MOBILE BANKING AND THE SHIFT IN BANKING PRODUCTS/

SERVICES: CASE STUDY OF EQUITY BANKS EQUITEL

 ABSTRACT

Equity Bank Limited is one of the organizations that has embraced innovations and
adopted various delivery channel technologies in an effort to meet their customer needs.
This research was a case study of Equity banks Equitel and sought to determine the shift
in mobile banking products and services. The specific objectives of the study were to
determine the extent of adoption of mobile banking services among equity bank
customers in Mombasa County and establish the factors influencing the usage of mobile
banking services. Data was collected using a questionnaire and targeted a population of
150 customers from all the branches of Equity bank in Mombasa County. A total of 135
customers responded to the questionnaires. The data was analyzed using tables and
percentages to answer the research objectives. The findings of this study showed that,
customers were yet to embrace this innovation of Equitel due to many factors. This also
showed that, being informed alone was not enough to persuade customers to use the
Equitel service but this had to do with their behavioural intention to adopt the service.
The awareness created by Equity Bank to persuade customers was very important and the
level of knowledge gained through various means of advertisement could not be over
emphasized in helping to facilitate their decision in the adopting mobile banking services
and this has been equally stated in the findings of researchers in the past. Secondly, the
research also looked at the factors which influence the consumers to adopt the use of
mobile banking services and the framework was used to analyze this. The study
established that perceived financial cost, social influence, perceived credibility, perceived
usefulness, perceived ease of use, perceived self-efficacy, compatibility and awareness
had some level of significant effect on consumer adoption rate in Equity Bank. Perceived
credibility and perceived financial cost were the major drawbacks while social influence,
perceived usefulness, associated reward, perceived self-efficacy, compatibility, awareness
and perceived ease of use are seen as determinants of mobile banking adoption in Equity

ii
Bank. The study recommends that attention should be given to students in educational
institutions as they consist of a larger population of the country due to their favourable
attitude towards new innovation and this is also evident that the majority of them are
using the equitel service. Equally, the banks staff should be trained and be
knowledgeable about how to use the self-service so as to provide support for customers.
This study also recommends that the commercial banks and mobile phone operators in
Kenya should partner in order to come up with more innovative and affordable mobile
banking products and services. This will ensure that a large number of Kenyans who are
not using mobile banking services are also brought on board. The government of Kenya
through the regulatory agencies should also come up with policies to create a level
playing field for all operators to avoid monopoly in the sector. This will allow more
firms to enter the sector, lower the transaction charges and encourage greater financial
inclusion.

iii
 TABLE OF CONTENTS

DECLARATION...............................................................................................................ii
DEDICATION..................................................................................................................iii
ACKNOWLEDGEMENT...............................................................................................iv
ABSTRACT........................................................................................................................v
LIST OF TABLES..........................................................................................................viii
CHAPTER ONE: INTRODUCTION..............................................................................1
1.1 Background of the Study...............................................................................................1
1.1.1 Mobile Banking.................................................................................................. 2
1.1.2 Equity Banks Equitel......................................................................................... 3
1.1.3 The Banking Industry in Kenya and Mobile Banking....................................... 3
1.2 Research Problem..........................................................................................................5
1.3 Research Objectives.......................................................................................................6
1.4 Value of the Study..........................................................................................................7

CHAPTER TWO: LITERATURE REVIEW.................................................................9

2.1 Introduction....................................................................................................................9
2.2 Theoretical Review........................................................................................................9
2.2.1 Financial Intermediation Theory........................................................................ 9
2.2.2 Innovation Diffusion Theory..............................................................................

10
2.2.3 Contemporary Banking Theory........................................................................11
2.3 Determinants of Mobile Banking.................................................................................11
2.4 Empirical Review........................................................................................................15
2.5 Summary of Literature Review...................................................................................19

CHAPTER THREE: RESEARCH METHODOLOGY..............................................20

3.1 Introduction..................................................................................................................20
3.2 Research Design..........................................................................................................20
3.3 Study population..........................................................................................................20
3.4 Sample and Sampling Techniques...............................................................................20
3.5 Data Collection............................................................................................................21
3.6 Data Analysis...............................................................................................................21

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CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION...................23
4.1 Introduction..................................................................................................................23
4.2 Data Analysis...............................................................................................................23
4.3 Level of Consumer Knowledge about Mobile Banking..............................................25
4.4 Factors influencing Adoption of Mobile Banking Service at Equity Bank.................26
4.5 Regression Analysis.....................................................................................................31

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS..34

5.1 Introduction..................................................................................................................34
5.2 Summary......................................................................................................................34
5.3 Conclusions..................................................................................................................36
5.4 Recommendations........................................................................................................37
5.5 Limitations of the Study..............................................................................................38
5.6 Suggestions for Further Research................................................................................38

REFERENCES................................................................................................................40
APPENDICES..................................................................................................................44
Appendix I: Questionnaire.................................................................................................44

v
vi
 LIST OF TABLES

Table 4.1: A cross-tabulation of gender & mobile banking usage............................... 22

Table 4.2: A cross-tabulation of age of respondents & their mobile banking usage.... 23

Table 4.3: A cross-tabulation of occupation & mobile banking usage........................... 23

Table 4.4: Consumers knowledge and usage of mobile banking................................ 24

Table 4.5: A cross-tabulation of usefulness & mobile banking usage.......................... 25

Table 4.6: A cross-tabulation of simplicity & mobile banking usage............................ 26

Table 4.7: A cross-tabulation of compatibility & mobile banking usage..................... 26

Table 4.8: A cross-tabulation of social influence & mobile banking usage................ 27

Table 4.9: A cross-tabulation of self-efficacy & mobile banking usage....................... 28

Table 4.10: A cross-tabulation of financial cost & mobile banking usage. 28

Table 4.11: A cross-tabulation of credibility & mobile banking usage.......................... 29

Table 4.12: Regression Model Summary........................ 30

Table 4.13: ANOVA.. 31

Table 4.14: Regression Coefficients.......................... 31

vii
 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Mobile banking refers to provision of banking and bank related financial services with the help

of mobile telecommunication devices. The scope of services may include facilities to conduct

bank and stock market transactions to administer their accounts and access customized

information. Internet banking helped give the customers anytime access to their banks,

customers could check out their account details, get their bank statements, perform transactions

like transferring money to other accounts and pay their bills sitting in their homes and offices

(Porteous, 2006).

This study is based on three major theories: financial intermediation theory, innovation diffusion
theory (IDT) and contemporary banking theory. Financial intermediation theory is based on the
theory of informational asymmetry and the agency theory. Diffusion of innovation theory
attempts to explain and describe the mechanisms of how new inventions in this case internet and
mobile banking is adopted and becomes successful. Contemporary banking theory suggests that
banks, together with other financial intermediaries are essential in the allocation of capital in the
economy. This theory is centred on information asymmetry, an assumption that different
economic agents possess different pieces of information on relevant economic variables, in that
agents will use this information for their own profit (Freixas & Rochet, 2008).

The Equitel brand was hailed by Equity Group as the 'next big thing' i.e. Equity 3.0. The move

was to give Equity Bank the opportunity to continue its mission of furthering financial inclusion

and innovative service offerings for all Kenyans by presenting their financial services offering on

to a single platform which will make banking services more accessible, flexible convenient and

more affordable. Airtel Kenya on their part stated that the partnership would increase their

1
revenue by up to 10%. The brand made Equity Bank the first financial institution in Africa to

offer a full banking suite through a Mobile Virtual Network Operator (MVNO) called Equitel.

1.1.1 Mobile Banking

The term mobile refers to applications, which are designed for users on the move. Mobile device

is commonly known as cell phone and users commonly use it for communication and as a

wireless delivery channel. Mobile banking is also known as M-Banking - a form of banking

transaction carried out via a mobile phone. Moreover, it is defined as a type of execution of

financial services in the course of which - within an electronic procedure- the customer uses

mobile communication techniques in conjunction with mobile devices. The technologies

generally used for mobile banking are Interactive Voice Response (IVR), Standalone Mobile

Application Clients, Short Messaging Service (SMS) and Wireless Application Protocol (WAP)

(Salzaman, Palen & Harper, 2001).

Mobile banking is causing a flurry of activity in the worlds financial services industry. In fact, it

is leapfrogging traditional banking and now many top banks are up and running with their own

mobile banking solutions, trying to take advantage of technology that comes with mobile phones

and introduce the service as a means of providing fast and efficient services, and financial

institutions of all sizes are busy assessing their place in the mobile banking world. Consequently,

it has created a playing field for competitors comprising of not only banks but also

telecommunication companies (Feig, 2007).

The terms Mobile Phone banking and mobile banking (M-banking) are used interchangeably.

The term M-Banking is used to denote the access to banking services and facilities offered by

financial institutions such as account-based savings, payment transactions and other products by

2
use of an electronic mobile device. Mobile banking has yielded a multiple effect on the number

of solutions available to clients. This is in addition to more efficient transactional environment

and the high substitution of banking points (Koivu 2002).

1.1.2 Equity Banks Equitel

In 2015, Equity Banks Finserve Africa limited launched a Mobile Virtual Network Operator

called Equitel. An MVNO refers to a mobile carrier that leases infrastructure from existing telcos

and launches its operations riding on the telcos network. In the case of Finserve, Airtel Kenya

was chosen for Equitel. Equity Bank planned to use Equitel as a tool to foster convergence

between mobile money and banking. To this effect, the bank issues its customers with SIM cards

taking advantage of Kenyas large mobile penetration which allowed the bank to scale its service

faster.

According to the latest report by the Communications Authority of Kenya, Equitel has managed

to amass a market share of 4.4% with 1.6 Million subscribers. During the release of the

Banks quarter one 2016 results the bank attributed Equitel to the growth of its loan books to

Kshs. 272 Billion. The Bank issued a total of 3.4 Million loans to customer with 2.8 Million of

these loans or 81% of total loans via Equitel. Equitel further saw a 315% quarter on quarter rise

in transaction volumes to 45.6 Million from 11 Million in quarter one 2015. The value of these

transactions rose 562% to 62 Billion from 9.4 Billion in quarter one 2015. The average loans

issued via the platform stood at 42,000 up from 7,000 with the average repayment period at 4

Months.

1.1.3 The Banking Industry in Kenya and Mobile Banking

The banking industry has come a long way in ensuring its survival having experienced increased

competition over the last few years arising from increased innovations among the players and
3
new entrants into the financial market, through the provision of mobile banking services. One of

the biggest challenges being faced by banks in Kenya is stiff competition from the most

unexpected quarters: the telecommunication industry, mainly Safaricom. This is because while

banks have been struggling to attract more customers to bank with them for quite a while,

Safaricom launched the M-Pesa in 2007 and within a relatively short period it already has more

than 10-million users and is providing many poor and rural Kenyans with access to financial

services that were previously out of reach, because either banking services were too expensive

for them or were almost inaccessible. With M-PESA, customer's money can only be accessed

through mobile technology (Ivatury & Mas, 2008).

Hence, the banks had to find ways to compete effectively and profitably, and started coming up

with their own mobile banking solutions and forming partnerships with these telecommunication

service providers. There has since been a rapid growth in the adoption of mobile banking by the

commercial banks in Kenya in recent years, evidenced by the numerous advertisements in the

media on the various mobile banking services being offered by these banks. For instance, the

major advertisements by banks seen in the media include Barclays Bank of Kenyas Hello

Money, Kenya Commercial Banks Mobi-bank, Co-operative Bank of Kenyas M-Banking,

Equity Banks M-Kesho and Eazzy 247, Family Banks Pesa Pap, National Banks SIM-ple

banking, Commercial Bank of Africas M-Shwari just but to mention a few. Some of the services

being offered include transfer of funds from bank account to mobile phone account like M-Pesa,

airtime top-up, change of mobile banking PIN, banking services like account inquiry which

includes balance inquiry and mini statement inquiry, funds transfer between accounts both own

and other peoples accounts, cheque book request, bill payment and viewing linked accounts,

just but to mention a few. These services are offered in partnership with the telecom companies,

the telecoms providing the mobile banking platform and their services embedded in the banks
4
mobile banking services as well. For instance, most of the services mentioned above like

MKesho and Hello Money are linked to M-Pesa, thus allowing customers to transfer funds from

their bank accounts to M-Pesa.

1.2 Research Problem

Around the globe, various initiatives use the mobile phone to provide financial services, not only

to those without access to traditional banks but also to the banked population. Yet relatively little

scholarly research explores the use of these mobile banking/mobile payments systems (Donner

and Tellez, 2008). Scholarly research on the adoption and socioeconomic impacts of mobile

banking systems in the developing world is scarce because the systems are so new (Maurer,

2008). Even less attention has been paid to the social, economic, and cultural contexts

surrounding the use of these systems. In addition, even the few researchers who have conducted

research in mobile banking have come up with different conclusions on the most important

factors influencing its adoption.

Sulaiman et al (2007) argue that the personal characteristics of mobile banking users are

important determinants of their adoption decisions, and that understanding customer perceptions

of mobile banking services will enable service providers to plan their marketing strategies.

McGee (2009) argues that a consumers propensity to use mobile devices to conduct banking

functions depends on the sophistication of the device and not the consumers age, and that users

with smart phones are more likely to use the devices for mobile banking than those with ordinary

cell phones. Porteous (2006) argues that as unbanked people start to use mobile phones they

become reachable at a lower cost and therefore more bankable in the sense that a basic

transactional service becomes more viable to offer via the phone, hence his emphasis is on cost.

5
Agboola (2006) did a study on the effect of information and communication technology (ICT) on

banking operations in Nigeria. Wambari (2009) studied mobile banking in developing countries

using a case of Kenya. The study elaborated that the adoption and use of mobile phones is a

product of a social process, embedded in social practices such as SMEs practices which leads to

some economic benefits. Munaye (2009) looked at the application of mobile banking as a

strategic response by equity bank Kenya limited to the challenge in the external environment.

Kigen (2010) investigated the impact of mobile banking on transaction costs of microfinance

institutions. Kingoo (2011) studied the relationship between electronic banking and financial

performance of commercial banks in Kenya where he paid keen attention on the microfinance

Institutions in Nairobi.

Besides calling for attention to this gap in the research literature and emphasizing the need for

research focusing on the context(s) in which mobile banking systems are used, this study sought

to explore the extent of adoption of mobile banking and how it has influenced the banking

products and services in Kenya. This study focused on Equity banks Equitel and attempted to

answer the following research question: to what extent has the introduction of Equitel influenced

the banking products and services in Kenya?

1.3 Research Objectives

The study was guided by the following objectives:

(i) To establish the extent of adoption of mobile banking services among Equity bank customers.

(ii) To determine the factors influencing the adoption of mobile banking products and services at

Equity bank.

(iii) To establish the relationship between the factors influencing adoption of mobile banking and

the level of adoption by Equity banks customers

6
1.4 Value of the Study

The study will not only be useful to the banks in Kenya but will also provide an understanding of

the effects of mobile banking to the M-banking services providers. This will be useful to the

service providers (Safaricom, Airtel and Orange) who will use it to solve existing bottlenecks to

encourage M-banking in Kenya. This will enable them to tailor make their products in line with

customers needs and make targeted marketing decisions for M-banking. To the management of

Equity bank, this study will inform them on the financial effects of mobile banking on the

performance of the company. Through the findings of this study, the management will be able to

strategize on how to realize maximum benefits from mobile banking.

For the policy makers and agencies like the Central bank of Kenya (CBK), the findings of this

study will be important in informing the policy formulation especially with regard to regulating

the mobile banking services in Kenya. The research findings add dimensions that may help

improve policy direction with regard to regulation of mobile banking as well as factors that spur

economic growth.

To the academicians and students of finance, this study will help build the knowledge base in the

discipline by adding on the existing literature on mobile banking and financial sector

development. The study will be used as a source of reference material besides suggesting areas

where future research may be conducted.

7
8
 CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
This chapter focuses on review of theoretical, conceptual and empirical literature along the

studys conceptualization. First, the chapter presents literature on mobile banking followed by

mobile banking adoption and finally looks at the challenges facing mobile banking.

2.2 Theoretical Review

This study is anchored on three theories which are reviewed in this section. These theories

include the financial intermediation theory, innovation diffusion theory (IDT) and contemporary

banking theory.

2.2.1 Financial Intermediation Theory

Financial intermediation is a process which involves surplus units depositing funds with

financial institutions who then lend to deficit units. Bisignano (2012) identified that financial

intermediaries can be distinguished by four criteria. First, their main categories of liabilities or

deposits are specified for a fixed sum which is not related to the performance of a portfolio.

Second, the deposits are typically short-term and of a much shorter term than their assets. Third,

a high proportion of their liabilities are chequeable which can be withdrawn on demand and

fourthly, their liabilities and assets are largely not transferable. The most important contribution

of intermediaries is a steady flow of funds from surplus to deficit units.

The financial intermediation theory highlights the role of financial intermediaries in economy;

most of the studies performed highlight their role in achieving a durable economic growth, and

the impact of regulations on financial intermediation, accentuating the role of the central bank in

the regulation, supervision and control of financial intermediaries. This theory assisted in

9
analyzing the transactions behavior of commercial banks, and how it affects their financial

performance (Scholtens & Van Wensveen, 2013).

2.2.2 Innovation Diffusion Theory

Mahajan and Peterson (2005) defined an innovation as any idea, object or practice that is

perceived as new by members of the social system and defined the diffusion of innovation as the

process by which the innovation is communicated through certain channels over time among

members of social systems. Diffusion of innovation theory attempts to explain and describe the

mechanisms of how new inventions in this case internet and mobile banking is adopted and

becomes successful. Sevcik (2004) stated that not all innovations are adopted even if they are

good it may take a long time for an innovation to be adopted. He further stated that resistance to

change may be a hindrance to diffusion of innovation although it might not stop the innovation it

will slow it down.

The adoption and use of mobile banking has the potential to extend the limited nature and reach

of the formal financial sector to the poor and rural population in Africa. Most of the existing

literature is from the developmental/practitioners arena with a few scholarly studies emerging

(Mas & Morawczynski, 2009). Although most of the studies from the practitioners are not peer

reviewed, they provide valuable information on actual usage and contextual information on the

development and use of the phenomenal. For example, Ivatury and Pickens (2006) provided

valuable insight into the characteristics of the early adopters of WIZZIT, one of the first major

initiatives dedicated to offering mobile banking to the poor in South Africa. Also significant are

the ethnographic work of Morawczynski during 18 months stay in Kenya (Morawczynski and

Krepp, 2011). By applying the traditional technology acceptance models and frameworks to the

adoption of transformational mobile banking services, this study aims to bring the discussion to

10
the mainstream information systems literature. This theory was used to study how various new

mobile banking products affects financial performance of commercial banks.

2.2.3 Contemporary Banking Theory

Bhattacharya and Thakor (1993) contemporary banking theory suggests that banks, together with

other financial intermediaries are essential in the allocation of capital in the economy. This

theory is centred on information asymmetry, an assumption that different economic agents

possess different pieces of information on relevant economic variables, in that agents will use

this information for their own profit (Freixas & Rochet, 2008). Asymmetric information leads to

adverse selection and moral hazard problems. Asymmetric information problem that occurs

before the transaction occurs and is related to the lack of information about the lenders

characteristics is known as adverse selection. Moral hazard takes place after the transaction

occurs and is related with incentives by the lenders to behave opportunistically.

2.3 Determinants of Mobile Banking

User adoption of mobile banking applications is determined by many factors. Literature findings

identify some of the issues and factors associated with mobile banking, which are also related to

other IS/IT applications; these factors are further used to generate the constructs applicable to

this research in order to build the initial research model and investigate the research objectives.

The factors can be organized into five categories: risk and security, socioeconomic background

and culture, service characteristics, cost of service and device, and device features.

2.3.1 Risk and Security

Security and trustworthiness of a service was identified as one of the most important factors

within every target customer segment when deciding on the use of a banking service delivery

channel. Some agreed that using mobile phone in banking is trustworthy" (Mattila, 2002). Fain
11
and Roberts (1997) defined risk is a perception of consumer, not a characteristics of a product.

It was found that the security factor could influence consumers attitudes towards online banking

in China (Laforet & Li, 2005). Furthermore, it was considered to be one of the greatest concerns

in adoption of mobile banking services (Luarn & Lin, 2004), as individuals may worry about

security issues during mobile banking service transactions such as data input and output

mechanisms (Laukkanen & Lauronen, 2005), loss of connection risk and personal performance

mistakes (Kuisma et al., 2007). As a result, many people may decide not to use this service and

ignore the extra benefits of using mobile banking. However, some previous studies have argued

that, on the contrary, security issues were not major obstacles for consumers in adopting mobile

banking (Laukkanen & Lauronen, 2005).

2.3.2 Socio-economic background and Culture

Laforet and Li (2005) found that the lack of understanding of the concepts and benefits was a

main barrier to consumers using mobile banking, subsequently, users of mobile banking were not

intended to be highly educated and were typically younger people in China; this was in contrast

to the situation in the western countries as discussed by Karjaluoto, Mattila and Pento, (2002).

As discussed by Trappey and Trappey (2001), the Chinese are used to carrying cash, and have

little confidence in traditional financial management. Compared to other Asian consumers,

Chinese consumers seem to be more traditional and less affected by new technology

advancements. Heinonen (2004) and Forman and Sriram (1991) found that some customers

simply prefer to deal directly with a bank clerk instead of utilizing arms-length technology

(e.g. mobile banking). In addition, Singh (2004outlined that males used mobile banking more

than females, and mobile banking users tended to come from high-income groups such as small

business owners, salaried employees and senior managers. Furthermore, a negative, hard-to-use

image (Fain & Roberts, 1997) of technologies and computers may have been perceived by
12
consumers when thinking about using mobile banking. Therefore, the socio-economic

background and culture of potential users could be factors that influence the usage of mobile

banking.

2.3.3 Service Characteristics

The account balance service is one of the most promising mobile banking services, and is

designed to help customers check their account balance and latest transactions immediately

anytime/anywhere (Laukkanen, 2007). Luakkanen and Lauronen (2005) found that location free

access created convenience in requesting account balances. Furthermore, accessibility and

portability are classified as dimensions of convenience in the consumer behaviour literatures

(Yale & Venkatesh, 1986; Gehrt & Yale, 1993). Consequently the spatial and temporal distance

between need recognition and need satisfaction can be considered important for doing banking

via mobile phone. The ability to allow consumers to have more control over their financial

situation is one attraction of mobile banking services (Laukkanen & Lauronen, 2005), as the

consumer prefers to act for himself/herself when dealing with his /her own monetary transactions

through the mobile device. Luakkanen (2005) found that the flexibility of being able to use the

service wherever and whenever the users want enables immediate completion of banking tasks

(transferring money or paying a bill). This would save time and be perceived as convenient and

efficient. The bank provides several services through mobile media, information-based,

transactionbased and personal services (Laudon, & Laudon, 2002). The SMS service is the

easiest way to check account balances and latest transactions via mobile phone (Laukkanen,

2007). Laukkanen et al (2007) found that speed of data transmission and the user interface

impaired the added value of mobile services. Therefore, the characteristics of the service as

perceived by the user and provided by the banking institution and service provider are important

factors influencing the usage of mobile banking.

2.3.4 Cost of service and device

13
According to Nah, Siau, and Sheng (2005), the cost of mobile devices and mobile services was

identified as an investment concern. Luarn and Lin (2004) argued that financial cost was one of

the greatest concerns in adoption of mobile banking services. Furthermore, Ram and Sheth

(2007) stated that it was not viable for consumers to change their way of performing their

banking tasks without offering a strong performance-to-price advantage. The price of banking

services may have an opposite effect with respect to the adoption of mobile banking, which may

result in consumers preferring the traditional banking services (Laukkanen et al., 2007). Users

agree to pay a reasonable fee to use this service; however this would depend on the banking and

service provider. Provision of a lower service cost is also a major benefit for users using mobile

banking and performing banking transaction functions through a mobile device; so the value for

money barrier may be another factor influencing the adoption of mobile banking services.

2.2.5 Device Features

The somewhat limited input and display capability of current mobile devices is seen as limiting

the use of mobile banking applications (Pousttchi & Schurig, 2004; Laukkanen, & Lauronen,

2005). For example, a mobile phones small screen cannot accommodate enough information

about an account, and scrolling up and down would be needed. However, the mobile phone

device itself may have little effect; Laukkanen (2007) found that when customers had experience

in using a mobile phone service, they did not stress the importance of screen size in the service,

but rather focused their attention on the spatial issues in the service consumption. Therefore

device features may not be an issue for bank customers when considering using mobile banking.

2.4 Empirical Review

A number of studies show that mobile banking has positive effects on bank productivity, banking

transaction, bank patronage, bank services delivery, customers services and bank services and

have positive effects on the growth of banking.

14
Agboola (2006) in his study on Information and Communication Technology (ICT) in Banking

operations in Nigeria using the nature and degree of adoption of innovative technologies; degree

of utilization of the identified technologies; and the impact of the adoption of ICT devices on

banks, found out that technology was the main driving force of competition in the banking

industry. During his study he witnessed increase in the adoption of ATMs, EFT, smart cards,

electronic home and office banking and telephone banking. He indicates that adoption of ICT

improves the banks image and leads to a wider, faster and more efficient market. He asserts that

it is imperative for bank management to intensify investment in ICT products to facilitate speed,

convenience, and accurate services, or otherwise lose out to their competitors.

Tiwari, Buse and Herstatt (2006) studied mobile banking as business strategy, impact of mobile

technologies on customer behavior and its implications for banks. The study sought to examine

the opportunities for banks to generate revenues by offering value added; innovative mobile

financial services while retaining and even extending their base of technology to understanding

customers. Shirley and Sushanta (2006) studied the impact of information technology on the

banking industry and analyzed both theoretically and empirically how information technology

related spending can affect bank profits via competition in financial services that are offered by

the banks. Using a panel of 68 US banks for a period of over 20 years to estimate the impact of

IT on profitability of banks, they found out that though IT might lead to cost saving, higher IT

spending can create network effects lowering bank profits.

Donner and Tellez (2008) did a study on mobile banking and economic development where they

sought to link adoption, impact, and use. The study established that through offering a way to

lower the costs of moving money from place to place and offering a way to bring more users into
15
contact with formal financial systems, m-banking/ m-payments systems could prove to be an

important innovation for the developing world. However, the true measure of that importance

required multiple studies using multiple methodologies and multiple theoretical perspectives

before answering the questions about adoption and impact.

Malhotra and Singh (2009) in their study on the impact of internet banking on bank performance

and risk found out that on average internet banks are larger, more profitable and are more

operationally efficient. They also found that internet banks have higher asset quality and are

better managed to lower the expenses for building and equipment and that internet banks in India

rely substantially on deposits. They further found out that smaller banks that adopt internet

banking have been negatively impacted on profitability.

Ching et. al., (2011) studied the factors affecting Malaysian mobile banking adoption from the

point of an empirical analysis. This study aimed at extending the Technology Acceptance Model

(TAM) to investigate mobile banking acceptance in Malaysia. More specifically, the objective of

this study was to examine the relationships between constructs of perceived usefulness,

perceived ease of use, social norms, perceived risks, perceived innovativeness, and perceived

relative advantages towards behavioural intention in adopting mobile banking. The findings of

this study revealed that perceived usefulness, perceived ease of use, relative advantages,

perceived risks and personal innovativeness were the factors affecting the behavioural intention

of mobile users to adopt mobile banking services in Malaysia. Meanwhile, the social norms were

the only factor found to be insignificant in this study.

Tchouassi (2012) sought to find out whether mobile phones really work to extend banking

services to the unbanked using empirical Lessons from Selected Sub-Saharan Africa Countries.
16
This study sought to discuss how mobile phones could be used to extend banking services to the

unbanked, poor and vulnerable population. The study noted that poor, vulnerable and low-

income households in Sub-Saharan Africa (SSA) countries often lacked access to bank accounts

and faced high costs of conducting basic financial transactions. The mobile phone presented a

great opportunity for the provision of financial services to the unbanked. In addition to

technological and economic innovation, policy and regulatory innovation was needed to make

these services a reality.

Al-Jabri (2012) studied mobile banking adoption in Saudi Arabia by looking at the application of

diffusion of innovation theory. This study sought to investigate a set of technical attributes and

how they influence mobile banking adoption in a developing nation, like Saudi Arabia. The study

used diffusion of innovation as a base-line theory to investigate factors that may influence

mobile banking adoption and use. The findings suggested that banks, in Saudi Arabia, should

offer mobile banking services that are compatible with various current users' requirements, past

experiences, lifestyles, and beliefs in order to fulfill customer expectations. This study was useful

in understanding and analyzing the effect of the volume of mobile transactions on the financial

performance of commercial banks.

Wambari (2009) studied mobile banking in developing countries using a case of Kenya. This

study sought to establish the importance of mobile banking in the day to-day running of small

businesses in Kenya and to understand the challenges involved in using m-banking as a business

tool and appreciate the advantages and disadvantages there in. The study elaborated that the

adoption and use of mobile phones is a product of a social process, embedded in social practices

such as SMEs practices which leads to some economic benefits.

17
Munaye (2009) studied the application of mobile banking as a strategic response by equity bank

Kenya limited to the challenge in the external environment. He also reviewed the concept of

mobile banking as a strategic response where its effects on financial performance were not

considered. Kigen (2010) studied the impact of mobile banking on transaction costs of

microfinance institutions where he found out that by then, mobile banking had reduced

transaction costs considerably though they were not directly felt by the banks because of the then

small mobile banking customer base. He sought to determine the impact that mobile banking

bore on transactional costs of microfinance institutions.

Kingoo (2011) studied the relationship between electronic banking and financial performance of

commercial banks in Kenya where he paid keen attention on the microfinance Institutions in

Nairobi. He actually looked at the wider electronic banking. According to Koivu (2012) uptake

of mobile phone in Kenya has been unprecedented. Mobile banking in Kenya affects

performance of organization, behaviour and decision making of the entire economy. The trend of

continued reliance on mobile devices to execute monetary transaction is steadily gaining

momentum. Mobile banking is one innovation which has progressively rendered itself in

pervasive ways of cutting across numerous sectors of economy and industry.

Zift (2006) carried a study that showed that many users of mobile phones were not aware of the

existence of mobile banking services being offered by MFIs while others found online bank sites

being complex as the reasons why consumers were reluctant to take advantage of mobile

banking services.

18
2.5 Summary of Literature Review
From the empirical literature discussed, globally some scholars were not in agreement that

mobile banking has an impact on profitability of commercial banks as they noted that high

spending on technological innovations by commercial banks can lower bank profits especially if

the rate of adoption by users is not that fast. Also excessive competition in the banking industry

was seen to increase the probability of excessive risk taking by banks which in the end may

affect their financial performance. In the local context, researchers reviewed the impact of

mobile banking on performance of commercial banks, SMEs and micro finance institutions,

where they agreed that mobile banking had an impact on performance of these financial

institutions but they did not look at the profitability aspects of commercial banks. Following

these mixed findings on the impact of mobile banking on financial performance of commercial

banks, this study aims to bridge this gap by looking at the shift in mobile banking products and

services at Equity bank in Kenya.

19
 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction
This chapter focuses on the methods of data collection and analysis. It highlights the research

design, study population, data collection and data analysis.

3.2 Research Design

This study embraced a case study design where quantitative data was collected. Kothari (2004)

describes case study as a comprehensive study of a social unit be that unit a person, a group, a

social institution, a district or a community. This research design was appropriate for this study

since the unit of study was Equity bank.

3.3 Study population

The population of interest for the study comprised all customers of Equity bank in Mombasa

County. Equity bank has four branches in Mombasa County; Digo road, Moi avenue, Abdel

Nasser road and Changamwe.

3.4 Sample and Sampling Techniques

The sample frame for the study was all customers of Equity Bank who have been patronizing the

services of the bank for at least one year. Owing to the fact that, the population of all customers

of Equity bank was too large and was unknown to the researchers at the time of the study, one

hundred and fifty (150) sampled customers were selected from all the branches in Mombasa

County. These branches were selected due to the fact that, they were accessible to the

researchers. The choice of this sample size was based on purposive sampling. Purposive

sampling technique as a non-probability sampling was used as the technique for the research.

20
This method was selected to enable the researchers to target specific customers of Equity Bank

who were in a position to provide the information needed for the study.

3.5 Data Collection

The study used both primary and secondary data to achieve the research objectives. The research

team designed a questionnaire for customers of the sampled Equity Bank branches in Mombasa

County. Both closed and open ended questions were used for the study. The questionnaire

comprised of three sections: section A looked at demographics of the respondents, section B

focused on mobile banking services usage while section C concentrated on the determinants of

mobile banking services. Secondary sources of data collection were obtained for additional

information. The study relied on both unpublished and published data such as, articles from

journals and the internet which is related to the topic. Sources of all secondary data were duly

acknowledged at the reference section of the research.

3.6 Data Analysis

Descriptive statistics such as frequency distribution was used to assess the demographic profile

of the respondents to make the analysis more meaningful, clear and easily interpretable.

Descriptive statistics allow the researchers to present the data acquired in a structured, accurate

and summarized manner. The analysis of data was done with the help of the statistical software

of Statistical Package for Social Sciences (SPSS). Regression analysis was done to establish the

relationship between the determinants of mobile banking as the independent variables and

customer adoption of mobile banking services as the dependent variable. The regression model

used was as follows:

21
Y = 0 + 1 X1 + 2 X2 + 3 X3 + 4 X4 + 5 X5 + 6 X6 + 7 X7 +

Where:

Y = Adoption of mobile banking services

0 = constant: It defines the level of adoption of mobile banking services without inclusion of

the predictor variables

1 5 = regression coefficients

X1 = Perceived usefulness

X2 = Simplicity

X3 = Compatibility

X4 = Social influence

X5 = Self-efficacy

X6 = Financial cost

X7 = Credibility

= Unexplained variables i.e. error term, it represents all the factors that affect the dependent

variable but are not included in the model either because they are not known or difficult to

measure.

22
 CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION

4.1 Introduction

The objectives of this study were to establish the extent of adoption of mobile banking services

among bank customers and to determine the shift in banking products and services as a result of

introduction of Equitys Equitel in the Kenyan banking sector. The first part of the chapter

presents the demographic characteristics of the respondents. Secondly, the mobile banking usage

of respondents was also discussed. The last part discussed the determinants of mobile banking

usage of customers in Equity bank Limited.

4.2 Data Analysis

Out of the targeted 150 customers, 135 responded to the questionnaires giving a response rate of
90%. This was deemed appropriate for the purpose of this study.

4.2.1 Respondents Demographic Characteristics

The demographic details showed the gender, age and occupation of the respondents. These are

shown in the table below.

Table 4.1: A cross-tabulation of gender & mobile banking usage

Respondents
Gender Users Non-users Total
Male 41 52 93
Female 14 28 42
Total 55 80 135
Source: Research data (2016)

As reflected in Table 4.1 above, ninety three (93) of the entire respondents were males and fifty

seven (42) were females. This indicated that there were more male respondents than female. It

also indicates that fifty five (55) customers out of the total population were using mobile banking

services while eighty (80) were non-users.

23
Table 4.2: A cross-tabulation of age of respondents & their mobile banking usage

Age of Respondents

Below 20 21 30 31 40 41-50 51 years Total

years years years years and above
Mobile banking 1 18 24 10 2 55
users
Mobile banking non- 2 36 25 12 5 80
users
Total 3 54 19 22 7 135
Source: Research data (2016)

Table 4.2 unveiled the age groups of the respondents included in the study. Three (3)

respondents fell within the lowest age group which was below 20 years while the majority of the

respondents (54) were between the ages of 21 - 30, with nineteen (19) respondents indicating 31

to 40 as their age group range. Another set of twenty two (22) respondents fell within the age

group between 41 to 50 and only seven (7) of the respondents were over 51 age group. The study

showed that, respondents between the ages of 21 - 30 were in the dominant group.

Table 4.3: A cross-tabulation of occupation & mobile banking usage

Occupation of Respondents
Student Employed Self-employed Others Total

Users of m-banking 10 35 10 0 55
Non- users of m-banking 22 43 15 0 80
Total 32 78 25 0 135
Source: Research data (2016)

The study revealed that, the highest respondents were employed with seventy-eight (78)

respondents, followed by the students with thirty-two (32) of respondents, the remaining twenty-

five (20) were self-employed persons.

24
4.3 Level of Consumer Knowledge about Mobile Banking

The study went further to investigate the level of consumer knowledge about mobile banking

servicers among Equity bank customers. The findings are tabulated below.

Table 4.4: Consumers knowledge and usage of mobile banking

_______________________________________________________________________
Consumers knowledge and Frequency Percentage
usage of mobile banking
_______________________________________________________________________
Have you heard of mobile banking before?

Yes 100 74.1

No 35 25.9

Total 135 100.0

Do you own a mobile phone?

Yes 135 100

No 0 0

Total 135 100

Do you use mobile banking services?

Yes 55 40.7

No 80 59.3

Total 135 100.0

____________________________________________________________________________
Source: Research data (2016)

As shown in Table 4.4, majority of the customers of Equity Bank included in the study, 74.1%

(100) have heard of mobile banking facility as well as the benefits they could derive from using

this innovation. Customers indicated that Equity Bank has used different means of advertisement

such as radio, bill boards, newspapers and even TV in conveying their messages to their

customers but it is rather unfortunate that innovation is yet to be well embraced by the banks

customers.

25
The high rate of consumer knowledge about mobile banking indicated that, Equity Bank is

making possible efforts to inform their customers about mobile banking services. Though a lot of

people claim to have heard of mobile banking services, when compared to the rate of adoption of

current users of the services this was rather very low. This shows that, consumers attitude

towards mobile banking in Equity Bank is low with the way the innovation is embraced.

4.4 Factors influencing Consumer Adoption of Mobile Banking Service at Equity Bank

In finding out the shift in mobile banking services at Equity bank the study investigated the

factors influencing the consumer adoption of mobile banking. These factors included usefulness,

simplicity, compatibility, social influence, self-efficacy, financial cost and credibility of mobile

banking service.

4.4.1 Usefulness of Mobile Banking Service and its Impact on Usage

Table 4.5: A cross-tabulation of usefulness & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 50 45 95
No 5 35 40
Total 55 80 135
Source: Research data (2016)

From the results above (Table 4.5), responses elicited from the Equity Bank customers sampled

for the study unveiled that, majority of them (95) confirmed that, the usefulness of mobile

banking service is very important to their decision to use the service while fourty (40) indicated

that the usefulness of the self-service was not likely to influence their decision to use it. These

respondents were skeptical about the reliability of the usefulness of mobile banking service

having considered the issue of security.

26
4.4.2 Simplicity of Mobile Banking Service and its Impact on Usage

Table 4.6: A cross-tabulation of simplicity & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 39 70 109
No 16 10 26
Total 55 80 135
Source: Research data (2016)

Table 4.6 shows that majority (109) of the customers surveyed confirmed that ease of use is

important for their decision to adopt mobile banking service. These respondents acknowledged

that, their perception about the ease of use of this device helped their decision to use this service

having been informed about its advantages and disadvantage while twenty-six (26) of the

respondents strongly testified against the statement. The researchers concluded that, when an

innovation is easy to use consumers will adopt it. This finding therefore shows that, perceived

ease of use has a positive effect on consumer intention to adopt and use mobile banking services.

4.4.3 Compatibility of Mobile Banking Service and its Impact on Usage

Table 4.7: A cross-tabulation of compatibility & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 43 58 101
No 12 22 34
Total 55 80 135
Source: Research data (2016)

In measuring the compatibility of customers against mobile banking service usage at Equity

Bank, the results showed that, majority of the respondents (111) believed that, the services

provided through their banks using a mobile device must be compatible with their important

27
transaction needs before they can use the self-service. This is therefore saying that, when an

innovation is not compatible with an individuals need then, there might be no need to use it.

Nevertheless, another set of respondents summing up to thirty-nine (34) testified against the

issue being discussed (Table 4.7). The researchers therefore supported that compatibility has a

positive effect on consumer intention to adopt and use mobile banking.

4.4.4 Social Influence of Mobile Banking Service and its Impact on Usage

Table 4.8: A cross-tabulation of social influence & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 35 58 93
No 20 22 42
Total 55 80 135
Source: Research data (2016)

In the quest to find out the impact of social influence on customer adoption of mobile banking

services in Equity Bank, the responses obtained from the questionnaires revealed that, ninety

three (93) of the entire respondents included in the study considered the importance of social

influence with regards to their adoption of mobile banking services provided by Equity bank.

However, forty-two (42) respondents saw it in the negative direction and took a stand that social

influence could not in any way have an impact on their usage of mobile banking services Equity

bank renders. These findings showed that, consumers can be influenced by people they know

after finding out the benefits they could derive from using a particular service.

4.4.5 Self-Efficacy of Mobile Banking Service and its Impact on Usage

28
Table 4.9: A cross-tabulation of self-efficacy & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 42 63 105
No 13 17 30
Total 55 80 135
Source: Research data (2016)

Analysis with regards to self-efficacy of mobile banking service and its impact on usage revealed

that, as many as one hundred and five (105) of respondents indicated that, their previous use of

electronic device could make develop interest in using mobile banking facilities (Table 4.9).

Negatively, thirty (30) of another set of respondents believed that, this would not influence their

decision to use mobile banking services. From the results it could be seen clearly that, majority

of the respondents strongly affirm to the issue being investigated. The conclusion therefore

drawn by the researchers was that, self-efficacy of a mobile banking service could have an

influence on customers decision towards the adoption of the service.

4.4.6 Financial Cost of Mobile Banking Service and its Impact on Usage

Table 4.10: A cross-tabulation of financial cost & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 52 68 120
No 3 12 15
Total 55 80 135
Source: Research data (2016)

Results from the questionnaires administered revealed that, a total number of one hundred and

twenty (120) respondents strongly testified that, financial cost of using mobile banking service

29
would have no impact on their decision towards the adoption and use of the service provided by

Equity Bank. This means that, some customers were willing and would not mind the stress of

going for branch-based transaction if the cost is high. On the contrary, another set of fifteen (15)

respondents were discouraged by the cost of using mobile banking services and to them it was

too high, even if it is useful they will still not adopt the innovation (Table 4.10). Where the costs

are low, this will encourage greater usage of the service. The researchers deduced from the

results obtained that, most of the respondents who were office workers who did not see cost as an

issue could probably mean that, they earn substantial or above the minimum wage which could

have made it possible for them to afford the service. Basically, this research finding shows that

perceived financial cost has a negative effect on consumer intention to adopt and use mobile

banking services of Equity bank.

4.4.7 Credibility of Mobile Banking Service and its Impact on Usage

Table 4.11: A cross-tabulation of credibility & mobile banking usage

Respondents
Responses Users Non-Users Total

Yes 50 60 110
No 5 20 25
Total 55 80 135
Source: Research data (2016)

Findings from the responses gathered from the questionnaires administered to the sampled

customers of Equity bank revealed that, as many as one hundred and ten (110) respondents do

consider security and privacy as an issue before applying to use mobile banking service (Table

4.11). Twenty five (25) of another set of respondents do not consider security and privacy as an

issue before applying to use mobile banking service. The researchers concluded that, credibility

of an innovation, such as the mobile banking service rendered by Equity bank do have an impact

on the customer adoption of a mobile banking services.

30
4.5 Regression Analysis

In order to understand the relationship between level of adoption of mobile banking services at

Equity bank and mobile banking determinants, a regression analysis was performed. The

dependent variable was adoption of mobile banking services by the customers while the

independent variables were perceived usefulness, simplicity, compatibility, social influence, self-

efficacy, financial cost and credibility. The results are presented on Tables 4.12, 4.13 & 4.14.

Table 4.12 Regression Model Summary

Model Summary
Std. Error of the
Model R R Square Adjusted R Square Estimate
1 .754a .569 .138 .468
a. Predictors: (Constant), perceived usefulness, simplicity, compatibility, social
influence, self-efficacy, financial cost, credibility
Source: Research data (2016)

Table 4.12 shows that the coefficient of correlation (R) is positive 0.754. This means that there is

a positive correlation between adoption of mobile banking services and factors influencing the

adoption of mobile banking services. The coefficient of determination (R Square) indicates that

56.9% of the increase in the adoption of mobile banking services by Equity bank customers is

influenced by the determinants of mobile banking. This leaves 43.1% to be influenced by other

factors.

Table 4.13 ANOVA

31
 ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 1.449 5 .290 1.321 .038a
Residual 1.097 130 .219
Total 2.545 135
a. Predictors: (Constant), perceived usefulness, simplicity, compatibility, social influence,
self-efficacy, financial cost, credibility
b. Dependent Variable: Adoption of mobile banking services
Source: Research data (2016)

Table 4.14 Regression Coefficients

Coefficientsa
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 2.374 3.882 .611 .568
Perceived usefulness .651 .389 .884 .902 .001
Simplicity .328 .315 .392 .039 .002
Compatibility .739 .421 .157 .360 .004
Social influence .134 .358 .352 .951 .003
Self-efficacy .535 .073 .054 .251 .000
Financial cost -.440 .550 -.108 -.245 .001
Credibility .589 .074 .347 .801 .000
a. Dependent Variable: Adoption of mobile banking services
Source: Research data (2016)

Table 4.13 shows the Analysis of Variance (ANOVA). The p-value is 0.038 (ANOVA table)

which is < 0.05. This implies that the independent variables are predictors of the dependent

variable. From the regression coefficients table (4.14) the regression model can be derived as

follows:

Y = 2.374 + 0.651X1 + 0.328X2 + 0.739X3 + 0.134X4 + 0.535X5 - 0.440X6 + 0.589X7 +

32
The results in table 4.14 indicate all the variables have a positive effect on adoption of mobile

banking services except financial cost. The most influential variable is compatibility with a

regression coefficient of 0.739 and a P-value of 0.004. Perceived usefulness follows with a

regression coefficient of 0.651 and a P-value of 0.001. Next is credibility with a regression

coefficient of 0.589 and P-Value of 0.000 followed by self-efficacy with 0.535 and p-value of

0.000. Simplicity had a coefficient of 0.328 (p-value 0.002), social influence 0.134 (p-value

0.003) and financial cost a coefficient of -0.440 (p-value 0.001).

33
 CHAPTER FIVE: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS
5.1 Introduction

The purpose of this study was to establish the shift in mobile banking products and services as a

result of the introduction of Equity banks Equitel in the Kenyan banking sector. The specific

objectives were to establish the extent of adoption of mobile banking services among Equity

bank customers and the shift in banking products and services as a result of introduction of

Equitel in the Kenyan banking sector. This chapter presents a summary of the findings,

recommendations based on the findings of the study, suggestions for further research and the

conclusions drawn from the study

5.2 Summary of findings

5.2.1 Extent of adoption of mobile banking services among Equity bank customers

The findings of this study showed that, consumers were yet to embrace this innovation of Equitel

due to many factors which have been described in the research. This also showed that, being

informed alone is not enough to persuade customers to use the self-service but this had to do

with their behavioural intention to adopt the service. The awareness created by Equity Bank to

persuade customers was very important and the level of knowledge gained through various

means of advertisement could not be over emphasized in helping to facilitate their decision in the

adopting mobile banking services and this has been equally stated in the findings of researchers

in the past.

5.2.2 Factors influencing adoption of mobile banking services at Equity bank

Secondly, the research also looked at the factors which influence the consumers to adopt the use

of mobile banking services and the framework was used to analyze this. The proposed research

framework developed were perceived financial cost, social influence, perceived credibility,

34
perceived usefulness, perceived ease of use, perceived self-efficacy, compatibility and

awareness. All these factors had some level of significant effect on consumer adoption rate in

Equity Bank. Looking at the research framework it was observed that, two factors serve as a

major drawback for consumer adoption of mobile banking services in Equity Bank. From this

research finding, perceived credibility (security and privacy) and perceived financial cost were

the major drawbacks while social influence, perceived usefulness, associated reward, perceived

self-efficacy, compatibility, awareness and perceived ease of use are seen as determinants of

mobile banking adoption in Equity Bank. The research findings were consistent with the findings

of other researchers such as Luarn and Lin (2005), Min, Ji and Qu (2008) and Laforet and Li

(2005). This research was able to confirm that, there exists a relationship between compatibility

and perceived usefulness because the perception that an innovation (mobile banking) is

compatible with an individuals need lead to the thought of its usefulness. Perceived credibility

(security and privacy) was seen as a major challenge for providers as this was asserted by

Langendoerfer (2000). These findings showed that perceived credibility had a stronger effect on

consumers behavioural intention to use mobile banking than Technology Acceptance Model

(TAM) variables (perceived usefulness and perceived ease of use) as claim by Luarn and Lin

(2005) and this was also in line with the critical success factor pointed out for mobile commerce

which was highlighted by Langendoerfer (2000) that, credibility can be a setback for the system.

The research showed that for customers of Equity Bank who have previous experience in using

related technological device (internet banking) must have gained more confidence in their past

usage of similar services and could have been the reasons for their decision to use the service and

equally, few customers (users) are were willing to overlook the issues of security & privacy and

financial cost and to take advantage of the benefit associated with mobile banking service.

Majority of the non-users were able to confirm that, security and privacy and the cost were their
35
major concern for not using the service. From the research findings, it was observed that, there

exist a positive relationship between compatibility and perceived usefulness. When an innovation

is seen as been compatible with an individual transaction or business needs then it leads to the

thought of its usefulness by the customers. This research work is valid, useful and could arguably

be used by other researchers and mobile banking operators in Kenya to improve the rate of

adoption on the usage of mobile banking in Kenya.

5.2.3 Relationship between level of adoption and mobile banking factors

The results indicate that all the mobile banking variables have a positive effect on the level

adoption of mobile banking services except financial cost. The most influential variable was

compatibility followed by perceived usefulness, credibility, self-efficacy, simplicity, social

influence and financial cost. The findings show that Equity bank customers consider all these

factors before subscribing to the mobile banking services. Financial cost of the mobile banking

services however had a negative impact on the level of adoption.

5.3 Conclusions

Mobile technology is changing rapidly in Kenya and firms that are able to adapt quickly are

likely to benefit more. The introduction of Equitel has had an impact on the shift in the mobile

banking services offered to customers in the banking sector. Due to its low charges, Equitel has

been able to penetrate the mobile banking market at a fast rate. The huge potential of growth due

to Equitys bank large customer base should also worry the competitors such as Safaricom.

From the study it can be concluded that, mobile banking service adoption rate is very low with

customers of Equity Bank. However, when it comes to all the factors that can influence the

adoption and usage of mobile banking services, majority of the respondents included in the study

36
attested to the findings that all the factors as reviewed from the analysis such as awareness,

usefulness, simplicity, compatibility, self efficacy and creditability of mobile banking service can

have an influence on their adoption and usage of the service.

5.4 Recommendations

It is evident that Equity Bank (Kenya) Limited has invested and still continue to invest in

delivery channel technologies and they are clearly benefiting in terms of performance. The study

however noted that the bank had not invested sufficiently in creating awareness and educating

the customers on their different technologies, their use and benefits. The study recommends that

the bank should invest more on the same so as to ensure that the existing customers make more

use of the delivery channel technologies and new customers can be made aware of the

technologies available at the bank and how they can be beneficial to them. The bank will in turn

be able to reap more in terms of customer base and gain competitive advantage in the industry

This study also recommends that the commercial banks and mobile phone operators in Kenya

should partner in order to come up with more innovative and affordable mobile banking products

and services. This will ensure that a large number of Kenyans who are not using mobile banking

services are also brought on board.

The government of Kenya through the regulatory agencies should also come up with policies to

create a level playing field for all operators to avoid monopoly in the sector. This will allow

more firms to enter the sector, lower the transaction charges and encourage greater financial

inclusion.

37
Attention should be given to students in educational institutions as they consist of a larger

population of the country due to their favourable attitude towards new innovation and this is also

evident that the majority of them are using the equitel service. Equally, the banks staff should be

trained and be knowledgeable about how to use the self-service so as to provide support for

customers. The effectiveness and efficiency of mobile banking service in the bank will reduce

manpower and reduce the congestion at the banking hall. The higher the number of customers

that use mobile banking services at a reduced price, the higher the return on investment for

banks. The banks need to visit tertiary institutions and make the benefit known to students

through seminars, conferences etc, which is likely to increase their customer base and also

activate intending users to use mobile banking service since there is high significant number of

mobile phone users in this category. Equally, more attention should be given to the office

workers having shown a positive attitude towards the innovation which gives them access to the

service anytime and anywhere. It is also suggested that, banks should channel their attention

towards this categories of customers in order to increase mobile banking adoption in Kenya.

5.5 Limitations of the Study

A limitation for the purposes of this research project was regarded as any factor that affected or

could have affected the attainment of research objectives. The major limitation was that being a

case study the unit of analysis was one organization and thus the findings may not be applicable

to other organizations as there are no two organizations that are similar.

5.6 Suggestions for Further Research

There is need to conduct a study to quantify the impact of delivery channel technologies in terms

of figures and costs, so as to indicate how much is saved by use of the technologies and whether

the benefits of the delivery channel technologies translate into profits for the banks. The research

will assist in determining whether the cost of investing on the delivery channel technologies is
38
financially feasible and whether banks or organizations in general should invest heavily on

technology. There is also need to conduct a comparative study between the current delivery

channel technologies and the brick and mortar delivery channels in terms of financial

performance.

39
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 APPENDICES
Appendix I: Questionnaire

Declaration: This is an academic research project aimed at establishing the shift in mobile
banking services at Equity Bank. There is no right or wrong answer and any information given
will be held in confidence for academic use only. Thank you in advance for taking your valuable
time to participate.

Part A: Demographic Information

1. Name of customer: ............................................................................ (Optional)
2. Gender of respondent: (please tick one)
Female ( )
Male ( )

3. Age of the respondent: (please tick one)

Below 20 years ( )
20 30 years ( )
31 40 years ( )
41 50 years ( )
51 years and above ( )

4. Occupation: (please tick one)

Student ( )
Employed ( )
Self-employed ( )
Others (please specify): ................................................

Section B: Level of Consumer Knowledge about mobile banking

5. Have you heard of mobile banking before?

Yes ( )

No ( )

6. Do you own a mobile phone?

Yes ( )

No ( )

44
7. Do you use mobile banking services?

Yes ( )
No ( )

Section C: Factors influencing adoption of mobile banking services

8. Please indicate whether you agree or disagree that the following factors are important in your
decision to use mobile banking services offered by Equity bank.
Yes No
Perceived usefulness of the service to the customer ( ) ( )

Simplicity (ease of use) ( ) ( )

Compatibility (compatible with the customers bank transaction needs) ( ) ( )

Social influence (opinions of friends, parents, relatives etc) ( ) ( )

Self-efficacy (how well one can execute courses of action) ( ) ( )

Financial cost of using the service ( ) ( )

Credibility (privacy & security) ( ) ( )

Awareness (level of information consumers have on mobile banking) ( ) ( )

45