The influence of credit cards on the growth of the retail banking business in Kenya
The main objective of this research project is to establish whether Credit Cards usage can influence the growth of the Retail Banking Business. This was necessitated by the fact that many Kenyan financial Institutions have entered into this credit card market with a lot of aggression since the beginning of this millennium. Before 1990. two financial institutions only always dominated the card market after two banks went under (Trade and Trust Bank who used to issue and acquire Visa and MasterCard credit cards). In addition, currently there is quite a lot of Credit Card coverage in both print and mass media. Currently, there are 18 out of 45 retail banking businesses dealing with either acquiring or issuing of credit cards and the trend has been an upward one (Appendix B). This research project focuses on the Retail Banking Businesses in the Kenyan market, but briefly mentions other non-financial retail business that have been involved in the card business. It limits itself to credit cards only and highlights other cards like debit. Loyalty, proprietary and charge cards for definition purposes since they are part of the retail banking but not covered in detail in this research work and are meant to enhance service delivery to customers and embrace use of technology- ATMs and Point Of Sale terminals. A questionnaire to heads and senior staff of card centres was used to collect the relevant information. More information was sought directly from card associations, Central Bank of Kenya, respective issuing banks tariffs, application forms and brochures in the baking halls. From the research it can be concluded that most banks dealt with issuance of both Silver and Gold Cards, and none issued Platinum cards. In addition, the research finding show that Credit Cards contributed substantial revenue and indeed they have a strong influence on the growth of Retail Bank Business. Most cardholders did not settle their monthly card bills in full, hence allowing the issuers to earn interest for the rolled over balances and the factors that made retail banks to introduce cards included cross-selling opportunities. Customer request and as another Income stream. Further, the research showed that banks followed up the inactive account holders with a view of activating while the cardholders who had problems in repaying their card debts were followed until they cleared and the remainder taken to Credit Reference Bureau for negative file listing. It is recommended that further research on ways to reduce the impact of high fraud losses would be important as fraud was highlighted as a key challenge and concern for Credit Card industry growth. Investigation on card literacy and how to improve it for enhancement of recruitment and use of Credit Cards was noted as a concern, and hence a research on this area would be recommended. Since Credit Cards were noted to have contributed less than 10%, a study on how on factors that can lead to contribute more would be encouraged as the research found that the cards had a very strong influence on growth of retail bank business.