Farooq, Amna; Moon, Moin Ahmed

Article
Service fairness, relationship quality and customer loyalty
in the banking sector of Pakistan

Pakistan Journal of Commerce and Social Sciences (PJCSS)

Provided in Cooperation with:

Johar Education Society, Pakistan (JESPK)

Suggested Citation: Farooq, Amna; Moon, Moin Ahmed (2020) : Service fairness, relationship quality
and customer loyalty in the banking sector of Pakistan, Pakistan Journal of Commerce and Social
Sciences (PJCSS), ISSN 2309-8619, Johar Education Society, Pakistan (JESPK), Lahore, Vol. 14, Iss. 2,
pp. 484-507

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Pakistan Journal of Commerce and Social Sciences
2020, Vol. 14 (2), 484-507
Pak J Commer Soc Sci

Service Fairness, Relationship Quality and

Customer Loyalty in the Banking Sector of Pakistan
Amna Farooq
School of Management, Air University, Multan, Pakistan
Email: [Link]@[Link]

Moin Ahmad Moon (Corresponding author)

School of Management, Air University, Multan, Pakistan
Email: moin@[Link]

Article History
Received: 20 Jan 2020 Revised: 14 May 2020 Accepted: 09 June 2020 Published: 30 June 2020

Abstract
This research intends to develop and corroborate the structural anatomy of service
fairness perceptions, relationship quality in conjunction with customer loyalty in
commercial banks. This study inspects the intervening mechanism of trustworthiness
between service fairness and relationship quality explicitly. Systematically selected
consumers of commercial banks provided the data via a self-administered structured
questionnaire. Procedural and distributive perceptions of fairness proved to be significant
predictors of trustworthiness, which in turn significantly intervenes the relationship
between service fairness and relationship quality. Interactional fairness did not influence
trustworthiness and relationship quality. Affective trust and affective commitment
strongly predicted the loyalty of customers of commercial banks. To enhance customer
loyalty, banking service providers may implement relationship-based strategies to cater to
the dynamically competitive commercial banking market in Pakistan.
Keywords: customer loyalty, relationship quality, service fairness, trustworthiness,
procedural fairness, distributive fairness, affective trust, affective commitment.
1. Introduction
Long-term relationships have defined the business markets in 21 century, more specifically,
the service industry. Since services are not easy to evaluate before or even after purchase,
coupled with the highly dynamic and competitive business environment, relationship quality
and loyalty are of significant importance for service firms (Roy et al., 2018). The market trend
is now changing from the concept of traditional to relational strategies, which cannot be easily
imitated by competitors (Kwiatek et al., 2020). Banks, due to a highly competitive
environment, have switched to relational rather than having a transactional-based
relationship (Rust et al., 2004; Nguyen & Mutum, 2012; Hapsari et al., 2020).
 Farooq & Moon

As the importance and practice of relationship-based business has started to take

popularity among banks, the fairness in these relational transactions has posed severe
challenges for the firms (Giovanis et al., 2015). It has become crucial for the banking
sector to provide fair services (Wang et al., 2018). Many researchers have developed and
practically scrutinize the associations between fairness of the services offered and
resultant relationship quality (Chi et al., 2020; Sekhon et al., 2014; Athanasopoulou,
2013; Kharouf et al., 2014; Roy et al., 2015). In this paper, we propose that
trustworthiness plays a mediating role between three formative elements of service
fairness as well as in relationship quality. Besides, unlike previous studies, we also
consider trust as a bi-dimensional (cognitive and affective) construct (Giovanis et al.,
2015; Sekhon et al., 2014; Putra & Putri 2019; Roy et al., 2015 & Kharouf et al., 2014;
Liu et al., 2011).
To respond to the rapidly changing environment effectively, service organizations need to
identify service fairness that gives an advantage over competitors and to understand how
consumers intend to be loyal to a service provider. Therefore, this study has three
objectives: (1) to examine how customers perceive service fairness, which successively
builds trustworthiness, (2) to examine if trustworthiness is an imperative factor in
identifying and predicting the relationship quality, and (3) to explore how relationship
quality affects customer loyalty. This research draws a comprehensive structural model
that explores the associations of service fairness, relationship quality, and loyalty at a
deeper level by operationalizing their dimensions.
Service fairness dimensions; procedural, distributive and interactional fairness serves as
the basis for trustworthiness judgments because fairness opinions are developed quicker
as compared to trustworthiness perceptions resulting in trustworthiness formation (Putra
& Putri 2019; Lind, 2001). Trustworthiness further builds relationship quality where trust
is the direct outcome because complications and insecurities in shopper–vendor
relationship are mitigated with the perceptions of trustworthiness (Kwiatek et al., 2020).
Trust further explains the satisfaction with banks and subsequent commitment with the
banking service provider based on the relationship quality concept. Relationship quality
concepts have been widely used across a wide range of fields to explain the loyalty with
service providers by numerous researchers (Hapsari et al., 2020; Chi et al., 2020; Putra &
Putri, 2019). Therefore, this study looks to build customer loyalty with banking service
providers though the relationships between service fairness, trustworthiness, and
relationship quality constructs.
This study identifies the trust-building mechanism by incorporating trustworthiness as the
mediator between service farness dimensions and trust dimensions. This study may help
banking service providers to implement relationship-based strategies to enhance customer
loyalty in a highly competitive and changing market. In the following section, we review
the literature of the critical concepts of this study and formulate the pertinent hypothesis.
The next section outlines the methodology of this research. Following the methods
section, the empirical results of this research and their discussion are presented in the
following section. The next section sheds light on the logical implications of the research.
In the end, the study details the limitations and prospects of future research guidelines.
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2. Theory and Hypothesis Development

2.1 Customer Loyalty
Loyalty is the passionate commitment for the repetitive purchase of a brand regardless of
marketing and situational influences, which can urge switching. It refers to the feeling of
strong support for someone or something. Relationship with service providers makes
customers spend more, flourish optimistic words, and suggest these sellers to others
(Budianto, 2019). Loyalty is an upshot of relational constituent like the commitment of
buyers with sellers (Herhausen et al., 2019). Loyalty can be measured using the buying
record and actual buying pattern of a customer (Wolter et al., 2017). Loyalty affects the
firm's productivity, as enhanced punters retention leads to cost reduction and sales growth
(Cossío-Silva et al., 2016). Recent studies elaborate on the consequences of vigorous
connections between loyalty and word of mouth (Ranaweera & Menon, 2013). For
instance, the increase in relationship equity increases loyalty in older customers where,
higher the satisfaction, higher is the loyalty as compared to the newer customers
(Raimond et al., 2008).
2.2 Service Fairness
Oliver (2014) defines service fairness as evaluating the rightness when handled by the
service providers. Seiders & Berry (1998) describe it as the customer's acuity of the
degree of rightfulness in the conduct of a service organization. Consumers have their
'fairness' standards, and they match a firm's services to these standards in an attempt to
opt for whether they are handled justly or not (Seiders & Berry, 1998). Qin et al. (2019)
suggest that comparisons among services received can also evaluate service fairness.
Fairness is dependent on decision making as well as palatable to the stakeholders of that
decision (Sofiana & Prihandono, 2019). Service spending choices should be designed
upon customers' perceptions of fairness (Qin et al., 2019). Service fairness is a
multidimensional construct. An enduring discussion on the appropriate modeling of
dimensionality of the concept is still going on (Colquitt et al., 2007). This study employs
an arguable dominant approach that suggests a three-dimensional structure instead of two
and four-dimensional structures (Roy et al., 2018; Colquitt et al., 2007; Kumar et al.,
1995). Seiders & Berry (1998) suggested three components, i.e., procedural, distributive,
and interactional fairness. These parsimonious dimensions are well supported by
evidence (Martínez et al., 2006; Sofiana & Prihandono, 2019; Smith et al., 1999).
2.2.1 Procedural Fairness
The fairness of measures and processes that determine the outcomes of exchange is
termed as procedural fairness (Lind, 2001). The theoretical origins of procedural fairness
are grounded in the relational model (Lind, 2001). Thus, procedural fairness is process-
oriented and reflects the appropriateness of those procedures for the situation. This
dimension of fairness may be complicated but is relevant to the buyer-seller exchanges in
service firms such as banks (Blodgett et al., 1997) Tax et al., 1998). Kusmar et al. (1995)
stated that the client's insight about the fairness of processes used by the organization
about the exchange is procedural fairness.

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2.2.2 Distributive Fairness

Perceived evaluation of the consequences of an argument, negotiations, or a judgment
among different groups can be referred to as distributive fairness (Blodgett et al., 1997).
Research in social psychology shows that distributive fairness has been derived from
equity theory (Wang et al., 2018). A person compares his/her scenario with others and
perceives the outcome to be fair or unfair, which may then influence feelings, thoughts,
and behavior (Sofiana & Prihandono, 2019). These perceptions depend upon the
cognitive and affective behavioral reaction to that outcome (Moon et al., 2018; Roy et al.,
2018). Perceptions of distributive fairness contribute to the division of costs and profits
among related parties. This study included distributive fairness as a discrete aspect of
total insight of equality. Distributive fairness is the result of the core service quality.
Financial satisfaction, competence, continuance commitment, and trust, based on the dual
domains model depend upon distributive fairness Ting (2011).
2.2.3 Interactional Fairness
The mechanism of treating customers through interpersonal communication to solve their
problems is interactional fairness (McColl & Sparks, 2003). Interactional fairness
includes courtesy, respect and consideration, quality, and extent of communication while
dealing with the customer. This aspect of service fairness has the utmost influence on
customer satisfaction and trust (Tax et al., 1998). The worth of interpersonal dealing
received differs from the processes implemented by the organizations. Interactional
fairness, however, is an expansion of the procedural fairness that expounds the social
aspect of the association (Qin et al., 2019) and is the latest addition in the literature of
fairness (Colquitt et al., 2007). In other words, interactional fairness is the excellent
dealing received from interpersonal communication resulted from the methods adopted
by the association.
Heuristic theory (Lind, 2001) asserts that an entity exploits the notion of fairness to
develop reactions to uncertain situations. This theory suggests that the people deploy a
'fairness heuristic' to decide if they want to start an exchange relationship with a
particular organization. Van (2001) states that when individuals have no information
about the trustworthiness of an organization, their perception of fairness serves as the
basis for trustworthiness judgments for that organization. Fairness Heuristic theory also
indicates that fairness opinions are developed quicker as compared to trustworthiness
perceptions (Lind, 2001). As a result, fairness judgments help effectively in
trustworthiness formation. Van (2001) explains the fact that we can gauge procedural,
interactional fairness, and distributive fairness in terms of organization's consistency,
accuracy, correct-ability, respect towards individuals, and explanation of the process that
are engaged in the interaction, serves as the basis of this phenomenon. On the other hand,
trustworthiness cannot be easily gauged (Mayer et al., 1995). Therefore, it is prudent to
consider that perception of interactional, procedural, and distributive fairness influence
the perception of trustworthiness. Thus, we develop the hypothesis that:
 H1: Distributive fairness positively affects trustworthiness.
 H2: Procedural fairness positively affects trustworthiness.
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 H3: Interactional fairness positively affects trustworthiness.

2.3. Trustworthiness
Trustworthiness is the attributes of the organization the shopper develops based on their
judgment with different aspects such as inferred standard and previous behaviors (Wu,
Quyen & Rivas, 2017; Caldwell & Clapham, 2003; Sekhon et al., 2014). Previously trust
and trustworthiness were used interchangeably (Wu, Quyen & Rivas, 2017). However, it
is essential to distinguish between the two. We propose that there is an affirmative
causative link from trustworthiness to trust in buyer-seller relations (Sekhon et al., 2014;
Moon, Mohel & Farooq. 2019). The resultant readiness to rely on and the acceptance of
trusting comportment by consumers is trust (Alhazmi, 2019). Similarly, Flores and Solomon
(1998) describe that trustworthiness as the key to comprehend and envisage trust.
Heuristic theory indicates that trustworthiness insights take time to develop as compare to
fairness insights (Lind, 2001). Merz et al. (2018) defined a significant theoretical
dissimilarity in the credibility of trustee and trust. He implies that institutional theory
describes their connection with each other. Based on this theory, it is concluded that the
credibility of trustee shrinks complications and insecurities in shopper–vendor
relationship that assists in promoting the trust of the customers in the give and take
system. Flores & Solomon (1998) describe that a high level of trustworthiness motivates
the trustor to trust. Sekhon et al. (2014) stated that there is a sanguine causal link from
trustworthiness to cognitive as well as affective trust. Trustworthiness is the principal
factor to comprehend and envisage the levels of trust (Colquitt et al., 2007). Therefore, it
is logical to propose a mediating relationship of trustworthiness between dimensions of
service fairness and trust. Consequently, we hypothesize that:
 H4: Trustworthiness positively affects cognitive trust.
 H5: Trustworthiness positively affects affective trust.
2.4. Trust
Trust is the critical readiness to rely on, as well as the retention of trusting behavior by
shoppers (Evans, Anderson & Gilliland, 2018). Trust has two dimensions in the
established literature. Cognitive trust helps the customers to depend confidently on the
proficiency and consistency of service providers (Moorman et al., 1992). Cognitive trust
is formed through knowledge, belief, consistency, capability, and fidelity of trading
partners. On the other side, emotional ties in relationships form the affective trust.
According to Moorman et al. (1992), it is "predictability" while Alhazmu (2019)
describes it as "reliableness." Care and concern demonstrated by a partner lead to
affective trust (Wu et al., 2017). The service provider's responsible conduct serves as the
basis of readiness to depend on him (Merz et al., 2018). Trust is considered to be a
significant constituent of relational satisfaction by several hypothetical (Evans et al.,
2018; Gundlach et al., 1995) and pragmatic (Tax et al., 1998) studies. In line with the
understanding of relationship quality, we propose a consequential affirmative effect of
trust on satisfaction. So, we develop the hypothesis that:
 H6: Cognitive trust positively affects satisfaction.
 H7: Affective trust positively affects satisfaction.
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2.5. Satisfaction
Satisfaction is a positive sentimental condition that concludes after the evaluation of an
organization's operating link with other organizations (Anderson & Weitz, 1989).
Satisfaction is a degree of how the service provider's services meet or exceed the
expectations of the customer (Kuhn & Mostert, 2016). Customer satisfaction is defined as
the arousing response of the customer to the observed dissimilarity between expectations
and performance (Akrout & Nagy, 2018). Satisfaction as "the consumer's fulfillment
response," suggested by Su, Swanson, and Chen (2016). Further, satisfaction is an
essential predictor of customer commitment and loyalty. A higher level of customer
satisfaction makes them committed to their providers. Moreover, satisfaction occurs with
the gratification of customer's social needs, and the regular completion generates
emotional bonds, thus leading to commitment (Fellows et al., 2016). Our model
incorporates satisfaction to influence commitment positively, and we hypothesize that:
 H8: Satisfaction positively affects affective commitment.
 H9: Satisfaction positively affects calculative commitment.
2.6. Commitment
Commitment means a constant desire to maintain a relationship. Commitment is a
customer's enduring direction for a business relationship based on arousing attachments
(Moorman et al., 1992; Geyskens et al., 1996) as well as over consumer's belief that
staying in the relationship is beneficial rather than ceasing it (Geyskens et al., 1996;
Fellows et al., 2016). Marketing scholars describe it as an attachment where two parties
want to continue a rapport (Morgan & Hunt, 1994; Moorman et al., 1992). Many research
studies state that relationships are rooted in numerous kinds of commitment (Gundlach et
al., 1995; Kumar et al., 1995; Harrison, 2001; Gruen & Acito, 2000). Moreover,
commitment has two significant dimensions (Allen & Meyer, 1990). Attitudinal fondness
to someone leads to a commitment to a marketing relationship known as affective
commitment (Gundlach et al., 1995; Hunt & Morgan, 1994; Kumar et al., 1995). Achrol
(1996) argued that feelings of belongingness are what lead to affective commitment
towards the organizations. Calculative commitment is the commitment that arises out of a
calculation about the benefit of keeping the relationship or the losses to be incurred if it is
forgone (Geyskens et al., 1996). On the appearance of alternatives, relationships based on
cynical calculation dissolve. Calculative commitment stays positive when customers find
it financially beneficial to maintain a relationship. Allen & Meyer (1990) states that
commitment is a behavior that encourages a customer's choice to be loyal to an
organization. Accordingly, we hypothesize that:
 H10: Affective commitment positively affects loyalty.
 H11: Calculative commitment positively affects loyalty.
The conceptual model (Figure 1) shows the relationships among the perceptions of service
fairness, trustworthiness, relationship quality, and customer loyalty. The relationship between
interactional, procedural, and distributive fairness perceptions and trustworthiness is based on
the Heuristic theory (Lind, 2001). Trustworthiness predicts cognitive and affective trust with
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 Service Fairness, Relationship Quality and Customer Loyalty

the help of Caldwell and Clapham (2003) trustworthiness Lenz. Furthermore, the relationships
among (cognitive and affective) trust and satisfaction, and commitment are rooted in the
works by Morgan and Hunt (1994). Loyalty is the outcome of the relationship quality
constructs in the conceptual model.

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Figure 1: Conceptual Model

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 Service Fairness, Relationship Quality and Customer Loyalty

3. Methodology
3.1. Sample
Customers of commercial banks of three cities of Punjab, namely, Rawalpindi, Multan,
Lahore, and Faisalabad are the sample of this study. We chose to collect data from
Punjab because Punjab is densely populated as compared to other provinces of Pakistan
(Pakistan Bureau of Statistics, 2018). Moreover, the literacy rate of Punjab is higher than
in other provinces, and more people use banking services in Punjab as compared to other
provinces. The sample of our study comprises of 371 systematically intercepted
customers of commercial banks. We opted for systematic sampling because it reduces the
potential for bias in the results (Hair et al., 2017).
Multiple criteria determined the sample size of our study. First, according to the generally
recognized principle, structural equation modeling (SEM) should be carried out on at
least 200 sample sizes (Kline, 2015). Secondly, many researchers argue that for
determining sample size, each anticipated parameter requires 5-10 responses (Hair et al.
2017). Based on these guidelines, a sample size of 340 respondents is enough to conduct
the study. Therefore, we deem it appropriate to use a sample size of 371 respondents.
3.2. Research Instrument
The items were adopted from different studies that used the same conceptualizations of
the constructs as our study. 29 of 31 items to measure fairness were adopted from Sekhon
et al. (2014), two items (that measured impartiality) were adopted from Tax et al. (1998)
and Patterson et al. (2006). Four items of trustworthiness were adopted from Sekhon et
al. (2014) and Doney & Cannon, 1997). Trust (both cognitive and affective) was
measured using 6 (3 of each) items adopted from Sekhon et al. (2014). Three items of
satisfaction were adopted from Fornell (1992). Furthermore, ten items (5 of each) to
measure commitment (calculative and affective) were adopted from Sekhon et al. (2014).
Eight items to determine loyalty were adopted from Harris and Goode (2004). We used a
5-point Likert scale (ranging from 5= strongly agree to1= strongly disagree). At the end
of the questionnaire, we also used some demographics questions.
3.3. Data Collection
Data were collected from a systematically intercepted commercial bank customers from
four cities of Pakistan via a self-administered questionnaire. Four trained researchers
collected the data manually by visiting city head offices of banks of Lahore, Rawalpindi,
Faisalabad, and Multan from October 2019 to December 2019 (Moon & Attiq, 2018).
Contacts were made at regular banking hours from 9 am to 5 pm. We approached every
3rd customer entering the bank. The researchers, upon contact, asked the customers to
participate in the study.
Overall, we approached 1098 customers, and only 822 agreed to participate in the survey.
Those who agreed to participate were briefed about the study. Respondents were
requested to act in response to questions, along with keeping in mind the services of the
bank they use. Out of 922 respondents, 271 did not return or left in between. We were left
with 551 responses (36% Lahore, 25% Multan, 21% Rawalpindi, 18% Faisalabad). After
screening, 180 questionnaires were dropped due to missing demographic information and
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invalid responses. The final sample size of our study was 371 respondents, which
concluded a 54 percent response rate. Respondents participated in the study voluntarily
without any financial compensation.
3.4. Data Analysis Procedures
The current study has utilized SPSS and AMOS version 25.0 for analysis of the data. We
further incorporated structural equation modeling (SEM) to test the relationship between
the proposed hypotheses.
4. Results and Discussion
Before conducting the data analysis, this study undertook data screening to detect and
treat errors, which can otherwise hamper the results. For data screening, we performed
specific initial tests. Out of 371 responses, there were no cases of missing and aberrant
values. We treated a few outliers in the data set with the mean of the corresponding
variable. The values of skewness and kurtosis were within the accepted range of ±1 and
3, respectively, indicating that the data were normally distributed (Cousineau & Chartier,
2010).
To evaluate common method biasness (CMB), we applied Harman's single-factor model.
Common method bias occurs if a single factor explains more than 50 % (Podsakoff et al.,
2003). The outcomes of CMB analysis present that the model has achieved a 40.39%
discrepancy for the sample. Afterward, we investigated the CMB in confirmatory factor
analysis (CFA), which also revealed that CMB is not a notable problem in our sample
data (Podsakoff et al., 2003). We further tested the multicollinearity among the
independent variables of the study (Diamantopoulos & Winklhofer, 2001). All the values
of variance inflation factor and tolerance level were within the accepted threshold of
VIF<10 and Tolerance level ≥ 0.1, indicating that multicollinearity is not an issue.
4.1. Sample Profile
The sample of 371 respondents from commercial banks of Punjab comprised 50 % of the
male population. The majority of the respondent (44 %) are of 28-38 years, followed by
40 % of respondents of 18-24 years. The majority of the respondents earned a monthly
income above 30,000 PKR, and 36 % belonged to Lahore, 25 % belonged to Multan, 21
%, and 18 % of the respondents belonged to Rawalpindi and Faisalabad, respectively.
4.2. Structural Equation Modeling
Further, we utilized a two-step approach (Anderson & Gerbing, 1988), where, for
reliability and validity, we tested the measurement model, and for testing the proposed
hypothesis, we used the structural model.
4.2.1. Confirmatory Factor Analysis (CFA)
We performed CFA on fourteen constructs by using maximum likelihood estimation
(MLE). In the initial run of CFA, the model indicated a poor fit. However, during the re-
specification of CFA, after removing the items with low squared multiple correlations
(SMCs<0.2) and low factor loadings (FL<0.6) as suggested by Kline (2015), the showed

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and excellent fit (CMIN/df= 1.75, CFI = 0.94; TLI = 0.94; IFI = 0.95; NFI = 0.88, GF1=
0.87, AGFI = 0.84, RMSEA = 0.04, PClose=0.61).
Table 1: Results of Confirmatory Factor Analysis
Factor Standard Mean t-value
Loadings Deviation
Procedural fairness
PF2 0.69 1.15 3.30 11.33
PF3 0.63 1.06 3.30
PF5 0.63 1.13 3.54 10.58
PF7 0.65 1.06 3.48 10.85
Interactional fairness
IF1 0.78 1.13 3.48
IF2 0.76 1.06 3.86 14.57
Distributive fairness
DF9 0.75 1.14 3.15
DF8 0.78 1.20 3.25 15.65
DF7 0.82 1.11 3.26 16.53
DF6 0.76 1.16 3.22 15.07
DF5 0.79 1.16 3.12 15.87
DF4 0.80 1.18 3.26 15.99
DF3 0.83 1.15 3.19 16.63
DF2 0.78 1.06 3.24 15.50
DF1 0.76 1.13 3.32 15.16
Affective commitment
AC1 0.68 1.05 3.37
AC2 0.67 1.03 3.26 11.56
AC3 0.69 1.11 3.13 11.69
AC4 0.76 1.01 3.55 12.69
AC5 0.74 1.03 3.42 12.60
Affective trust
AT1 0.84 1.17 3.16
AT2 0.84 1.15 3.05 19.85
AT3 0.83 1.12 3.09 19.63
Cognitive trust
CT1 0.78 1.06 3.09
CT2 0.79 1.15 3.01 16.92
CT3 0.79 1.17 3.22 16.96
Satisfaction
Sat1 0.88 1.14 3.25
Sat2 0.87 1.17 3.29 22.74
Sat3 0.72 1.14 2.95 16.72
Calculative commitment
CC3 0.61 1.99 3.49
CC4 0.60 1.07 3.17 9.36
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Trustworthiness
TW3 0.87 1.04 3.61
TW4 0.62 1.98 3.64 12.06
Loyalty
LY1 0.56 1.94 3.52
LY2 0.64 1.99 3.46 9.64
LY3 0.70 1.12 3.31 10.20
LY4 0.77 1.19 3.15 10.78
LY5 0.68 1.03 3.66 10.04
LY6 0.64 1.97 3.67 9.61
LY7 0.69 1.13 3.62 10.08
LY8 0.70 1.14 3.43 10.20

4.2.2. Reliability and Validity

We further tested the reliability and validity of the scales. For reliability, the values of
Cronbach's alpha (α) of all the latent variables surpassed the recommended level of 0.7
(Fornell & Larcker, 1981). Furthermore, we also found the composite reliability (CR) for
all variables within the recommended perimeter of 0.6, indicating the reliability of the
scales (Bagozzi & Yi, 1988).
We also assessed the discriminant and convergent validity of the scales by using multiple
criteria. First, the values of the average variance extracted (AVE) surpassed the
recommended threshold of 0.5, indicating convergent validity for all scales. Second,
significant factor loading of all the observed variables (FL > 0.5) also indicated the
convergent validity of the scales used in this study (Fornell & Larcker, 1981). Moreover,
the values of CR higher than AVE (CR>AVE>0.5) is also evidence of the convergent
validity of the scales. Furthermore, the excellent model fit indices and substantial and
significant factor loadings in CFA (FL>05) prove that the scales are discriminately valid
(Tabachnick & Fidell, 2007). Another evidence of divergence is the higher square root of
AVE coefficients than the inter-construct correlations for all constructs (Fornell &
Larcker, 1981).

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Table 2: Reliability and Validity

α CR AVE TW PF IF DF AC AT CT SAT CC LY.

TW 0.70 0.72 0.67 0.82

PF 0.73 0.75 0.52 0.61** 0.72**

IF 0.75 0.75 0.70 0.65** 0.64** 0.84

DF 0.94 0.94 0.72 -0.09** -0.01 -0.03 0. 85

AC 0.82 0.83 0.60 0.73** 0.64** 0.64** 0.02 0.78

AT 0.87 0.87 0.80 -0.09** -0.00 -0.06 0.73** 0.01 0.89

CT 0.83 0.83 0.72 -0.12** -0.04 -0.07** 0.79** 0.03 0.78** 0.85

SAT 0.86 0.87 0.79 -0.10** -0.02 -0.05 0.71** 0.02 0.83** 0.83** 0.89

CC 0.84 0.54 0.47 0.78** 0.64** 0.70** 0.01 0.74** -0.08 -0.02 -0.03 0.68

LY 0.87 0.87 0.56 0.63** 0.61** 0.63** -0.02 0.69** -0.03 -0.03 -0.02 0.61** 0.74

Note: Diagonal entries are the square roots of AVE, α: Cronbachs Alpha, CR: Composite reliability, AVE: Average
Variance Extracted, **:p < 0.05 PF=Procedural fairness, DF=Distributive fairness, IF=Interactional fairness,
TW=Trustworthiness, CT=Cognitive Trust, AT=Affective Trust, Sat=Satisfaction, CC=Commulative Commitment.
AC=Affective Commitment, LY=Loyaalty.

4.2.3. Structural Model and Hypothesis Testing

After assessing the reliability and validity, a full latent structural model was specified to
test the proposed hypothesis. The results showed that the model was a good fit
(CMIN/DF= 1.45, GFI= 0.84, AGFI= 0.88, IFI= 0.83, TLI= 0.85, NFI= 0.83, RMSEA=
0.03, CFI= 0.89, PClose= 1.01). The results indicated that the total variance explained
(Model R2) by the model in loyalty was 71% (R2 = 0.71, p < 0.05). The findings propose
that relationship quality, derived from the perceptions of service fairness and
trustworthiness, resulted in stronger banking customer loyalty (Chi et al., 2020; Hapsari
et al., 2020: Putra & Putri, 2019; Kwiatek et al., 2020) in Pakistan. Furthermore, the
predictors of calculative commitment cause 22% (R2 = 0.22, p < 0.05) variance, and 32%
(R2 = 0.32, p < 0.05) variance is explained in the affective commitment by its predictors.
These findings highlight the fact that banking consumers are more loyal to banks when
they are emotionally committed to the banks (Chi, Wen & Ouyang 2020). These are
interesting insights since banking consumers are supposed to be more calculative in their
commitment when using banking services (Giovanis et al., 2015; Sekhon et al., 2014;
Kharouf et al., 2014; Roy et al., 2015).

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Figure 2: Structural Model Results (Notes: * p< 0.1, ** p<0.05, ns not significant)
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All the hypotheses in the structural model, except one, were supported. The structural
model results in Table 3 indicate that H1 and H2 are supported. The results show that
procedural fairness (H1: ɣ= 0.97; p < 0.01) and distributive fairness (H 2: = 0.17; p < .001)
has a significant positive influence on trustworthiness. The results specify that customers
of commercial banks seek procedural and distributive fairness rather than interactional
fairness to perceive the trustworthiness of their corresponding bank. The outcomes that
the customers obtain by the bank and the procedures and policies used by the banks to
produce those outcomes are considered the most important factor as compared to the
ways by which the consumers are obtaining those outcomes and being treated by the bank
(Chi et al., 2020; Hapsari et al., 2020).
However, the results suggest no association between interactional fairness and
trustworthiness (H3: ɣ = 0.08; p < .385). We may attribute this to the fact that the
interactions in different industries differ significantly, and consequently, the perceptions
of interactions change significantly. The banks usually follow standard operating
procedures to go about their business and may overlook interactional fairness (Hapsari et
al., 2020). The results further indicate that trustworthiness has a substantial positive effect
over cognitive trust (H4: ɣ = 0.20; p < .001) and affective trust (H5: ɣ = 0.17; p < 0.05),
supporting H4 and H5. The results of our study suggest that when consumers' perceptions
about trustworthiness enhance, it also enhances their confidence and emotional ties to
rely on that service provider. The results are in line with various previous studies that
stated a significant impact of trustworthiness on affective and cognitive trust (Colquitt et
al., 2007; Solomon & Flores, 1998).
The results of the study showed that cognitive trust (H6: ɣ = 0.51; p < .01) and affective
trust (H7: ɣ = 0.72; p < .001) both have a substantial positive influence on satisfaction,
confirming H6 and H7. The results of this study in line with various other studies suggest
that as the customers' trust in their bank increases, their satisfaction also enhances (Putra
& Putri 2019; Kwiatek et al., 2020). The results further indicate that H8 and H9 are
supported, as satisfaction has a significant influence on calculative commitment (H 8: ɣ =
0.01; p < 0.1) and affective commitment (H9: ɣ = 0.01; p < 0.1). The findings suggest that
if the customers are highly satisfied with their service provider, their commitment level
with that service provider also increases. The findings of relationship quality support that
trust, satisfaction, and commitment are correlated and posit significant positive impacts
on each other (Putra & Putri 2019; Kwiatek et al., 2020).
The results of the study also indicate that calculative commitment (H 10: ɣ = 0.55; p <
0.01) and affective commitment (H11: ɣ = 0.63; p < 0.01) has a significant influence on
loyalty. These findings suggest that calculative and affective commitment influence
customers' loyalty. It means that the highly committed customers are the ones who are
more loyal to their banks. These results are complementary to various studies suggesting
that commitment encourages customers' choice to be loyal to an organization (Izogo et
al., 2017; Allen & Meyer, 1990).

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Table 3: Results of Hypothesis

Structural path Estimate T –value p-value Decision
H1 PF.  TW 0.98 3.50 .001 Supported
H2 DF  TW 0.17 3.63 .001 Supported
H3 IF  TW 0.08 1.20 .385 Not-Supported
H4 TW.  CT 0.21 3.39 .001 Supported
H5 TW.  AT 0.17 2.89 .004 Supported
H6 CT  Sat 0.52 10.82 .001 Supported
H7 AT  Sat 0.72 13.79 .001 Supported
H8 Sat  CC 0.01 2.66 .090 Supported
H9 Sat  AC 0.01 2.17 .089 Supported
H10 CC  LY 0.56 5.30 .001 Supported
H11 AC  LY 0.64 7.84 .001 Supported
Notes: PF=Procedural fairness, DF=Distributive fairness, IF=Interactional fairness, TW=Trustworthiness,
CT=Cognitive Trust, AT=Affective Trust, Sat=Satisfaction, CC=Commulative Commitment.
AC=Affective Commitment, LY=Loyaalty.

4.2.4. Mediation Analysis

Furthermore, we used bootstrapping method of Hayes (2015) and the model comparison
method of Baron and Kenny (1986) to test the mediation. To generate 95 percent
confidence intervals for accessing mediation effects, 5000 re-samples were used in this
study. Direct (without and with mediator) and indirect effects for all the variables were
analyzed in mediation analysis. The results of mediation are provided in Table 4. Results
depicted that trustworthiness mediates the relationship between distributive fairness and
cognitive trust (γ = 0.02, p < 0.1). The results further indicated that trustworthiness
mediates the relationship between interactional fairness (γ=0.02, p<0.1), procedural
fairness (γ = 0.17, p < 0.1), and cognitive trust. Further, trustworthiness mediates the
relationship between distributive fairness (γ = 0.01, p < 0.1) and mediates the relationship
between procedural fairness (γ = 0.13, p < 0.1) and affective trust. Surprisingly, in this
study, interactional fairness and affective trust were not mediated by trustworthiness.

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Table 4: Direct & Indirect Effects

Direct Indirect
Paths
γ P γ p
WOM DF  CT. 0.56 0.02
WM DF  TW.  CT 0.96 0.02 0.02 0.09
WOM IF  CT. 0.19 0.01
WM IF  TW.  CT 0.19 0.26 0.02 0.06
WOM PF  CT. 0.16 0.03
WM PF.  TW.  CT 0.23 0.35 0.17 0.06
WOM DF  AT 0.91 0.01
WM DF  TW.  AT 0.89 0.01 0.01 0.095
WOM IF  AT 0.36 0.01
WM IF  TW.  AT 0.39 0.07 0.02 0.53
WOM PF  AT 0.36 0.01
WM PF  TW  AT 0.49 0.10 0.13 0.08
Notes: PF=Procedural fairness, DF=Distributive fairness, IF=Interactional fairness,
TW=Trustworthiness, CT=Cognitive Trust, AT=Affective Trust, Sat=Satisfaction,
CC=Commulative Commitment. AC=Affective Commitment, LY=Loyaalty. WM =
With Mediator, WOM = Without Mediator
The findings of the mediation analysis show that trustworthiness mediates the
relationships between dimensions of service fairness and cognitive and affective trust. It
means that customers' trust is built on the service providers when they seek fairness by
them. When customers get fair treatment by the banks, they form perceptions of
trustworthiness about them, which leads toward the cognitive and affective trust of
consumers in their corresponding bank. The findings correspond to several previous
studies (i.e., Putra & Putri 2019; Giovanis et al., 2015; Sekhon et al., 2014; Roy et al.,
2015; Kharouf et al., 2014)
5. Discussion and Implications
This study makes significant contributions in theory as well as in practice. From a
theoretical standpoint, the results of our study support the prior work and confirm the
relationships among service fairness, trustworthiness, relationship quality and loyalty
(Giovanis et al., 2015; Sekhon et al., 2014; Roy et al., 2015; Kharouf et al., 2014; Liu et
al., 2011). The current study academically advances the understanding of the complex
network of relationships between service fairness, trustworthiness, relationship quality,
and customer loyalty in the banking sector of Pakistan. This enhanced understanding of
the customer loyalty mechanism may guide academicians to consider fairness and
trustworthiness as an essential consideration in the service sector. From the managerial
perspective, the significance of service fairness to trustworthiness is very critical for the
banks. A positive image of the bank as a trustworthy service provider is created in the
minds of the customers when they are treated fairly; in turn, customer loyalty is built.
Banks can develop customers' cognitive or affective trust by making them satisfied and

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committed to build and sustain enduring connections. The banks must ensure the fair
treatment of customers to increase the level and number of loyal customers.
Findings revealed that service fairness influences customers' loyalty through
trustworthiness and relationship quality. If an organization treats the customers fairly,
they form perceptions of trustworthiness about the organization, which further leads to
the development of customers' trust and consumer satisfaction. Satisfied customers,
sometimes, form emotional bonds with the service providers that they trust. This study
shows that calculative and affective commitment play a key role in creating customer
loyalty.
The banks may employ several strategies that center around service fairness and
relationship quality. For instance, banks should offer unbiased and equal services to all
the customers of the banks. Banks should also introduce policies that ensure the
customer's satisfaction by seriously handling the complaints and making necessary and
possible changes into their offerings and services on reasonable terms. Moreover, banks
should provide customers with clear, concise, timely appropriate information about their
decisions and make sure that the customer understands the provided information about
the banking services and decisions. Banks should also understand the customer's
circumstances and provide advice that is suitable to the customers.
Additionally, the banking service providers in Pakistan should fulfill their promises by
delivering the services as the customers expect them to be. Baking service providers
should also ensure that their dealings with their customers do not involve any unfair
conditions and provide them a fair deal. They should emphasize winning their customer's
trust by building up a reputation of being honest, looking after their customers, being
responsive, and having the customer's interest at heart. Doing so would result in
satisfying customer experience with the bank and would lead to more committed and
loyal customers. Satisfied and pleasant experience may result in the development of
affective tendencies such as identification with the bank, being part of the family,
emotionally attached, and happy belongingness. Banks should also focus on offering
distinct services with more benefits with greater affordability and ease of access to
maximize customer loyalty.
5.1 Conclusion
Due to an extremely competitive environment, banks are crafting relational-based
strategies to create long-lasting associations with their clients, rather than relying solely
on transactional interactions. In banks, service fairness, trustworthiness, and relationship
quality are considered as the most significant elements to build customer loyalty. The
current study examined how customers form perceptions about the trustworthiness of
their service provider, which results in trust, satisfaction, and commitment that leads
toward customer loyalty. Our study was accomplished in the commercial banking
domain, which offered an outstanding analysis basis for our posited bonding. The
empirical evidence from confirmatory factor analysis confirms that dimensions of service
fairness, except interactional fairness, have a far-reaching effect on customers' loyalty
through trustworthiness and relationship quality in the banking sector.
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5.2 Limitations and Future Research

This study has found the factors directing customer loyalty in the banking sector. Future
studies can use the same trend in other industries as well and may also utilize the
longitudinal research design to elaborate on the relationship further. Moreover, increased
remote channels can be used to study further the insignificant relationship of interactional
fairness and trustworthiness that derives further links. Increased sample size may also
yield significant insights into the mechanism of building loyalty formation through
relationship quality. This model may be replicated in other industries and settings to
increase the generalization of the results. Various other variables, such as service quality,
brand equity, and individual differences in perceptions of banking services, may also
yield significant, exciting insights in the future. It would be interesting to know the
differences between Islamic and commercial baking consumer's perception of service
fairness and the trustworthiness of the banking services providers. Future studies may
compare the results of Islamic and commercial banking customers.
Grant Support Details / Funding
This research work received no research grant.

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