The main intent of the study is to investigate how service quality costs influence the financial performance of commercial banks. The population for the study included 12 banks, with financial data gathered from their annual reports and financial disclosures covering the years 2019–2023. To meet the study's objectives, a descriptive analytical method was utilized. The findings indicated a notable connection between the independent variables—namely, internal failure costs, prevention costs, appraisal costs, and external failure costs—and the financial performance measures of return on assets and earnings per share for the commercial banks in question. The study suggests that increasing investments in prevention and appraisal costs could lead to a reduction in both external and internal failure costs, thereby enhancing financial performance, improving customer satisfaction, expanding market share, and strengthening competitiveness.