Electronic Banking Channels as a Strategy for Gaining Competitive Advantage in Banking Services: A Case of Kenya Commercial Bank

A Research Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Master’s Degree in Business Administration (MBA)This study focused on assessing electronic banking channels as a strategy for gaining competitive advantage in banking services in Kenya Commercial Bank (KCB). The specific objectives that guided the study included: to highlight the key factors of e-banking as a competitive advantage tool at KCB, to determine the relationship between e-banking application and competitive advantage of KCB, to establish whether customer preferences influence electronic channels of banks, and to establish challenges and propose solutions to tap opportunities and solve the identified challenges at KCB. This study used the descriptive research design. The population for the study was all the staff working at KCB whose total number was 235. The sampling frame came from the official list of employees working at KCB in 2017. The study used stratified sampling technique. For the sample size, the study selected 70% of the total population to be the representative which brought the sample size to 165 respondents. Primary data was collected using a self-administered questionnaire attached as Appendix I. Completed questionnaires were analyzed using Statistical Package for Social Science (SPSS). The study used statistical frequencies and percentages for analysis. For likert questions, the study employed the use of means and standard deviations to show the strength and the degree in response differences. Inferential analysis was conducted which entailed Pearson correlation coefficient used to examine the nature of relationships between study variables in terms of significant and insignificant factors. Multiple regression analysis was also be used to show the strength of existing relationships between the study variables, and data was presented using tables and figures. The study shows that e-banking has become a full-fledged delivery and distribution channel at KCB as a financial products and service. Internet banking is convenient and reduces bank queuing as well as reducing geographical barriers. E-banking at KCB contributes to varying models of cash withdrawals and cash management, and it provides customers with the interactivity that attracts them to utilize the functions of e-banking. KCB consumers understand the meaning and functionality of the security features of e-banking, even though they still have doubts about the trust ability of e-banking privacy policies. KCB assures its customers’ security through provision of privacy statement and information about the security of the shopping mechanisms, and the use of encrypted data packets. The company’s technical direction and framework for technology is based on development service that is determined by its ICT strategy. ICT strategy supports the strategic objectives of the organization involving development of new and improved products and service capabilities. KCB’s large investments in complex ICT systems have increased its efficiency in creating entry barriers in the market and it is also used to reduce the cost of doing business by reducing transaction costs to both suppliers and customers. E-banking has ensured that KCB policy makers are focused on the growing demand in ICT skills, that they are constantly taking corrective steps to prepare the required numbers and quality beforehand. The e-banking strategy at KCB also focuses on being the low cost producer in the market. The bank emphasizes on the employment of highly experienced staff in online banking, development and refining of existing products and investment in organizational learning. Electronic banking systems at KCB provide easy access to banking services, and thus leads to higher levels of customer satisfaction and retention. E-banking at KCB has reduced the loan processing time as borrowers loan applications are viewed by the loan processing and loan approval authority simultaneously. Tele-banking (telephone banking) has allowed consumers at KCB to call the bank with instructions to pay certain bills or to transfer funds between accounts. ATM services at KCB has significantly increased productivity during banking hours and they are a cost-effective way of achieving higher productivity per period of time. Personal Computer Banking has allowed KCB customers to perform a lot of retail banking functions by providing its consumers with the convenience of conducting many banking transactions electronically using the Internet. Security of information is one of the biggest concerns of KCB’s customers who make use of e-banking, since they face the security risks of having unauthorized access into their banking accounts. As a bank, KCB provides a comprehensive explanation of their policies to their e-banking customers, and their consumers have the right to opt out of certain parts of giving the bank their personal information which makes doing business over the Internet challenging for them. Breaches of security and disruptions to the system’s availability can damage KCB’s reputation, and their reliance on new technology to provide services makes security and system availability the central operational risk of their e-banking. KCB’s security practices are regularly tested and reviewed by outside experts to analyze network vulnerabilities and recovery preparedness, and their challenge is in the form of capacity planning that would address the increasing transaction volumes and new technological developments that take place more often. KCB should pay special attention to convenience by providing its customers with electronic banking service at points which can be easily accessible. For instance, some ATMs should be installed in supermarkets, learning institutions and medical centers. The bank can also offer mobile applications that can be downloaded and be used in smartphones to allow users to access banking services from their gadget