Reframing Digital Banking Strategy Beyond Commoditization: Emotional Experience, Value Co-Creation, and Customer Loyalty Among Young Digital Banking Customers

Although digital banking has transformed financial services, studies emphasize functional service quality and technology adoption, with limited attention to mechanisms underlying loyalty among consumers. This study develops an emotional experience-based digital banking loyalty model integrating Online Flow State (OFS), Digital Customer Experience (DCX), Customer Engagement (CE), and Value Co-Creation (VCC). Drawing on the Stimulus–Organism–Response (S-O-R) framework and Expectation-Confirmation Theory (ECT), the study examines how immersive digital experiences foster engagement and loyalty VCC significantly moderates DCE-CE relationships. A quantitative design using purposive sampling was used, with data collected from 212 banking users outside Java, including Medan, Padang, Batam, Tarakan, Gorontalo, and Pangkal Pinang. The model was analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM). Results show that 9 of 11 hypotheses were supported. OFS significantly enhances DCX, which strengthens CE and Customer Loyalty, while VCC significantly moderates the OFS–DCX relationship. [A] However, the direct effect of OFS on Customer Loyalty was not supported, indicating that emotional immersion alone is insufficient without customer experiences. The findings contribute by integrating S-O-R and ECT with emotional experience, engagement, and value co-creation, while highlighting ecosystems that encourage participation and sustain loyalty among consumers.