An Assessment Of The Effect Of Alternative Delivery Channels On Performance Of Selected Commercial Banks In Kenya

Abstract

In the banking sector, alternative delivery channels (ADCs) are channels and methods for providing banking services directly to the customers. Customers can perform banking transactions through their ATM, contact the bank’s call center for any inquiry, access the digital interactive voice response (IVR), perform transactions through internet banking, and even on smart phones through mobile banking and through bank agents. The purpose of the study was to assess the effect of alternative delivery channels on performance of selected commercial banks in Kenya. The specific objectives of the study were to: establish the influence of ATMs, mobile banking, internet banking and agency banking in building financial performance in the Kenyan commercial banking sector. The study was guided by the resource based view theory, social technical systems theory and strategic alignment theory. Descriptive survey design was used in this study. The study was carried out in Nairobi County. The study population composed of 86 IT and Strategy Directors of 43 operational commercial banks in Kenya. The study was a census of the whole study population. The commercial banks’ headquarters in Nairobi were targeted with their IT and strategy directors being the study subjects that were focused on. The banks were categorized into three tiers according to CBK market capitalization weighted index and all banks participated in the study. Drop-and-pick-later method was applied in questionnaire administration. The reliability and validity of the questionnaire was tested before final questionnaire was developed and the threshold of 0.7 met. Data analysis was through descriptive and inferential statistics by use of SPSS. Before collection of data, the questionnaire was tested for validity and reliability. Presentation of findings was aided by use of tables. The study findings indicate that ATMs positively and significantly influenced performance of commercial banks (β = 0.345; t = 5.109; p < 0.05). On agency banking, study results indicated that agency banking significantly and positively influenced performance of commercial banks (β = 0.375; t = 5.092; p < 0.05). Regarding internet banking, results indicate that internet banking was a significant influencer of performance of commercial banks (β = 0.196; t = 3.460; p < 0.05). Study results also indicated that mobile banking was a significant and positive predictor of performance of commercial banks (β = 0.235; t = 3.806; p < 0.05). From the study findings, the following recommendations are made. First, banks should consider increasing their ATM network and increasing the number of services or transactions that customers can carry out using the ATM. Secondly, commercial banks should consider enabling more service provision through agents. Third, banks should focus more on security as many customers shun internet banking due to security concerns. Lastly, rather than just doing simple account balance checking and paying bills, mobile banking should incorporate seamless transfer of funds and making credit card payments anywhere.