Key success factors in the banking industry: a case study of major commercial banks in Kenya

Abstract

The banking industry is characterized by intense competition and changes in customer awareness and demands. This study was carried out in Nairobi, Kenya in September, 2006 with an objective to determine the key success factors in the banking industry. In understanding key success factors banks can gain sustainable competitive advantage by devoting their resources in the desired direction; and effectively developing an edge that will significantly impact on their operational performance. The case study focused on five leading banks which have in the last three years accounted for 70% of profits -in the industry, in order to find out what factors would be attributed to . their success. The necessary data was gathered through self administered questionnaires . among the customers of these banks, and secondary data from Central Bank and websites of the selected banks. Descriptive statistics were used to analyse the data, The findings of this study are in agreement with empirical studies from the developed world and available theoretical literature which postulates that the key success factors in the banking industry are mainly employment of modem technology, convenience size and distribution system, wide product range, packaging and image, quality service delivery, reasonable cost of services and sound corporate governance. It was noted that twenty four hour access to' banking services IS an opportunity to b~ .' exploited as most customers ranked this convenience as most important. Cost of services was also a found to be a critical factor that bank customers use to determine their bank of -- Vt I preference. In recognizing this, banks have the potential to increase turnover by charging favourable interest rates for services thereby attracting and maintaining a large number of customers. Other important factors were found to be banks proximity to customer's place of work,personalized service and improved E-banking facilities. The Central Bank of Kenya, commercial banks and academicians will benefit from the findings of this study. Banks will be able to capitalise on key success factors in the banking industry to improve their competitive position. The findings of the study will also assist bank customers in making rational, informed decisions on choosing banks in order to maximise the rate of return on their deposits and investments