Operational Risks In Alternative Banking Channels In Kisumu County, Kenya
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.
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