Get in with a Foreigner: Consumer Trust in Domestic and Foreign Banks

Prior research suggests that trust plays an important role for individuals' participation in stock markets. This paper focuses on potential customers in retail banking markets and empirically investigates their trust in foreign banks and domestic banks. Using a large survey on savings patterns of Indian households, we find that potential retail banking customers in India are less likely to trust foreign banks with their money than Indian private banks. However, our results also suggest that highly educated Indians using information sources tend to have more confidence in foreign banks than in Indian private banks.