The Counterintuitive Role of Shariah Compliance and Personalization in Islamic Digital Banking: A PLS-SEM Analysis of Negative Effects on Customer Satisfaction

Introduction: This study examines antecedents of customer satisfaction and loyalty within the Islamic Digital Banking Service Quality (IDBSQ) framework. Customer satisfaction is central to Islamic banking loyalty, yet Shariah Compliance and Personalization roles remain contested. Methods: A quantitative survey of Islamic banking customers was conducted through purposive sampling. Partial Least Squares Structural Equation Modeling was used to test relationships among Shariah Compliance, Assurance, Reliability, Responsiveness, Efficiency, Personalization, satisfaction, and loyalty. Results: Analysis revealed Shariah Compliance and Personalization exert significant negative effects on Customer Satisfaction. Negative effect of Shariah Compliance is more pronounced than that of Personalization. Statistical suppression, where shared variance with other service dimensions reverses path signs, offers an explanation. Substantively, Shariah Compliance may suffer pseudo-Shariah perceptions, where formal certification without genuine transformation leads to skepticism and cognitive dissonance. A literacy gap between religious enthusiasm and comprehension of Islamic contracts burdens customers. Personalization may backfire through creepiness, privacy intrusiveness, and reactance, as excessive personalization triggers discomfort and reduces trust. Conclusion and suggestion: Negative coefficients do not necessarily imply these constructs are inherently detrimental. They highlight complex dynamics requiring careful interpretation. Statistical artifacts and substantive shortcomings both contribute to the observed effects. Findings challenge conventional assumptions and underscore the need for nuanced managerial strategies. Corporations should shift from formal to substantive Shariah compliance, invest in customer education, adopt moderate personalization, prioritize transparency and consent, and train frontline staff in relational personalization. Diagnostic checks for suppression and nonlinear relationships are recommended before managerial decisions. Segmentation by religiosity and generational preferences is advised.