Increasing Customer Trust in Islamic Bank: Role of Service Quality and Satisfaction

Abstract

The financial services sector, particularly banking, fundamentally relies on trust as a cornerstone of its business operations. For bank customers, trust is a critical factor influencing their decision to establish and maintain transactional relationships, including the utilization of financial services. This research aims to comprehensively examine how electronic service quality (e-service quality) and customer satisfaction contribute to enhancing customer trust in Islamic Banks. Employing university students enrolled in Islamic higher education institutions in Malang, East Java, Indonesia, as the unit of analysis, this study adopts a quantitative approach. Data were collected from a sample of 97 Islamic bank customers through online questionnaires and analyzed using the Partial Least Squares Structural Equation Modeling (PLS-SEM) technique. Result show that E-Service Quality has a positive and significant effect on Customer Satisfaction with a path coefficient (β) of 0.798. This is the largest coefficient among the relationships studied, indicating a strong positive effect. Furthermore, Customer Satisfaction also shows a positive and significant influence on Customer Trust with a path coefficient (β) of 0.611. Lastly, the direct effect of E-Service Quality on Customer Trust has a path coefficient (β) of 0.199, which is not significant. The research findings indicate that e-service quality exerts the most substantial positive and significant influence on customer satisfaction within the tested research model. However, the analysis reveals that e-service quality does not have a direct significant impact on customer trust. Instead, customer trust is significantly influenced by the level of satisfaction experienced by customers. The crucial implication of this study lies in the affirmation of customer satisfaction as a primary outcome of e-service quality and simultaneously a key determinant in building customer trust, specifically within the context of Islamic bank customers. These results underscore the importance for Islamic banking institutions to prioritize the enhancement of their e-service quality to cultivate high levels of customer satisfaction, which will ultimately strengthen customer trust and long-term loyalty. This research provides empirical contributions to understanding the dynamics of trust in the Islamic banking context and offers strategic implications for bank management.