This study aims to examine customer loyalty (CL) formation within a highly regulated Islamic banking environment. It investigates how regulatory pressure (RP), bank trust (BT) and perceived lack of alternatives (PLA) jointly shape CL in a structurally constrained financial system, using Aceh, Indonesia, as a unique empirical context where Islamic banking operates as the dominant and institutionally embedded system.
Drawing on institutional theory and relationship marketing perspectives, this study uses a quantitative research design using survey data from 355 Islamic banking customers in Aceh. The proposed conceptual model is tested using partial least squares structural equation modeling to assess direct, mediating and moderating relationships among the key constructs.
The results show that RP is positively associated with BT and also has a direct effect on CL. BT significantly influences CL, highlighting its role as a key relational mechanism in an institutionalized banking environment. PLA also shows a positive relationship with CL, indicating that structural conditions contribute to continued customer engagement. However, the moderating effect of PLA is not supported, suggesting that relational and structural mechanisms operate as distinct pathways in shaping loyalty outcomes.
The cross-sectional design and single-region context limit the generalizability of the findings. Future research may use longitudinal and cross-country designs to further examine CL under different institutional and regulatory settings.
The findings suggest that although regulatory frameworks contribute to BT and customer retention, sustainable CL requires complementary managerial efforts such as service-quality improvement, customer experience enhancement and digital innovation. This is important to ensure that loyalty is reinforced through relational mechanisms rather than relying solely on structural conditions.
This study contributes to the literature by providing empirical evidence on how established relational mechanisms (BT) and structural conditions (PLA) jointly shape CL within Aceh’s mandatory Islamic banking system. Rather than proposing a new theoretical perspective, the study extends the empirical application of institutional theory and relationship marketing by demonstrating how these established mechanisms operate in a fully regulated Islamic banking environment where conventional banking alternatives are effectively absent.
