Factors Affecting Internet Banking Adoption in Kenya: Case Study of National Bank of Kenya and Equity Bank

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA).The general purpose of the study was to determine the factors affecting the adoption of internet banking in Kenya among users of National Bank of Kenya and Equity Bank. The writing of the research paper was directed by the subsequent research questions: How do culture, customer perceptions and perceived risk affect the adoption of internet banking in Kenya? How do cost and resources reduction affect the adoption of internet banking? And how does privacy and security risk affect the adoption of internet banking? The study was conducted through the use of a descriptive research design, quantitative and qualitative research techniques were used to obtain information. The target population for the study comprised of 3,300 corporate account holders from National Bank of Kenya and Equity Bank, which consist of 1,500 corporate customers from National bank of Kenya and 1,800 corporate customers from Equity bank at Harambee and Kenyatta avenue branches for National Bank of Kenya and Upper Hill and Kenyatta avenue branches for Equity Bank in Nairobi. The sampling frame consisted of corporate customers and sampling techniques used include the random sampling method. Data was collected from the respondents and the collected data was numbered, edited and entered in to the system so as to be run through the use of Statistical Package for Social Sciences (SPSS). The researcher then used descriptive statistics technique to the data collected, the analyzed data was then presented through the use of tables and charts that showed the different percentages and frequencies of the data. The findings on the Culture, and customer perceptions of internet banking usage indicated that most customers are not influenced much by culture. Among all the variables used culture was the weakest psychological determinant in respect to internet banking adoption but still played a key role and cannot be ignored. Research and findings contradict the earlier by other authors indicated that the intention to use internet banking was being affects primarily and positively by the culture of the internet user. The findings on the resources and rewards of internet banking services indicate that banks should create awareness on the benefits of using internet banking. Customers can have easy access to the global markets, reducing the costs banking, save time and improve banking services was important to them. The automation of banking services and user friendly tools for managing the customers’ funds give the latter increased comfort in time management. Since the customer can access internet banking services at his convenient time, then they are able to schedule and utilize their time without unnecessary travels to a physical bank. A customer can use internet banking to send or receive money instantly, transfer money to another country at a touch of a button and at the comfort of their homes. The findings on the privacy and security of internet banking services indicated that customers do not trust banks to secure their personal information and this is a big inherence in the adoption of internet banking. Lack of trust among the respondents on financial institutions was a significant issue that prevents customers from internet banking acceptance. Respondents believe that trust and privacy are critical component in attract and retain present customers as well as improving and encouraging the adoption of internet banking in Kenya. The study revealed that banks should capitalize on the benefits that Internet banking offer as consumers tend to want value for their money and relate rewards that they get from the use of internet banking as a reason for wanting to engage in internet banking. A large number of respondents do not have experience with the Internet banking which makes them to be drawn to what they are used to and what they trust that is the physical bank. The study revealed that the perception of security has the stronger impact on customers' attitude, which in turn influences customers' intention to use electronic banking services. Utilization of internet banking services indicated that the respondents are worried about releasing their personal information and banking details, they believe that it is not safe to use internet banking which results in financial institutions experiencing problems in appealing to customers. Respondent’s perception about security risk was found to be the most dominant influential factor, followed by resources. The study recommends that bank managers should focus on the promotion, encouraging and educating the customers on the invaluable advantages that are gained from the use of internet banking. Banks should ensure that internet banking privacy, trust and security is given a high priority to increase consumer confidence through improving their technological, infrastructure and websites to ensure that they provide structural and systems which will include safety nets, regulations and security checks to promote a sense of security and privacy about the related technological that they are using