Interdisciplinary Studies in Society, Law, and Politics 2024; 3(2): 18-24
Original Research
Consumer Trust in Digital Banking: A Qualitative Study of Legal and
Regulatory Impacts
Vishwajit Gupta1* , Sumitra Shukla2
1 Ph.D. Student, SMS Group of Institutions;Pune, India
2 Research Scholar Mahatma Gandhi Kashi Vidyapith, Varanasi, India
* Corresponding author email address: vishgupta@ismspune.in
Received: 2024-01-15 Revised: 2024-02-16 Accepted: 2024-02-27 Published: 2024-04-01
The shift towards digital banking has significantly transformed the financial landscape, necessitating a deeper
understanding of the factors influencing consumer trust. This study aims to explore how legal and regulatory
frameworks, coupled with perceived security measures, impact consumer trust in digital banking services. A
qualitative research design was employed, using semi-structured interviews to gather data from 30 participants who
use digital banking services. Participants were selected through purposive sampling to cover a broad demographic
range. Data were collected to achieve theoretical saturation and analyzed using NVivo software to identify emerging
themes and patterns. The analysis revealed three main themes: Regulatory Impact, Perceived Security, and Consumer
Trust Dynamics. Regulatory Impact included categories such as Compliance Standards, Consumer Protection Policies,
Transparency, and Enforcement and Penalties. Perceived Security was detailed through Technological Safeguards,
Risk Management, User Experience, and Data Management. Consumer Trust Dynamics comprised Initial Trust
Formation, Trust Maintenance, Impact of Negative Experiences, Role of Peer Influence, and Long-term Relationship
Building. The study concluded that a robust legal and regulatory framework, effective security measures, and
dynamic trust-building practices are pivotal in fostering consumer trust in digital banking. Transparent regulations,
advanced security technologies, and proactive customer relationship management are essential for banks to
maintain and enhance trust among users.
Keywords: Digital Banking, Consumer Trust, Qualitative Study, Regulatory Frameworks, Security Measures, Trust Dynamics.
How to cite this article:
Gupta, V., & Shukla, S. (2024). Consumer Trust in Digital Banking: A Qualitative Study of Legal and Regulatory Impacts.
Interdisciplinary Studies in Society, Law, and Politics, 3(2), 18-24. https://doi.org/10.61838/kman.isslp.3.2.4
1. Introduction financial activities has triggered a complex interplay of
T
factors that influence consumer trust, an essential
he rapid advancement of digital technologies has component for the sustained growth of this sector (Kaur
profoundly reshaped the banking industry, et al., 2021; Sivaram & Satheesh, 2021; Søilen &
pushing the boundaries of how banking services are Benhayoun, 2021).
delivered and consumed (Ally, 2023; Martínez-Navalón Digital banking, by virtue of its technology-driven
et al., 2023; Mohamad et al., 2023; Tham et al., 2022). nature, necessitates robust legal and regulatory
This shift has led to the widespread adoption of digital frameworks to ensure security, privacy, and reliability—
banking platforms, which now serve as a primary all critical to building consumer trust. Studies like those
interface between financial institutions and their by Ally (2023) highlight the specific legislative measures
customers. The integration of digital banking into daily tailored to the context of mobile banking in Tanzania,
© 2024 The authors. Published by KMAN Publication Inc. (KMANPUB). This is an open access article under the terms of the Creative
Commons Attribution-NonCommercial 4.0 International (CC BY-NC 4.0) License.
Gupta & Shukla Interdisciplinary Studies in Society, Law, and Politics 3:2 (2024) 18-24
providing a framework that is increasingly being In addition to understanding the direct effects of
mirrored globally to adapt to the new digital realities technological and regulatory changes, it is imperative to
(Ally, 2023). Similarly, the international perspective on consider the cultural and psychological factors that
the adoption and trust mechanisms in mobile banking, as influence consumer behavior towards digital banking.
explored by Baabdullah et al. (2019), indicates a Kivijärvi, Laukkanen, and Cruz (2007) provide a cross-
convergence towards an integrated model that cultural comparison that offers insights into the nuances
accommodates technological, behavioral, and legal of trust across different cultural backgrounds, suggesting
dimensions (Baabdullah et al., 2019). that trust formation can vary significantly based on
Further, the role of legal changes in the backdrop of cultural context, which must be considered in the
technological advancements, as discussed by Berg regulatory and legal design (Kivijärvi et al., 2007).
(2022), sheds light on how traditional legal In summary, the introduction of digital banking has
infrastructures are evolving in response to the demands brought forth a multitude of changes in the financial
of modern technology-driven environments, including sector, prompting a thorough examination of how legal
digital banking (Berg, 2022). This evolution is crucial as frameworks, technological advancements, and consumer
it directly impacts consumer perceptions and trust, behavior interact to shape trust. This manuscript aims to
particularly when managing sensitive genomic delve into these interactions through qualitative
information, which parallels the privacy concerns in analyses based on interviews with diverse banking
digital banking. consumers, providing a comprehensive view of the
Moreover, the digital transformation within banking is factors that influence consumer trust in digital banking.
not only about technological adoption but also about
how these technologies translate into consumer trust 2. Methods and Materials
and usage, as evidenced in the works of Kaur, Ali, and
2.1. Study Design and Participants
Hassan (2021) and Sivaram and Satheesh (2021). These
studies explore how in-branch digital efforts and This study adopts a qualitative research design to
perceived risks respectively play significant roles in explore consumer trust in digital banking, focusing
shaping consumer attitudes towards digital banking particularly on the impacts of legal and regulatory
platforms (Kaur et al., 2021; Sivaram & Satheesh, 2021). frameworks. A qualitative approach is chosen due to its
Consumer trust in digital banking is also influenced by strength in providing depth and detail through direct
factors such as ease of use and perceived privacy, which observation, communication with participants, and the
are fundamental to user acceptance and are extensively analysis of text data. This method allows for a nuanced
discussed in the literature by Martínez-Navalón, exploration of perceptions, thoughts, and behaviors of
Fernández-Fernández, and Alberto (2023). Their individuals in their natural settings, which is essential for
findings align with those of Casaló, Flavián, and Guinalíu understanding the complex dynamics of trust in digital
(2007), who assert that the perception of security, financial services.
privacy, and usability are critical determinants of trust in Participants were recruited using a purposive sampling
online banking environments (Casaló et al., 2007; technique to ensure a wide range of perspectives on the
Martínez-Navalón et al., 2023). use of digital banking services. The sample included
Trust dynamics are further complicated by negative users from various demographics, including age, gender,
experiences and the efficiency of the response socioeconomic status, and geographical location.
mechanisms to such incidents. Skvarciany and Iljins Additionally, banking professionals and regulatory
(2015) emphasize the importance of change experts were interviewed to gain insights from within
management in trust formation, noting that effective the industry and those who frame its operational
management of changes within banks significantly guidelines. The study aimed for theoretical saturation,
bolsters consumer trust. This aspect is critical as digital where no new themes emerged from interviews,
banking inherently involves continuous updates and indicating that the collected data sufficiently
changes to its systems and interfaces (Skvarciany & represented the range of experiences and opinions on
Iljins, 2015). the topic.
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Prior to the interviews, all participants were informed This software facilitated the organization, coding, and
about the study's aims, the nature of their involvement, sorting of data, aiding in the identification of common
and their right to withdraw from the study at any point. themes and patterns. The analysis followed a thematic
Confidentiality and anonymity were strictly maintained, approach, initially involving the coding of data in an
with all data being coded to prevent identification of inductive manner, allowing themes to emerge from the
participants. Consent forms were signed digitally by all data itself rather than imposing preconceived categories.
participants, confirming their voluntary participation As the study progressed, these themes were refined and
and their understanding of the confidentiality measures connected to construct a comprehensive understanding
in place. of the influences of legal and regulatory frameworks on
consumer trust in digital banking.
2.2. Measures
3. Findings and Results
2.2.1. Semi-Structured Interview
In this qualitative study, a total of 30 participants were
Data was collected through semi-structured interviews,
interviewed to explore their perceptions of trust in
which allowed for flexibility in how questions were
digital banking. The demographic profile of the
posed, enabling a deeper exploration of individual
participants was diverse, ensuring a broad range of
responses. The interview guide was prepared with open-
insights. The sample consisted of 17 women and 13 men,
ended questions to elicit detailed responses on personal
reflecting a relatively balanced gender distribution.
experiences, perceptions of safety and security in digital
Participants' ages ranged from 20 to 65 years, with 10
banking, and the impact of legal and regulatory measures
participants aged 20-35, 12 participants aged 36-50, and
on trust. Interviews were conducted face-to-face when
8 participants aged 51-65, thereby covering young
possible, and via secure video conferencing platforms
adults, middle-aged individuals, and older adults. The
where necessary, each lasting between 30 to 60 minutes.
participants were also varied in terms of their
All interviews were audio-recorded with the
professional backgrounds: 12 were from a financial
participants' consent and transcribed verbatim for
services background, 8 worked in technology-related
analysis.
fields, and 10 were employed in various other sectors
including education, healthcare, and retail.
2.3. Data Analysis
The transcribed interviews were analyzed using NVivo
software, a powerful tool for qualitative data analysis.
Table 1
The Results of Qualitative Analysis
Categories Subcategories Concepts
Regulatory Impact Compliance Standards GDPR compliance, PSD2, KYC procedures, audit trails
Consumer Protection Policies fraud prevention, dispute resolution, account security
Transparency clear terms of use, privacy policies, user agreements
Enforcement and Penalties fines, sanctions, legal actions, compliance checks
Perceived Security Technological Safeguards encryption, biometric authentication, secure protocols
Risk Management risk assessment processes, incident response plans
User Experience interface design, ease of access, error handling
Data Management data storage practices, data access, breach notification
Consumer Trust Dynamics Initial Trust Formation brand reputation, initial user experience, marketing
Trust Maintenance continuous improvement, customer support, updates
Impact of Negative Experiences response to fraud, system downtimes, data leaks
Role of Peer Influence word of mouth, social media reviews, family recommendation
Long-term Relationship Building loyalty programs, personalized services, customer retention
In the qualitative analysis of semi-structured interviews banking, three main themes emerged, each consisting of
with participants concerning consumer trust in digital a varying number of subthemes and enriched with
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Gupta & Shukla Interdisciplinary Studies in Society, Law, and Politics 3:2 (2024) 18-24
detailed concepts. The findings are summarized as Data Management: Practices around data storage, access,
follows: and breach notifications were crucial. "Immediate
notifications about unusual activities help me act quickly
3.1. Regulatory Impact to secure my account," was a feedback from an
interviewee.
The first theme focuses on the legal and regulatory
frameworks impacting consumer trust. Four subthemes
3.3. Consumer Trust Dynamics
were identified:
Compliance Standards: Participants noted the The dynamics of trust development and maintenance
importance of banks adhering to comprehensive include five subthemes:
compliance protocols. Concepts such as GDPR Initial Trust Formation: Brand reputation, initial user
compliance, PSD2 requirements, KYC procedures, and experience, and marketing efforts are fundamental. "I
audit trails were frequently mentioned. One participant chose my bank because of their good reputation and
remarked, "Knowing that my bank strictly follows GDPR positive reviews," said one participant.
makes me feel safer about where my data goes." Trust Maintenance: Continuous improvement, customer
Consumer Protection Policies: This subtheme includes support, and regular updates are vital. "Regular updates
fraud prevention mechanisms, dispute resolution and visible improvements show that they care about our
processes, and account security measures. A common security," another participant expressed.
sentiment was, "The dispute resolution process was Impact of Negative Experiences: How banks handle
swift and transparent, which helped restore my trust." issues such as fraud, system downtimes, and data leaks
Transparency: The clarity of terms of use, privacy influences trust. "Their quick action during the system
policies, and user agreements was highlighted. "Clear outage retained my trust," a participant recalled.
terms and privacy policies make it easier for me to trust Role of Peer Influence: Word of mouth, social media
the services," shared a participant. reviews, and family recommendations play significant
Enforcement and Penalties: The presence of regulatory roles. "I tried the app because my sister recommended it,
enforcement and penalties for non-compliance were and she hasn’t had issues," mentioned a user.
seen as crucial. Concepts include fines, sanctions, legal Long-term Relationship Building: Loyalty programs,
actions, and compliance checks. "Heavy penalties for personalized services, and strategies for customer
breaches make banks more vigilant," explained another retention are impactful. "Their rewards program and
user. personalized offers make me feel valued," shared
another.
3.2. Perceived Security
4. Discussion and Conclusion
Security perceptions play a critical role in shaping trust.
This theme encompasses four subthemes: The qualitative analysis of the semi-structured
Technological Safeguards: Encryption technologies, interviews conducted in this study revealed three main
biometric authentication, and secure protocols are themes, each encapsulating a distinct aspect of consumer
pivotal. "The biometric login feature gives me peace of trust in digital banking. The themes identified were
mind," stated a participant. Regulatory Impact, Perceived Security, and Consumer
Risk Management: This includes risk assessment Trust Dynamics. Each theme comprised several
processes and incident response plans. "Their proactive categories that provided a more granular understanding
risk management reassures me that my funds are safe," of how each aspect influences trust. Specifically, the
a user commented. categories under Regulatory Impact were Compliance
User Experience: Factors such as interface design, ease of Standards, Consumer Protection Policies, Transparency,
access, and error handling affect trust. "A user-friendly and Enforcement and Penalties. Under Perceived
interface that works smoothly is less frustrating and Security, the categories identified were Technological
feels more secure," a respondent noted. Safeguards, Risk Management, User Experience, and
Data Management. Finally, Consumer Trust Dynamics
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included categories such as Initial Trust Formation, services in creating lasting customer relationships and
Trust Maintenance, Impact of Negative Experiences, Role trust.
of Peer Influence, and Long-term Relationship Building. Our findings reveal that the presence of strong
The theme of Regulatory Impact highlighted the compliance standards, consumer protection policies,
significant role of legal frameworks in establishing a transparency, and enforcement mechanisms
secure digital banking environment. The Compliance significantly enhances consumer trust in digital banking.
Standards category included concepts like GDPR This is particularly relevant in the context of Ally's
compliance, PSD2 requirements, KYC procedures, and (2023) discussion on the comprehensive legal
audit trails. Consumer Protection Policies focused on frameworks for mobile banking in Tanzania, which
mechanisms for fraud prevention, dispute resolution, underscores the necessity of robust legal structures to
and account security, which are crucial for maintaining safeguard consumer interests and ensure service
user trust. Transparency in banking operations was credibility (Ally, 2023). Similarly, the transformation of
discussed in terms of clear terms of use, privacy policies, legal impacts in digital environments, as examined by
and user agreements, ensuring that consumers are well Berg (2022), supports our findings by demonstrating
informed. Lastly, Enforcement and Penalties dealt with how updated legal frameworks that keep pace with
the implications of regulatory actions, such as fines and technological advancements foster consumer trust.
sanctions, which reinforce the seriousness of the These studies confirm that proactive regulatory
regulatory framework. measures are crucial in maintaining a secure and
In the theme of Perceived Security, the importance of trustworthy digital banking environment, as also
technological and procedural safeguards in fostering evidenced by the positive consumer responses to clear
trust was underscored. The Technological Safeguards and enforced regulations noted in our findings (Berg,
category covered essential security measures like 2022).
encryption, biometric authentication, and secure The theme of perceived security, encompassing
communication protocols. Risk Management was about technological safeguards, risk management, user
institutional strategies to preemptively address experience, and data management, is central to fostering
potential threats, including risk assessment processes trust. The emphasis on technological safeguards, such as
and incident response plans. User Experience encryption and biometric authentication, resonates with
highlighted the influence of interface design and findings from Casaló, Flavián, and Guinalíu (2007), who
functional usability on perceived safety and ease of use. argue that security measures are critical to building
Data Management focused on how data is handled, online trust. Furthermore, Sivaram and Satheesh (2021)
stored, and protected, with concepts such as data storage highlight the direct impact of perceived risks on the
practices, access controls, and prompt breach adoption of digital banking services, which aligns with
notifications. our findings that effective risk management strategies
The theme of Consumer Trust Dynamics explored the are essential for reducing consumer apprehensions and
psychological and relational aspects of how trust is enhancing trust (Sivaram & Satheesh, 2021).
developed and maintained over time. Initial Trust The significance of user experience, especially in terms
Formation included concepts such as brand reputation of interface design and ease of access, is corroborated by
and initial user experiences that influence a consumer’s Martínez-Navalón, Fernández-Fernández, and Alberto
first impression. Trust Maintenance involved continuous (2023), who found that usability and privacy are decisive
improvement, customer support, and regular updates factors in adopting digital banking technologies
that help sustain trust. Impact of Negative Experiences (Martínez-Navalón et al., 2023). This alignment suggests
examined how effectively banks handle issues like fraud that a seamless and user-friendly interface not only
and system downtimes, which can critically affect trust. enhances user satisfaction but also contributes to a
Role of Peer Influence reflected the significance of social deeper sense of security and trust among digital banking
endorsements and reviews in trust-building. Finally, users.
Long-term Relationship Building emphasized the The dynamics of trust formation and maintenance
importance of loyalty programs and personalized revealed in this study include initial trust formation,
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Gupta & Shukla Interdisciplinary Studies in Society, Law, and Politics 3:2 (2024) 18-24
trust maintenance, the impact of negative experiences, factors that underpin consumer trust in digital banking.
the role of peer influence, and long-term relationship They affirm that trust is not merely the absence of
building. These dynamics are particularly reflective of security concerns but is actively constructed through
the nuanced nature of trust, which is not static but ongoing interactions between consumers and their
evolves over time and through various interactions. For banking platforms, influenced by both institutional
example, the role of initial trust formation highlighted by practices and social dynamics. Thus, for banks and
the positive reputation of banks aligns with the findings regulatory bodies, prioritizing these elements is
of Kivijärvi, Laukkanen, and Cruz (2007), who noted the paramount for cultivating a trusted digital banking
importance of cultural and initial trust factors in environment.
electronic service consumption (Kivijärvi et al., 2007). This study, while comprehensive, is not without its
Furthermore, the importance of managing negative limitations. The qualitative nature of the research,
experiences effectively and the impact of such focused on semi-structured interviews, may not capture
management on trust maintenance are supported by the full breadth of consumer experiences and
Skvarciany and Iljins (2015), who discuss how change perceptions across different demographic and
management practices within banks can significantly geographic segments. Additionally, the theoretical
influence trust. Their study reinforces our findings that saturation approach, while ensuring depth of
effective responses to negative incidents are crucial for understanding, may limit the generalizability of the
sustaining trust (Skvarciany & Iljins, 2015). findings to broader populations or different cultural
The role of peer influence, as discussed in our findings, is contexts.
supported by the work of Søilen and Benhayoun (2021), Future research should aim to expand the geographic
who emphasize the role of institutional trust and its and demographic scope of the study to include a wider
influence through community and network circles variety of consumers, potentially incorporating
(Søilen & Benhayoun, 2021). This peer influence is a quantitative methods to validate and extend the
powerful factor in the diffusion of trust or distrust in qualitative insights. Longitudinal studies could also
digital banking services. provide valuable information on how trust evolves with
This qualitative study has provided rich insights into the ongoing changes in the digital banking landscape and
factors influencing consumer trust in digital banking, regulatory environments. Additionally, comparative
identifying three key themes: Regulatory Impact, studies between different regulatory frameworks could
Perceived Security, and Consumer Trust Dynamics. The shed light on the most effective practices for fostering
data reveal that comprehensive and transparent consumer trust.
regulatory frameworks, robust security measures, and For practitioners, this study underscores the importance
effective management of trust dynamics are essential in of implementing robust security measures, maintaining
fostering consumer trust. Participants highlighted the transparency, and actively managing customer
importance of strict compliance standards, proactive relationships to build and sustain trust. Banks should
consumer protection policies, and clear transparency in invest in advanced security technologies and ensure
banking operations as foundational to their trust. The these measures are communicated clearly to consumers.
significance of technological safeguards, such as Regular training for staff on privacy and security, along
encryption and biometric security, along with seamless with transparent communication regarding the handling
user experiences, was emphasized in relation to of personal data and breaches, could also enhance trust.
perceived security. Furthermore, the study explored the Moreover, banks should consider customer feedback
nuances of trust dynamics, noting the critical role of mechanisms to continuously improve their digital
initial trust formation, effective handling of negative services. The regulatory bodies are encouraged to
experiences, and the influence of peer networks in update and enforce regulations that protect consumer
maintaining and building trust over time. interests while promoting innovation in the banking
The findings of this study contribute significantly to the sector. This balanced approach is crucial for the
existing literature by elucidating the intricate sustained development of a secure and trustworthy
relationships between legal, technological, and relational digital banking ecosystem.
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Gupta & Shukla Interdisciplinary Studies in Society, Law, and Politics 3:2 (2024) 18-24
Authors’ Contributions Services Marketing. https://doi.org/10.1057/s41264-020-
00082-w
Authors contributed equally to this article. Kivijärvi, M., Laukkanen, T., & Cruz, P. (2007). Consumer Trust
in Electronic Service Consumption: A Cross-Cultural
Comparison Between Finland and Portugal. Journal of
Declaration Euromarketing. https://doi.org/10.1300/j037v16n03_05
Martínez-Navalón, J. G., Fernández-Fernández, M., & Alberto, F.
In order to correct and improve the academic writing of P. (2023). Does Privacy and Ease of Use Influence User Trust
in Digital Banking Applications in Spain and Portugal?
our paper, we have used the language model ChatGPT. International Entrepreneurship and Management Journal.
https://doi.org/10.1007/s11365-023-00839-4
Transparency Statement Mohamad, L., Osman, Z., Mohamad, R. K., Ismail, Z., & Din, M.
I. M. (2023). The Perceived Attitude of Bank Customers
Towards the Intention to Use Digital Banking in Malaysia.
Data are available for research purposes upon
International Journal of Academic Research in Business and
reasonable request to the corresponding author. Social Sciences. https://doi.org/10.6007/ijarbss/v13-i1/15570
Sivaram, A., & Satheesh, E. K. (2021). Customers’ Perceived Risk
Acknowledgments and Attitude Towards Adoption of the Digital Banking
Services. South Asian Journal of Social Studies and
Economics. https://doi.org/10.9734/sajsse/2021/v12i430312
We would like to express our gratitude to all individuals Skvarciany, V., & Iljins, J. (2015). The Role of Change
helped us to do the project. Management in Trust Formation in Commercial Banks.
Verslas Teorija Ir Praktika.
https://doi.org/10.3846/btp.2015.557
Declaration of Interest Søilen, K. S., & Benhayoun, L. (2021). Household Acceptance of
Central Bank Digital Currency: The Role of Institutional
The authors report no conflict of interest. Trust. The International Journal of Bank Marketing.
https://doi.org/10.1108/ijbm-04-2021-0156
Tham, W. K., Lim, W. M., & Vieceli, J. (2022). Foundations of
Funding
Consumption and Production in the Sharing Economy.
Electronic Commerce Research.
According to the authors, this article has no financial https://doi.org/10.1007/s10660-022-09593-1
support.
Ethical Considerations
In this research, ethical standards including obtaining
informed consent, ensuring privacy and confidentiality
were observed.
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