An Analysis of Retail Customer Loyalty in Zambian Merged Banks a Case Study of a Merged Bank

Abstract

This study examined the impact of a bank merger on retail customer loyalty in Zambia, using a case study of a commercial bank merger that took place in 2024. The general objective of the study was to analyze how bank mergers influence retail customer loyalty, with specific emphasis on identifying key determinants of loyalty, examining challenges experienced during the merger process, and evaluating measures that can enhance customer loyalty, retention, and satisfaction in a post-merger environment. The study further assessed the roles of customer satisfaction, brand perception and digital banking experience in shaping retail customer loyalty.
A mixed-methods approach was employed, combining quantitative and qualitative data. Quantitative data was derived from internal customer experience metrics, including Customer Satisfaction Scores (CSAT), Customer Effort Scores (CES), and Net Promoter Scores (NPS). Qualitative data was obtained through semi-structured interviews with retail management officials. Statistical techniques such as descriptive statistics, correlation analysis, and regression analysis were used to determine the strength and direction of relationships between retail customer loyalty and its key predictors, while thematic analysis was applied to interpret qualitative insights.
The findings revealed that retail customer loyalty in the context of bank mergers is multidimensional, influenced by both attitudinal and behavioral factors. Quantitative results showed that brand perception and digital banking experience are the strongest drivers of customer loyalty, with very strong positive correlations (r = 0.905 and r = 0.94, respectively) and significant regression coefficients (β = 0.42 and β = 0.28). Customer satisfaction exhibited a moderate influence (r = 0.551; β = 0.30), reflecting service gaps, particularly in the contact center. The model explained approximately 64% of the variation in customer loyalty (R² ≈ 0.64), indicating strong explanatory power.
Despite improvements in customer experience metrics, including an increase in NPS from negative to positive levels and gradual improvements in CSAT and CES, performance remained below target thresholds. Qualitative findings revealed that retail customer loyalty is strongly influenced by trust, service quality, communication, digital reliability, and staff engagement. However, the merger process introduced challenges such as service disruptions, communication gaps, and inconsistent customer experiences, which negatively affected customer trust and satisfaction.
A key finding of the study was the distinction between transactional activity and true customer loyalty. While many customers remained active post-merger, high transaction volumes were accompanied by low deposit retention, as customers frequently transferred funds to mobile money platforms and competing financial institutions. This indicates the presence of partial or functional loyalty, where customers engage with the bank without strong relational commitment.
The study concluded that bank mergers present both risks and opportunities for retail customer loyalty. While disruptions can weaken customer trust in the short term, effective post-merger strategies can restore and strengthen customer relationships. The study recommends that banks adopt a holistic customer loyalty framework that integrates service quality improvements, digital banking reliability, proactive communication, and personalized customer engagement. Specific recommendations include strengthening contact center performance, enhancing system reliability, leveraging data analytics for customer retention, promoting deposit retention strategies, and standardizing delivery service across channels.
At a regulatory level, the study recommended that supervisory authorities incorporate customer experience and retention considerations into merger approval frameworks to safeguard consumer confidence. Overall, the study contributes to the understanding of retail customer loyalty dynamics in transitional banking environments and provides practical insights into managing retail customer relationships in the aftermath of bank mergers.