Applying EASTL ethical constructs in AI-driven CRM: the mediating role of sustainable customer trust in enhancing customer retention in private sector banks

Abstract

The rapid integration of Artificial Intelligence (AI) in banking, Customer Relationship Management (CRM) has undergone several changes, which have also led to ethical concerns and implications on customer outcomes. While previous studies have studied AI adoption and trust independently, little attention has been placed on how ethical AI dimensions interact and affect customer retention via trust mechanisms. In this sense the objective of our study is to investigate ethical AI practices (using the EASTL framework) and its impact on Customer Retention (CR), with Sustainable Customer Trust (SCT) as mediator factor in private sector banks. A quantitative research design was taken by implementing structured questionnaires for 361 respondents. The model consists of five major ethical AI constructs-Normative Ethical Alignment, Institutional Accountability Mechanisms, Algorithmic Transparency and Explainability, Data Security and Privacy, and Regulatory and Social Legitimacy. The data were processed by Partial Least Squares Structural Equation Modeling (PLS-SEM) to calculate the direct and indirect relationships. The model accounts for 48.4% for Variance in Sustainable Customer Trust and 32.1% for Customer Retention. Algorithmic Transparency, Data Security, Institutional Accountability and Regulatory Legitimacy are the major factors that directly and indirectly affect customer retention via trust suggesting partial mediation. But Normative Ethical Alignment was not significant. Sustainable Customer Trust formed a vital mediating factor of ethical AI practices on the customer retention and its influence from the one-sided effect. The research shows that ethical AI is not only a compliance obligation, but a strategic lever for building trust and long-term customer relationships. These results present useful insights for banks and policymakers into how to develop open and trustworthy AI systems that are responsible and reliable to instill customer trust and sustainability within digital banking environments.