Uptake of alternative channels and operational performance of Commercial Banks in Kenya

Abstract

The aim of this study is to determine whether there is a relationship between the uptake of alternative channels and operational performance of commercial banks in Kenya. The study was guided by three main objectives; to determine the utilization of alternative channels in commercial banks in Kenya; to determine the relationship between the utilization of alternative channels and operational performance of commercial banks in Kenya and to determine factors that are hindering the uptake of alternative channels in Kenya. The alternative banking channels under study include; ATMs, mobile banking, agency banking and internet banking. Operational performance was measured by cost to income ratio of commercial banks in Kenya, channel availability or reliability which was measured by channel uptime and channel speed of service. The study adopted a causal and descriptive research design. Both secondary and primary data was used in the study; secondary data was retrieved from CBK annual supervision reports and the Economic survey 2016, prepared by Kenya bureau of statistics. Secondary data that was collected included; the number of transactions over years on the selected alternative channels, cost to income ratios, data on channel uptime to measure reliability and availability, and channel speed of service. Primary data was in the form of two questionnaires, one administered to managers and the other to customers, both of commercial banks in Kenya. The study used correlation and regression statistics to analyze the data. The study finds that the utilization of alternative channels is continually increasing year after year. The study finds a positive relationship between utilization of agency banking, mobile banking and cost to income ratio; a positive relationship between utilization of all channels under study and channel uptime; and a negative relationship between agency, mobile and internet banking against average channel speed of service. The study also finds that utilization of ATMs and Mobile banking predicts channel reliability and speed of service. The study further concludes that reliability and security of alternative channels affects the uptake of alternative channels.