Operational Risks in Alternative Banking Channels in Kisumu County, Kenya
Abstract
Business done through the internet and other upcoming technologies is giving the banks a
competitive advantage by dropping the operational cost while giving the best customer
satisfaction by meeting these customer’s needs through the provision of quality services.
Alternative banking channels are here to stay due to the many benefits they bring into the
Kenyan banks operations environment for instance, reduction of costs in terms of staffing
costs, rented space cost since customers don’t need to physically visit the banks, flexible
hours of service for example being able to transfer funds irrespective of the time
especially with the mobile banking, agency banking that operate beyond the 8:00 to 4:00
normal banking hours and the deposit taking ATMs. There exist literature on the various
benefits and challenges of ABCs but there is a knowledge gap in regards to how
operational risks in these alternative banking channels can be mitigated. The study’s main
aim was to investigate the various operational risks in alternative banking channels, how
these operational risks affect the bank and its customers and the various measures set in
place to manage these operational risks by banks and the various regulatory authorities.
The study’s purpose and objectives was attained by adoption of descriptive survey
design. The study targeted commercial banks and agents. The study made use of the
questionnaire for data collection and was carried out on 238 respondents who were given
a questionnaire to fill. However, only 205 filled and returned the questionnaires which
makes the rate of responses to be 86.13%. The study revealed that the following
operational risks affect the alternative banking channels. They include: internal and
external fraud, non-compliance issues, inadequate staff training, failed systems and
transactions, staff errors and omissions, financial crisis and customer attrition. Key
findings from one-sample t test indicate that almost all factors under consideration in this
study registered a mean score of more than three, which suggests that these mean score
are statistically significant from the mid-point (3).The implication of this is that most
respondents felt that the operational risks actually affect the alternative banking channels
to a larger extent within banks in Kisumu County, Kenya. Therefore, Banks in Kisumu
County, Kenya are affected by the same operational risks. However, there occurs
significant difference in the type of alternative banking channels in Kisumu County,
Kenya. . The researcher suggests that further research should be done on the challenges to
managing operational risk affecting alternative banking channels. Moreover, the study
suggests that future studies on operational risk should focus on bank headquarters since
most of the banks alternatives banking channels are centrally managed.
Publisher
University Of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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