Transformation of Financial Performance in Islamic Banking through Digital Transformation and Smart Services
Keywords:
digitalization, artificial intelligence, quality of service, customer satisfaction, customer knowledge, financial indicators perceived by the client, Islamic banksAbstract
Digitalization and artificial intelligence (AI) are transforming retail banking, but evidence on how they affect the financial performance of Islamic banks, especially through customer mechanisms, remains limited. This study examines the impact of digitalization, AI, and service quality on customers' perceived financial performance, acting as parallel intermediaries of customer satisfaction and understanding. A cross-sectional survey was conducted among 120 customers of Islamic banks in Medan, Indonesia, selected from a specific sample (active users of digital services interacting with AI capabilities over the past six months). The data was analyzed using SEM-PLS. The measurement model met standard quality criteria (convergence and discriminatory validity; reliability), while the structural model showed good compliance (SRMR = 0.07) and predictive relevance (Q² > 0). The model explained the significant variance (R²: satisfaction = 0.431, knowledge = 0.441, perceived financial return = 0.760). Digitalization, artificial intelligence, and service quality have had a positive impact on satisfaction and knowledge, which in turn has improved the perception of customer financial performance; Both mediators showed significant indirect effects. These results show that robust digital channels and AI capabilities, with consistent service quality and effective customer training, increase satisfaction and awareness – key ways in which customers perceive their Islamic bank's best financial results. Practical implications and directions for future research are discussed.
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