Rifky Budi Setiawan

Type of the article: Research Article

Abstract
Banks invest in digital platforms expecting stronger loyalty. Yet, it remains unclear why some investments build durable relationships while others do not, because prior research conflates what customers do with how they experience it. This study tests whether co-created service experience mediates the relationship between customer-perceived digital transformation and customer loyalty among digital banking customers in Indonesia. Survey data were collected in 2025 from 360 customers of five banks in Medan, Indonesia, who had used mobile or internet banking for at least six months, ensuring direct experience with digital banking, and were analyzed using partial least squares structural equation modeling (PLS-SEM) with bootstrapping. All four hypotheses were supported: digital transformation was strongly associated with co-created service experience (β = 0.659, p < 0.001) and significantly associated with loyalty directly (β = 0.425, p < 0.001); co-created service experience was significantly associated with loyalty (β = 0.478, p < 0.001) and partially mediated the digital transformation–loyalty relationship (indirect effect β = 0.315, p < 0.001; VAF = 42.6%), with the model explaining 67.8% of the variance in loyalty. Digital transformation is thus associated with loyalty through two distinct routes, only one of which depends on customers feeling like genuine participants. Institutional trust was not measured directly in this study, so the link between this pattern and Indonesia's institutional trust conditions is interpretive and requires further testing. Because the sample is limited to a single city, findings apply to this market and should not be generalized to Indonesian banking as a whole.