The economic notion of trust

Abstract

It is apprehended that the human element of trust is becoming the number one asset for the financial organisations. And since trust is a matter of relationships, financial organisations need to create, expand and maintain consumer trust for communication, transactions and payments. Financial institutions are known for their ability to cultivate long-standing relationships with their clients based on integrity and trust. And as we move towards electronic-based transactions, there is the need to explore the factor of trust in order to identify how financial organizations are shaped in the future and what issues are raised. Trust always affects two measurable outcomes: speed and cost and there are essentially two mechanisms that lead to economic notions of trust, the one is based on repeated interaction the other one is based on beliefs. The ultimate goal is to engage online commerce users quickly and establish and preserve strategic trust under challenging situations. In the ecommerce context, based on the target, the study of trust can be categorized as macro-level or micro-level. The macro-level study of trust deals with what called institution-based trust and the micro-level study of trust is different from the macro-level study in that the target of the former is an individual e-business. The research questions that are brought in the surface are: what exactly is trust in the on-line environment? What are the sources of trust? Is there more than one form of trust? Is it a static or dynamic phenomenon etc. The paper will try to explore, examine, and describe the methods for estimating the economic value of trust (cost of developing trust, maintaining trust and trust failure), the impacts of trust on e -economy (general finding) and how trustworthy financial organizations are created and finally financial organizations benefit from trust.