Another psychological effect I see in play here (although with much less confidence than with the bystander effect) is cognitive dissonance and, specifically, the effect it has on one’s morality, as explained by Carol Tavris in her “Mistakes Were Made (but Not by Me)” book.
The book asks you to imagine two students who are very much the same. On the test one of them decides to cheat, the other one decides not to. This may be because of completely external reasons. For example, one of the students have prepared for the topic A, the other one prepared for the topic B. By accident, the test focuses on topic B. The second student doesn’t have to cheat because she’s prepared. The first student doesn’t know much about B and so she decides to cheat.
After the test, both students try to minimize their cognitive dissonance. The non-cheating one is likely to endorse statements such as “all cheating is bad” or “only bad people cheat” and “all cheaters should be expelled”. The cheating student, on the other hand, is more likely to identify with statements such as “the tests are only a farce” or “cheating is not a big deal”. (See Carol Tavris explain the mechanism in more detail in this video.)
Now try to apply that to a person being asked to help by a Jew in distress.
They may decide not to help because the stakes are too high. If the Nazis found out, they would execute the entire family. But the understanding that you’ve basically sentenced a person to death is not an easy one to live with. To ease the cognitive dissonance between what the subject believes about himself and what he had done he’s likely to start believing things like “Jews are not human” or “Jews are intrinsically evil and should be eliminated for the benefit of all”. In the end he may turn in his neighbor, who’s hiding Jews, to the Gestapo.
Martin Sustrik, Research: Rescuers During the Holocaust, April 30, 2018