an assessment of the impact of technological innovation on

An Assessment Of The Impact Of Technological Innovation On Service Quality In The Retail Banking Industry In Kenya: A Case Of Family Bank Limited

by

Philip James Muinde

A thesis presented to the School of Business and Economics

of

Daystar University

Nairobi, Kenya

In partial fulfillment of the requirements for the degree of

MASTER OF BUSINESS ADMINISTRATION

in Strategic Management

May 2014

Daystar University Repository

Library Archives Copy

AN ASSESSMENT OF THE IMPACT OF TECHNOLOGICAL

INNOVATION ON SERVICE QUALITY IN THE RETAIL BANKING INDUSTRY IN KENYA: A CASE OF FAMILY BANK

LIMITED

by

Philip James Muinde

In accordance with Daystar University policies, this thesis is accepted in partial fulfillment of the requirements of the award of

the Masters of Business Administration degree

Date

__________________________________ _______________ Duncan Irungu, MBA, MA., Supervisor

__________________________________ _______________ James Karau, PhD., Reader

__________________________________ _______________ Thomas Koyier, Msc., Business Administration

Head of Department of Commerce

___________________________________ _______________ Muturi Wachira, DBA, CPA(K), CPS(K), Dean, School of Business and Economics

ii



AN ASSESSMENT OF THE IMPACT OF TECHNOLOGICAL

INNOVATION ON SERVICE QUALITY IN THE RETAIL BANKING INDUSTRY IN KENYA – A CASE OF FAMILY BANK

LIMITED

I declare that this thesis is my original work and has not been submitted to any other college or university for academic credit.

Signed: ______________________________ Date: ___________

Philip James Muinde

iii



ACKNOWLEDGMENTS

I thank God for his all sufficient grace that has enabled me to work towards the

completion of my master’s degree. For He is God, and He knows the plans that He has

for me; plans to give me a future and a hope. Surely, He who began the work has been

faithful to the end. His wisdom and direction I cannot take for granted. Thanks be to

almighty God.

To my Supervisor and Reader, as well as the entire Daystar Community that has in

one way or another assisted with the completion of this final work, I am thankful.

I am grateful for all the friends and colleagues that have offered their support through

their insight as well as encouragement. To my family, I am thankful for their continual

spiritual and moral support. I do not take it for granted that you always told me to

work with the end in mind. Thanks be to you all.

Thank you and God bless

iv



Table of Contents

ACKNOWLEDGMENTS ............................................................................................iv

Table of Contents ...........................................................................................................v

LIST OF TABLES ........................................................................................................ix

LIST OF FIGURES .......................................................................................................x

LIST OF ABBREVIATIONS AND ACRONYMS .....................................................xi

ABSTRACT ................................................................................................................ xii

CHAPTER ONE: INTRODUCTION AND BACKGROUND TO THE STUDY .......1

Introduction ....................................................................................................................1

Background to the Study ................................................................................................2

Industry Background ......................................................................................................3

Background to Family Bank Ltd....................................................................................5

Historical Background ...................................................................................................5

Products and Services ....................................................................................................6

Statement of the Problem ...............................................................................................7

Purpose of the Study ......................................................................................................8

Objectives of the Study ..................................................................................................8

Research Questions ........................................................................................................8

Rationale of the Study ....................................................................................................9

Significance of the Study ...............................................................................................9

Scope of the Study .......................................................................................................10

Assumptions of the Study ............................................................................................10

Limitations and Delimitations ......................................................................................10

Definition of Terms......................................................................................................11

Summary ......................................................................................................................12

CHAPTER TWO .........................................................................................................13

LITERATURE REVIEW ............................................................................................13

Theoretical Framework ................................................................................................13

Innovation ....................................................................................................................13

Product Innovation .......................................................................................................13

Process Innovation .......................................................................................................14

Service Quality.............................................................................................................14

Service Concept ...........................................................................................................14

Service Quality Concept ..............................................................................................15

Service Quality Measurement ......................................................................................16

v



SERVQUAL (Gap Model) ............................................................................................16

Other service quality models .......................................................................................19

Electronic Service Quality (E-S-QUAL) ......................................................................19

IT Alignment model ......................................................................................................21

Technological Innovation ............................................................................................22

Application of technological innovation in the banking sector ...................................23

Improved core banking systems ...................................................................................24

Automated Teller Machines (ATMs) ............................................................................24

Debit Cards and Credit Cards .....................................................................................25

Mobile Banking ............................................................................................................25

Internet Banking...........................................................................................................25

Impact of Technological Innovation on Service Quality .............................................26

Empirical Perspectives .................................................................................................29

Conceptual Framework ................................................................................................35

Summary ......................................................................................................................36

CHAPTER THREE .....................................................................................................38

RESEARCH METHODOLOGY.................................................................................38

Research Design...........................................................................................................38

Population ....................................................................................................................39

Target Population .........................................................................................................39

Sample Size ..................................................................................................................40

Sampling Design ..........................................................................................................42

Types of data ................................................................................................................43

Data Collection Methods .............................................................................................43

Data Collection Procedure ...........................................................................................43

Questionnaire Pre-testing .............................................................................................44

Data Analysis ...............................................................................................................44

Ethical Considerations .................................................................................................46

Summary ......................................................................................................................46

CHAPTER FOUR ........................................................................................................47

DATA PRESENTATION, ANALYSIS AND INTERPRETATION .........................47

Introduction ..................................................................................................................47

Response Rate ..............................................................................................................47

Respondents Profile .....................................................................................................48

Gender..........................................................................................................................48

vi



Age Group ....................................................................................................................48

Occupation ...................................................................................................................49

Education Level ...........................................................................................................50

Income level .................................................................................................................50

Length of Account operation ........................................................................................51

Type of account held ....................................................................................................52

Frequency of bank visits ..............................................................................................52

Preferred cash withdrawal method ..............................................................................53

Preferred cash deposit method ....................................................................................54

Preferred access to bank statement method.................................................................55

Awareness of services offered by Family bank ............................................................55

Awareness of Mobile banking (PesaPap!) ...................................................................56

Awareness of Internet banking.....................................................................................56

Awareness of ATM card services .................................................................................57

Awareness of ATM Card point of Sale .........................................................................57

Electronic banking Services subscribed ......................................................................58

Reasons for not subscribing .........................................................................................59

Introduction of electronic services has improved service delivery ..............................59

Customer Expectations And Perceptions of Service Quality .......................................60

Customer Expectations on Service Quality ..................................................................60

Summary of expectation findings .................................................................................71

Perceptions of Service Quality.....................................................................................73

Summary of perceptions findings .................................................................................85

Gap Analysis ................................................................................................................87

Correlation of Expectations and Perceptions ...............................................................93

Interviews with senior management – Customer Service and Innovations and Strategy Department .................................................................................................................100

Market Opportunities .................................................................................................102

Relationship between technological innovation and service quality – interviewee responses ....................................................................................................................103

Technological Innovation: Product versus Process Innovations ..............................103

Service Strategy .........................................................................................................104

Information Systems Strategy and Architecture ........................................................105

Summary of Key Findings .........................................................................................105

Summary ....................................................................................................................108

vii



CHAPTER FIVE .......................................................................................................110

DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ........................110

Introduction ................................................................................................................110

Discussions ................................................................................................................111

Objective One ............................................................................................................111

Objective Two ............................................................................................................111

Objective Three ..........................................................................................................114

Objective Four ...........................................................................................................115

Conclusion .................................................................................................................117

Recommendations for the Study ................................................................................117

Recommendations for Further Studies.......................................................................119

Summary ....................................................................................................................119

REFERENCES ..........................................................................................................120

APPENDICES ...........................................................................................................126

Appendix 1: Questionnaire ........................................................................................126

Appendix 2: Interview Guide.....................................................................................135

Appendix 3: Letter from Daystar University .............................................................137

Appendix 4: Letter from National Commission for Science, Technology and Innovation (NACOSTI) .............................................................................................138

Appendix 5: Research Permit ....................................................................................139

Appendix 6: Authorization letter from Family Bank .................................................140

viii



LIST OF TABLES

Table 4.1: Response Rate .............................................................................................47

Table 4.2: Gender.........................................................................................................48 Table 4.3: Awareness of Mobile banking (PesaPap!) ..................................................56

Table 4.4: Awareness of Internet banking ...................................................................56 Table 4.5: Awareness of ATM card services ...............................................................57

Table 4.6: Awareness of ATM Card point of sale .......................................................57 Table 4.7: Electronic banking Services subscribed .....................................................58

Table 4.8: Reasons for not subscribing ........................................................................59 Table 4. 9: Expectations - Ease of Use ........................................................................61

Table 4.10: Expectations - Reliability .........................................................................63 Table 4.11: Expectations - Assurance ..........................................................................65

Table 4.12: Expectations - Security .............................................................................66 Table 4.13: Expectations - Support Services ...............................................................67

Table 4.14: Expectations - Convenience .....................................................................68 Table 4.15: Expectations - System availability............................................................69

Table 4.16: Expectations - Employee Knowledge .......................................................70 Table 4.17: Expectation Mean Scores .........................................................................71

Table 4.18: Perceptions - Ease of Use .........................................................................73 Table 4.19: Perceptions - Reliability ...........................................................................75

Table 4.20: Perceptions - Assurance ............................................................................78 Table 4.21: Perceptions - Security ...............................................................................80

Table 4.22: Perceptions - Support Services .................................................................81 Table 4.23: Percpetions - Convenience .......................................................................82

Table 4.24: Perceptions - System Availability ............................................................83 Table 4.25: Perceptions - Employee Knowledge .........................................................84

Table 4.26: Perception Mean Scores ...........................................................................86 Table 4.27: Gap Analysis - Perceptions versus Expectations ......................................88

Table 4.28: Correlations - Ease of use .........................................................................94 Table 4.29: Correlation - Reliability ............................................................................95

Table 4.30: Correlation - Assurance ............................................................................96 Table 4.31: Correlations - Security ..............................................................................97

Table 4.32: Correlations - Support Services ................................................................98 Table 4.33: Correlation - Convenience ........................................................................98

Table 4.34: Correlation - System availability ..............................................................99 Table 4.35: Correlation - Employee Knowledge .......................................................100

Table 4.36: Ranking of Service Quality Dimensions ................................................114

ix



LIST OF FIGURES

Figure 4.1: Age Group .................................................................................................48 Figure 4.2: Occupation.................................................................................................49

Figure 4.3: Educational Level ......................................................................................50 Figure 4.4: Income Level .............................................................................................50

Figure 4.5: Length of Account Operation ....................................................................51 Figure 4.6: Type of account held .................................................................................52

Figure 4.7: Frequency of Bank Visits ..........................................................................52 Figure 4.8: Preferred Cash withdrawal method ...........................................................53

Figure 4.9: Preferred cash deposit method ..................................................................54 Figure 4.10: Preferred method for accessing bank statements ....................................55

x



LIST OF ABBREVIATIONS AND ACRONYMS

ATM – Automated Teller Machine

EMV – Europay, Master Card, and Visa

e-SERVQUAL – Electronic Service Quality

IT – Information Technology

OECD – Organization for Economic Cooperation and

Development SERVQUAL – Service Quality

xi



ABSTRACT

The purpose of this study was to assess the impact of technological innovation on

service quality in the retail banking industry. The research mainly focused on a case

of one retail bank that has been at the forefront of investments in information

technology (IT) so as to offer enhanced e-services to its customers, namely Family

Bank. The research had four main objectives; to identify technological innovations

adopted by Family Bank for e-based service delivery; to identify the e-based service

delivery channels preferred by Family Bank customers; to examine customer

expectations and perceptions of service quality for e-based services offered by the

bank; and lastly, to evaluate the relationship between technological innovation and

service quality in Family Bank. The findings of the study revealed that there were

three main technological innovations for e-services in Family Bank; ATM, Mobile,

and Internet banking. The key findings for the study revealed that most customers

preferred ATM services and mobile banking services as compared to internet banking.

Generally there was positive correlation along certain service quality dimensions in

assessing the degree of relationship between expectations and perceptions. However,

through gap score analysis, it was clear that several gaps still existed in service quality

for aspects such as ease of use, reliability, security, and system availability. The study

recommended that the bank focus on improving service quality by addressing these

gaps through strategic intervention.

xii



CHAPTER ONE: INTRODUCTION AND BACKGROUND TO

THE STUDY

Introduction

Technological innovation has radically transformed business across different

industries globally. According to the Organization for Economic Cooperation and

Development (OECD) innovation is “an iterative process initiated by the perception

of a new market and/or new service opportunity for a technology based invention

which leads to development, production, and marketing tasks striving for the

commercial success of the invention” (OECD, 1991, p. 303). Innovation leads to new

business opportunities by generating demand for goods and services.

In a bid to innovate in products as well as services, commercial banks have

been recognized globally for investing heavily in information technology. According

to Ovum (2013), “retail banks across the globe will see IT spending grow 3.4%

reaching US $ 118.6 billion in 2013, as CIOs focus on customer satisfaction and

revenue growth”. Zhu, Wymer, and Chen (2002) note that “in order to remain

competitive, service providers are increasingly offering customers information

technology (IT)-based service options” (p. 69). In the banking industry, these IT-

based service options have included internet banking, mobile banking, electronic

money transfers, automated teller machines, and other such enhancements to

traditional banking.

Not only have these developments been evident on a global scale, but more

specifically, Africa has had its own fair share of technological innovations in banking.

According to African Business (2013) technological innovation has largely

contributed to a banking boom in Africa – mainly because it has made banking

services accessible to the unbanked, led to new card technology, mobile banking, new

1



management software, new applications and services which have widened the

customer base, offered improved service, led to new products and reduced costs.

A study by Pinetrade Survey International in Nairobi and Mombasa revealed

that “six out of ten Kenyans mostly traders, relied on mobile money, MPESA, Airtel,

among others, than hard earned cash stuffed in wallets citing security and

convenience as their primary motivating factors” (Ndindi, 2013, p. 37).On the mobile

money front, banks have responded strategically by rolling out mobile banking

platforms such as M-Shwari (Commercial Bank of Africa), M-Benki (Kenya

Commercial Bank), M-Kesho (Equity Bank), and Pesapap (Family Bank). The

increased use of mobile money has transformed the financial services landscape,

thereby necessitating banks to innovate accordingly.

It is evident that commercial banks have rolled out similar products and

services. Sadeghi and Bemani (2011) attest to this fact and state that “many banking

services have become increasingly similar to each other [and therefore] presenting

quality services to customers is an effective way for separating a product, since it

makes your product more valuable” (p. 16). According to KPMG (2013) bank

customers have a tendency to move from one bank to another due to customer

satisfaction and service quality factors. In a study that targeted 25,000 respondents in

Africa, the KPMG report revealed that 42.6% of the respondents cited service quality

as their main reason for changing banks (KPMG, 2013, p. 27). Service quality in the

banking industry was therefore critical for customer retention and loyalty for the

banks involved in the survey.

Background to the Study

There are significant investments in IT globally, in Africa, and even in Kenya,

mainly geared towards achieving high standards in service quality. Many of these

2



investments are tailored towards enhancing the delivery of financial services across

banks, thus implying that a relationship exists between service quality and new

innovations supported by technology within the banking industry. This study seeks to

examine this relationship with a view to understanding how banks can competitively

apply technological innovation to enhance service quality.

Industry Background

According to the Central Bank of Kenya as at the end of the second quarter

ending June 30th

, 2013, the Kenyan banking sector comprised 43 commercial banks,

out of which 31 are locally owned and 12 are foreign owned (CBK, 2013). As such,

customers may find it easy to easily switch financial institutions in line with their

service quality experiences. The industry is also characterized by significant

investment in IT. Nyangosi (2012) states that “Kenyan banks have exponentially

embraced the use of information and communication technologies in their service

provision” and as such, it has led to “a wide range of new products, prompted by

increased competition, embracing ICT and enhanced customer needs” (p. 2).

Among some of the major technological developments in the industry is

mobile banking technology. According to Ernst and Young (2013) mobile money

which is described as the storage and movement of money on cell phones, has had a

worldwide impact that is likely to change the nature of financial services for retail

customers and businesses alike. The report however revealed that mobile banking has

taken off successfully as an innovation of developing countries rather than developed

countries, targeted at the largely unbanked populous in these regions (Ernst & Young,

2013).

In Kenya, mobile banking is no longer a possibility but a reality as commercial

banks now have mobile banking services integrated into their normal bouquet of

3



products and services. Equity Bank for example, operates the Eazzy 247 product

which is a “mobile banking service that allows you access to bank services using your

mobile phone … and is available through Safaricom, Orange, YU, Airtel and MTN

USSD, SMS and internet services, making it easier to transact anywhere, anytime”

(Equity, 2013, para.1). Family Bank operates a similar product branded as Pesapap,

where the term itself implies the ability for the bank customer to quickly and easily

access their funds from their bank accounts at any time. It has also launched PesaMob,

offering a virtual platform through which accounts can be opened without necessarily

visiting a branch (Family Bank, 2013). In terms of service quality, timely access to

funds at any time through mobile access has become a key benefit and new feature for

financial service access.

Another key development that has affected operational aspects of banking is

the adoption of new core banking systems by Kenyan banks. Banks have followed

global trends by adopting advanced IT systems to perform standard banking

operations. These technological upgrades have particularly shaped the nature of

competition within the industry. In 2007 the Kenya Commercial Bank (KCB) adopted

the TEMENOS T24 core banking system to support 131 of its branches across the

country so as to offer “a faster, more effective service to customers and deliver new

technology-driven products such as internet banking” (Temenos, 2007, para. 2).

Similarly, Imperial Bank invested in “Oracle Reveleus and Oracle Mantas

solutions to ensure strong corporate governance, risk and compliance mechanisms”

(Oracle, 2010, para. 3). Family Bank also invested in a new core banking system

based on the Oracle platform known as Flexcube (Family Bank, 2012). The main

emphasis in adopting these new systems has therefore been to create more effective

4



service delivery, increased product and service options, and better internal controls to

protect customer funds.

The Kenyan banking industry has also been dominated by the use of ATM

services over the last decade. According to a survey by FSD-Kenya (2007), the

industry had a total of 968 ATMs by the end of December 2007 (Nyangosi, 2012).

According to annual reports from Central Bank of Kenya, ATM banking services

have been overtaken by increased use of mobile banking (CBK, 2013). Technology

has therefore shaped the nature of service delivery channels in the banking industry

over time.

Njuguna, Ritho, and Olweny (2012) note that “although there is a significant

growth of internet users in Kenya, the number of financial transactions carried out

over the internet remains very low” (p. 247). Despite this, internet banking has still

become relevant in transforming financial services offered by banks in Kenya.

Among other technological developments discussed, commercial banks have adopted

these IT-based services with a view to enhance service quality.

Background to Family Bank Ltd

Historical Background

Family Bank was initially known as Family Finance Building Society. It was

registered as a Building Society in October 1984, under the Building Societies Act

and commenced operations in early 1985. It later converted into a fully fledged bank

in May 2007 and the key driver behind the conversion was the need to offer a wider

range of products and services to customers. The bank is regulated by the Central

Bank of Kenya (CBK) and is also inspected regularly using CAMEL ratings that look

at Capital, Assets, Management, Earnings and Liquidity. Family Bank is also a

member of the Deposit Protection Fund. In terms of branch distribution the bank has

5



grown from only one branch in 1985 to over 67 branches currently across the country.

(Family Bank, 2013).

Products and Services

Over the past three years the bank has upgraded its core banking system in a

bid to offer superior products and services at affordable rates (Family Bank, 2013).

These products and services are specifically designed to target several market

segments ranging from the low-income earners in the mass retail market, investment

groups, small and medium sized companies, and large corporations as well as

government institutions and parastatals. Depending on these targeted markets the

bank has suitable loan products, some of which are now accessible through a new

mobile banking platform known as PesaMob. This platform mainly facilitates access

to personal loans. Other loans are accessible through traditional bank channels and are

subject to routine appraisal procedures at the branches. This is in addition to other

bank services under trade finance. In terms of money transfer, the bank has real time

gross settlement (RTGS) transfers, electronic funds transfers (EFT), Mpesa Services,

and Western Union (Family Bank, 2013).

The bank has focused on convenience, affordability and accessibility in the

delivery of services offer to customers. Several technologically-driven products have

propelled business growth through enhanced service options such as mobile banking

(Pesapap) designed to enable customers to remotely access their bank accounts for

transactions and enquiries; and recently PesaMob, which enables non-customers to

open virtual accounts and transact without having to visit a branch; rental payment

facilities (M-kodi) to assist tenants to pay into their landlords’ bank accounts through

the mobile phone; church-based mobile banking facilities (M-Kanisa) to enable

6



churches to collect tithes and offerings from their congregation electronically and

directly into church accounts (Family Bank, 2013).

Statement of the Problem

Technology has become increasingly important for service quality

improvement across different industries. According to Olorunleke and Akinyele

(2010), technology has become a major driving force in the banking industry, making

it necessary to conduct research on investments in technology and their overall impact

on the industry. Ankrah (2012) states that technology “has brought about a complete

paradigm shift in the functioning of banks and delivery of banking services” (p. 53).

Some of the shifts or changes in the industry noted have been in the form of

automated teller machines (ATM), point of sale (POS) terminals, mobile and internet

banking. Because of the significant technological changes in the banking industry,

service delivery methods have changed, thereby necessitating for studies to be

conducted on the impact of technological innovations on service quality, in line with

these new service delivery methods.

Family Bank invested in a new core banking system based on the Oracle

platform known as Flexcube (Family Bank, 2012). The main emphasis in adopting

these new systems was to create more effective service delivery as well as additional

service delivery channels. The bank has been at the forefront of the industry changes

brought about by technological forces. It was recently nominated for being the second

best bank in technology use in Kenya in 2011 (Family Bank, 2011). Two years later, a

large proportion of its retail clientele have subscribed to its e-based products and

services. However, the impact of these new technologically improved e-products and

services on the bank’s service quality has not been fully investigated. The bank and

industry in general, has not been able to identify the exact impact of technological

7



innovations on service quality for the new service delivery channels resulting from

the IT innovations. Therefore, in line with this gap, this study sought to assess the

impact of technological innovations on service quality in Family Bank.

Purpose of the Study

The purpose of this study was to assess the impact of technological innovation

on service quality in Family Bank.

Objectives of the Study

1. To identify technological innovations adopted by Family Bank for e-based

service delivery.

2. To identify the e-based service delivery channels preferred by Family Bank

customers.

3. To examine customer expectations and perceptions of service quality for e-based

services offered by Family Bank.

4. To evaluate the relationship between use of technological innovation and service

quality in Family Bank.

Research Questions

1. What were the technological innovations adopted by Family Bank for e-based

service delivery?

2. What e-based service delivery channels were most preferred by Family Bank

customers?

3. What were the customer expectations and perceptions of service quality for e-

based services offered by Family Bank?

4. What was the relationship between use of technological innovation and service

quality in Family Bank?

8



Rationale of the Study

There have been few studies in the retail banking sector in Kenya to justify

that technological innovations play a crucial role in affecting service quality.

According to a study by Ombati (2007) several researchers have focused on service

excellence in the Kenyan banking industry, and efficiency based gains of technology

in the banking industry. However, there are fewer studies on the relationship between

technological innovation and service quality. A review of the literature reveals that

studies on electronic service quality have been carried out in other countries (Daniel

& Berinyuy, 2010; Olorunleke & Akinyele, 2010; Parasuraman et al., 1988; Roses,

2010). This study therefore sought to assess the impact of technological innovation on

service quality in the Kenyan context. More specifically, the study identified Family

Bank as a suitable case of a commercial bank that has recently invested heavily in

technology in a bid to enhance service delivery options for its retail clients. It assessed

this relationship while taking into account the strategic importance placed on

technological innovation for service delivery in the banking industry.

Significance of the Study

The findings of this study are expected to be useful for commercial banks

seeking to exploit technology for strategic purposes within the retail banking industry.

More so, it will be relevant for managers that seek to understand the role of

technological innovations on service quality for its customers.

Secondly, the study is expected to shed light on customer perceptions vis-à-vis

customer expectations of service quality for IT- based solutions that the banks offer to

retail customers. This information will be useful in helping service delivery teams in

banks identify gaps that currently exist in among retail customers in the use of IT-

based services.

9



Lastly, the results shall also be important for academic researchers in

contributing to the body of literature on technology and service quality in the Kenyan

banking industry. The study shall therefore form a basis for future research on

technological innovations and service quality.

Scope of the Study

The study focused on technological innovations and service quality in Family

Bank. It limited itself to customers from seven branches located within the Nairobi

metropolitan.

Assumptions of the Study

This study assumed that:

1. There existed a relationship between technological innovation and service quality.

2. Customers could either respond positively or negatively to technological

innovations introduced by the bank.

3. Customers formed certain expectations and perceptions of service quality for the

banks’ new e-based products.

1. Confidentiality and sensitivity of information – commercial banks are usually

sensitive in releasing financial data and information relating to their strategic plans

due to the competitive nature of the industry. As such, all respondents were informed

from the onset that their responses would be treated with anonymity and

confidentiality.

2. Availability of respondents – commercial banks tend to have busy schedules

that could limit the availability of respondents for interviews and also their ability to

answer questionnaires appropriately. The researcher used the mall-intercept method to

10



overcome this limitation by selecting customers waiting to receive services at the

banking halls. This proved to be a convenient way for customers to respond to the

questionnaire since they were more readily available and willing to participate in the

study as they waited to be served.

Definition of Terms

Customer expectations – these are “beliefs about a service that serve as

standards against which service performance is judged” (Parasuraman, Zeithaml, &

Berry, 1988, p. 15).

Customer perceptions – this is what customers experience out of a service

offered to them (Parasuraman, Zeithaml, & Berry, 1988).

E-banking (electronic banking) – “this is the process by which a customer may

perform banking transactions electronically without visiting a brick-and-mortar

institution” (Ombati, Magutu, Nyamwange, & Nyaoga, 2010, p. 156).

E-based services – e-services have been defined as “those services that can be

delivered electronically” (Javalgi, Martin, & Todd, 2004, p. 561).

Information Technology (IT) – It is the “processes and applications that create

new methods to solve problems, perform tasks, and manage communication” (Ferrell,

Hirt, & Ferrell, 2009, p. 35).

Innovation – It is an iterative process initiated by the perception of a new

market and/or new service opportunity for a technology based invention which leads

to development, production, and marketing tasks striving for the commercial success

of the invention (OECD, 1991, p. 303).

Internet Banking – it is the “use of internet and telecommunication networks

to deliver a wide range of value added products and services to bank customers”

(Steven, 2002, p. 15).

11



Retail banking – it is “the cluster of products and services that banks provide

to consumers and small businesses through branches, the Internet, and other channels”

(Clark, Dick, Hirtle, Stiroh, & Williams, 2007, p. 40).

Service – “an activity or series of activities of a more or less intangible nature

than normal, but not necessarily, takes place in the interaction between the customer

and service employees and/or physical resources or goods and/or systems of the

service provider, which are provided as solutions to customer problems” (Gronroos

2001, p. 151).

Service quality – service quality is “the difference between customer

expectations of service to be received and perceptions of the service actually

received” (Parasuraman, Zeithaml, & Berry, 1988, p. 15).

Technological Innovation – It comprises of “new products and processes and

significant technological changes of products and processes” (OECD, 1993, p. 303).

Technology – it is “the application of knowledge, including the processes and

procedures to solve problems, perform tasks, and create new methods to obtain

desired outcomes” (Ferrell et al., 2009, p. 35).

Summary

This chapter has presented an introduction and background of technological

innovation and service quality, and the relationship between the two variables. It has

also covered the research problem, purpose, objectives, research questions,

justification, significance, scope, limitations and definition of terms. The second

chapter will review literature relevant to the study.

12



CHAPTER TWO

LITERATURE REVIEW

This chapter will review the literature on technological innovation as applied

in the banking industry. It will also review theories on service quality and

technology’s role on service quality. The conceptual framework for the study will be

discussed at the end of the chapter, thereby highlighting and illustrating the various

relationships between technological innovation and service quality as discussed in the

literature.

Theoretical Framework

Innovation

Several scholars and research-based organizations have identified two main

types of innovation commonly applied to achieve competitive advantage within

organizations, these are product innovations and process innovations (Dess, Lumpkin,

& Eisner, 2008; Faberberg, 2003; OECD, 2005). This section reviews product and

process innovations in particular, as these are more commonly applied to the banking

sector.

Product Innovation

This refers to “efforts to create product designs and applications of technology

to develop new products for end users” (Dess et al., 2008, p. 414). An in-depth

knowledge of the product as well as the needs of the customer is essential for product

innovation to be successful. The OECD defines product innovation as “the

introduction of a good or service that is new or significantly improved regarding its

characteristics or intended uses; including significant improvements in technical

specifications, components and materials, incorporated software, user friendliness or

other functional characteristics” (OECD, 2005, para. 156).

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Process Innovation

Process innovation emphasizes on improving operational efficiencies within

organizations so as to reduce costs (Fagerberg, 2003). The OECD defines it as

follows:

It is the implementation of a new or significantly improved production or

delivery method. This includes significant changes in techniques, equipment

and/or software. Process innovations can be intended to decrease unit costs of

production or delivery, to increase quality, or to produce or deliver new or

significantly improved products. (OECD, 2005, para. 163).

Jeston and Nelis (2006) discuss five levels of process innovation ranging from

small improvements, improvements of sub-processes, redesign of processes, redesign

of business, and finally the redesign of the industry value chain. The levels basically

represent a continuum reflecting the degree of change associated with improvements

to organizational processes. It is evident that process innovation within an

organization has the potential to transform the industry the firm operates in.

Service Quality

Service Concept

The concept of service is broad and can be applied to different industries.

According to a research study conducted by Johns (1999) “services are mostly described

as ‘intangible’ and their output viewed as an activity rather than a tangible object” (p.

954). Therefore service does not necessarily involve any tangible evidence, but is mainly

concerned with interactions and experiences the customer has with the organization.

Edvardsonn (1998) also emphasizes on the participation of customers in the service

process, since they are co-producers of service, and the customer’s

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outcomes are evaluated in terms of value added and quality. This point of view on

service considers the customer’s perspective to be crucial in defining service.

Another study viewed service as part of a wider scope of management, being

classified as part of three management paradigms – manufacturing paradigm (goods,

technical production standards); legal paradigm (regulations, rules and procedures

relating to the external environment); and the service paradigm (focusing on service

management, customer interactions and the creation of value) (Gummesson, 1994). It

is this last paradigm that captures the attention of this study. Service is seen as a

managerial activity that requires active involvement of personnel towards enhancing

customer interactions and creating value.

Service Quality Concept

Service quality theory developed with the work of Parasuraman, Zeithaml, and

Berry in 1988 in a research article titled SERVQUAL: a multiple-item scale for

measuring consumer perceptions of service. In this article, they defined service

quality as “the difference between customer expectations of service to be received and

perceptions of the service actually received” (p. 15). In explaining the concept, they

highlighted on three major themes stating that; firstly, there was a higher level of

difficulty in measuring service quality vis-à-vis goods quality; secondly, service

quality perceptions arise from comparisons of consumer expectations with actual

service performance; and lastly, the evaluation of service quality is not only

dependent on the outcome of a service but the process of service delivery itself

(Parasuraman et al., 1988, p. 42). From their contributions, it is clear that service

quality is dynamic and is a function of consumers’ expectations vis-à-vis service

performance. It is also heavily influenced by the service processes within an

organization.

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Other scholars have also discussed service quality extensively. According to

Wyckoff (1984) service quality is defined as “the degree of excellence intended and

control of variability in achieving that excellence, in meeting the customer’s

requirements” (p. 81). This definition alludes to the fact that the customer’s

requirements must be taken into consideration during service quality assessment.

Early theoretical models on service quality take into account these customer

requirements by categorizing service quality into two; technical quality and functional

quality (Gronroos, 2001). According to Gronroos (2001) technical quality refers to the

result of the service and the question, what has been provided? Functional quality on

the other hand, refers to the way in which the service has been delivered, and relates

to the question, how has the service been delivered? In distinguishing between the two

types of quality, it was noted that technical quality related to easily measurable

characteristics of service that could be copied by competitors, whereas functional

quality which was characterized by personal aspects of service encounters afforded

the service firm opportunities for competitive advantage.

Service Quality Measurement

SERVQUAL (Gap Model)

Service quality models have developed over time with a view to better

understand service quality. SERVQUAL was the first service quality model

developed by Parasuraman, Zeithaml, and Berry (1988). They proposed that there

exist certain gaps between customer expectations and perceived performance that

determine the level of service quality. Technically, the model is depicted through the

following function:

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where:

SQ = overall service quality; k = number of attributes

Pij= Performance perception of stimulus i with respect to attribute j.

Eij= Service quality expectation for attribute j that is the relevant norm

for stimulus i

The SERVQUAL model originally had ten dimensions of service quality

(reliability, responsiveness, competence, access, courtesy, communication, credibility,

security, understanding/knowing the customer, tangibles) that were collapsed into

five, namely – reliability, responsiveness, tangibles, assurance and empathy

(Parasuraman et al.,1988) define these five dimensions as follows:

a) Reliability – this involves consistency of performance and dependability. It

means that the firm performs the service right the first time, and that it

honours its promises.

b) Responsiveness – concerns the willingness or readiness of employees to

provide service. It involves timeliness of service.

c) Tangibles – it includes the physical evidence of the service, such as physical

facilities, appearance of personnel, tools or equipment used to provide the

service, physical representations of the service, such as a plastic credit card or

bank statement, or other customers in the facility.

d) Assurance – knowledge and courtesy of employees and their ability to inspire

trust and confidence.

e) Empathy – caring individualized attention the firm provides to its customers.

SERVQUAL has been recognized for being a generic model that can be

applied to any service organization for service quality measurement; as well as for

strategic purposes by enabling management to make decisions related to prioritization

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of performance improvement through identification of service quality gaps (Shahin,

2005). However, the 5-dimensional structure introduced by Parasuraman et al. (1988)

was criticized by many other authors. Firstly, several criticisms were raised with

regard to the fact that the five dimensions were generic and industry-dependent;

thereby could not be standardized for measuring service quality across different

industries (Culiberg & Rojsek, 2010). On the same note, Buttle (1996) critiques the

dimensionality of SERVQUAL by arguing that the five dimensions are not universals

but are rather contextualized depending on the study or industry under assessment.

Secondly, the scale used for measuring service quality could not be appropriately

applied in different cultural contexts (Cui, Lewis, & Park, 2003).

In addition SERVQUAL is based on the disconfirmation paradigm instead of

the attitudinal paradigm (Buttle, 1996). The disconfirmation paradigm is widely used

in customer satisfaction literature to suggest that customers have one of three options

in evaluating a service; that their expectations are exceeded (O>E); their expectations

are met (O=E); or that their expectations are not met (O<E) – where O stands for

outcomes, and E stands for expectations. The problem with this paradigm is that it

limits customers’ perceptions and expectations to fixed or structured values, whereas

customers’ attitudes which are not fixed, also have an important role to play in

assessing service quality. Buttle (1996) also notes that the four or five items used

under each dimension cannot be fully relied upon to capture the variability within

each SQ dimension, thereby implying limitations in the scale used; also, moments of

truth exist which change from one customer interaction to another, thereby leading to

variations of customer assessments of SQ within each dimension; and lastly,

SERVQUAL requires two administrations of the instrument which can lead to

boredom and confusion amongst respondents.

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Other service quality models

The literature on service quality models is extensive. After the SERVQUAL

(GAP) model, newer variations have emerged with a view to capture service quality

in a number of industries. Seth and Deshmukh (2005) for example, reviewed 19

service quality models, with SERVQUAL being among the primary models. This

literature review will focus on this preliminary model, as well as focus on the

technologically oriented models that serve the purpose of this study – to evaluate the

effects of technological developments and innovations on service quality.

Electronic Service Quality (E-S-QUAL)

There have been several studies of service quality from a technological

perspective, that led to the development of E-S-QUAL, which is “a multiple-item

scale for measuring the service quality delivered by Web sites on which customers

shop online” (Parasuraman et al, 2005). This research distinguishes between

traditional service quality versus electronic service quality. In this case, the original

work of Parasuraman et al. (1985) on SERVQUAL is in the traditional category,

whereas the introduction of electronic and technological elements into service quality

lead to the modernistic perspective of the concept.

However, this new model narrows down its focus to web-site applications and

customer interactions with online interfaces. The model does not necessarily consider

how technology upgrades affect internal processes, but focuses moreso, on service

innovation – where IT has provided the platform for new means to deliver service

(Parasuraman et al., 2005).

In fact, in defining electronic service quality (e-SQ) Parasuraman et al. (2005)

emphasise on the fact that the definintion is meant to capture all phases of a

customer’s interaction with a web site – they therefore define it as “the extent to

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which a web site facilitates efficient and effective shopping, purchasing, and delivery”

(p. 5). The focus for this study was therefore limited to web site use by online

customers.

Despite this limitation, the study provides useful insights in terms of

methodology and questionnaire design. Ideally, after identifying the key attributes of

service quality within the area of interest, Parasuraman et al. (2005) developed a final

questionnaire with 113 items with preference for a 5 point Likert scale ranging from 1

(strongly disagree) to 5 (strongly agree). Among the attributes they considered key for

e-SQ, were three of the five preliminary attributes in the original SERVQUAL model

(reliability, responsiveness, assurance) , plus newer IT-related attributes to incorporate

the other 2 attributes (tangibles and empathy). The new attributes included access,

flexibility, ease of navigation, efficiency, security/privacy, price knowledge, site

aesthetics, and customization/personalization. The questionnaires were administered

to a random sample of internet users through an online survey, who were screened to

determine if they had sufficient online shopping experience. In refining the data

collected, the scholars narrowed down on four essential dimensions for measuring e-

SQ:

a) Efficiency – the ease and speed of accessing and using the site

b) Fulfillment – the extent to which the site’s promises about order delivery and

item availability are fulfilled.

c) System availability – the correct technical functioning of the site

d) Privacy – the degree to which the site is safe and protects customer

information

The findings of the study revealed that of the four dimensions, efficiency and

fulfillment were the most important aspects of web site service quality from the

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customer’s perspective. Following this dimension is the system availability aspect, in

which issues of connectivity and downtime was critical, after which the last most

important dimension to service quality was privacy. As earlier noted, the study

reveals important dimensions of service quality that can be applied to other service

sectors, not limited to online sites, but other applications of IT in services.

IT Alignment model

Originally, the model was designed by Berkley and Gupta (1994). It is meant

to link service quality aspects of an organization to the IT strategies that it adopts

(Seth & Deshmukh, 2005). Through several case studies from several sectors (such as

banking, courier, transportation, manufacturing and service industries) it describes the

use of IT for improving service quality. More specifically, “the model describes in

detail where IT had been used or could be used to improve specific service quality

dimensions including reliability, responsiveness, competence, access,

communications, security, understanding and knowing the customers” (p. 924). Below

is an illustration of the model, with an emphasis on aligning service quality and

information system (IS) strategies.

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Source: Berley & Gupta

From the illustration, the service strategy of the organization, which consists

of dimensions derived from SERVQUAL (reliability, responsiveness, competence,

access, communication, security, and understanding the customer), is supported by

information system applications. The service delivery system defines the information

system requirements and leads the organization to adopt the appropriate IS strategy

and architecture. Therefore, this cycle continues as customer needs change to inform

the service strategy, thereby necessitating information systems to be re-aligned

accordingly.

Technological Innovation

Technological innovation has become an increasingly important factor for

businesses. According to Godin (2010) technological innovation is centred on

technological change and is an essential component for generating competitive

advantage for firms and nations alike. There have been different perspectives on

technological innovation, particularly within the banking sector. Whereas some

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scholars do not recognize automation of systems, improved loan processing methods,

or new financial products as innovation, financial services practitioners have a

different viewpoint on the same; that is bankers or practitioners in financial services

tend to prefer a perspective that appreciates any improvement in processes or products

as a form of innovation (KPMG LLP-UK, 2007).

However, according to other scholars quoted in a survey from the MIT Sloan

School of Management “the traditional paradigm of innovation is that it is product- or

technology-focused, and emerges from a dedicated group doing what is termed

research and development [R&D]”(Banking on Innovation, p. 10). Furthermore, the

survey noted that these scholars do not recognize software development efforts within

the banking sector as contributing significantly to scientific and technological

advances within the IT sector.

This paper adopts the first view, thereby appreciating that any process or

product development within the banking sector that leads to improved service quality

is a form of technological innovation.

Application of technological innovation in the banking sector

According to Accenture (2012) “to remain relevant to customers it is critical

for banks to have a technology innovation operating model that can evolve the

customer proposition accordingly to minimize the risk of attrition and provide

differentiation where required” (p. 2). Therefore customer retention is only achievable

in contexts where banks have offered value propositions to customers that match with

their preferences. Below is a discussion on some of the innovations in the banking

sector meant to offer better value propositions to customers in order to remain

relevant in the retail banking sector.

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Improved core banking systems

Among the earliest indications of technological innovation within the banking

industry was the adoption of improved data processing systems to manage a large

client base. This was more so as banks realized that information technology could be

used to substitute previously labour-intensive tasks (Fatoki & Musara, 2010). These

systems have been used to streamline back office processes while acting as a platform

allowing for banks to provide a wide array of products and services. Basically

technological developments in other industries have spurred a similar pace of

development in banking as customer preferences in financial services shift towards

increasingly more convenient service offerings (Accenture, 2012). Core banking

platforms enable banks to address this shift in market needs.

Automated Teller Machines (ATMs)

In the late 20th

century the greatest indicator of technological innovation

among banks was the presence of a wide ATM network (Nyangosi, 2012). ATMs

increase the distribution network or delivery channel that banks can use to serve their

clients. This mode of delivery is highly dependent on a reliable core banking system

that can support transactions across the network. As the name suggests, automated

teller machines have gradually replaced manual tellers in banking halls as customers

can easily access their funds away from the bank. According to Frei, Harker, and

Hunter (1998) “banks have invested heavily in ATM machines due to their cost

advantage on a per-transaction basis” (p. 11). Fatoki and Musara (2010) also note that

ATMs have significantly reduced the human errors experienced during teller

transactions while increasing convenience and accessibility to customers. Therefore

this technological change has had wide implications on cost savings and improved

service offering for banks.

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Debit Cards and Credit Cards

To further enhance the credit function of banks while leveraging on the

network provided by ATMs and e-payment systems, banks have used credit cards to

provide limits to their customers allowing them to borrow short-term credit (White &

Frame, 2009). Debit cards on the other hand are prepaid cards which provide an

alternative to carrying cash. Online banking allows for payment for goods and

services on the internet by allowing bank customers to access their accounts online.

Mobile Banking

A recent phenomenon prevalent in the Kenyan financial services market is

mobile banking. Mobile banking has largely been precipitated by technological

innovation in the telecommunications industry. This innovation has led to new

partnerships and mutually beneficial alliances between banks and telecommunications

providers. According to Njenga (2008) “the remarkable gains made towards mobile

phone access have seen a steady progress in the scope of innovations emanating from

exploitation of these fairly new technologies” (p. 1). Among the most successful

initiatives in mobile banking is Mpesa by Safaricom Ltd. Jack and Suri (2010)

indicate that Safaricom formalized the mobile money transfer system – “an sms-based

money transfer system that allows individuals to deposit, send, and withdraw funds

using their cell phone” (p. 2). To date Safaricom has partnered with several banks to

extend the reach of this innovation to the wider population that has access to mobile

phones enabling them to access their bank accounts through the mobile phone.

Internet Banking

Internet banking technology has enabled customers to access bank services

online. According to Alam (2007) bank services are digitized and automated, thereby

aligning themselves with the numerous possibilities of online services available to

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their clients. Jayawardhena and Foley (2000) explain the rational for internet banking

by highlighting on several major benefits, namely; cost savings since the average cost

per transaction or service is much lower when provided for online than in a brick-and-

mortar branch; increased customer base since the internet has wider reach; mass

customization whereby services are largely personalized based on information

collected from clients online; marketing and communication benefits since banks can

run their own web pages accessible to existing and potential clients. Furthermore, they

state that “internet technologies have paved way for a multitude of different banking

products to be innovated” (p. 22). Therefore, internet banking has created

opportunities for more business for banks while enabling customers to enjoy the

flexibility and convenience offered through the use of such technology.

Impact of Technological Innovation on Service Quality

In assessing the impact of technology on service quality, there have been

numerous studies on the relationship between these two variables within the banking

industry. This section seeks to review some of these studies in light of the theoretical

framework supporting this relationship. Ombati (2007) states that, “banks have largely

implemented service delivery technology as a way of augmenting services

traditionally provided by bank personnel” (p. 9). Some of this augmentation has led to

removal of “repetitive, time consuming tasks, reduced human error and extended

access to banking related facilities” (Ombati, Magutu, Nyamwange, & Nyaoga, 2010,

p. 155). Therefore, banks have continuously improved their services to meet client

needs through information technology.

Service related issues on technology are usually dependent on customers’

interactions with the different e-based services. According to a study by Snellman and

Vihktari (2003) on the Finnish banking sector, the same level of complaints in

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traditional banking was evident in technology-based banking. Whereas unfriendliness

and timeliness of service led to customer dissatisfaction on traditional service delivery

options, technology-based services were prone to failure in service design or service

processes. The concern on service design was noted by Dabholkar (1994), who

emphasized on the need for flexibility in the design of technology to enable customers

to make changes to transactions remotely, when they are in a neutral location where a

bank employee may not be available.

Bateson (2000) points out that efficiency and speed are also important

attributes of service quality resulting from technology use. The more customers switch

to e-based products, the easier it is to experience a level of efficiency and speed in

service that would not normally be experienced from traditional banking service

options.

Another important aspect introduced by technological innovation in banking

services is convenience. According to a study on ATM service quality by Asabere,

Baah, and Odediyah (2012), “the advantages and benefits of using ATM have given

new impulsion in dimensions of quality of service and banks are offering new choices

to customers” (p. 219). Among some of the attributes noted in their study with respect

to the impact of technology on ATM service quality include; security and convenience

of ATMs; adequate number of ATMs; a user-friendly system, and functionality of

ATMs.

In relation to e-service quality, Parasuraman et al. (2005) note several

important attributes, as earlier discussed in this paper. These attributes were in

addition to the original SERVQUAL attributes for reliability, responsiveness and

assurance, and they included access, flexibility, ease of navigation, efficiency,

security/privacy, price knowledge, site aesthetics, and

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customization/personalization.Despite these new attributes being inclined towards

usability and customer experience of web sites, they still provide important

technologically based attributes of service quality, such as in the use of internet

banking and mobile banking applications.

In a study on service quality dimensions in technology-based banking,

Mojoodi, Najafizadeh, and Ghasemi (2013) use exploratory factor analysis to identify

service quality dimensions applicable for technology-based banking. They arrived at

eight dimensions of “easiness, assurance, security, customization, comprehensiveness,

convenience, support services and employee knowledge” (p. 3206). They defined

these dimensions as follows:

a) Easiness – this refers to how easily users can learn how to work with the

technology and use it.

b) Assurance – this means that technology works true to the statements or promises

made about it.

c) Security – the safety in using technology, proper handling of information and

quality information.

d) Customization – to make (something/services) according to a customer’s

individual requirments and needs.

e) Comprehensiveness – this means that the technology must be capable of providing

a wide range of customer needs.

f) Convenience – the convenience of using technology over the employees as well as

speed and time of using the technology.

g) Support services – the service provided to customers during problem situations

and through call centres.

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h) Employee knowledge – the amount of employees’ information and knowledge to

solve customer problems.

Empirical Perspectives

This section seeks to study the methodology and findings from studies

conducted on the relationship between technology and service quality in the banking

industry. The SERVQUAL model has been applied in a number of service industries,

where the methodology for study has involved the use of a questionnaire containing

22 items divided into the five dimensions earlier discussed – namely; tangibles,

reliability, responsiveness, assurance, and empathy (Parasurman et al., 1985).The

model was reviewed through an iterative process where initially 97 attributes were

formulated with an expected impact on service quality (Parasuraman et al., 1988).

These were further purified to identify the attributes with the most significant

influences, leading to five main dimensions of service quality. This was for the

purpose of condensing the scale dimensions and reliability of the measures in use

(Daniel & Berinyuy, 2010).

The initial SERVQUAL model determined to explore service quality in four

service categories; retail banking, credit card, securities brokerage and product and

repair maintenance (Parasurman et al., 1988). The study assessed the five service

quality dimensions through focus twelve focus group interviews with customers in

each category, with a view to ascertain customers expectations vis-à-vis perceptions.

These focus group interviews were followed by executive interviews of nationally

recognized companies from the four service categories in order to discuss the five

service quality gaps contained in the model.

The findings of this study revealed several service quality gaps; management

perceptions and consumer expectations differed, for example in the banking industry,

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“privacy or confidentiality during transactions emerged as a pivotal quality attribute”

(p. 44). This formed the first proposition for SERVQUAL, which pointed out that the

gap between management perceptions and customer expectations would have an

impact on service quality assessment by customers.

Secondly, a gap existed between management perceptions and service quality

specifications. This was evidenced by resource and market constraints that made it

difficult for firms to operate with quality specifications in tandem with managers’

views of what they perceived to be up to customers’ expectations.

Thirdly, the study by Parasuraman et al. (1985) also reveals a gap between

service quality specifications and service delivery. Despite having the right

specifications, delivering to these specifications within the sampled firms from the

four service industries was not always guaranteed. Rather, because of human contact

it was clear that some services could not be easily standardized.

The fourth gap was with respect to service delivery and external

communications (Parasuraman et al., 1985). According to this gap, the public display

of information and communication to customers may create expectations for

customers that are higher than what they receive from actual service performance.

Lastly, the findings of this study revealed that the first four gaps lead to the fifth

service quality gap. In conclusion the study stated that “service quality as perceived

by a consumer depends on the size and direction of the fifth gap, which in turn

depends on the nature of the gaps associated with the design, marketing, and delivery

of services” (p. 46).

Other empirical studies geared towards the banking sector specifically identify

key attributes of service quality applicable from a technological context. These studies

borrow heavily from the initial SERVQUAL model with a view towards achieving

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research objectives tailored towards understanding the relationship between these two

key variables.

According to Mojoodi et al. (2013), their empirical study on the relationship

between service quality in technology based banking and customer satisfaction

revealed eight important dimensions for the technological context; these were earlier

discussed in this paper. The study had a student sample who were heavy users of

banking technology. Seven hundred questionnaires were distributed out of which 560

were usable, representing an 80% response rate. In analyzing the data for the study,

the researchers used the inferential statistical method, and structural equation

modeling to test for the relationship between the variables. A goodness of fit test was

carried out to ensure suitability and adequacy of the data. The study concluded that

the eight dimensions were a reliable measure of service quality for technology based

banking, and that customer satisfaction was highly dependent on service quality

resulting from the use of banking technologies.

Another empirical research by Akinyele and Olorunleke (2010) on the

relationship between technology and service quality in the Nigerian banking industry

used a cross-sectional survey design with a questionnaire based on a multiple-item

scale for e-banking services. As earlier noted in the literature review, the study had

identified eight major dimensions of service quality applicable in a technological

banking context through exploratory factor analysis. The study used inferential

statistics to make generalizations about the populaton. The population was drawn

from banks in Lagos and Ota, in Nigeria with customers from the central business

district being included in the sample. In this study, the respondents were customers

that used e-banking services such as internet banking, mobile banking, and ATM. One

hundred and twenty questionnaires were issued with a response rate of 62.5%, coming

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to a total of 75 customers. Seventy seven percent (77%)were personal customers

while twenty three percent (23%) were corporate customers.

The questionnaire consisted of both open ended and close ended questions, in

the form of statements on a 1-5 Likert scale to evaluate “customer perceptions of

electronic banking performance and the most important attributes of electronic

banking service” (p. 215). It had three main sections; general information; a section

on the relationship between technology and service quality in the banking sector; and

customer preference of different service delivery channels.In admistering the

instrument for the study, the researchers used a mall intercept method to capture

respondents during peak hours, whereby, out of every five customers in the queue,

one was selected.

For data analysis, Akinyele and Olorunleke (2010) used frequency and

percentage proportions of the statement describing the relationship between the two

variables based on customer feedback. From the same scores, the researchers

computed the mean scores to determine the perceived relationship. Finally,

correlation analysis was also used to establish the relationship between the various

electronic banking channels and service quality dimensions.

The findings of the study revealed that morecustomers had adopted ATM

banking compared to mobile and internet banking. More specifically with regard to

preference of deposits, 26.7% of the customers preferred using ATM method of cash

deposit while 73.3% preffered the teller approach.There was a positive correlation

between all service quality dimensions and ATM banking. However, there existed a

negative correlation between most service quality dimensions with mobile and

internet banking. The researchers also used an importance-performance grid to

measure customers perceptions of the relative importance of the service quality

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dimensions. In cases where the scores were negative, it implied that given the

performance of these items, their mean performance scores were problematic. Scores

were negative on dimensions such as ease of use for internet banking, efficiency in

transactions processing, personalization, and speed. These were therefore problem

areas that the customers considered important, that had not been fully addressed by

the bank. In conclusion, the study revealed that their was an overall positive

relationship between technology and service quality.

In assessing service quality of e-services, several scholars also sought to

conduct a service quality assessment of Automated Teller Machines in the banking

industry of Ghana (Asabere, Baah, & Odediyah, 2012). Their study had two

objectives which entailed analyzing the current standards of service quality and trends

of ATM banking in Ghana as well as improvements of the found ATM standards and

trends. Questionnaires were issued to bank customers to gauge their views of ATM

Services. A sample size of 120 customers was used, out of which 102 provided

accurate and precise responses.

The findings revealed that 88.2% of the respondents used ATM services

wheraeas 11.8% did not – implying that a very high percentage of customers used

ATMs. Out of those that did not use the service, 50% cited that most of the time the

ATM provided by their bank did not work (reliability) whereas 50% indicated that the

ATMs provided by the bank were not user friendly (ease of access). In relation to

ATM Banking, the study also found that “none of the respondents perform ATM

banking transactions involving cash deposits and cash transfer to their own accounts

and different accounts” (p. 222). In terms of awareness, 54% of the respondents did

not know that they could use their ATM cards to deposit cash into their personal

accounts.

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On service related challenges, a majority of the respondents cited that

sometimes transaction receipts were not available, 11.8% indicated that most times

receipts weren’t available, 11.7% said that the ATM has too many customers when

they want to make transactions. 5.9% of the customers noted that the ATMS provided

did not offer a 24-hour service and were not functional on weekends and holidays.In

conclusion, the study recommended that “the banking industry in Ghana should

augment and diversify their services through ATMs” and also “improve ATM features

to suit customers while using this medium to build a strong and sustatinable

relationship with customers” (p. 225).

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Conceptual Framework

Chandran (2004) explains that concepts are “terms that refer to the

characteristics of events, situations, groups, individuals that we are studying” (p. 57).

Kombo and Tromp (2006) state that a concept is an abstract or general idea inferred

or derived from specific instances (p. 61).

The conceptual framework for this study is derived from the literature on

technological innovation and service quality. It is based on the original SERVQUAL

model while borrowing heavily from further studies that adopted SERVQUAL in

order to assess the relationship between technology and service quality within the

context of banking services. It is important to note, that for the purposes of this study,

technological innovation is mainly a function of the adoption of new banking

technologies for enhanced service-delivery options for bank customers. In this case,

studies that assess the relationship between technology and service quality formed an

essential part of the literature review for this study. It is from this background that the

conceptual framework was designed.

Consequently the independent variable for the study shall be technological

innovation, captured by three main forms of technology employed in the banking

industry for customers, namely; internet banking, mobile banking, and ATM services.

For the dependent variable, the study will take into account dimensions of service

quality noted to have been important for assessing e-service quality in technological

banking from previous studies. The researcher in this case, integrated some of the

initial SERVQUAL dimensions with the newer variations of e-service quality as used

by other similar studies. As such, the development of the questionnaire to measure the

SERVQUAL dimensions was also informed by the empirical literature.

35



For the intervening variable, this study borrows heavily from the IT alignment

model (Berkley & Gupta, 1994), focusing on the rationale behind adopting new

technologies in the bank, that is, the identification of new market opportunities,

necessitating technological innovation, existing service strategies based on

understanding customer needs as well as current information systems strategy and

architecture.

Dependent

Variable

Service Quality

Independent Ease of use/navigation

Variable Reliability

Technological Innovation Assurance

Internet Banking Security

Mobile Banking

Convenience

ATM Banking Support Services

Intervening Variables Employee knowledge

Market opportunities System availability

Service strategy – understanding customer needs; developing service delivery systems

Current Information

Systems Strategy and Architecture

Summary

This chapter has covered the literature on technological innovation and service

quality with a view to understanding the role that innovation plays in enhancing

service quality within the banking industry. It has outlined the theoretical framework,

36



taking into account the differences between product and process innovations, the

meaning of service quality, service quality measurement tools, electronic service

quality, as well as forms of technological innovation prevalent in the banking

industry. It also discussed empirical findings of similar studies in other banks. In

concluding, the chapter effectively captures the relationship between the two variables

of technological innovation and service quality as supported by the literature, through

the conceptual framework. It is this conceptual framework that guided the study

towards data collection, presentation, analysis and interpretation of findings.

37



CHAPTER THREE

RESEARCH METHODOLOGY

According to Mugenda and Mugenda (2003) research methodology refers to

the procedures that are used in conducting a study. This chapter has discussed the

research design, population, sampling and data collection methods that will be used

during the study. It has also discussed how data in the study was analyzed as well as

the ethical considerations taken into account by the researcher.

Research Design

Creswell (2009) defines a research design as a plan or collection of procedures

that guide the decisions made by the researcher in selecting detailed methods of data

collection and analysis. In the research process the research design follows

identification of the research problem and the literature review (Bryman, 2001). The

design is therefore informed by the type of research problem and the purpose of the

study.

Research designs can be classified into two major categories – qualitative and

quantitative research design. According to Mugenda and Mugenda (2003) qualitative

research focuses on designs, techniques and measures that do not produce discrete

numerical data; instead the data is in the form of words as opposed to numbers and the

words are grouped into categories. Kumar (2011) notes that quantitative studies are

used to test objective theories by examining the relationship between variables

through measurement, have large sample sizes, seek to quantify the extent of variation

in a phenomenon, and use frequency distributions and other statistical procedures.

This study used a quantitative approach in which data was tabulated in frequency

distributions and analyzed through statistical procedures. The study also used a

38



qualitative approach in which information from the interview schedules was collated

into several response categories.

The study was non-experimental since there was no existence of a control and

experimental group. Experimental designs seek to study the effect of one or more

variables on certain phenomenon while holding other factors constant (Chandran,

2004). According to Kumar (2011), in non-experimental design, the researcher starts

from the effect in order to trace the cause. It mainly involves “observing a

phenomenon and attempting to establish what caused it” (p. 113).

The study was descriptive in nature in line with descriptive research design. In

simple terms a descriptive research design is intended to describe a state of affairs as

it exists (Kombo& Tromp, 2006, p. 71). It was also case-based, taking into account

one bank as a case study. According to Mugenda and Mugenda (2003) a case study is

“an in-depth investigation of an individual, group, institution or phenomenon” and

that “the primary purpose of the case study is to determine factors and relationships

among the factors that have resulted in the behaviour under study” (p. 173). In

essence, the research design was consistent with other previous studies that have had

similar research aims.

Population

According to Mugenda and Mugenda (2003) a population refers to an entire

group of individuals, events or objects having common observable characteristics. It

is an aggregate of all that conforms to a given specification. The population for this

study included all Family Bank customers totaling to 959,000 (Family Bank, 2011).

Target Population

The target population is the entire set of individuals, events or objects for

which the researcher would like to generalize the results of the study (Mugenda &

39



Mugenda, 2003).The study targeted all the banks’ customers with personal accounts

as well as retail business accounts that had subscribed to either one of the following e-

products: mobile, internet and ATM banking, operating within seven branches located

in the Nairobi Metropolitan. The target population consisted of a total of 90,122

customers. Due to the sensitivity and confidentiality of bank data, the researcher

concealed the identity of each branch for purposes of anonymity – as such, each

branch was assigned a letter to distinguish it from the rest.

Table 3.1: Target Population at Family Bank - customers with accounts in

the Nairobi CBD

Personal accounts (retail branches in CBD branches CBD)

A 28,886

B 22,011

C 23,172

D 14,108

E 101

F 324

G 1,520

Total 90,122 Source: Family Bank (2013)

Sample Size

Mugenda and Mugenda (2003) notes that in social science research, the

following formula has been useful in determining sample size, in cases where the

target population is greater than 10,000. This is in view of the fact that the sample size

must be reasonably large to represent salient characteristics of the population.

where: n = the desired sample size (if the target population is greater than

10,000) z = the standard normal deviate at the required confidence level p = the proportion in the target population estimated to have

characteristics being measured

40



q = 1-p d = the level of statistical significance set

In determining the sample size, the researcher sought to maintain a 95%

confidence interval while seeking to achieve an accuracy level of 8.95%. In choosing

this level of significance, the researcher considered that in order to represent data that

captured information close to the population mean, a level of significance had to be

chosen that would yield a sample size that included at least 100 respondents, and less

than several hundreds due to time and resource limitations. In applying the following

formula, the study arrived at a sample size of 120 customers.

The sampling frame for this study was drawn from the target population and

took samples of customers who operate both ordinary savings accounts as well as

retail business accounts from the seven branches identified for the study. According to

Kothari (2004), the sampling frame is also known as the source list, and seeks to

guide the researcher’s sample in ensuring it as representative of the population as

possible. From the table below, the sample of 120was sourced from the seven

branches by apportioning the total number of customers in each branch to the total

target population, and multiplying this proportion by 120to arrive at the total number

of customers sampled from each branch.

41



Table 3.2: Sampling Frame

Sample = No. of customers in CBD Customers in CBD operating branch/Total Customers in branches retail accounts Target Population X 120

A 20,886 28

B 19,011 25

C 18,172 24

D 7,108 9

E 7101 9

F 8324 11

G 9,520 13

Total 90,122 120 Source: Researcher (2013)

Sampling Design

For the purpose of this study the researcher used purposive sampling, a non-

probability sampling method. In non-probability sampling selection of the sample is

non-random and therefore subjective since there is no equality in the selection of

elements from the population to participate in the sample (Guy & Peil, 1992). On the

other hand, probability sampling has random selection where it is guaranteed that each

element of the population is given an equal chance of selection. Basically, purposive

sampling is a case where the researcher purposely targets a group of people believed

to be reliable for the study (Kombo& Tromp, 2006). Furthermore, a purposive sample

may be used in targeting individuals who are particularly knowledgeable about the

issues and the investigation under research (Engel & Schutt, 2009).

However, in cases where the sample selected cannot be properly justified,

purposive sampling can be highly biased due to the subjectivity and independence

accorded to the researcher in selecting his or her sample. The researcher controlled

this bias by including a level of randomness in the manner in which the sampled

customers were selected. Basically, during peak hours, the mall intercept method was

42



used in which every third customer in the queue was asked if they had subscribed for

any of the three service offerings under assessment in the study, after which the

questionnaire was administered. This was upon successfully confirming that the

customer fit the particular customer profile for which this study sought to investigate.

Types of data

According to Chandran (2004) there are mainly two sources of data: primary

and secondary data. Primary data are collected directly from original sources such as

respondents or the field where data are available. Such data is acquired through a

census, field survey or focus group discussion. On the other hand secondary data is

acquired indirectly from a library, as well as from reports and publications. This study

used both primary and secondary data. Primary data was mainly sourced through the

use of questionnaires administered to respondents as well as an interview schedule

with senior managers in Innovations and Strategy Department, and Customer Service

Department.

Data Collection Methods

Data collection is gathering empirical evidence in order to gain new insights

about a situation and answer questions that prompted the undertaking of research

(Chandran, 2004).As earlier mentioned data collection for this study involved the

administration of questionnaires to respondents and an interview with 2 senior

managers in the Innovations and Strategy Department and Customer Service

Department of the bank.

Data Collection Procedure

The data collection procedure for this study involved administering

questionnaires to the members of the selected sample. In administering questionnaires

the researcher used the mall intercept method that has been used in other similar

43



studies. In this method, questionnaires were issued to customers at the banking halls

during peak hours whereby every third bank customer in the queues was selected for

the sample across the targeted branches in the CBD. Data was also collected by

interviewing two senior managers from the Customer Service and Innovations and

Strategy Departments.

Questionnaire Pre-testing

Harper and Thompson (2011) note that in order for questionnaires to provide

useful results, the questions must be both valid and reliable. Reliability measures the

relevance of the questions included in the questionnaires. Validity refers to whether

the instrument is actually able to test what it is supposed to test. Mugenda and

Mugenda (2003) note that the procedures used in pre-testing the questionnaire should

be identical to those which will be used during the actual data collection. A pre-test

sample is usually between 1% to 10% depending on the sample size. The researcher

pretested the questionnaire using customers from a test branch not included in the

sample. In this case the pretest was conducted at Kilimani Branch, which was outside

the main CBD where the final sample was drawn from. The pre-test sample used10%

of the total sample size, coming to a total of 12respondents. Out of this sample, the

researcher noted that the questionnaire was too long, and some of the questions had

not been properly structured to direct customers from one section to the next.

Corrections were made to the final questionnaire before it was administered to the

final sample.

Data Analysis

The research used descriptive statistics to profile the customers’

demographically in terms of their age, gender, education and occupation. Frequency

distributions as well as percentage analysis wasused to assess the respondents’

44



profiles.Percentage analysis was also used to assess customers’ levels of awareness of

the different IT-based service options available to them by the bank, in line with the

banks’ innovations and also used for analyzing customers’ feedback to the

expectations-matrix included in section two of the questionnaire. Bar charts and pie

charts captured and highlighted customers’ preferred service options with respect to

methods for cash deposits and withdrawals, and means through which they accessed

bank statements.

Finally, correlation analysis was used to assess the degree of relationship for

the eight dimensions of service quality, by regressing perceptions’ values against

expectations’ values. This was with a view to gauge if customers’ perceptions of the

IT-based services were in line with their expectations of the same services or if there

was a digression, meaning that for customers’ with higher expectations, perceptions

were significantly low. In order to gauge the impact of technological innovation on

service quality, the researcher used three main service types discussed in the paper

(mobile banking, internet banking, and ATM banking services) as the basis upon

which to conduct a service quality assessment.

The study used eight dimensions of service quality for the analysis (ease of

use, reliability, assurance, security, support services, convenience, system availabiltiy,

and employee knowledge), based on previous studies conducted in the banking

industry on key service quality dimensions for technology based banking. Some

dimensions were also incorporated from the original SERVQUAL model i.e.

reliability.The revised SERVQUAL model for measuring e-service quality also

considered factors such as system availability (Mojoodi et al.,Najafizadeh & Ghasemi,

2013;Parasuraman et al., 1988; Parasuraman et al., 2005). Therefore, the researcher

used a framework that took into account key service quality dimensions

45



applicable for technological banking from several other researches applicable in the

technological banking context, and applied them in a retail banking setting in Kenya,

in order to analyze the relationship between technological innovation and retail

banking.

Ethical Considerations

This research took into account several ethical issues. Firstly, it upheld the

confidentiality and privacy of all respondents that participated in the study by not

using their responses in any way that would be prejudicial towards them. In fact, in

order to maintain privacy, the researcher had stated to all respondents from the onset

that their responses would be treated with anonymity. More specifically, anonymity

was upheld in the research by ensuring that none of the forms contained any reference

based questions that would have required the respondents to disclose their identity.

This encouraged respondents to give factual information.

Secondly, the research encouraged voluntary and informed consent, where all

the participants in the study participated freely after understanding the purpose of the

study. Approval had been sought from the bank’s headquarters before data was

collected. Lastly, the researcher ensured that all findings to the study were disclosed

in a factual manner that did not compromise on accuracy.

Summary

This chapter has discussed the research methodology for the study. Key

aspects relating to the research design, population, sampling design, data collection

procedures and data analysis, as well as several ethical considerations were covered.

The next chapter shall cover the data presentation, analysis and interpretation of

findings.

46



CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

Introduction

The purpose of the study was to assess the impact of technological innovation

on service quality in Family Bank. This chapter presents the research findings that

comprehensively answer the research questions. This chapter presents the response

rate, the demographic profile, and profile data and presents it in descriptive tables

using mean, correlations, bar graphs, charts and pie charts. It also assesses in detail,

the rating for expectations and perceptions for the service quality dimensions with

respect to e-services offered by the bank. The data was analyzed through the use of

the Statistical Package for Social Scientists (SPSS) version 21.0. Microsoft Office –

Excel 2010 was also used to generate charts.

Response Rate

Table 4.1: Response Rate Response Rate Percentages

Complete Questionnaires 101 84.2

Incomplete Questionnaires 19 15.8

Total 120 100.0

Out of 120 questionnaires distributed, a total of 101 questionnaires were

responded to. This is equivalent to a response rate of 84%, as presented in table

4.1.Other similar studies had response rates of up to 80% (Mojoodi et al., 2013) and

some up to 62.5% (Akinyele et al., 2010). A response rate of 84% was therefore

considered sufficient and acceptable for the purposes of this study.

47



Respondents Profile

Gender

Table 4.2: Gender

Response Rate Percentages

Male 59 58.4

Female 42 41.6

Total 101 100.0

A total of 101 respondents formed the sample and from the findings, the

sample was composed of 59 male respondents constituting 58.4% of total and 42

female respondents constituting 41.6% of total as presented in table 4.2. These

findings indicate that on average, males seem to have subscribed more to e-services

vis-à-vis their female counterparts. Interestingly, these findings also matched with

Ombati’s (2007) research findings, whereby there were more male respondents

(61.3%) as opposed to females (38.7%). Another study specifically designed to assess

service quality for ATM services also found that 58.5% of the respondents were male

while 41.2% were female (Asabere, Baah, &Odediyah, 2012). This is therefore a

strong indication that there is an emerging trend in gender, whereby more males than

females use e-banking services.

Age Group

35

30

25 20

Percentage 15 10

5

0

Less than 25 26-35 years 36-45 years 46-55 years years

56-65 years Over 65

years

Age Group

Figure 4.1: Age Group

48



With regard to the age of the respondents, the findings show that 30% were in

the 46 – 55 age group, 26% in the 36 – 45 group, 23% in the 26 – 35 group, 13% in

the 56 – 65 group, 7% who were less than 25 and 2% who were over 65 years. The

sample revealed a generally older age group compared to a similar study by Ombati

(2007) where a majority of the respondents (45.3%) were between the ages of 26 – 35

years. Despite this, it was noted that for this particular study, majority of the

respondents were adults of mature age and able to effectively respond to the variables

of the study.

Occupation

Employed

Student (Private Sector)

9% 23%

Self Employed 41%

Employed (Public Sector)

27%

Figure 4.2: Occupation

In response to the occupation of the respondents, approximately 42% were self

employed, 27 % were employed in the public sector, 23% employed in the private

sector and 9% were students. It could therefore be concluded that a majority of the

respondents to the study were either in business or employed. Only a minority were

students. Their responses were therefore valid with regard to assessing service quality

for e-services among heavy users of these services, mainly from business men and

women as well as salaried individuals.

49



Education Level

Postgraduate Primary 1% 6%

Undergraduat

e

Secondary 30%

28%

College 35%

Figure 4.3: Educational Level

The highest education levels of the respondents varied, where 35% had

attained college education, 30% undergraduate education, 28% secondary education,

6% primary education and only 1% postgraduate education level. A majority of the

respondents therefore were literate and could understand and effectively respond to

the variables of the study.

Income level

35

Pe

rce

nta

ge

30

25

20

15

10

5

0

Income Level

Figure 4.4: Income Level

50



With regard to the income levels of the respondents, approximately a third

(32%) earn a monthly income of between Kenya Shillings 41,000 and 60,000 , 19%

between Kenya Shillings 61,000 and 80,000, 19% between Kenya Shillings 21,000

and 40,000, 13% below Kenya Shillings 20,000, 10% between Kenya Shillings

81,000 and 100,000 and 8% above Kenya Shillings 101,000. This indicates that the

respondents had a constant source of income that would make them eligible for the

electronic banking services under study.

Length of Account operation

Pe

rce

nta

ge

70 60 50 40 30 20 10

0 Less than 1 year 1-3 years 4-6 years Over 7 years

Length of account operation (years)

Figure 4.5: Length of Account Operation

When asked about the length of operating accounts held, a majority of the

respondents (65%) were between 1 and 3 years. A further 21% for less than 1 year,

13% for 4 to 6 years and only 1% for over 7 years. Most of the respondents therefore

had held accounts for a period that they would have been informed of the products

and services offered by the bank.

51



Type of account held

60

Pe

rce

nta

ge

50

40

30

20

10

0

Type of account

Figure 4.6: Type of account held

With regard to the type of accounts held, it was noted that many of the

respondents held more than 2 accounts. The salary account had the highest number of

account holders at approximately 52%, followed by JengaBizna at 44%, Mwananchi

account at 37%, Personal current account at 21%, Tujenge account at 17%, Mdosi

junior at 7%, Foreign currency account at 3% and Fixed deposit account at 2%. These

results were in line with the respondents’ occupation as the majority of them were

either self employed or employed.

Frequency of bank visits

Monthly 17%

Daily 38%

Weekly 21%

Twice a week 24%

Figure 4.7: Frequency of Bank Visits

52



The study further sought to determine the frequency of bank visits by the

respondents. More than a third (39%) of the respondents visited the bank daily, 24%

visited twice a week, 21% visited weekly and 17% visited monthly. Going by these

statistics, it is possible that a majority of the customers still opt for traditional banking

at the brick-and-mortar branch, with relatively fewer customers transacting away from

the branch. It could be either that for customers in the 17% category, they were avid

users of mobile banking and ATM services, or did not have high levels of income to

sustain regular banking at the branch premises.

Preferred cash withdrawal method

Mobile Banking

(PesaPap!) 17%

Teller

ATM 28% 55%

Figure 4.8: Preferred Cash withdrawal method

More than half of the respondents (55%) preferred to withdraw cash via the

ATM, 28% via the tellers in the banking hall and 17% via the mobile banking

(PesaPap!) method. This could indicate that most customers were already familiar

with ATM services relative to mobile banking services, and considered the ATM to

be faster and more efficient than a counter withdrawal.

53



Preferred cash deposit method

Mobile

Banking ATM

(PesaPap!) 26% 24%

Teller 50%

Figure 4.9: Preferred cash deposit method

Regarding the preferred methods of cash deposits, half of the respondents

(50%) preferred to use the tellers in the banking hall, a quarter (26%) the ATM, and

the remaining 24% preferred Mobile banking (PesaPap!) method. Therefore, with

regard to cash deposits, only a minority preferred e-services that would not require

them to visit the banking hall for services. These findings were in line with those in

the study carried out by Akinyele and Olorunleke (2010) in which 26% of the

customers preferred to use the ATM method of cash deposit and 73.3% preferred

teller deposits. In this case, an additional channel for mobile banking meant that a

proportion of the customers would use mobile banking i.e. 24% and close to 50%

would still use the teller for deposits. Furthermore, it appeared that the distribution of

responses along both mobile banking and ATM services was fairly even, indicating

that most probably the customers that were avid users of ATM services were also

subscribed for mobile banking.

54



Preferred access to bank statement method

Pe

rce

nta

ge

of

cust

om

ers

45 40 35 30 25 20 15 10

5 0

Printed copies Email Internet banking Postal mail from the branch statements access

Preferred method for accessing statements

Figure 4.10: Preferred method for accessing bank statements

The study sought to find out the preferred method of accessing bank

statements from the respondents where 39% preferred printed copies from the branch,

26% preferred email statements, 21% preferred internet banking access to statements

and the final 15% preferred postal mail. From the findings, it therefore appeared that a

majority of customers still preferred traditional methods for accessing statements, as

opposed to the new e-service for accessing statements online. The minority preferred

postal mail, a strong indicator that there was still a shift from the traditional approach

to accessing statements, but less than full acceptance of e-based service options for

accessing account information online.

Awareness of services offered by Family bank

The study further sought to understand the level of awareness of the

respondents regarding the services being offered by the bank. The selected services

were mobile banking (PesaPap!), internet banking, ATM card services and ATM card

point of sale purchases. The responses are as follows:

55



Awareness of Mobile banking (PesaPap!)

Table 4.3: Awareness of Mobile banking (PesaPap!)


Yes 96 95.0

No 5 5.0

Total 101 100.0

A majority of the respondents (95%) were aware of the mobile banking

(PesaPap!) services being offered by the bank while 5% were not. The significantly

large level of awareness for the bank’s mobile banking product is an indicator of the

customers’ receptiveness and familiarity with the marketing campaigns by the bank to

capitalize on this particular technological innovation among retail customers.

Furthermore, these findings correspond to contributions by Ndindi (2013) who cited

that six out of ten Kenyans relied on mobile money rather than cash. This could also

explain why awareness levels were as high as 95% in this case.

Awareness of Internet banking

Table 4.4: Awareness of Internet banking


Yes 79 78.2

No 22 21.8

Total 101 100.0

Regarding the Internet banking services, more than three quarters (78%) of the

respondents were aware while the remaining 22% were not. A high level of awareness

for internet banking service was also an indicator that there was sufficient

communication to customers by bank personnel, through various materials, and even

word-of-mouth communication amongst customers, of the service. Lack of awareness

for the remainder of customers could likely be attributed to lack of a need for the

service, probably by aged customers (between the ages of 46-55 years that formed the

56



majority at 30%). Secondly, it could also be attributed to those customers that run

accounts for which the service may not be useful, such as the Mdosi Junior accounts,

and fixed deposit accounts.

Awareness of ATM card services

Table 4.5: Awareness of ATM card services


Yes 99 98.0

No 2 2.0

Total 101 100.0

Regarding the ATM card service, nearly all the respondents (98%) were aware

while only 2% were not aware. In this case, the high levels of awareness could be

attributed to the fact that ATM services have been largely popular among customers

across different banks, in line with the stand suggested by Nyangosi (2012) that ATM

network presence was the greatest indicator of technological innovation in the 20th

century.

Awareness of ATM Card point of Sale

Table 4.6: Awareness of ATM Card point of sale


Yes 90 89.1

No 11 10.9

Total 101 100.0

When asked about their awareness of the ATM card point of sale services,

89% of the respondents were aware of the service while the remaining 11% were not.

Therefore, a large number of those customers that used ATM cards were also aware of

their functionality at point of sale outlets, whereas a small minority was not.

57



Electronic banking Services subscribed

Table 4.7: Electronic banking services subscribed


Mobile banking 61 60.4

Internet Banking 23 22.8

ATM card services 64 63.4

Card Point of sale service 44 43.6

None of the above 12 11.9

In addition to gauging the level of awareness for the various e-services

available by the bank, the researcher also sought to find actual subscription rates for

these e-services. The respondents were therefore asked to indicate which electronic

banking services that they had subscribed to. The findings show that a majority of

them (63%, and 60%) had subscribed for the ATM card services and the mobile

banking services respectively. A further 44% had subscribed for the ATM card point

of sale service, 23% for internet banking, and the remaining 12% had not subscribed

to any of the electronic services.

In comparing actual subscriptions against awareness levels, it emerges that

awareness levels were significantly higher than subscription rates. This would imply

that not all customers have registered for the e-services that they claim to be aware of.

For example, on ATM services, despite having a 98% awareness level, only 63% had

subscribed. On mobile banking, 95% of customers were aware whereas only 60% had

subscribed. The same applies for internet banking, with 23% having subscribed vis-à-

vis an awareness level of 78%.Similarly on point of sale transactions, only 43.6% of

the customers used the service against an awareness level twice as high of 89.1%. The

non-subscription rate was quite low at 12%, thereby supporting the validity of the

study, since meaningful inferences can therefore be made on service quality

58



expectations and perceptions based on the high subscription rate from the sample that

was used for the study.

Reasons for not subscribing

Table 4.8: Reasons for not subscribing


Lack of Information 5 41.7

Not useful 5 41.7

No reason 2 16.7

Total 12 100.0

The respondents that had not subscribed to any of the electronic banking

services were further asked reasons for not subscribing. The common response were

lack of information about the services and the services not being useful to them both

at approximately 42% while 17% had no specific reason for not subscribing. For

customers that had cited lack of usefulness as a reason for non-subscription, perhaps

some communication gaps existed in terms of the functionality and benefit of the e-

services. In such instances, the effective communication of what the e-services could

offer could cause these customers to positively consider the bank’s e-services.

Introduction of electronic services has improved service delivery

Disagree Strongly Strongly

2% Disagree Agree

2% 26%

Neutral 28%

Agree 42%

Figure 4.11: Introduction of electronic services has improved service

delivery 59



Respondents were asked to rate the extent to which electronic services had

improved service delivery. It emerged that 43 respondents (42%) had strongly

supported the relationship between e-services and service quality, whereas 27(26%)

strongly agreed, and 29(28%) were neutral. 2 respondents (2%) each disagreed or

strongly disagreed with the statement. Thus, those that were in agreement that e-

services contributed to enhanced service quality were close to two-thirds of the

respondents, indicating a strong association between technological innovation and

service quality.

Customer Expectations and Perceptions of Service Quality

The statements captured in this section with regard to customer expectations

and perceptions of service quality were informed by previous research on service

quality as discussed in the literature. More specifically, the questionnaire was

formulated after considering similar statements used to gauge the service quality

dimensions under study, from other researches. As such, the researcher borrowed

from Parasuraman et al. (1985) in the formulation of elements relating to reliability

and assurance, as administered in their 22-item research instrument in a study titled

SERVQUAL: a multiple-item scale for measuring consumer perceptions of service.

The statements used for the other service quality dimensions took into consideration

the work of other scholars that carried out similar studies in the banking industry from

a technological context (Mojoodi et al., Najafizadeh et al., 2013; Olorunleke et al.,

2010; Parasuraman et al., 1988; Parasuraman et al., 2005).

Customer Expectations on Service Quality

The study sought to determine the information regarding customer

expectations of service quality with regard to the electronic services offered by the

bank. In response the respondents were expected to rate the level of expectations

60



using the likert scale (Strongly disagree – 1, Disagree – 2, Neutral - 3, Agree – 4,

strongly agree – 5, No response - 6). The specific service quality variables under

study were ease of use, reliability, assurance, security, support services, convenience,

system availability and employee knowledge.

The findings for the various ratings on expectations under the eight service

quality dimensions were as follows:

Ease of Use

Table 4.9: Expectations - Ease of Use

1 2 3 4 5 6

Ease of use % f % f % f % f % f % f % n total

1 I expect that mobile 0% 0 0% 0 3.96% 4 3.96% 4 47.52% 48 44.55% 45 100% 101 banking services

should be easy to use

2 I expect that I should 0% 0 0% 0 1.98% 2 8.91% 9 45.54% 46 43.56% 44 100% 101 be able to withdraw or

deposit money through my mobile phone

without asking for extra help from bank

personnel 3 I expect to easily 0% 0 0.99% 1 0% 8.91% 9 69.31% 70 20.79% 21 100% 101

access my cash at the ATM without seeking

for additional help from bank personnel

4 I expect that all 0% 0 0% 0 0.99% 1 8.91% 9 70.30% 71 19.80% 20 100% 101 additional options for

service at the ATM such as money

transfers to Mpesa and Mpesa withdrawals at

the ATM should be easy to use and access

5 I expect that it should 0% 0 0.99% 1 1.98% 2 3.96% 4 37.62% 38 55.45% 56 100% 101 be easy to use the banks internet-banking service

Regarding the ease of use of mobile banking services, the respondents were

first asked whether they expect that mobile banking services should be easy to use. 48

respondents (47.52%) strongly agreed, 4(3.96%) agreed and 4(3.96%) were neutral

61



and the remaining 45(44.55%) did not respond as they were most likely not

subscribed to the service. Therefore more than half of the respondents agreed that they

expected mobile banking services should be easy to use.

Second, when asked whether they expected to withdraw or deposit cash

through the mobile phone without asking for extra help from bank personnel,

46(45.54%) strongly agreed, 9(8.91%) agreed, 2(1.98%) were neutral and 44(43.56%)

did not respond. Once again, more than half of the respondents indicated that they

expected it to be easy to withdraw from the mobile phone without asking for help.

With regard to the ease of use of ATM services, the respondents were they

were first asked whether they expected to easily access cash at the ATM without

seeking additional help from bank personnel, 70(69.31%) strongly agreed, 9(8.91%)

agreed, 1(0.99%) disagreed, and the remaining 21(20.79%) did not respond.

Customers’ expectations were therefore high with respect to use of ATM services.

Regarding ease of use and access to additional options for service at the ATM,

such as money transfers to Mpesa and Mpesa withdrawals, 71 respondents (70.30%)

strongly agreed, 9(8.91%) agreed, 1 respondent (0.99%) was neutral and 20(19.80%)

did not respond. Thus for quality service, customers felt these options should be easy

to use, without seeking further help.

The respondents were finally asked whether they expected that it should be

easy to use the banks Internet banking services to which 38(37.62%) strongly agreed,

4(3.96%) agreed, 2(1.98%) were neutral, 1(0.99%) disagreed, and 56(55.45%) did not

respond. Customers’ expectations for internet banking were therefore low on ease of

use, mainly because a large number of customers interviewed had not subscribed for

the service or those that had registered were not fully accustomed to the e-service.

62



Reliability

Table 4.10: Expectations - Reliability

1 2 3 4 5 6

Reliability % f % f % f % f % f % f % total n

1 I expect that any 0 0 0.99% 1 0.99% 1 5.94% 6 48.51% 49 43.56% 44 100.00% 101 transaction I perform

through mobile banking

is completed within the stipulated time period

promised by the bank 2 I expect that when a 0 0 2.97% 3 1.98% 2 4.95% 5 47.52% 48 42.57% 43 100.00% 101

mobile banking transaction fails to go

through, that the bank responds to my query

promptly and enables me to access my cash

within 24 hours 3 I expect that when I use 0 0 0.99% 1 0.99% 1 4.95% 5 49.50% 50 43.56% 44 100.00% 101

mobile banking services they will work the first

time I make an attempt to do so without any

problems 4 I expect that when I use 0 0 0.00% 0 1.98% 2 4.95% 5 74.26% 75 18.81% 19 100.00% 101

my ATM Card, the

transaction will be successful on my first

attempt 5 I expect that if my ATM 0 0 0.00% 0 0.99% 1 4.95% 5 75.25% 76 18.81% 19 100.00% 101

withdrawal fails, the bank will respond to my

query in less than 24 hours

6 I expect that my 0 0 0.00% 0 0.00% 0 5.94% 6 74.26% 75 18.81% 19 99.01% 100 ATM/Debit card should

work at any Supermarket/Shop or

point of sale outlet

7 I expect that the banks' 0 0 0.00% 0 4.95% 5 3.96% 4 36.63% 37 54.46% 55 100.00% 101 internet banking services work on a 24 hour basis as promised

Regarding reliability of the mobile banking services, the respondents were

first asked whether they expected any transaction performed through mobile banking

should take place within the stipulated time period promised by the bank. In their

response, 49(48.51%) strongly agreed, 6(5.94%) agreed, 1(0.99%) was neutral,

1(0.99%) disagreed and the remaining 44(43.56%) did not respond. A majority of the

63



responses therefore indicate that customers expected mobile banking services to be

completed in time as promised by the bank.

Second, they were asked whether they expected that when a mobile banking

transaction failed to go through, the bank should respond to their query promptly and

enable them to access cash within 24 hours. Their response was that 48(47.52%)

strongly agreed, 5(4.95%) agreed, 2(1.98%) were neutral, 3(2.97%) disagreed and

43(42.57%) did not respond. Again, a majority of respondents had high expectations

for this statement.

Third, with regard to the expectation that when customers used mobile

banking, it would work the first time, 50(49.50%) strongly agreed, 5(4.95%) agreed,

1(0.99%) was neutral, 1(0.99%) disagreed, and the remaining 44(43.56%) did not

respond. Thus, out of the 57 customers that responded to this question, 55(96.5%)

agreed with the statement.

Regarding reliability of ATM services, the respondents were first asked to rate

their expectations as to whether transactions would be successful on their first

attempt, to which 75(74.26%) strongly agreed, 5(4.95%) agreed, 2(1.98%) were

neutral and 19(18.81%) did not respond.

When asked whether they expected the bank to respond to queries within 24

hours for failed withdrawals, 76(75.25%) strongly agreed, 5(4.95%) agreed, 1(0.99%)

was neutral and 19(18.81%) did not respond.

When asked if they expected the ATM card to work at any point of sale,

75(74.26%) strongly agreed, 6(5.94%) agreed, and 19(18.81%) did not respond.

Regarding the reliability of internet services, the respondents were asked if

they expected that the service would work on a 24hour basis. In their responses,

64



37(36.63%) strongly agreed, 4(3.96%) agreed, 5(4.95%) were neutral and 55(54.46%)

did not respond.

Assurance

Table 4.11: Expectations - Assurance 1 2 3 4 5 6

Assurance % f % f % f % f % f % f % n totals

1 I expect to get 0% 1 0.99% 1 0.99% 1 3.96% 4 49.50% 50 43.56% 44 100% 101 accurate advice from

bank personnel on

how long it will take to be registered for

mobile banking

2 I expect to get 0% 0 0.00% 0 0.99% 1 2.97% 3 76.24% 77 19.80% 20 100% 101 accurate advice from bank personnel on

how long it will take to be registered for

an ATM card 3 I expect to get 0% 0 3.96% 4 0.99% 1 5.94% 6 37.62% 38 51.49% 52 100% 101

accurate advice from bank personnel on how long it will take

to be registered for internet banking

4 I expect that I get 0% 0 0.00% 0 3.96% 4 4.95% 5 72.28% 73 18.81% 19 100% 101 full confidence and

assurance from bank

personnel that the banks' services (mobile/atm/internet) will work as expected

Regarding assurance of the mobile banking services, the respondents were first

asked whether they expected to get accurate advice from bank personnel on how long

it would take to be registered for mobile banking. In their responses, 50(49.50%)

strongly agreed, 4(3.96%) agreed, 1(0.99%) was neutral, and 44(43.56%) did not

respond.

Regarding assurance of ATM services, the respondents were first asked to rate

their expectations on getting accurate advice from bank personnel on how long it

would take to be registered for an ATM card, 77(76.24%) strongly agreed, 3(2.97%)

agreed, 1(0.99%) was neutral and 20(19.80%) did not respond.

65



Regarding the assurance of internet services, the respondents were asked if

they expected to get accurate advice from bank personnel on how long it would take

to be registered for internet banking, to which 38(37.62%) strongly agreed, 6(5.94%)

agreed, 1(0.99%) was neutral, and 52(51.49%) did not respond.

The respondents were finally asked if they expected to get full confidence and

assurance from bank personnel that the services subscribed would work as expected;

73(72.28%) strongly agreed, 5(4.95%), agreed, 4(3.96%) were neutral, and

19(18.81%) did not respond.

Security

Table 4.12: Expectations - Security 1 2 3 4 5 6

% f % f % n Security % f % f % f % f total

1 I expect to feel 0.99% 1 0.99% 1 0.99% 1 4.95% 5 48.51% 49 43.56% 44 100% 101 safe about my

money while

performing my transactions

through mobile

banking 2 I expect to feel 0.00% 0 0.99% 1 1.98% 2 4.95% 5 72.28% 73 19.80% 20 100% 101

comfortable when

depositing money

through the ATM that my cash is secure

3 I expect that 0.99% 1 0.00% 0 2.97% 3 2.97% 3 36.63% 37 56.44% 57 100% 101 my financial

records and statements are

secure with the introduction of

internet banking by

Family Bank 4 I expect that 0.00% 0 0.00% 0 2.97% 3 2.97% 3 38.61% 39 55.45% 56 100% 101

my money is secure with the

introduction of internet banking by Family Bank

66



Regarding the security of the mobile banking services, the respondents were

first asked whether they expected to feel safe about their money while performing

transactions through mobile banking, 49(48.51%) strongly agreed, 5(4.95%) agreed,

1(0.99%) was neutral, and the remaining 44(43.56%) did not respond.

Regarding security of ATM services, the respondents were first asked to rate

the degree to which they expected to feel comfortable or secure about their cash when

depositing it at an ATM, 73(72.28%) strongly agreed, 5(4.95%) agreed, 2(1.98%)

were neutral, and 20(19.80%) did not respond.

Regarding the security of internet services, the respondents were asked if they

expected that their financial records and statements are secure with the introduction of

internet banking by Family Bank. In response, 37(36.63%) strongly agreed, 3(2.97%)

agreed, 3(2.97%) were neutral, and 57(56.44%) did not respond. The respondents

were also asked if they expected that their money was secure with the introduction of

internet banking by Family Bank, 39(38.61%) strongly agreed, 3(2.97%) agreed,

3(2.97%) were neutral, and 56(55.45%) did not respond.

Support Services

Table 4.13: Expectations - Support Services

1 2 3 4 5 6

Support services

% f % f % f % f % f % f % total n

1 I expect that the 0.00 0 0.00% 0 2.97% 3 53.47% 54 17.82% 18 25.74% 26 100.00% 101 bank’s employees %

are competent to

advise me on what would be

the most suitable e-based service

for me 2 I expect that the 0.00 0 0.00% 0 1.98% 2 12.87% 13 55.45% 56 29.70% 30 100.00% 101

bank employees % usually take less than 24 hours to

resolve any service-related problem I have as a result of using e-based services

67



Regarding the expectations of support services for mobile banking services,

the respondents were first asked whether they expected that the bank’s employees

were competent to advise them on what would be the most suitable e-based service,

18(17.82%) strongly agreed, 54(53.47%) agreed, 3(2.97%) were neutral, and the

remaining 26(25.74%) did not respond. The respondents were also asked if they

expected that the bank employees usually took less than 24 hours to resolve any

service-related problem they had as a result of using e-based services, to which

56(55.45%) strongly agreed, 13(12.87%) agreed, 2(1.98%) were neutral, and


Convenience

Table 4.14: Expectations - Convenience 1 2 3 4 5 6

Convenience

%

f

%

f

%

f

%

f

%

f % f % total n

1 I expect that I 0.00% 0 0.00% 0 1.98% 2 4.95% 5 44.55% 45 48.51% 49 100.00% 101 am able to

withdraw or make

purchases from my

account through

mobile banking at

any time 2 I expect that 0.00% 0 0.00% 0 0.00% 0 8.91% 9 59.41% 60 31.68% 32 100.00% 101

the banks’ ATMs are

conveniently located

3 I expect that I 0.00% 0 0.00% 0 3.96% 4 2.97% 3 37.62% 38 55.45% 56 100.00% 101 should easily

access my account information online through internet banking

Regarding the expectations on convenience of mobile banking services, the

respondents were first asked whether they expected that they could withdraw or make

purchases from their account through mobile banking at any time, 45(44.55%)

68



strongly agreed, 4(4.95%) agreed, 2(1.98%) were neutral, and 49(48.51%) did not

respond.

Regarding convenience of ATM services, the respondents were first asked to

rate whether they expected that the banks’ ATMs were conveniently located,

60(59.41%) strongly agreed, 9(8.91%) agreed, and 32(31.68%) did not respond.

Regarding the convenience of internet services, the respondents were asked if

they expected that they should easily access account information online through

internet banking. In response, 38(37.62%) strongly agreed, 3(2.97%) agreed,

4(3.96%) were neutral, and 56(55.45%) did not respond.

Generally, customers’ expectations on convenience were quite high with most

strongly agreeing to the statements.

System availability

Table 4.15: Expectations - System availability

1 2 3 4 5 6

System %

availability

%

f

%

f

%

f

%

f

%

f

%

f

total

n

1 I expect that 0.00% 0 0.00% 0 3.96% 4 3.96% 4 43.56% 44 48.51% 49 100% 101 the system is

available at

all times whenever I

am accessing my account

through my mobile phone

2 I expect the 0.00% 0 0.00% 0 2.97% 3 6.93% 7 60.40% 61 29.70% 30 100% 101 bank to

inform me in advance

whenever the system is

down

On expectations for system availability of mobile banking services, the

respondents were asked whether they expected that the system was available at all

times whenever they accessed their accounts through their mobile phones, 44(43.56%)

strongly agreed, 4(3.96%) agreed, 4(3.96%) were neutral, and the

69



remaining 49(48.51%) did not respond. Thus customer expectations with regard to the

availability of the system were high.

The respondents were also asked if they expected the bank to inform them in

advance whenever the system was down, 61(60.40%) strongly agreed, 7(6.93%)

agreed, 3(2.97%) were neutral, and 30(29.70%) did not respond. Expectations were

therefore also high with regard to customers being informed of system downtime.

Employee Knowledge

Table 4.16: Expectations - Employee Knowledge

1 2 3 4 5 6

Employee f % n Knowledge % f % f % f % f % f % total

1 I expect that 0.00% 0 0.99% 1 0.99% 1 4.95% 5 65.35% 66 27.72% 28 100% 101 on average

bank staff

should be well equipped

to market and sell the

banks’ new e- based

products and services

2 I expect that 0.00% 0 0.99% 1 0.99% 1 4.95% 5 66.34% 67 26.73% 27 100% 101 bank staff

know how to resolve problems I may encounter in relation to the use of e- banking services

Regarding the expectations on employee knowledge, the respondents were

first asked whether they expected that on average bank staff should be well equipped

to market and sell the banks’ new e-based products and services, 66(65.35%) strongly

agreed, 5(4.95%) agreed, 1(0.99%) was neutral, 1(0.99%) disagreed and the

remaining 28(27.72%) did not respond. The respondents were also asked if they

expected that bank staff knew how to resolve problems they might encounter in

relation to the use of e-banking services, 67(66.34%) strongly agreed, 5(4.95%)

70



agreed, 1(0.99%) was neutral, and 27(26.73%) did not respond. Therefore on

employee knowledge, customers felt strongly that staff should be knowledgeable.

Summary of expectation findings

From the expectation findings, it is clear that the respondents’ expectations

regarding the service quality of the electronic banking systems were very high as a

majority of those that had subscribed to the respective services strongly agreed with

the expectations. Those that did not respond were assumed not to have subscribed to

the service or had no expectations at all regarding these e-services. Below is a

summary table of the mean scores for the statements under each service quality

dimension. The mean was calculated by dividing the product of frequencies and

scores for each statement against the sum of frequencies for all valid responses on the

Likert scale from 1 – 5, for each statement in the questionnaire. It was assumed as

earlier discussed, that the non-response was mainly due to lack of subscription to the

selected e-service by the respondent or the inability of the respondent to adequately

give a rating of their expectation for that particular e-service.

Table 4.17: Expectation Mean Scores

Ease of use Sum of Mean

frequencies for Score per responses on statement scale (1-5)

1 I expect that mobile banking services should be easy to use 56 4.79

2 I expect that I should be able to withdraw or deposit money through my

mobile phone without asking for extra help from bank personnel 57 4.77 3 I expect to easily access my cash at the ATM without seeking for additional

help from bank personnel 80 4.85 4 I expect that all additional options for service at the ATM such as money

transfers to Mpesa and Mpesa withdrawals at the ATM should be easy to use and access 81 4.86

5 I expect that it should be easy to use the banks internet-banking service 45 4.76

Reliability

1 I expect that any transaction I perform through mobile banking is completed

within the stipulated time period promised by the bank 57 4.81 2 I expect that when a mobile banking transaction fails to go through, that the

bank responds to my query promptly and enables me to access my cash within 24 hours 58 4.69

71



3 I expect that when I use mobile banking services they will work the first time I

make an attempt to do so without any problems 57 4.82 4 I expect that when I use my ATM Card, the transaction will be successful on

my first attempt 82 4.89 5 I expect that if my ATM withdrawal fails, the bank will respond to my query

in less than 24 hours 82 4.91 6 I expect that my ATM/Debit card should work at any Supermarket/Shop or

point of sale outlet 81 4.93 7 I expect that the banks' internet banking services work on a 24 hour basis as

promised 46 4.70

Assurance 1 I expect to get accurate advice from bank personnel on how long it will take to

be registered for mobile banking 57 4.77 2 I expect to get accurate advice from bank personnel on how long it will take to

be registered for an ATM card 81 4.94 3 I expect to get accurate advice from bank personnel on how long it will take to

be registered for internet banking 49 4.59 4 I expect that I get full confidence and assurance from bank personnel that the

banks' services (mobile/atm/internet) will work as expected 82 4.84

Security 1 I expect to feel safe about my money while performing my transactions

through mobile banking 57 4.75 2 I expect to feel comfortable when depositing money through the ATM that my

cash is secure 81 4.85 3 I expect that my financial records and statements are secure with the

introduction of internet banking by Family Bank 44 4.70 4 I expect that my money is secure with the introduction of internet banking by

Family Bank 45 4.80

Support services 1 I expect that the bank’s employees are competent to advise me on what would

be the most suitable e-based service for me 75 4.20 2 I expect that the bank employees usually take less than 24 hours to resolve any

service-related problem I have as a result of using e-based services 71 4.76

Convenience 1 I expect that I am able to withdraw or make purchases from my account

through mobile banking at any time 52 4.83 2 I expect that the banks’ ATMs are conveniently located 69 4.87

3 I expect that I should easily access my account information online through

internet banking 45 4.76

System availability 1 I expect that the system is available at all times whenever I am accessing my

account through my mobile phone 52 4.77 2 I expect the bank to inform me in advance whenever the system is down 71 4.82

Employee Knowledge 1 I expect that on average bank staff should be well equipped to market and sell

the banks’ new e-based products and services 73 4.86 2 I expect that bank staff know how to resolve problems I may encounter in

relation to the use of e-banking services 74 4.86

72



It was interesting to note that the lowest most common mean score was 4.70,

under service quality dimensions of reliability and security. Despite high expectations,

respondents ratings were relatively low with regard to the reliability of the system as

far as 24-hour internet banking was concerned, as well as the security of financial

records with the introduction of internet banking. The only uncharacteristic mean

score was 4.20 on support services, whereby respondents felt that bank employees

should be competent, but only showed moderate expectation for this vis-à-vis

expectations for other service quality elements.

Perceptions of Service Quality

The study further sought to determine customer perceptions of service quality

with regard to the electronic services offered by the bank. The respondents were

expected to rate their level of perceptions using the likert scale (Strongly disagree – 1,

Disagree – 2, Neutral - 3, Agree – 4, Strongly agree – 5, No response - 6). The

specific perceptions of service quality were evaluated under the following variables;

ease of use, reliability, assurance, security, support services, convenience, system

availability and employee knowledge. The findings were as follows:

Ease of Use

Table 4.18: Perceptions - Ease of Use

1 2 3 4 5 6


1 I find mobile

banking

services easy

to use 0.99% 1 0.99% 1 1.98% 2 20.79% 21 32.67% 33 42.57% 43 100% 101 2 I find that I

am able to use mobile

banking services

without asking for

help from bank

personnel 0.99% 1 0.99% 1 1.98% 2 15.84% 16 35.64% 36 44.55% 45 100% 101

73



1 2 3 4 5 6


3 I find that I can easily access my cash at the ATM without asking for help from

bank

personnel 0.00% 0 0.00% 0 1.98% 2 22.77% 23 56.44% 57 18.81% 19 100% 101 4 I find it easy

to use the additional options for service at the ATM such as money transfers to Mpesa and Mpesa withdrawals at the ATM 0.00% 0 0.00% 0 11.88% 12 29.70% 30 39.60% 40 18.81% 19 100% 101

5 I find it easy to use the banks internet

banking

service 0.00% 0 0.99% 1 4.95% 5 15.84% 16 24.75% 25 53.47% 54 100% 101

Regarding the perception on ease of use of mobile banking services, the

respondents were first asked whether they found mobile banking services easy to use.

The findings indicate that 33(32.67%) strongly agreed, 21(20.79%) agreed and

2(1.98%) were neutral, 1(0.99%) disagreed, 1(0.99%) strongly disagreed and the

remaining 43(42.57%) did not respond as they most likely did not subscribe to the

service. Thus, more than half the respondents were in agreement with the first

statement as far as their perceptions were concerned.

Second, when asked whether they found that they were able to use mobile

banking services without asking for help from bank personnel, 36(35.64%) strongly

agreed, 16(15.84%) agreed and 2(1.98%) were neutral, 1(0.99%) disagreed, 1(0.99%)

strongly disagreed and 45(44.55%) did not respond. More than half of the respondents

were also in agreement with this statement.

74



With regard to the ease of use of ATM services, the respondents were first

asked whether they could easily access their cash at the ATM without asking for help

from bank personnel, 57(56.44%) strongly agreed, 23(22.77%) agreed, 2(1.98%) were

neutral and the remaining 19(18.81%) did not respond. Regarding additional options

for service at the ATM such as money transfers to Mpesa and Mpesa withdrawals at

the ATM, 40(39.60%) strongly agreed, 30(29.70%) agreed, 12(11.88%) were neutral

on ease of use and access for this statement, 19(18.81%) did not respond. Customers

perceptions on ATM services were therefore high, an indicator that they were satisfied

with the bank’s services.

The respondents were finally asked whether they found it easy to use the

banks’ internet banking service. A quarter of the respondents at 25(24.75%) strongly

agreed, 16(15.84%) agreed, 5(4.95%) were neutral, 1(0.99%) disagreed and

54(53.47%) did not respond. The high non-response rate was an indicator that most

customers did not subscribe to the service, and therefore could not offer responses to

the statement. However, out of those that responded (i.e. 47 respondents), 41(87.23%)

were in agreement.

Reliability

Table 4.19: Perceptions – Reliability

1 2 3 4 5 6

% f % f % f % f % f % f % n Reliability total

1 From 0.99% 1 1.98% 2 4.95% 5 33.66% 34 13.86% 14 44.55% 45 100% 101 experience I have found that any transaction I perform through mobile banking takes place within the stipulated time period promised by the bank

75



1 2 3 4 5 6

% f % f % f % f % f % f % n Reliability total

2 When my 0.99% 1 2.97% 3 8.91% 9 36.63% 37 6.93% 7 43.56% 44 100% 101 transaction fails

when using

mobile banking, the bank usually

responds promptly to my

query and enables me to

access my cash in less than 24

hours 3 I usually find 0.99% 1 0.00% 0 8.91% 9 32.67% 33 17.82% 18 39.60% 40 100% 101

that when I use mobile banking,

the service works the first

time I try to use it without any

problems 4 I usually find 0.00% 0 0.00% 0 6.93% 7 48.51% 49 26.73% 27 17.82% 18 100% 101

that when I use my ATM Card,

the transaction is normally successful the

first time I make an attempt

5 The bank 0.00% 0 0.99% 1 22.77% 23 43.56% 44 14.85% 15 17.82% 18 100% 101 usually

responds to my query in less

than 24 hours in case my

transaction fails at the ATM

6 My ATM/Debit 0.00% 0 0.99% 1 6.93% 7 41.58% 42 25.74% 26 24.75% 25 100% 101 card normally

works at the Supermarket/Sh

op or point of sale outlet

7 Normally, the 0.00% 0 0.00% 0 3.96% 4 23.76% 24 19.80% 20 52.48% 53 100% 101 banks' internet

banking services work

on a 24 hour basis as

promised

There were seven statements on reliability for which customers were to rate

their perceptions. It emerged that a majority of the customers responded with a rating

of 4 (agree) to most of the statements. The findings were as follows:

76



Regarding reliability of the mobile banking services, the respondents were first

asked whether from their experience they found that any transaction they performed

through mobile banking took place within the stipulated time period promised by the

bank. In their response, 14(13.86%) strongly agreed, 34(33.66%) agreed, 5(4.95%)

were neutral, 2(1.98%) disagreed, 1(0.98%) strongly disagreed and the remaining

45(44.55%) did not respond. Second, they were asked whether when their transactions

failed using mobile banking, the bank usually responded promptly to their query and

enabled them to access their cash in less than 24 hours. Their response was that

7(6.93%) strongly agreed, 37(36.63%) agreed, 9(8.91%) were neutral, 3(2.97%)

disagreed, 1(0.99%) strongly disagreed and 44(43.56%) did not respond. Third, with

regard to the perception that when they used the mobile banking services, it worked

the first time, 18(17.82%) strongly agreed, 33(32.67%) agreed, 9(8.91%) were

neutral, 1(0.99%) strongly disagreed and the remaining 40(39.60%) did not respond.

Regarding reliability of ATM services, the respondents were first asked to rate

their perception on whether they usually find that when they used their ATM Card,

the transaction was normally successful the first time they made an attempt, to which

27(26.73%) strongly agreed, 49(48.51%) agreed, 7(6.93%) were neutral and

17(17.82%) did not respond. Second when asked whether the bank usually responded

to their queries in less than 24 hours in case their transaction failed at the ATM,

15(14.85%) strongly agreed, 44(43.56%) agreed, 23(22.77%) were neutral, 1(0.99%)

disagreed and 18(17.82%) did not respond. Third, when asked if their ATM/Debit

card normally worked at the Supermarket/Shop or point of sale outlet, 26(25.74%)

strongly agreed, 42(41.58%) agreed, 7(6.93%) were neutral, 1(0.99%) disagreed and


77



Regarding the reliability of internet services, the respondents were asked if the

banks' internet banking services worked on a 24 hour basis as promised. In their

response, 20(19.80%) strongly agreed, 20(19.80%) agreed, 4(3.96%) were neutral and


Assurance

Table 4.20: Perceptions – Assurance

1 2 3 4 5 6

f

% % f % f % f % f % f % n Assurance total

1 I have found from 0.00% 0 0.99% 1 4.95% 5 36.63% 37 12.87% 13 44.55% 45 100% 101 experience that I

always get accurate advice

from bank personnel on how

long it will take to be registered for

mobile banking 2 I have found from 0.99% 1 0.00% 0 3.96% 4 61.39% 62 12.87% 13 20.79% 21 100% 101

experience that I always get

accurate advice from bank personnel on how

long it will take to be registered for

an ATM card 3 I have found from 0.00% 0 0.00% 0 2.97% 3 35.64% 36 10.89% 11 50.50% 51 100% 101

experience that I always get

accurate advice from bank

personnel on how long it will take to

be registered for internet banking

4 Generally, I feel 0.99% 1 0.00% 0 5.94% 6 42.57% 43 28.71% 29 21.78% 22 100% 101 that I get full

confidence and assurance from bank personnel that the banks' services (mobile/atm/inter net) will work as expected

Regarding assurance of the mobile banking services, the respondents were first

asked whether they always got accurate advice from bank personnel on how long it

would take to be registered for mobile banking. In their response, 13(12.87%)

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strongly agreed, 37(36.63%) agreed, 5(4.95%) were neutral, 1(0.99%) disagreed,

1(0.99%) strongly disagreed and the remaining 45(44.55%) did not respond.

Regarding assurance of ATM services, the respondents were first asked if they

always got accurate advice from bank personnel on how long it would take to be

registered for an ATM card, 13(12.87%) strongly agreed, 62(61.39%) agreed,

4(3.96%) were neutral, 1(0.99%) strongly disagreed and 21(20.79%) did not respond.

On the assurance of internet services, the respondents were asked if they

always got accurate advice from bank personnel on how long it would take to be

registered for internet. In their response, 11(10.89%) strongly agreed, 36(35.64%)

agreed, 3(2.97%) were neutral, and 51(50.50%) did not respond.

The respondents were finally asked if they felt that they got full confidence

and assurance from banks’ personnel that the banks' services(mobile/ATM/internet)

worked as expected, to which 29(28.71%) strongly agreed, 43(42.57%) agreed,

6(5.94%) were neutral, 1(0.99%) strongly disagreed and 22(21.78%) did not respond.

In reviewing the responses, it was clear that a majority of the customers either

agreed or strongly agreed with the statements regarding their perceptions of the e-

services. There was an overwhelmingly positive response of 61.39% for the

respondents in agreement with regard to assurance as to being advised on how long it

would take for their ATM cards to be ready (statement 2). Once again, from the table

it was evident that the non-response rate for internet banking-related statements

(statement 3), that internet banking subscription was low.

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Security

Table 4.21: Perceptions – Security

1 2 3 4 5 6

%

Security % f % f % f % f % f % f total n 1 I feel safe 0.00% 0 0.99% 1 5.94% 6 43.56% 44 11.88% 12 37.62% 38 100% 101

about my

money while performing

my transactions through

mobile banking

2 I feel 0.00% 0 2.97% 3 17.82% 18 40.59% 41 12.87% 13 25.74% 26 100% 101 comfortable

when depositing

money through the

ATM that my cash is

secure 3 I am 2.00% 2 2.00% 2 5.00% 5 32.00% 32 7.00% 7 52.00% 52 100% 100

confident that my

financial records and

statements are secure

now that the bank has

introduced internet

banking 4 I feel that 0.00% 0 0.99% 1 4.95% 5 33.66% 34 5.94% 6 54.46% 55 100% 101

my money is secure with

the introduction of internet banking by Family Bank

Overall, most customer perceptions on security were in the ‘agree’ category, with a high non-

response rate being evidenced across the first statement on mobile banking and third statement

on internet banking. Very few customers strongly disagreed, while the rest scored on either

strongly agreed. A minority of customers ranging from 3% to 6% were neutral on all the

statements discussed on security. More specifically, with reference to the first statement, majority

of the customers (43.56%) agreed that they felt safe about performing transactions via mobile

banking, while 80



12(11.88%) respondents strongly agreed. The same applied to statements 2 up to 4,

where the ‘agree’ scores were at 40.59%, 32% and 33.66% respectively. For

statement 3 and 4, on internet banking, a majority of customers did not respond

(52.00% and 54.46%), thus the lower percentages for those respondents in agreement

with the statement.

Support Services

Table 4.22: Perceptions - Support Services

1 2 3 4 5 6

Support services % f % f % f % f % f % f % n

total 1 From my 0.00% 0 0.00% 0 2.97% 3 53.47% 54 17.82% 18 25.74% 26 100% 101

experience, the

bank’s employees are

competent enough to

advise me on what would be

the most suitable e-based

service for me 2 Usually, Family 0.00% 0 1.98% 2 22.77% 23 37.62% 38 14.85% 15 22.77% 23 100% 101

bank's employees take

less than 24 hours to resolve any service- related problem I have as a result of using e-based services

On perceptions for support services of mobile banking services, the

respondents were first asked whether the bank’s employees were competent enough to

advise them on what would be the most suitable e-based service for them, 18(17.82%)

strongly agreed, 54(53.47%) agreed, 3(2.97%) were neutral, and the remaining

26(25.74%) did not respond. The respondents were also asked if Family bank's

employees took less than 24 hours to resolve any service-related problem that were as

a result of using e-based services; 15% strongly agreed, 37% agreed, 23% were

neutral, 2% disagreed and 23% did not respond.

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In this case, the bank was rated poorly with regard to the response time for

resolving service related problems for the e-based services (Mobile/ATM/Internet

banking). On the other hand, the perceptions were relatively better for customers with

respect to employee competency to advise on suitable services for subscription by the

customer.

Convenience

Table 4.23: Perceptions – Convenience

1 2 3 4 5 6

Convenience % f % f % f % f % f % f % n total

1 I normally find 0.99% 1 0.00% 0 4.95% 5 33.66% 34 16.83% 17 43.56% 44 100% 101 that I am able

to withdraw or make purchases

from my account

through mobile banking at any

time 2 I feel that the 0.00% 0 0.00% 0 3.96% 4 45.54% 46 27.72% 28 22.77% 23 100% 101

banks’ ATMs are


3 I find it easy to 0.00% 0 0.00% 0 1.98% 2 17.82% 18 20.79% 21 59.41% 60 100% 101 access my account information online through internet banking

Regarding the perceptions on convenience of the mobile banking services, the

respondents were asked whether they were able to withdraw or make purchases from

their account through mobile banking at any time, to which 17(16.83%) strongly

agreed, 34(33.66%) agreed, 5(4.95%) were neutral, 1(0.99%) strongly disagreed and


The respondents were asked to rate whether they felt that the banks’ ATMs

were conveniently located, 28(27.72%) strongly agreed, 46(45.54%) agreed, 4(3.96%)

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were neutral and 23(22.77%) did not respond. Perception levels were therefore

satisfactory with regard to the convenience of ATM location.

Regarding the convenience of internet services, the respondents were asked if

they found it easy to access their account information online through internet banking.

In response, 21(20.79%) strongly agreed, 18(17.82%) agreed, 2(1.98%) were neutral,

and 60(59.41%) did not respond.

Overall, the non-response rate for convenience was quite high for statements 1

and 3, mainly because fewer customers had subscribed to mobile banking and internet

banking, as opposed to ATM banking services. Customers seemed to be satisfied with

the convenience of ATM location, and the majority were fairly comfortable with the

convenience of mobile banking as well.

System availability

Table 4.24: Perceptions - System Availability

1 2 3 4 5 6

System availability % f % f % f % f % f % f % n total

1 I usually find 0.99% 1 0.00% 0 2.97% 3 34.65% 35 14.85% 15 46.53% 47 100% 101 that the

system is always

available whenever I

want to access my

account through my

mobile phone 2 Family Bank 2.97% 3 8.91% 9 14.85% 15 38.61% 39 11.88% 12 22.77% 23 100% 101 normally

informs me in advance whenever the system is down

Regarding expectations of system availability for mobile banking services, the

respondents were asked whether they found the system to be always available

whenever they wanted to access their account through mobile phone, 15(14.85%)

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strongly agreed, 35(34.65%) agreed, 3(2.97%) were neutral, 1(0.99%) strongly

disagreed and the remaining 47(46.53%) did not respond.

The respondents were also asked if the bank informed them in advance

whenever the system was down, 12(11.88%) strongly agreed, 39(38.61%) agreed,

15(14.85%) were neutral, 9(8.91%) disagreed, 3(2.97%) strongly disagreed and


Thus, on system availability, it emerged that most customers were also fairly

satisfied with the availability of the systems. Over 50% of the customers either rated

the statements with a score of 4 or 5, implying high levels of perception with respect

to this service quality dimension.

Employee Knowledge

Table 4.25: Perceptions - Employee Knowledge

1 2 3 4 5 6

Employee % f % f % f % f % f % f % n Knowledge total

1 From my 0.00% 0 0.99% 1 0.99% 1 50.50% 51 24.75% 25 22.77% 23.00 100% 101 experience,

I feel that

Family Bank staff

are well equipped to

market and sell the

banks’ new e-based

products and

services 2 I feel that 0.00% 0 0.99% 1 2.97% 3 46.53% 47 27.72% 28 21.78% 22.00 100% 101

Family Bank staff know how to resolve problems I may encounter in relation to the use of e- banking services

84



Regarding the perceptions on employee knowledge, the respondents were first

asked whether they felt that Family Bank staff were well equipped to market and sell

the banks’ new e-based products and services, to which 25(24.75%) strongly agreed,

51(50.50%) agreed, 1(0.99%) were neutral, 1(0.99%) disagreed and the remaining

23(22.77%) did not respond. The respondents were also asked if they felt that Family

Bank staff knew how to resolve problems they might encounter in relation to the use

of e-banking services, to which 28(27.72%) strongly agreed, 47(46.53%) agreed,

3(2.97%) were neutral, 1(0.99%) disagreed and 22(21.78%) did not respond. In this

case, more than half of the respondents either agreed or strongly agreed with the

statements. This implied that their perceptions of employee knowledge on e-services

were quite high.

Summary of perceptions findings

The customers’ responses with regard to perceptions were varied from one

service quality dimension to the next. In addition, there were a large number of

respondents that did not respond to some of the statements, implying that they either

did not subscribe for the particular service, or had no views regarding the particular

statement. Below is a summary table of the mean scores for the statements under each

service quality dimension. As with the expectation findings, the mean was calculated

by dividing the product of frequencies and scores for each statement against the sum

of frequencies for all valid responses on the Likert scale from 1 – 5, for each

statement in the questionnaire. Non-responses were not taken into account in the

computation. It was assumed as earlier discussed, that the non-response was mainly

due to lack of subscription to the selected e-service by the respondent or the inability

of the respondent to adequately give a rating of their perception for that particular e-

service.

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Table 4.26: Perception Mean Scores

Sum of Mean Responses on Score per

Service Quality Dimensions/Mean Scores scale (1-5) statement

Ease of use

1 I find mobile banking services easy to use

58 4.81 2 I find that I am able to use mobile banking services without asking for help

from bank personnel 56 4.80 3 I find that I can easily access my cash at the ATM without asking for help from

bank personnel 82 4.95 4 I find it easy to use the additional options for service at the ATM such as

money transfers to Mpesa and Mpesa withdrawals at the ATM 82 4.71 5 I find it easy to use the banks internet banking service

47 4.72

Reliability 1 From experience I have found that any transaction I perform through mobile

banking takes place within the stipulated time period promised by the bank 56 4.64 2 When my transaction fails when using mobile banking, the bank usually responds

promptly to my query and enables me to access my cash in less than

24 hours 57 4.46

3 I usually find that when I use mobile banking, the service works the first time I

try to use it without any problems 61 4.64 4 I usually find that when I use my ATM Card, the transaction is normally

successful the first time I make an attempt 83 4.83 5 The bank usually responds to my query in less than 24 hours in case my

transaction fails at the ATM 83 4.41 6 My ATM/Debit card normally works at the Supermarket/Shop or point of sale

outlet 76 4.78 7 Normally, the banks' internet banking services work on a 24 hour basis as

promised 48 4.83 Assurance

1 I have found from experience that I always get accurate advice from bank

personnel on how long it will take to be registered for mobile banking 56 4.77 2 I have found from experience that I always get accurate advice from bank

personnel on how long it will take to be registered for an ATM card 80 4.85 3 I have found from experience that I always get accurate advice from bank

personnel on how long it will take to be registered for internet banking 50 4.88 4 Generally, I feel that I get full confidence and assurance from bank personnel

that the banks' services (mobile/atm/internet) will work as expected 79 4.80 Security

1 I feel safe about my money while performing my transactions through mobile

banking 63 4.76 2 I feel comfortable when depositing money through the ATM that my cash is

secure 75 4.40 3 I am confident that my financial records and statements are secure now that the

bank has introduced internet banking 48 4.50 4 I feel that my money is secure with the introduction of internet banking by

Family Bank 46 4.72 Support services

1 From my experience, the bank’s employees are competent enough to advise me on what would be the most suitable e-based service for me 75 4.92

2 Usually, Family bank's employees take less than 24 hours to resolve any

service-related problem I have as a result of using e-based services 78 4.33

86



Sum of Mean Responses on Score per

Service Quality Dimensions/Mean Scores scale (1-5) statement

Convenience

1 I normally find that I am able to withdraw or make purchases from my account

through mobile banking at any time 57 4.75 2 I feel that the banks’ ATMs are conveniently located

78 4.90 3 I find it easy to access my account information online through internet banking

41 4.90

System availability

1 I usually find that the system is always available whenever I want to access my

account through my mobile phone 54 4.81 2 Family Bank normally informs me in advance whenever the system is down

78 4.12

Employee Knowledge

1 From my experience, I feel that Family Bank staff are well equipped to market

and sell the banks’ new e-based products and services 78 4.94 2 I feel that Family Bank staff know how to resolve problems I may encounter in

relation to the use of e-banking services 79 4.89

Interestingly, customer perceptions were high on all parameters under each

service quality dimension. However, despite the high scores, there were several

perception scores that were relatively low at below a mean of 4.50. These were under

dimensions for system availability, support services, security and reliability. System

availability scored a mean of 4.12 as far as informing them in advance when the

system was down. On support services there was a mean score of 4.33 in relation to

whether the bank took less than 24 hours to resolve service issues relating to e-

services. In relation to security, customers had a mean score of 4.40 on their

perception as to how secure they felt about depositing cash at the ATM. Lastly, with

respect to reliability, customers scored a mean score of 4.41 in relation to whether it

took less than 24 hours for the bank to resolve a dispute relating to a mobile banking

transaction.

Gap Analysis

The SERVQUAL model was designed to assess the gap between customer

perceptions and expectations of certain service quality dimensions. According to

87



Parasuraman et al. (1985), they had identified 5 service quality dimensions of

reliability, responsiveness, tangibles, assurance, and empathy. For the purposes of this

study, the service quality dimensions took into consideration models that had been

applied in the banking industry within a technological context (Mojoodi et al.,

Najafizadeh et al., 2013; Olorunleke et al., 2010; Parasuraman, et al., 1988;

Parasuraman, et al., 2005). As such, the eight service quality dimensions discussed in

this paper were rated based on the specific statements in each dimension formulated in

line with these previsous studies, and mean scores computed for the purpose of

conducting gap analysis. The formula used for SERVQUAL to measure the gap was

as follows:

The gap scores were as tabulated below. A negative score meant that

perceptions were lower than expectations, thus implying poor service quality, whereas

a positive score implied that perceptions were higher than customer expectations,

thereby implying that there was a high level of service quality.

Table 4.27: Gap Analysis - Perceptions versus Expectations

Perception Expectation Gap

Means Means Score

Ease of use

1 I find mobile banking services easy to use

4.81 4.79 0.02 2 I find that I am able to use mobile banking

services without asking for help from bank personnel 4.80 4.77 0.03

3 I find that I can easily access my cash at the ATM without asking for help from bank personnel 4.95 4.85 0.10

4 I find it easy to use the additional options for service at the ATM such as money transfers to Mpesa and Mpesa withdrawals at the ATM 4.71 4.86 (0.16)

5 I find it easy to use the banks internet banking

service 4.72 4.76 (0.03) Average

4.80 4.81 (0.01)

88



Reliability 1 From experience I have found that any

transaction I perform through mobile banking

takes place within the stipulated time period

promised by the bank 4.64 4.81 (0.16)

2 When my transaction fails when using mobile

banking, the bank usually responds promptly to

my query and enables me to access my cash in

less than 24 hours 4.46 4.69 (0.23)

3 I usually find that when I use mobile banking, the service works the first time I try to use it without any problems 4.64 4.82 (0.19)

4 I usually find that when I use my ATM Card, the transaction is normally successful the first time I make an attempt 4.83 4.89 (0.06)

5 The bank usually responds to my query in less than 24 hours in case my transaction fails at the ATM 4.41 4.91 (0.50)

6 My ATM/Debit card normally works at the

Supermarket/Shop or point of sale outlet 4.78 4.93 (0.15) 7 Normally, the banks' internet banking services

work on a 24 hour basis as promised 4.83 4.70 0.14 Average

4.66 4.82 (0.17)

Assurance 1 I have found from experience that I always get


long it will take to be registered for mobile banking 4.77 4.77 (0.00)

2 I have found from experience that I always get accurate advice from bank personnel on how long it will take to be registered for an ATM card 4.85 4.94 (0.09)

3 I have found from experience that I always get


long it will take to be registered for internet

banking 4.88 4.59 0.29 4 Generally, I feel that I get full confidence and

assurance from bank personnel that the banks'

services (mobile/atm/internet) will work as

expected 4.80 4.84 (0.04)

Average 4.82 4.79 0.04

Security 1 I feel safe about my money while performing

my transactions through mobile banking 4.76 4.75 0.01 2 I feel comfortable when depositing money

through the ATM that my cash is secure 4.40 4.85 (0.45) 3 I am confident that my financial records and

statements are secure now that the bank has introduced internet banking 4.50 4.70 (0.20)

4 I feel that my money is secure with the

introduction of internet banking by Family Bank 4.72 4.80 (0.08)

Average

89



4.59 4.78 (0.18)

Support services 1 From my experience, the bank’s employees are

competent enough to advise me on what would

be the most suitable e-based service for me 4.92

2 Usually, Family bank's employees take less than 24 hours to resolve any service-related problem I have as a result of using e-based services 4.33

Average 4.63

Convenience

4.20 0.72

4.76 (0.43)

4.48 0.15

1 I normally find that I am able to withdraw

or make purchases from my account through mobile banking at any time 4.75 4.83 (0.07)

2 I feel that the banks’ ATMs are conveniently

located 4.90 4.87 0.03 3 I find it easy to access my account information

online through internet banking 4.90 4.76 0.15 Average

4.85 4.82 0.03 System availability

1 I usually find that the system is always available

whenever I want to access my account

through my mobile phone 4.81 4.77 0.05

2 Family Bank normally informs me in advance

whenever the system is down 4.12 4.82 (0.70) Average

4.47 4.79 (0.33) Employee Knowledge

1 From my experience, I feel that Family Bank staff are well equipped to market and sell the banks’ new e-based products and services

2 I feel that Family Bank staff know how to

resolve problems I may encounter in relation to the use of e-banking services

Average

4.94 4.86 0.07

4.89 4.86 0.02

4.91 4.86 0.05

On ease of use, gap scores were positive for the first three statements,

implying that customer expectations were met, and negative for the last two

statements where customers felt that it was not as easy to use enhanced service

options at the ATM as expected. The same applied for internet banking services,

where customers felt it was difficult to use the services contrary to their expectations.

The average score for ease of use was -0.01. These findings on ease of use matched

with similar gap scores of -0.10 by Ombati et al. (2010) in a study carried out on

90



customers of commercial banks within the Nairobi CBD. Thus, it could be inferred

that customers generally found it difficult to use e-services vis-à-vis their expectations

of the same services.

With respect to reliability of e-services, customers’ expectations were not met

except on the last statement for internet banking services being available on a 24 hour

basis. This implied that the bank scored poorly in terms of the reliability of its services

to customers. The highest negative score for this service quality dimension was -0.50

whereby customers felt that the bank did not respond in less than 24 hours in

resolving failed ATM transactions. The findings on reliability coincided with those of

a similar study on Merchant bank by Osei-Poku (2012) where there was an average

mean score of -0.85. The mean score on reliability in this case was -0.17.

On assurance, outcomes (perceptions) matched expectations on the accuracy

of information conveyed by bank personnel on mobile banking registration for

customers. On the contrary, customers felt that they did not get the same level of

accuracy with respect to ATM card registration. Registration for internet banking

services was however, satisfactory, as customers expectations were met in the sense

that they received accurate information on how long it would take to be registered for

the service, with a positive score of 0.29. On the pertinent question of whether

customers got full confidence and assurance from bank personnel that e-services

would work as expected, there was a negative gap score of -0.04. This meant that

customers on average did not feel assured about whether these services would work or

not.

Generally, the bank scored poorly on security since customers indicated that

on average, they were not comfortable that when they deposited money at the ATM, it

was secure. This had the highest negative score at -0.45.Interestingly, in the study

91



carried out by Ombati et al. (2010) in Nairobi, there was a positive score of 0.06 on

ATM security. This would imply that on average, Family Bank customers felt less

secure about transacting at the ATM than the average bank customer in Nairobi.

Secondly, on security of financial information since the introduction of internet

banking, there was a gap score of -0.20. The same applied to the security of

customers’ cash where there was a negative score of -0.08.

Customers’ had varied responses on support services, since there was a strong

positive score for statement 1 whereby customers felt employees were confident in

advising on suitable e-services, vis-à-vis their expectations. On the other hand,

statement 2 had a negative score at -0.43 since customers felt bank employees took

more than 24 hours to resolve their e-service related problems.

Customers’ expectations were fairly met with respect to convenience since

most of the gap scores for each statement centred on a 0-score. This was in relation to

ATM location and internet banking access. More specifically, with regard to ATM

location, the gap score was at 0.03. This was contrary to research findings by Ombati

et al. (2010) in which the gap score for ATM convenience was at – 0.41. Thus it could

be concluded that Family Bank customers generally found ATM location convenient

as opposed to the general bank customers interviewed from several other banks in

Ombati’s study.

In relation to mobile banking convenience, there was a negative response

from customers in that they were not always able to withdraw or make purchases

from their account through their mobile phone as expected. This was characterized by

a negative gap score of -0.07. However, the score was not too far from the neutral 0-

score where expectations would match perceptions.

92



On system availability, there was a very strong negative score of -0.70 as far

as customers perceptions against expectations were concerned with respect to whether

the bank would inform them in advance if the system was down. This implied that the

bank rarely communicated to its customers in case of a system failure. Their ratings

centred on a 0-score for the availability of the system for mobile banking, indicating

that their expectations were generally met in this regard.

Lastly, on employee knowledge, customers’ expectations were met with

positive gap scores of 0.07 and 0.02 for statement 1 and 2 respectively. This meant

that the bank had qualified staff to advise on suitable e-products and services. The

staff was also viewed as having the right skill-set to resolve problems relating to e-

services experienced by the customers.

Correlation of Expectations and Perceptions

In addition to gap analysis, the research went further to assess the degree of

relationship between expectations and perceptions through correlation analysis. This

was so as to assess how far apart expectations were from perceptions, or whether the

two variables were aligned such that perceptions matched expectations. Correlation

coefficient was selected as the appropriate statistical tool to explain this relationship

and association of the variables. To begin with, the Pearson’s correlation coefficient

(denoted as r) was used to test the relationship between the expectations and

perceptions. A coefficient (r) of +1 indicates a perfect positive relationship, a

coefficient (r) of 0 indicates no relationship and a coefficient (r) of -1 indicates a

perfect negative relationship. Spearman’s rank correlation (R) was also applied to the

findings and was used to test the association between the two variables. A coefficient

(R) of +1 indicates a perfect positive association, a coefficient (R) of 0 indicates no

association and a coefficient (R) of -1 indicates a perfect negative association. Finally,

93



a two tailed P-value test was applied to the findings to determine their statistical

significance. The results are presented below.

Ease of use

Table 4.28: Correlations - Ease of use

Service Expectation/Perception r R P

Statement

1 Mobile 1 0.890 0.940 0.005 2 Mobile 2 0.930 0.940 0.005 3 ATM 1 0.960 0.810 0.510 4 ATM 2 0.800 0.940 0.005 5 Internet 2 0.950 1.000 0.000

All the expectations and perceptions regarding the ease of use of the electronic

services offered by the bank had (r) values greater than 0.75 which indicates that there

was a strong positive relationship between the customer expectations and their

perceptions. This shows that the high expectations of the customers towards ease of

use of the electronic services are being fulfilled by the banks service. The correlation

values in this study revealed a near-perfect correlation for both mobile and ATM

banking as opposed to those in the study by Ombati et al. (2010) at 0.037 and 0.035

respectively. This would mean that whereas expectations varied greatly from

perceptions in their study, there was a greater degree of relationship and alignment

between these two variables for Family Bank customers. As such, it would imply

customers expectations were met with regard to ease of use.

Similarly, the (R) values were greater than 0.75 also indicating strong positive

association. This indicates that the ranking of perceptions in relation to their

expectations by the customers were closely associated therefore also implying the

fulfillment of expectations for ease of use. The P-value tests indicate that the findings

showed strong evidence of statistical significance (less than 0.05) except for the ATM

94



service Statement 1 whose P-value of 0.51 showing weak statistical significance of

the findings.

Reliability

Table 4.29: Correlation - Reliability


Statement

1 Mobile 1 0.540 0.810 0.050

2 Mobile 2 0.340 0.610 0.200 3 Mobile 3 0.570 0.720 0.100

4 ATM 1 0.330 0.820 0.040 5 ATM 2 0.000 0.460 0.350

6 ATM 3 0.400 0.760 0.008 7 Internet 1 0.860 0.900 0.020

With regard to reliability of the electronic services, the relationship (r)

between expectation and perception of Internet statement 1 is high positive (0.86),

medium positive for Mobile Statement 1 and 3, weak positive for mobile statements

2, ATM statement 1 and 3 and no relationship for ATM statement 3. These findings

indicate that some of the customers’ expectation (Internet statement 1) are being met,

Mobile Statement 1, 2 and 3 fall below expectation, while expectations for ATM

statement 1&3 are not being met.

Overall, it could be said that there was a positive correlation along all

statements on reliability, but to a low degree. These findings support the negative gap

scores on reliability along the first 6 statements, where the positive gap score on

reliability of internet banking services was associated with the high correlation of 0.86

for internet statement 1.

The rank association (R) was strong for Mobile statement 1, 3, ATM statement

1, 3 and Internet statement 1; and moderate for Mobile statement 2 and ATM

statement 2. This would imply that for the first statements on mobile banking, that

customers’ expectations and perceptions were positively associated as far as being

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able to complete transactions upon the first attempt on mobile banking was

concerned, within the stipulated time period. Despite this positive association, the

overall gap analysis for these statements showed that customers’ expectations were

not met.

The two-tailed P – value test shows strong statistical significance for mobile

statement 1, ATM statement 1, 3 and Internet statement 1. The statistical significance

though is low for the remaining statements.

Assurance

Table 4.30: Correlation - Assurance


Statement

1 Mobile 1 0.480 0.760 0.050 2 ATM 1 -0.020 0.750 0.050 3 Internet 1 0.680 0.840 0.030 4 General - 1

mobile/atm/internet 0.450 0.810 0.050

The correlation between customers’ expectations and perceptions with regard

to assurance were as follows: the relationship (r) was medium positive for mobile

statement 1, and general statement 1 (0.48, 0.45 respectively) which indicates that the

perceptions fell below the expectations though moderately being met for Internet

statement 1 at 0.68. There was no relationship for ATM statement 1 indicating that

the expectations were not being met.

On interpreting these moderate ratings for assurance, it emerged that they

coincided with the near zero scores from the gap analysis discussed earlier. As such, it

could imply that customers were indifferent or had their expectations barely met by

the bank with regard to the information disseminated to them to the extent that it

assured them of getting the expected e-services.

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The rank associations were all above 0.75 indicating strong positive

association between the customers’ expectations and perceptions. This positive

association would imply a general sense in which customer expectations were met.

All the two tailed P- value tests were 0.05 and below indicating strong evidence of

statistical significance.

Security

Table 4.31: Correlations - Security


statement

1 Mobile 1 0.360 0.700 0.122 2 ATM 1 0.010 0.600 0.208 3 Internet 1 0.650 0.880 0.020 4 Internet 2 0.650 0.880 0.0182

Regarding the correlation between customer expectations and perception on

security, the relationship (r) for Internet statement 1 and 2 (0.65) were moderately

strong positive, indicating the perceptions were slightly below expectations; low

positive for mobile statement 1 (0.36) showing the perceptions were below

expectations; and no relationship for ATM statement 1 (0.01) indicating that the

expectations were not being met.

The rank associations (R) were high positive with the exception of ATM

statement 1, which was medium positive. The two-tailed P-value test indicated that

the findings of mobile statement 1 and ATM statement 1 showed weak statistical

significance while those of Internet statement 1 and2 showed strong statistical

significance.

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Support Services

Table 4.32: Correlations - Support Services


statements

1 General - 1 1.000 1.000 0.000 mobile/atm/internet 2 General - 2 0.310 0.440 0.380 mobile/atm/internet

The relationship (r) with regard to expectations and perceptions of support

services was perfectly positive for general statement 1 and low positive for general

statement 2. This indicated that the bank had fulfilled all the expectations relating to

general statement 1 but the perceptions had fallen far below expectations for general

statement 2. These findings matched with the gap analysis scores which showed that

for statement 1, customers felt strongly that employees were able to advise them on

suitable e-services (gap score of 0.72) whereas for statement 2, there was an

overwhelmingly negative response (gap score of -0.43) whereby customers felt it took

longer than 24 hours to resolve e-service related problems.

Similarly, the rank association (R) between the expectations and perceptions

was perfectly positive for general statement 1 and low positive for statement 2. The

two-tailed P-value test indicated that the findings were statistically significant for

statement 1 but weak evidence for statement 2

Convenience

Table 4.33: Correlation - Convenience

Service Expectation/Perception r R P statements

1 Mobile 1 0.680 0.930 0.007 2 ATM 1 0.490 0.770 0.050 3 Internet 1 0.900 0.940 0.005

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The relationship (r) with regard to expectations and perceptions for

convenience was a high positive for the internet statement 1 and moderate positive for

mobile and ATM statements. This indicated that the bank had fulfilled most of the

expectations relating to convenience of internet banking but the perceptions only

barely met expectations for the mobile and ATM services. These findings matched the

gap scores for convenience where internet banking had the highest score in this

dimension of 0.15, whereas for statement 1 and 2 the scores were -0.07 (expectations

not met) and 0.03 respectively.

The rank association (R) between the expectations and perceptions was high

positive for all the services. The two-tailed P-value test indicated that the findings

were statistically significant for all the services.

System availability

Table 4.34: Correlation - System availability


statements

1 Mobile 1 0.640 0.880 0.020 2 General - 1 0.040 0.580 0.230

mobile/atm/internet

The relationship (r) with regard to expectations and perceptions of system

availability was moderate positive for mobile services and no relationship for the

general services. This indicated that the bank barely met customers’ expectations on

mobile banking services and had fallen short of the expectations relating to informing

customers in advance whenever the systems were unstable or out of service.

Similarly, the rank association (R) between the expectations and perceptions is

high positive for the mobile service and moderate positive for the general services.

The two-tailed P-value test indicated that the findings regarding to the mobile services

were statistically significant for but weak evidence for the general services.

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Employee Knowledge

Table 4.35: Correlation - Employee Knowledge

Services Expectation/Perception r R P

statements

1 General - 1 0.330 0.820 0.040 mobile/atm/internet 2 General - 2 0.400 0.810 0.050 mobile/atm/internet

The relationship (r) with regard to expectations and perceptions of employee

knowledge was moderately positive for the general services. This indicated that the

bank met customers’ expectations with regard to how skilled the bank employees are

in advising customers on suitable e-based services and in resolving problems

experienced by customers in the use of the e-based services.

The rank association (R) between the expectations and perceptions was high

positive for both general statements, also supporting the fact that expectations were

met. The two-tailed P-value test indicated that the findings were statistically

significant.

Interviews with senior management – Customer Service and Innovations and Strategy Department

E-services offered by the bank – interviewee responses

The researcher also conducted interviews with senior managers in the

customer service, and innovations and strategy departments. In total, 2 managers were

interviewed from the two departments, with a view to understanding the role of the

intervening variables highlighted in the conceptual framework in shaping service

quality outcomes. More specifically, the questions were centred on market

opportunities for technological innovation in the banking industry, the impact of

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technological innovation on service quality, and the service and IT strategies in place

to respond to customer needs while enhancing service quality.

The interviewees noted that there were numerous technological innovations

adopted by the bank for e-based service delivery. Notably, both interviewees

indicated that the bank had recently undertaken several measures to upgrade the

technology on their ATM cards in order to comply with new market standards for

Euro pay, MasterCard, and Visa (EMV) chip enabled cards that were more secure and

allowed for global inter-operatability.

In the long-term, it was noted that the cards would offer bank customers more

reliability in terms of access to funds on their accounts while facilitating online

payments. The current technology in use for ATM cards was limited to transactions

on the Kenswitch network, whereas the switch to the Visa platform by the bank in its

long-term strategy would allow customers to conveniently access their accounts

online.

Secondly, both interviewees pointed out that mobile banking was a key

technological innovation in the bank’s strategy for its retail market segment. This was

particularly emphasized through the recent launch of the banks new mobile banking

platform (PesaMob) that enables potential customers to open accounts without going

to the traditional brick-and-mortar branch. The product offers a wide array of services

that include payment services for bill payments, shopping for goods and services, as

well as access to loans.

Lastly, among the e-services that both interviewees mentioned, was internet

banking. According to the Head of Innovations and Strategy, this was a relatively new

area for the bank, in which it was noted that the services were in place but not fully

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active for online transactions. This was subject to further enhancements in the core-

banking system that would allow for such a platform in future.

The interviewees also mentioned other technological innovations that were

beyond the scope of the study, related to agency banking. As an alternative business

channel, agency banking allows the banks customers to access all services availed at

the branch through agents in remote locations not reachable through the branch

network. In this case, point of sale (POS) technology as well as mobile phones linked

to the banks’ core banking system allow for real-time and secure access to customer

accounts to facilitate transactions remotely through third party agents.

Market Opportunities

The interviewees were asked the degree to which market opportunities and

forces shaped the technological innovations adopted by the bank. Among the

responses, it was noted that there has been a high degree of competition in the

industry coupled with technological forces that have altered payment systems and

radically reshaped business models. This has been evidenced by mobile money

solutions offered by telecommunication firms. As a result, there has been a shift in

transaction volumes and money circulating from banks to platforms and systems

controlled by these telecommunication firms. Popular money transfer options in this

regard include Orange Money and Mpesa. It is in this context that banks’ business

models have changed to either partner with telecoms or develop similar mobile money

based platforms to capture and secure a market segment attracted to mobile-based

payment solutions (Head of Customer Service, personal communication, April23,

2014).

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Relationship between technological innovation and service quality

– interviewee responses

In assessing the relationship between technological innovation and service

quality, both interviewees noted that there was a strong positive relationship, citing

speed, efficiency, convenience, accessibility, and reliability as key attributes for better

service delivery. However, there were instances in which systems downtime was said

to have been a factor to consider in leading to poor service quality, since at these

times customers did not receive the services expected as per agreed times during

which the services were to be offered. Cases that were cited related to ATM and

mobile banking services. The management noted that a small proportion of customers

used internet banking, and therefore the service quality issues for the service type

were quite limited since the service was relatively new to customers.

The bank was said to have focused on technological innovation for service

quality due to several factors, namely, increased demands from knowledgeable and

well-informed clientele; technological forces that have changed how businesses and

individuals alike handle payments; competitive forces in the form of other banks that

have embraced technology for the development of IT-based products and services.

Technological Innovation: Product versus Process Innovations

Overall, the management considered the technological innovations by the

bank to be both product and process innovations, since many new products involved

the redesign and review of existing processes supported by IT. In the banking

industry, it was also noted by the interviewees that at times the term product and

service were used interchangeably – as was the case with the launch of the PesaMob

product, which was packaged to offer several services for ease in payments.

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Service Strategy

As such, it was necessary to find out if the bank conducted a general

assessment of its customer needs in order to inform its service strategy. The responses

for this particular question indicated that the bank had conducted assessments of the

market to some extent, but there was no dedicated research and development (R&D)

department for this purpose. The marketing department together with retail banking

departments had however been tasked with the role of informing the IT innovations

strategy in terms of new products, in line with the technical support from the IT

department.

To further understand the degree to which the service strategy was instituted,

as far as understanding customer needs was concerned, the researcher sought to find

out from the interviewees their views on what e-services they felt customers preferred.

Both managers noted that there was a high uptake of ATM card services, followed by

mobile banking, then internet banking. Agency banking was also mentioned as a

convenient alternative for customers. The researcher sought to investigate why these

particular preferences existed within the bank. It was noted that most old customers

had already applied for ATM cards and were comfortable with their use, followed by

mobile banking. Despite this, the main challenge was that customers had very limited

functionality for their ATM card, whereas the bank had provided other enhanced

services at the ATM that were not used as regularly or frequently as expected. Among

these services were, money transfers to other mobile users directly from customer

accounts (a product that had been initially branded as PepeshaPesa), Airtel Money and

Mpesa withdrawals for Family Bank customers and non-customers, added features

such as the ability to register for mobile banking via

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the ATM, apply for cheque books, and withdraw money from their virtual accounts

(PesaMob accounts).

Information Systems Strategy and Architecture

Lastly, several questions were asked with regard to the service and IT strategy

for the bank in the context of service quality. For the IT strategy, it was noted that

several customer relationship management tools were to be set up in order to manage

response times and effectively log customer complaints for quick resolution. At the

moment, it was noted that the CRM had not been fully implemented across the branch

network. Thus, in responding to IT-based service gaps, the bank had put in place

mechanisms within branches that enabled them to contact IT for required resolution.

The service standard for the bank was said to basically guide departments on

how long it would take for an issue to be resolved by the responsible department as

well as the banks’ promise to its customers for service delivery. The parameters used

to gauge the effectiveness of the service strategy ranged from timeliness,

effectiveness, speed, reliability and convenience. While comparing this list with the

eight parameters earlier discussed in the paper, it was noted that employee knowledge,

security, support services, and system availability were said to feature in the service

strategy and were key for service delivery.

Summary of Key Findings

The study interviewed 101 customers out of which 59 were male respondents

and 42 were female respondents. It emerged that from other similar studies in the

banking industry, there were more males than females transacting on e-service

platforms provided by banks. Furthermore on demographic data it emerged that a

majority of the bank customers (56%) were aged between 36 – 55 years. Most

respondents were self-employed (42%) whereas half of them were employed (50%),

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and the rest (8%) were students. Most customers had operated their accounts between

1 to 3 years (65%) whereas a smaller proportion had operated for less than 1 year

(21%), and an even smaller proportion for 4-6 years (13%) and over 7 years (1%).

Also, from the research, it emerged that most customers that had subscribed

for e-services had some form of income, with a majority earning a monthly income of

between Ksh. 41,000 – 60,000 (32%). Only a minority (8%) earned over 101,000.

10% earned between Ksh. 81,000 – 100,000. 19% earned between Ksh. 61,000 to

80,000, and another 19% between Ksh. 21,000 to 40,000. A small number earned less

than Ksh. 20,000 a month (13%).

It was interesting to note from the research that despite having very high

awareness levels for e-services, only a small proportion had subscribed for the

services. There was a high awareness level for ATM services and mobile banking in

line with views by Nyangosi (2012) on high penetration of these services in the retail

banking industry in Kenya, vis-à-vis other channels such as internet banking. These

high awareness levels were contrasted against the subscription rates for the services,

whereby over 75% of respondents were aware of all three e-services (78% for internet

banking, 98% for ATM services, and 95% for mobile banking). It was therefore

evident, that despite awareness of e-services, a smaller proportion of customers opted

to subscribe for them (23% subscription for internet banking, 64% subscription for

ATM banking, and 60% subscription for mobile banking). This phenomenon in low

subscription rates was in line with views by Njuguna, Ritho, and Olweny (2012) that

despite “a significant growth of internet users in Kenya, the number of financial

transactions carried out over the internet remains very low” (p. 247). The findings of

this study revealed that similarly, there was low usage of alternative e-service

channels by customers such as ATM and mobile banking.

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Customers were asked to rate the extent to which they felt that the introduction

of e-services had improved service delivery. Of the 101 respondents, 26% strongly

agreed whereas 42% agreed. Those in agreement therefore formed more than half of

the respondents at 68%. 28% were neutral, and 4% disagreed. Despite having high

levels of customers in agreement with this statement, not so many had subscribed for

the e-services, as would have been expected. In line with the overall objective of the

study, it could therefore be concluded that indeed, technological innovation has had an

impact on service quality.

To further understand the nature of this impact on service quality, the study

sought to assess customers’ expectations and perceptions of service quality along

certain dimensions, primarily focusing on various aspects of service quality. The

impact was therefore measured by taking into consideration the role that technological

innovations played in affecting ease of use, reliability, assurance, security,

convenience, system availability, support services and employee knowledge. Through

gap analysis, the research revealed that customers’ expectations were generally met

with regard to ease of use; thereby implying that technological innovations have made

it easier for customers to access bank services, either at the ATM or through their

mobile phones.

However, on reliability the bank did not meet customers’ expectations since a

majority of customers felt the bank did not deliver as promised on speed of mobile

banking services, response time to failed ATM transactions, and first-time attempts to

transact through the mobile phone or ATM. The only element of reliability for which

the bank met customers’ expectations was in relation to the 24 hour availability of

internet banking services. Thus in this regard, it seemed that technological innovation

had not had such a positive impact on reliability of e-services.

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The findings for the other service quality dimensions were varied since in

some aspects, customer expectations were met, while in others it was not the case. In

assurance for example, the average score neared zero, meaning that expectations

matched perceptions. On security, the overall score was negative, indicating that the

bank needed to work on ensuring customers felt more safe about their money while

transacting along the three e-services. The bank did well in its support services, but

there were poor scores as far as the ability of the bank employees to resolve service-

related problems within less than 24 hours.

Overall, customers felt that the banks’ e-services were convenient, from ATM

location, to internet banking access. However, the gap score and correlation analysis

revealed expectations were not being met in relation to the convenience of using

mobile banking services to access cash or make payments. In this regard,

technological innovation had only limited impact on convenience for customers. The

same applied to system availability, where the bank scored low with an average score

of -0.33.

Lastly, on employee knowledge, it was evident that technological innovation

was embraced by bank employees, leading to excellent customer advice on selection

of suitable e-services. On the same note, the gap and correlation analysis revealed that

on average customers felt that bank employees were knowledgeable enough to resolve

problems that could be encountered in the use of e-banking services.

Summary

Chapter four has presented the findings of the study in line with the objectives

and order of the questionnaire. It covered demographic data for the respondents, and

discussed levels of awareness as well as subscription for e-services in line with the

second objective which was to identify the e-based service delivery channels

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preferred by the banks customers. Through interviews, the research was also able to

meet the first objective which was to identify the technological innovations adopted

by the bank for e-based service delivery. Gap and correlation analysis was used to

examine customer expectations and perceptions of service quality, thereby addressing

the third objective of the study. This formed the basis upon which the fourth objective

was addressed; the relationship between the use of technological innovation and

service quality. In discussing the various service quality dimensions for each of the

three e-services, the research effectively shed light on areas that technological

innovation has had an impact on service delivery, and hence service quality.

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CHAPTER FIVE

DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS

Introduction

The chapter presents a discussion of the key findings from the study, noting

the relationships between these findings and the literature on the key variables of

technological innovation and service quality, as well as the various implications of the

findings for managerial and strategic purposes. It also draws conclusions on the

relationship between technological innovation and service quality, in line with the

overall objective of the study which was to assess the impact of technological

innovation on service quality.

The purpose of the study was to assess the impact of technological innovation

on service quality. This was achieved through four main objectives for the study; to

identify technological innovations adopted by Family Bank for e-based service

delivery; to identify the e-based service delivery channels preferred by Family Bank

customers; to examine customer expectations of service quality for e-based services

offered by Family bank; and to evaluate the relationship between use of technological

innovations and service quality in the bank. In order to address these objectives, the

study used two main research instruments, questionnaires administered to 120

respondents, out of which 101 questionnaires were filled and returned; and an

interview schedule in which 2 senior managers participated. The respondents were

mainly customers from whom views were gathered concerning their expectations and

perceptions of three e-services offered by the bank, namely; ATM, Mobile, and

Internet banking.

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Discussions

Objective One

Taking into account the first objective, the findings of the study revealed that

Family Bank had several technological innovations for e-based service delivery. It

was noted that mobile banking, internet banking, and ATM services were among the

most popular forms of technologically innovative e-services offered by the bank, as

per secondary data gathered from the bank’s website and publications, as well as from

the interviews and questionnaires administered to the bank’s customers. Out of these

e-services, most of the customers had subscribed for ATM card services (63%) and

mobile banking services (60%) whereas a small proportion had subscribed for internet

banking (23%). It was important to note that some customers had subscribed for all

three e-services, and some up to two e-services. As noted by Olorunleke and Akinyele

(2010), in recent times technology has had a “remarkable influence on the growth of

service delivery options” (p. 209). The impact of technological innovations in Family

Bank has actually led to increased service delivery options, as revealed from the

research findings.

Objective Two

The second objective for the study was to identify the e-based service delivery

channels preferred by Family Bank customers. The study addressed this objective in

three ways. Firstly, it sought to find the depth or level of awareness that customers

had for the various e-services offered by the bank. In this regard, a significantly large

proportion of the customers (95%) were aware of mobile banking (Pesapap!) services.

When comparing awareness levels against the subscription rate, it was clear that only

one third of those aware of mobile banking had subscribed for it (with an overall

subscription rate of 60.4%). ATM services had a subscription rate of 63% against

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awareness levels of 98%. Internet banking services had a low subscription of 23% vis-

à-vis awareness levels of 78%. Most of those that had not subscribed also cited lack of

information about the services or usefulness to them. The relatively high level of

subscription for mobile banking as compared to internet banking was in line with

Njenga’s (2008) stance that “mobile banking has led to steady progress in the scope of

innovations emanating from exploitation of these fairly new technologies” (p. 1).

Secondary sources such as the bank’s website and marketing materials showed that

there were new services that emanated from the mobile banking platform, such as

payments to merchants, payments for utilities, and opening of virtual accounts via the

mobile phone (Family Bank, 2013).

Whereas Jayawardhena and Foley (2000) point out several benefits of internet

banking such as reduced transaction costs for online transactions vis-à-vis transactions

at brick-and-mortar branch, increased customer base, personalization of services for

customers, as well as marketing and communication benefits, these do not seem to

have been reflected in the mass retail banking context for Family Bank. This was

evidenced by the low subscription rate for the e-service at 23%. Furthermore, these

findings for low internet banking subscription were in line with the views of Njuguna,

Ritho, and Olweny (2012) who postulate that internet usage was quite low despite a

growing number of internet users in Kenya.

Secondly, in terms of usage, the study sought to find out customers’ preferred

method for cash deposits, withdrawals, access to account statements, and frequency of

visits to the bank. This was in line with gauging how technologically savvy the

customers were as far as adopting the banks e-services was concerned. In this regard,

it was noted that a majority of the customers (38%) visited the branch daily, whereas a

second group visited the branch twice a week (24%), a third group visited weekly

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(21%) and the minority visited on a monthly basis (17%). From the findings, the

larger proportion of customers visited the branch either daily or twice in a week

(62%). This was an indication of low use of e-services, which did not require

customers to visit a branch.

Thirdly, in addressing the second objective, customers were eventually asked

which e-services they preferred. For accessing statements, most customers still

preferred the traditional approach for requesting for statements at the branch (39%)

whereas only 21% used internet banking. The rest still preferred a relatively manual

approach where bank personnel would send them statements via email (26%) and

15% preferred to receive the statements via postal mail. Low preference for internet

banking at 21% could closely be tied to a subscription rate of 23% for the internet

banking services. Furthermore, it emerged that customers were most comfortable and

familiar with ATM services since 55% preferred to withdraw at the ATM, 28%

preferred over the counter withdrawals, and 17% preferred withdrawals via mobile.

This was an indicator of low usage of mobile banking. For deposits, mobile banking

usage was also low since only 24% of the respondents used their mobile phones to

deposit, with the majority preferring over the counter deposits (50%) and the rest

depositing at the ATM (26%).

These findings for high ATM service preference were in line with a survey

carried out by FSD-Kenya (2007) which found out that over the last decade, the

Kenyan banking industry was dominated by the use of ATM services (Nyangosi,

2012). However, contrary to annual reports by Central Bank of Kenya that ATM

banking services were overtaken by mobile banking, this was not the case for Family

Bank. The findings revealed uptake for these two e-services was proportional (with

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subscription rates of close to 60% for both), in the sense that on average, each

customer registered for mobile banking also used ATM card services.

Objective Three

For the third objective, the study sought to examine customers’ perceptions of

bank services vis-à-vis their expectations of these services. In doing so, it was

possible to determine service quality levels for the customers along certain service

quality dimensions. Percentage analysis was used to gauge the proportion of

customers that scored certain values for the various service quality dimensions that

were considered. For instances where there was non-response, the study considered

the fact that not all respondents had subscribed for all services, but could have

subscribed for one or two out of the three possible e-services. Gap analysis and

correlation analysis was used in order to measure the distance in mean scores for

different statements on service quality, as well as the degree of relationship between

expectations and perceptions under each service quality dimension.

Table 4.36: Ranking of Service Quality Dimensions

Service Quality Average Gap Dimension Score

System Availability -0.33

Security -0.18

Reliability -0.17

Ease of Use -0.01

Convenience 0.03

Assurance 0.04

Employee Knowledge 0.05

Support Services 0.15

As seen from Table 4.36 above, these service quality dimensions were ranked

in terms of the average gap score. From the findings, customers’ expectations with

regard to e-services were met for dimensions such as convenience, assurance,

employee knowledge and support services. On ease of use, gap scores for the

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statements assessed were positive except for two statements on additional options for

money transfer to Mpesa via the ATM, and internet banking services. Thus, customers

expectations were fairly met by the bank with a mean score near zero (-0.01). Mean

gap scores were skewed towards strong negatives for the other three service quality

dimensions; system availability, security, and reliability.

Interestingly, similar studies conducted on customers of banks operating

within the CBD showed that most customers’ expectations were not met on service

quality dimensions such as reliability and ease of use (Ombati et al., 2010; Osei-Poku,

2012). Therefore the ratings provided by Family Bank customers were not dissimilar

from those of customers in other banks with regard to these two aspects of service

quality. However, on some aspects such as security, the bank’s customers felt less

secure at the ATM than customers from other banks interviewed within the Nairobi

CBD, as per the study by Ombati et al. (2010). On the contrary, findings by

Olorunleke and Akinyele (2010) who carried out a study in Ghana (Oceanic Bank

Plc), found that for security customers’ expectations were met with a gap score of

0.06. Therefore, responses would vary on certain variables depending on the bank and

context within which the research was carried out.

In addition, correlational analysis of expectations versus perceptions was

carried out, which yielded similar conclusions to those derived from the gap analysis.

Overall, the third objective was met through the use of both gap and correlation

analysis on expectations and perceptions.

Objective Four

The fourth objective of the study was to evaluate the relationship between the

use of technological innovation and service quality in Family Bank. This was

informed by the third objective, which mainly examined service quality through the

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measurement of customer expectations and perceptions of e-services offered by the

bank. In meeting this objective the findings of the study ultimately fulfilled the

overall purpose of the study, which was to assess the impact of technological

innovation on service quality.

As earlier discussed, impact was assessed by taking into account how

technological innovation had affected the eight key areas of service quality considered

important within a technological banking context (Mojoodi et al., 2013),namely these

were ease of use, reliability, assurance, security, support services, system availability,

convenience, and employee knowledge. These dimensions were mainly captured from

the original SERVQUAL Model (Parasuraman et al., 1985) as well as those that had

improved upon the model to assess e-service quality in the banking context (Mojoodi

et al., 2013).

Overall, technological innovation had both a positive and negative impact on

service quality for bank customers, as mean gap scores were positive for half of the

dimensions under consideration, and negative for the other half. The same applied to

the findings from the correlation analysis which led to similar conclusions. However,

this was contrary to general expectations from the literature that technological

innovation always led to improvements in service quality (Asabere, Baah,

&Odediyah, 2012; Bateson, 2000; Mojoodi et al., 2013; Ombati, 2007). From the

study, particularly the interviews, it was evident that the management of these

technological innovations within the bank shaped service quality outcomes.

Therefore, the introduction of new e-services does not necessarily lead to improved

service quality, as these technologies need to be managed for positive outcomes.

However, new technologies do generally improve upon existing processes, and lead to

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new procedures for solving problems and performing tasks in order to obtain desired

outcomes (Ferrell et al., 2009).

Conclusion

The Kenyan banking industry has experienced a high level of technological

innovation as evidenced by the number of new e-services rolled out. As banks reach

out to customers with these new and attractive e-services, it has been noted that the

introduction of technological innovation needs to be considered within a service

quality context. The findings of this study prove useful in highlighting on the strategic

importance of technological innovation and its impact on service quality for the

banks’ management as well as scholars. The key areas discussed in this paper with

respect to the eight service quality dimensions provide a basis for which the

management of customer related problems can be resolved to enhance service quality.

Recommendations for the Study

The study recommends that the bank undertakes the following measures in

order to close on the service quality gap that exists with respect to its e-services. More

specifically, this is in relation to the items for which there was a low positive

correlation or negative correlation, or those that had negative gap scores. Notably,

these included reliability, security, ease of use and system availability. Improvement

measures would entail strategic intervention towards addressing the weaknesses that

led to low customer perceptions on these four dimensions, as well as exceeding

customer expectations on those areas for which the bank was already competent.

Some of these strategic interventions recommended could include IT-based

support to reduce transaction times for mobile banking to those within customer

expectations, as well as increasing the reliability and up-time of ATM services

through continuous monitoring and support of ATM services. On security, the study

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recommends that the bank upgrades the ATM systems to allow for instantaneous

credit to customer accounts so as to increase customer confidence levels for cash

deposits via the ATM. As at now, the manual cash deposit system has elicited low

confidence from customers and requires upgrades that would lead to increased

efficiency. The bank could also develop mobile banking applications that would ease

access for certain services on its mobile banking platform (Pesapap!). For system

availability, the bank can work towards solutions that ensure consistent availability of

its e-services, more so on mobile banking and ATM services, where customers felt

that they needed to be informed in advance in case of any down time.

Secondly, it emerged that the bank customers had a high level of awareness

for its e-services but were not subscribed. The study recommends that further

assessment be done on how these subscription rates can improve in order for

customers to gain from the use of the technological innovations, in line with its long

term plan for IT-supported service quality.

Thirdly, a significant proportion of customers did not see a strong positive

relationship between service quality and the various technological innovations in use

(32%). This largely means that the bank has room to improve upon key service

quality variables in order for customers to experience enhanced service quality.

The study found that most customers preferred ATM services. Therefore short

term measures could be put in place to mitigate against poor service quality in relation

to these services that appear to be prioritized by customers, while long term strategies

work towards enhancing the features of services that may not be currently a priority

for a majority of the customers, such as internet banking services. In this respect, the

bank has a long term plan to switch to the Visa payments platform.

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Overall, a relationship exists between technological innovation and service

quality. However, this relationship was either positive or negative depending on

management’s input towards affecting the various service quality dimensions under

consideration. Therefore it was recommended that the bank develops a rating system

to closely measure these important attributes of service quality.

Recommendations for Further Studies

This study was mainly focused on addressing a gap in which very few studies

had been conducted on the impact of technological innovation on service quality. The

findings of the study revealed that there exists gaps between customers’ perceptions

and expectations for some e-services, while for other aspects, customers’ expectations

were generally met but not exceeded. Going forwards further research can be carried

out to establish how management can bridge the gaps through the adoption of

strategies to improve on IT systems and organizational processes for the enhancement

of service quality. Other areas of interest could include investigating why customers

prefer certain e-services over others, as well as how these e-services have

revolutionalized banking for customers.

Summary

This chapter has discussed the findings of the study within the context of its

set objectives, as well as recommendations on how best the bank can increase service

quality expectations for its e-services, in light of the various findings from the banks’

customers. It has made important conclusions on the need for technological

innovation to be considered within a service quality context in Kenya. By and large,

the study advocates for further research to strategically address service quality gaps

arising from the use of technological innovations in the banking industry and how

these innovations could be used to enhance the quality of banking services.

119



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APPENDICES

Appendix 1: Questionnaire Dear customer,

I am a student at Daystar University conducting a study on the impact of technological innovations currently in use by the bank on the quality of services offered. These technological innovations relate to electronic-based (e-based) products such as mobile banking, internet banking, ATM Card services.

Your responses will be treated confidential and used for academic purposes only. Thank you for your time.

SECTION 1 – RESPONDENT’S PROFILE

This section is meant to provide general background information about you as a customer.

1. Kindly indicate your gender

Male [ ]

Female [ ]

2. Please select your age group

Less than 25 years [ ] 46-55 years [ ]

26-35 years [ ] 56-65 years [ ]

36-45 years [ ] 66 years and over [ ]

3. What is your occupation?

Student [ ] Employed – public sector [ ]

Self-employed [ ] Other: specify _____________________ [ ]

Employed – private [ ] sector

4. Indicate your level of education

Primary [ ] Post graduate Degree [ ]

Secondary [ ] Doctorate/PhD [ ]

College/Bachelor’s degree [ ]

5. What is your net level of income?

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Ksh 20,000 and below [ ] Ksh 61,000 – 80,000 [ ]

Ksh 21,000 – 40,000 [ ] Ksh 81,000 - 100,000 [ ]

Ksh 41,000 – 60,000 [ ] Ksh 101,000 and above [ ]

6. How long have you operated your account with Family Bank?

Less than 1 year [ ] 4 – 6 years [ ]

1 – 3 years [ ] 7 years and [ ] above

7. Kindly indicate the type of account that you are using (tick all appropriate)

Ordinary Savings Account - [ ] Salary Account [ ] Mwananchi

Savings Account - Tujenge [ ] Personal Current Account [ ]

Business Account – JengaBizna [ ] Foreign Currency Account [ ]

Children’s Account – Mdosi Junior [ ] Fixed Deposit Account [ ]

Other (please specify)

_____________________________

8. How often do you visit the bank? (tick as appropriate)

Daily [ ]

Twice a week [ ]

Weekly [ ]

Monthly [ ]

9. What is your preferred method of cash withdrawal (tick one)

ATM [ ]

Teller [ ]

Mobile Banking/Pesapap [ ]

10. What is your preferred method of cash deposit? (tick one)

ATM [ ]

Teller [ ]

Mobile Banking/Pesapap [ ]

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11. What is your preferred method for accessing bank statements? (tick one)

Printed copies from the branch [ ]

Requested statement sent to my email [ ] by bank staff

Access through internet banking [ ]

Through postal mail [ ]

12. (a) Please indicate if you are aware of the services below offered by Family Bank (you can tick more than one):

Mobile

Banking

Yes [

]

No [

]

ATM Card Services

Yes [

]

No [

] (PesaPap)

Internet Banking

Yes [

]

No [

]

Point of sale

Yes [

]

No [

] purchases at shops with my ATM card

(b) Please indicate which of the below mentioned electronic banking services that you have subscribed for (you can choose more than one):

Mobile Banking [ ] ATM Card Services [ ] (PesaPap)

Internet Banking [ ] Point of sale purchases at shops with my debit [ ] card

None of the above [ ]

(c) If there is a service that you have not subscribed for in (b) above please explain why you have not yet subscribed for the service: __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________

(e) Do you think that the services of the bank have generally improved with the introduction of new electronic based services such as mobile banking (Pesapap), internet banking, and ATM Card services? (Please choose one)

Strongly [ ] disagree

Disagree [ ]

Neutral [ ]

Agree [ ]

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Strongly agree [ ]

SECTION 2 – CUSTOMER EXPECTATIONS AND PERCEPTIONS OF SERVICE QUALITY

Expectations: this is what you think a service should provide in terms of performance and value (what you hope to get or what you should get in terms of service)

Perceptions: It means observation, view, or opinion. It is your current reality or experience of the bank’s services.

Please proceed to the table on the next page and rate your expectations (what you

would like for service) versus your perceptions (your current experiences) of Family

Bank services.

Put your ratings in line with the service type (either mobile, ATM, or internet banking

service) that you have subscribed to.

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EXPECTATIONS – Please fill as per the rating guideline indicated

No. Service Type Service quality features/Rating

Rating (1-strongly disagree, 2-disagree, 3- neutral, 4-agree, 5- strongly agree

1 2 3 4 5

Ease of use

1 Mobile I expect that mobile banking services should

be easy to use

2 Mobile I expect that I should be able to withdraw or

deposit money through my mobile phone

without asking for extra help from bank personnel

3 ATM I expect to easily access my cash at the ATM

without seeking for additional help from bank

personnel

4 ATM I expect that all additional options for service

at the ATM such as money transfers to Mpesa

and Mpesa withdrawals at the ATM should be easy to use and access

5 Internet I expect that it should be easy to use the banks

internet-banking service

Reliability 1 Mobile I expect that any transaction I perform through

mobile banking is completed within the

stipulated time period promised by the bank

2 Mobile I expect that when a mobile banking

transaction fails to go through, that the bank

responds to my query promptly and enables me

to access my cash within 24 hours

3 Mobile I expect that when I use mobile banking

services they will work the first time I make an

attempt to do so without any problems

4 ATM I expect that when I use my ATM Card, the

transaction will be successful on my first

attempt

5 ATM I expect that if my ATM withdrawal fails, the

bank will respond to my query in less than 24

hours

6 ATM I expect that my ATM/Debit card should work

at any Supermarket/Shop or point of sale outlet

7 Internet I expect that the banks' internet banking

services work on a 24 hour basis as promised

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Assurance

1 Mobile I expect to get accurate advice from bank

personnel on how long it will take to be

registered for mobile banking

2 ATM I expect to get accurate advice from bank


registered for an ATM card

3 Internet I expect to get accurate advice from bank


registered for internet banking

4 General - I expect that I get full confidence and

mobile/atm/internet assurance from bank personnel that the banks'

services (mobile/atm/internet) will work as expected

Security

1 Mobile I expect to feel safe about my money while

performing my transactions through mobile

banking

2 ATM I expect to feel comfortable when depositing

money through the ATM that my cash is

secure

3 Internet I expect that my financial records and

statements are secure with the introduction of

internet banking by Family Bank

4 Internet I expect that my money is secure with the

introduction of internet banking by Family

Bank

Support services

1 General - I expect that the bank’s employees are

mobile/atm/internet competent to advise me on what would be the

most suitable e-based service for me

2 General - I expect that the bank employees usually take

mobile/atm/internet less than 24 hours to resolve any service-

related problem I have as a result of using e- based services

Convenience

1 Mobile I expect that I am able to withdraw or make

purchases from my account through mobile

banking at any time

2 ATM I expect that the banks’ ATMs are


3 Internet I expect that I should easily access my account

information online through internet banking

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System availability 1 Mobile I expect that the system is available at all times

whenever I am accessing my account through

my mobile phone

2 General - I expect the bank to inform me in advance

mobile/atm/internet whenever the system is down

Employee knowledge 1 General - I expect that on average bank staff should be

mobile/atm/internet well equipped to market and sell the banks’

new e-based products and services

2 General - I expect that bank staff know how to resolve

mobile/atm/internet problems I may encounter in relation to the use

of e-banking services

PERCEPTIONS – Please fill as per rating guideline below No. Service Type Service quality features/Rating

Rating (1-strongly disagree, 2-disagree, 3- neutral, 4-agree, 5- strongly agree

1 2 3 4 5

Ease of use

1 Mobile I find mobile banking services easy to use

2 Mobile I find that I am able to use mobile banking

services without asking for help from bank

personnel

3 ATM I find that I can easily access my cash at the

ATM without asking for help from bank

personnel

4 ATM I find it easy to use the additional options for

service at the ATM such as money transfers to

Mpesa and Mpesa withdrawals at the ATM

5 Internet I find it easy to use the banks internet banking

service

132



Reliability

1 Mobile From experience I have found that any

transaction I perform through mobile banking

takes place within the stipulated time period promised by the bank

2 Mobile When my transaction fails when using mobile

banking, the bank usually responds promptly

to my query and enables me to access my cash in less than 24 hours

3 Mobile I usually find that when I use mobile banking,

the service works the first time I try to use it

without any problems

4 ATM I usually find that when I use my ATM Card,

the transaction is normally successful the first

time I make an attempt

5 ATM The bank usually responds to my query in less

than 24 hours in case my transaction fails at

the ATM

6 ATM My ATM/Debit card normally works at the

Supermarket/Shop or point of sale outlet

7 Internet Normally, the banks' internet banking services

work on a 24 hour basis as promised

Assurance

1 Mobile I have found from experience that I always get


long it will take to be registered for mobile banking

2 ATM I have found from experience that I always get


long it will take to be registered for an ATM card

3 Internet I have found from experience that I always get


long it will take to be registered for internet banking

4 General - Generally, I feel that I get full confidence and

mobile/atm/internet assurance from bank personnel that the banks'

services (mobile/atm/internet) will work as expected

Security

1 Mobile I feel safe about my money while performing

my transactions through mobile banking

2 ATM I feel comfortable when depositing money

through the ATM that my cash is secure

3 Internet I am confident that my financial records and

statements are secure now that the bank has

introduced internet banking

4 Internet I feel that my money is secure with the

introduction of internet banking by Family

Bank

133



Support services

1 General - From my experience, the bank’s employees are

mobile/atm/internet competent enough to advise me on what would

be the most suitable e-based service for me

2 General - Usually, Family bank's employees take less

mobile/atm/internet than 24 hours to resolve any service-related

problem I have as a result of using e-based services

Convenience

1 Mobile I normally find that I am able to withdraw or

make purchases from my account through

mobile banking at any time

2 ATM I feel that the banks’ ATMs are conveniently

located

3 Internet I find it easy to access my account information

online through internet banking

System availability

1 Mobile I usually find that the system is always

available whenever I want to access my

account through my mobile phone

2 General - Family Bank normally informs me in advance

mobile/atm/internet whenever the system is down

Employee knowledge

1 General - From my experience, I feel that Family Bank

mobile/atm/internet staff are well equipped to market and sell the

banks’ new e-based products and services

2 General - I feel that Family Bank staff know how to

mobile/atm/internet resolve problems I may encounter in relation to

the use of e-banking services

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Appendix 2: Interview Guide

Technological Innovation - It comprises of “new products and processes and

significant technological changes of products and processes” (OECD, 1993).

1. Technological innovations in the bank:

a. What are the technological innovations adopted by Family Bank for e-

based service delivery options?

b. To what extent have this innovations been shaped by the market (other

industry players/customers etc)?

2. Relationship between technological innovation and service quality:

a. How have these technological innovations affected overall service

quality for the bank?

b. Would you say that there are differences in the levels of service quality

offered across the different service channels (e.g. Mobile Banking,

Internet Banking, and ATM Services)?

c. Would these innovations be considered as product innovations or

process innovations?

3. What are the major factors that have led the bank to focus on technological

innovations for service delivery?

4. Are there any market opportunities that have informed the IT innovations

strategy adopted by the bank?

5. Does the bank conduct a general assessment of customer needs in the market

to inform the IT innovations strategy it adopts?

6. E-based service preference:

a. In your view, which e-based service options are preferred by Family

Bank customers?

b. Why do you think that customers have preferred this particular service

based option vis-à-vis the other technologically innovative products

and services offered by the bank?

7. Current Information Systems Strategy and Architecture

135



a. In what ways have the current Information Systems in use affected the

quality of IT-based services offered by the bank?

b. In your view, is there a need to upgrade the current information

systems and architecture in order to improve the quality of IT-based (e-

based) service options offered by the bank?

8. Is there an overall service strategy for the bank?

a. If yes, does this service strategy have a component dealing with IT-

based service delivery systems?

b. If no, does the bank currently have a mechanism for responding to IT-

based service gaps in delivering service to customers?

c. Does the bank have service standards in place for its IT-based

services?

i. If yes, what are some of the major parameters used to gauge the

level of service quality experienced by customers?

ii. Which of the following parameters would you say feature in

the bank’s service strategy?

No. Service Quality Features in the service strategy (yes/no) Parameter

Yes No

1 Ease of use/navigation

2 Reliability

3 Assurance

4 Security

5 Convenience

6 Support Services

7 Employee Knowledge

8 System availability

Thank you for your participation

136



Appendix 3: Letter from Daystar University

137



Appendix 4: Letter from National Commission for Science, Technology and

Innovation (NACOSTI)

138



Appendix 5: Research Permit

139



Appendix 6: Authorization letter from Family Bank

140



an assessment of the impact of technological innovation on

Documents