020

2209

Abstract

Purpose

This paper investigates the viability of the relationship-oriented business model. Specifically, it examines 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.

Design/methodology/approach

The findings are based on analyses 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

Overall, the findings are that the relationship banking model generates non-interest revenue, but not revenue on net interest spread. In more detail, findings show that trust has a positive direct effect on client-level non-interest revenue. Furthermore, trust mediates the entire effect 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 little 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 spread.

Originality/value

While previous literature mainly has used subjective intentions (e.g., repurchase behavior) as operationalization of performance, this paper combines subjective survey data and objective performance data, allowing the investigation of how the customer relationship model affects actual performance. Furthermore, the paper investigates the relational banking model's effect on non-interest and net interest spread revenue, and we show that the relational banking model generates only non-interest revenue, and not net interest spread revenue. The fine-grained client-level data also allows the investigation on how the effect of trust on client-level performance differs among client groups with different cognitive characteristics (i.e., risk tolerance and financial literacy).

Keywords

Acknowledgements

We acknowledge financial support from Jan Wallander and Tom Hedelius Foundation (grant 2015-0523). We also thank Swedbank for providing data, and the editor and referees for valuable comments and suggestions.

Citation

Eriksson, K., Hermansson, C. and Jonsson, S. (2020), "The performance generating limitations of the relationship-banking model in the digital era – effects of customers' trust, satisfaction, and loyalty on client-level performance", International Journal of Bank Marketing, Vol. 38 No. 4, pp. 889-916. https://doi.org/10.1108/IJBM-08-2019-0282

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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