Islamic FinTech Innovation, Digital Service Quality, and the Adoption Intention of Islamic Digital Banking in Pakistan: The Mediating Role of Perceived Trust and the Moderating Effect of Financial Literacy

Abstract

The present research explores the factors that affect the adoption of Islamic digital banking in Pakistan by analyzing how Islamic FinTech Innovation and Digital Service Quality influences the Adoption Intention of Islamic digital banking with the mediation of perceived trust and moderation of financial literacy. A three-wave time-lagged survey design was used to reduce common method bias and 387 Islamic banking customers from Karachi, Lahore, Islamabad and Peshawar were surveyed. The proposed framework was analyzed using partial least squares structural equation modeling (PLS-SEM) with the software of SmartPLS 4.0. The results indicate that the Islamic FinTech Innovation and Digital Service Quality had a significant influence on Perceived Trust, which, in turn, had a significant impact on Adoption Intention for Islamic digital banking services. The findings also support the important mediating effect of Perceived Trust and moderating effect of Financial Literacy on trust–adoption link. The study fills the gap of Islamic FinTech and digital banking literature by suggesting integrated moderated mediation framework in the backdrop of Islamic banks in Pakistan.