Strategic response to mobile money transfer services by Commercial Banks in Kenya

Abstract

Increased competition threatens the attractiveness of an industry and reduces the profitability of the players. To succeed in the long term, organizations must compete effectively and out perform their rivals in a dynamic environment. Kenyans have embraced mobile money transfer services in masses due to the security, reliability, affordability and convenience associated with mobile banking and cash transfer. The business environment within which Kenyan commercial banks operates has therefore been threatened by the new entrants offering money transfers services. The threat to the industry cannot be ignored because the industry plays a significant role in our economy. This study sought to establish the strategic response of commercial banks in Kenya to the introduction of mobile money transfer services. This research study adopted descriptive cross-sectional research design. The population of study consisted of all the 43 commercial banks that are dully registered with Central Bank of Kenya by 2013. The study collected primary data from the managers of the commercial banks. The primary data was collected using semi-structured questionnaires. The respondents included senior and middle level managers who make strategic decisions in these commercial banks. The questionnaires were administered using the drop-and-pick method. The filled questionnaires containing the data were first edited then coded to facilitate statistical analysis Data collected was analyzed through descriptive statistics and the findings presented in form of frequency distribution tables, bar charts and pie charts. In the pursuit of collecting data, the researcher experienced challenges such as lack of cooperation from the banks which were unwilling to give information. The study found out that most of the commercial banks had increased their budgetary allocation to counter competition from mobile money transfer. Majority of the banks had adopted new technologies to counter competition that had been posed by the mobile money transfer; introduced a wide ATM network and also opened up more branches across the country to try reach more customers. The study concludes that most of the commercial banks have adopted strategies to mitigate the competition posed by mobile money transfer services. These included adopting new technologies such as mobile banking through collaborating with mobile/ telecommunication companies in effecting these services; online/internet banking and more introduction of plastic money through credit cards. The study recommends that commercial banks in Kenya must be in tune with its external environment. Banks also need to adopt strategies such as forming strategic alliance with other financial services providers. The banks also need to employ human resource strategies since lack of skilled man power was established as a major factor that hinders innovativeness.