Impact of Digital Service Innovation on Customer-Perceived Service Quality in the Pakistani Banking Sector: The Moderating Role of Technological Readiness

Abstract

The Pakistani banking sector is rapidly adopting digital innovations to improve service standards and maintain competitiveness. This study examines how digital service innovation (DSI) affects customer-perceived service quality (CPSQ), as well as testing the moderating role of technological readiness (TR). Based on the theory of innovation diffusion and service quality models, it is argued that the efficacy of DSI in influencing customer service perceptions depends on the readiness of customers as well as organizations to exploit new technologies. The data were collected using a structured questionnaire from 400 digital banking customers in major cities of Pakistan. Through the use of structural equation modeling (SEM) in analyzing, findings indicate there is a strong positive impact of DSI on CPSQ. Moreover, TR reinforces the impact, meaning that technologically more ready individuals are more likely to value the advantages of digital services. These findings imply that banks should not only invest in digital innovation but also emphasize enhancing customers' readiness for technology adoption to improve perceptions of service quality. The research adds to the body of knowledge of how technological adaptation would fill service quality gaps in digitally transforming economies and provides useful lessons to banking institutions looking to synchronize their innovation policy with customer capabilities.

 Keywords: Digital service innovation, customer-perceived service quality, technological readiness, Pakistani banking sector, service innovation