Emotional AI and its Impact on Consumer Brand Loyalty: Mediating Effect of Emotional Satisfaction and Moderating Effect of Digital Literacy and Privacy Risk in Private Banks of Sulaymaniyah.

Abstract

In the rapidly evolving financial sector of the Kurdistan Region of Iraq, private banks are integrating emotional artificial intelligence to strengthen customer relationships. Yet, little is known about how affective computing shapes long-term consumer behavior within collectivist cultures. This paper examines the direct and indirect effects of Emotional AI characteristics on consumer brand loyalty across private banks in Sulaymaniyah. Using a sequential explanatory mixed-methods design, quantitative data were gathered from 312 retail banking clients and processed through IBM SPSS 27 and SmartPLS 4.0 for structural equation modeling. To complement these numbers, thematic analysis was applied to 18 in-depth qualitative interviews using NVivo 14. The quantitative model demonstrated that perceived usefulness and empathy significantly drive emotional satisfaction, which in turn acts as a partial mediator for brand loyalty. The qualitative insights further explained these relationships by highlighting key sources of customer resistance, particularly high perceived privacy risks and local language barriers. Overall, the study shows that while Emotional AI supports customer attachment, financial institutions must address data privacy concerns and refine language localization to achieve meaningful technology adoption.