Service Quality and Customer Retention of Deposit Money Banks: The Mediating Effect of Customer Satisfaction in North-western Nigeria

Abstract

This study examined the service quality and customer retention of deposit money banks in northwestern Nigeria, with customer satisfaction as a mediating variable rooted in the Expectancy-Disconfirmation Model (EDM). A cross-sectional survey was employed to collect data from respondents. This study addresses a gap in the literature by investigating how service technology and trust influence customer retention in Nigeria's banking sector, which faces intense competition and shifting customer preferences. The study population comprised 384 retail bank customers from seven (7) banks in four metropolitan states—Kano, Kaduna, Katsina, and Sokoto—in northwestern Nigeria. The study utilised primary data collected on the sample using a 5-point Likert-scale questionnaire. Descriptive and inferential statistical tests, along with multiple regression and a PLS-SEM approach, were used to analyse the data. The results showed that customer satisfaction has a strong, positive, and significant effect on customer retention; service trust has a substantial, positive effect on customer retention, while service responsiveness has a negative, insignificant impact on customer retention. In the banking sector, service responsiveness positively mediates customer satisfaction, which in turn positively mediates the relationship between service trust and customer retention; customer satisfaction also has a moderately negative but statistically significant mediating effect on customer retention. This study recommends that banks focus on acquiring reliable, secure digital platforms (mobile apps, ATMs) with simple interfaces, robust encryption, and biometric authentication to enhance system quality and security, ensuring customers feel safe and confident. Additionally, customer engagement can be improved through AI-driven chatbots, self-service portals, and interactive mobile banking features. This will strengthen competitive strategies and increase the firms' market share and profitability.