Evaluating the Impact of Digital Banking Adoption on Customer Trust in National Bank

Thesis Abstract

The rapid digital transformation within the banking industry has significantly reshaped customer interactions and expectations, prompting a need to understand how digital banking adoption influences customer trust, particularly within the context of national financial institutions. Despite extensive technological advancements, many banks encounter challenges in fostering and maintaining customer trust amidst increasing concerns about data security, privacy, and service reliability. This study aims to evaluate the impact of digital banking adoption on customer trust in the National Bank, focusing on identifying key antecedents, mediators, and contextual factors that influence trust perceptions among banking customers. The specific objectives include (1) examining the extent of digital banking adoption by customers of the National Bank; (2) assessing the relationship between digital banking features and customer trust; (3) exploring the role of perceived security, ease of use, and service quality as mediating factors; and (4) providing actionable recommendations to enhance trust-building strategies through digital channels. The research adopts a descriptive correlational design to facilitate comprehensive understanding of relationships among variables, underpinned by the Theory of Reasoned Action and the Technology Acceptance Model (TAM) as the conceptual foundation, to elucidate the cognitive and behavioral processes influencing trust. The study's population comprises active retail banking customers of the National Bank in the country’s capital city, totaling approximately 50,000 individuals. A stratified random sampling technique was employed to select a sample size of 384 respondents, consistent with Krejcie and Morgan's sampling table, to ensure representativeness and statistical validity. Data collection instruments included a structured questionnaire, developed based on validated scales from prior literature, capturing information on digital banking usage, perceived security, ease of use, perceived service quality, and trust levels. To augment quantitative data, focus group discussions were conducted with 12 customers to explore nuanced perceptions and attitudes toward digital banking services. The validity and reliability of the questionnaire were established through expert review and pilot testing, yielding a Cronbach’s alpha of 0.89. Quantitative data were analyzed using descriptive statistics, Pearson correlation, and multiple regression analysis via SPSS version 26 to test the hypotheses and examine the strength of relationships among variables. Furthermore, structural equation modeling (SEM) was employed using AMOS to validate the proposed conceptual model and assess the mediating effects of perceived security, ease of use, and service quality on trust. Expected findings from the study include a positive correlation between digital banking adoption and customer trust, with perceived security and service quality acting as significant mediators. The study anticipates confirming that ease of use enhances trust directly and indirectly through perceived security and service quality, thus supporting the applicability of TAM and the Theory of Reasoned Action in digital banking contexts. These findings will contribute to existing literature by providing empirical evidence specific to national banking environments and elucidating the complex interplay between technological perceptions and trust formation. The research’s contribution to knowledge lies in its integrated approach, linking technological acceptance, security perceptions, and trust frameworks within a single model tailored for the banking sector. It offers practical insights for banking practitioners seeking to optimize digital channels to enhance trustworthiness, customer satisfaction, and loyalty in a competitive financial landscape. The study concludes that strategic investments in secure, user-friendly digital platforms, coupled with effective communication of security policies, are essential for fostering sustained customer trust. Based on the findings, it is recommended that the National Bank prioritize user-centered design and transparent communication regarding security measures to mitigate customer anxieties. Continuous customer education and engagement on digital security practices are also crucial. Future research could extend this investigation to include comparative analyses across different banking institutions and investigate longitudinal effects of digital banking evolution on trust over time. Ultimately, this study underscores the critical importance of aligning technological innovations with customer trust enhancement strategies to ensure sustainable banking relationships in the digital age.