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Part 1- Is lack of trust keeping customers away from digital financial services? Understanding the contours of trust

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Is lack of trust keeping customers away from digital financial services?

This blog is the first in our trust series where we study trust in digital financial services. This blog attempts to lay down the conceptual contours of trust.

India has made significant progress in financial inclusion over the years (Reserve Bank of India, 2022). However, obvious gaps remain. As per the latest Findex survey, India has the highest share of account inactivity globally at 35% (Demirgüç-Kunt et al., 2022). A recent report by Avendus estimates that 70% of credit demand of India’s Medium Small and Micro Enterprises (MSME) are unmet, signalling a substantial credit gap (Avendus, 2023).

Innovations in technology and business models in the last few decades have resulted in the rise of digital financial services (DFS) globally, including in India. DFS has the potential to reduce friction in accessing financial services leading to scale efficiencies, lower transaction costs and increase in speed— essentially overcoming the limitations of traditional banking (Pazarbasioglu et al., 2020). This makes DFS a promising instrument for advancing financial inclusion. However, recent studies suggest that DFS may yet have a long distance to traverse in furthering financial inclusion in India (Harihareswara et al., 2021). As of 2018 (which is the most recent available data) only 35% of Indian adults have ever made or received a digital payment. Observers also seem to suggest that the general growth in UPI transactions reported may be driven by increased usage by current users, rather than adoption by new users (Harihareswara et al., 2021). In the absence of official granular data, it is hard to comment either way.

Despite the rapid rate of digitisation in the country, why do such gaps remain in digital financial inclusion? Evidence from across the world suggests that trust is one of the key factors in the adoption of DFS (Manrai et al., 2021; Yan et al., 2021; Yiga & Cha, 2016). This would then imply that lack of trust could be one of the factors holding back the adoption of DFS in India. We assume that this is indeed the case, and we take it as a starting point to explore the notion of trust as a generic concept, and its specific application in the context of poor customers facing the advent of DFS.

Defining Trust – The Difficulty

We begin by noting that the word “trust” is both a noun and a verb. While the noun form anchors the word to a condition or orientation, the verb form describes an unfolding action carrying an expectation or an intention. A subtle confusion necessarily follows in various definitions that academic disciplines have attempted of the word. For example:

  • Philosophers define trust sometimes as a belief (Keren, 2020) and sometimes as an emotion (Lahno, 2020). The former kind of definition suggests that “trust entails a belief about the object of trust: either the belief that she is trustworthy with respect to what she is trusted to do, or that she will do what she is trusted to do” (Keren, 2020). However, Lahno argues that such a belief, if it exists, properly originates in the capacity to rely on the object of trust, and therefore in an emotional attitude, and genuine trust is that prior emotional attitude. Here, we see that if the emotional attitude is the condition (noun), then it enables the action of trusting (verb), or believing, in the object of trust. It remains unclear, though, which arose first – the emotional attitude or the belief. For, it could be argued that to cultivate the emotion, belief of some rudimentary form may have been first necessary. The belief, in this instance, would be an offering – and if the response is favourable, then the belief is transmuted from an offering into a future emotional as well as rational orientation. Either way, belief and emotion are not so easily separated in theory or in practice.  

  • Psychologists, like philosophers, seem to think that trust is both cognitive (involving reasoned belief) and affective (involving the arising of emotion), Both of these two aspects appear to  be implicated in the definition provided by Rousseau et al. (1998) who define trust as a “psychological state comprising the intention to accept vulnerability based on positive expectations of the intentions or the behaviour of another” (Rousseau et al., 1998). Again, it is unclear which comes first – the psychological state or the positive expectations. Stated differently, rational trust (reasoned belief) can pave the way for feelings of trust (an arising emotion) and emerging feelings of trust can pave the way for reasoning based on trust (Castelfranchi & Falcone, 2020).

  • We might say that for philosophers and psychologists, the matter of trusting one’s own self is still a properly relevant matter for inquiry, perhaps even of first-order importance before the other can enter the picture. For sociologists, however, the other is always already present and a relational perspective to that other is paramount for defining trust. And therefore, for sociologists, trust is always already an attribute of a social relationship (Cook & Santana, 2020). Cook, Hardy and Levi (2005) note that “trust exists when one party to the relation believes the other party has incentive to act in his or her interest or to take his or her interest to heart”. According to this account, trust in a social relationship is predicated upon the reasoned belief that the trustee has the incentive to act a certain way. These incentives presuppose a commitment to maintaining the relationship over time and a concern for securing a reputation as trustworthy (Cook & Santana, 2020).

We see that in all the above cases, reason and emotion are both grounds for trust, but they are not independent of each other and there is no telling which arises first. The confusion, as we said earlier, may be traced to the dual nature of the word. As Goodchild (2021) argues, it may, therefore, be impossible to speak of the true grounds for trust without implicating trust itself, and that would make the definition of trust circular – to act with trust is to trust that which is believed to be trustworthy. This seems to be, in different guises, the effective definition being offered by the different academic disciplines surveyed above.  

Defining Trust – A Way Forward

While tracing the true grounds of trust is difficult, a more feasible alternative would be to ask what the proximate grounds for trust could be, under conditions of missing trust. This, indeed, is a very practical question, concerning two or more actors who are called upon to relate to each other, and it is the approach taken by most of the policy discourse on digital trust. A good example is CIIE (2021), which derives the enablers of trust (or what we are calling the grounds for trust) in DFS as solutions to overcome the ever-present potential for mistrust (or distrust) in DFS.

A lack of trust could prevail owing to several situational factors. For instance, the environment will typically contain substantial elements of radical uncertainty (or contingency). Or there could be a power asymmetry between the two actors, as the psychological and sociological definitions appear to indicate.  And so on. There is, however, one gesture on the part of each actor that is common to all of these situations, and that gesture is a looking to the future, and an anticipation or expectation about the other’s actions after time has elapsed. To trust under conditions of missing trust is to call upon something that can become the basis for this anticipation or expectation, and that something is what we are calling the proximate grounds for trust. According to Goodchild (2021), these have been contingent and empirical throughout human history: “familiarity, ancestry, ritual, miracle, prophecy, scripture, experience, authority, tradition, property, character, intuition, law, money, force, evidence and need, for example.” It is debatable, however, as to whether these grounds enable the offering of trust as a choice or as an obligation. As Goodchild (2021) puts it – “As temporal, social and dependent beings, humans are obliged to trust in order to pass from moment to moment, to abide in relationships, and to reap opportunities from circumstances.”

Trust in DFS

In a perfectly competitive market, with an infinity of buyers and sellers facing each other, the trust enacted in a particular exchange between a particular buyer and a particular seller can be seen as arising from a choice on the part of each actor. The context, however, that we wish to explore is not one of perfect competition – the market for DFS for the poor is an overwhelmingly lop-sided market, with orders of magnitude fewer sellers in relation to buyers. Therefore, the trust that any poor buyer reposes in any particular seller of DFS is born more out of obligation than out of choice. Conversely, because each side of the market is required to trust the other, this means that the sellers of DFS can trust the poor buyers from the vantage point of choice rather than one of obligation.

Stated differently, necessity could be one of the proximate grounds of trust for the poor customer while opportunity is the proximate ground of trust for the DFS provider. The DFS provider has a superior capacity to make distrust more salient in their decision to engage with a poor customer. Distrust becomes more salient in two respects. On one hand, the DFS provider can require the poor customer to prove their trustworthiness in a more exacting way. On the other hand, poor customers have little means to assess the trustworthiness of DFS providers. Further, the existence of untrustworthy players or untrustworthy actions by seemingly trustworthy players adversely impact these customers. A caveat to consider here is that while a certain amount of necessity may be involved in the decision to participate in the DFS market, the degree of this necessity is likely to be different across services.

What then would it mean for poor customers to properly trust DFS in practical, concrete terms? What would the grounds of trust look like? We take this up in the second part of the series.

For Part-2 Click Here


Avendus. (2023). MSME Lending: Unlocking potential, Realizing dreams.

Castelfranchi, C. & Falcone, R. (2020). Trust: Perspectives in Cognitive Science. In J. Simon (Ed.), The Routledge Handbook of Trust and Philosophy. Routledge.

Clément, F. (2020). Trust: Perspectives in Psychology. In J. Simon (Ed.), The Routledge Handbook of Trust and Philosophy. Routledge.

Cook, K., & Santana, J. (2020). Trust: Perspectives in Sociology. In J. Simon (Ed.), The Routledge Handbook of Trust and Philosophy (pp. 189–204). Routledge.

Cook, K. S., Levi, Margaret., & Hardin, R. (2005). Cooperation without trust? Russell Sage Foundation.

Demirgüç-Kunt, A., Klapper, L., Singer, D., & Ansar, S. (2022). The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19.

Goodchild, P. (2021). The Metaphysics of Trust: Credit and Faith III. Rowman & Littlefield Publishers.

Harihareswara, N., Miller, H., & Deb, A. (2021, July 28). India May Not Have As Much Digital Financial Inclusion As It Seems. Centre for Global Development.

Keren, A. (2020). Trust and Belief. In J. Simon (Ed.), The Routledge Handbook of Trust and Philosophy. Routledge.

Lahno, B. (2020). Trust and Emotion. In J. Simon (Ed.), The Routledge Handbook of Trust and Philosophy. Routledge.

Manrai, R., Goel, U., & Yadav, P. (2021). Factors affecting adoption of digital payments by semi-rural Indian women: extension of UTAUT-2 with self-determination theory and perceived credibility. Aslib Journal of Information Management, 73(6), 814–883.

Pazarbasioglu, C., Mora, A., Uttamchandani, M., Natarajan, H., Feyen, E., & Saal, M. (2020). Digital Financial Services.

Reserve Bank of India. (2022, August 2). Financial Inclusion Index for March 2022.

Rousseau, D. M., Sitkin, S. B., Burt, R. S., & Camerer, C. (1998). Not So Different After All: A Cross-Discipline View Of Trust. Academy of Management Review, 23(3), 393–404.

Yan, C., Siddik, A. B., Akter, N., & Dong, Q. (2021). Factors influencing the adoption intention of using mobile financial service during the COVID-19 pandemic: the role of FinTech. Environmental Science and Pollution Research, 30(22), 61271–61289.

Yiga, C., & Cha, K. J. (2016). Toward understanding the importance of trust in influencing Internet banking adoption in Uganda. Information Development, 32(3), 622–636.

Cite this blog:


Ghosh, I., Ashraf, H., & Kulkarni, A. (2023). Is lack of trust keeping customers away from digital financial services? Understanding the contours of trust. Retrieved from Dvara Research.


Ghosh, Indradeep, Hasna Ashraf and Amol Kulkarni. Is lack of trust keeping customers away from digital financial services? Understanding the contours of trust. 2023.


Ghosh, Indradeep, Hasna Ashraf, and Amol Kulkarni. 2023. Is lack of trust keeping customers away from digital financial services? Understanding the contours of trust.

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