Automated teller machine services outsourcing practices by Kenyan banks.

Abstract

The banking industry in Kenya has been struggling in a hyper competitive environment since the days of economic market liberalization. In current years the competition has been extremely intense with each bank fighting for its survival against competitors who do not only want to remain cost effective,drive profit but also attract and retain customers. This has driven the banks to embrace information technology to reduce the pressure to operate efficiently and profitably, as well as to provide those services that are provided in the rest of the world as today's customer is no longer localized but globalized and his needs are no longer limited to his location. The Automated teller machine (ATM) has been one way in which the banks have embraced technology to provide better services to their customers. The deployment of ATMs has brought with itself challenges which were not apparent in the beginning, challenges like lack of skill, need for huge amounts of capital, lack of executive time to manage the ATM channel, security considerations and many others. These challenges have driven banks to look at outsourcing as one of the ways to mitigate these challenges. The objective of this study was to highlight the ATM service outsourcing models used in Kenya and the challenges that Kenyan banks have faced when outsourcing these services. All the banks in Kenya were surveyed. The study highlights the practices and the challenges. In this study senior bank managers that is ATM managers and IT managers were targeted to give a representative response to the survey. The survey revealed that several models are used in outsourcing of ATM services in Kenya, that there is no one prevalent model and that most of the banks own their own assets. The survey reveals that one of the major benefits the banks seek to achieve when outsourcing is to spur innovation followed closely by the need to improve customer service. It further indicated that challenges that are considered of importance are loss of control and some of the services being considered too critical to outsource. The report indicates that employee resistance to outsourcing is not considered a serious challenge when making the outsourcing decisions. Further research may be undertaken in Kenya on the subject of ATM services outsourcing to cover such areas as outsourcing failures, outsourcing risks, development of outsourcing partners and outsourcing partner selection.