EFFECTS OF ICT ADOPTION ON SERVICE QUALITY IN COMMERCIAL

BANKS. A SURVEY OF COMMERCIAL BANKS IN ELDORET TOWN

BBU/2009/14

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF DEGREE OF BUSINESS
MANAGEMENT (FINANCE AND BANKING OPTION)

UNIVERSITY OF ELDORET

May 2017
ii
 DEDICATION
I dedicate this research project to my parents for their support, encouragements and
understanding.

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 ACKNOWLEDGEMENT
This research project is a result of support from several sources; first I would like to give praise
and honor to the almighty God for giving me sufficient grace and power to write this project. I
would also like to thank my supervisors Benjamin Sang whose comments and advice was quite
useful to me many thanks goes to my friends for they all gave me the motivation that was key to
my achievements in writing this project.

ABSTRACT
The purpose of the study was to investigate the effects of ICT adoption on service quality in
commercial banks in Eldoret town. The study was a guide by the following objectives, to find out
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the effects of internet banking on service quality in commercial banks, to asses the effects of
mobile banking on service quality in commercial banks, to find out the use of ATM on service
quality in commercial banks and to investigate the effect of electronic fund transfer on service
quality in commercial Banks. The study was based on diffusion theory which includes the
generation, development, and implementation of new ideas or behaviors. Research design
employed was a survey of commercial banks at headquarters the target population was 132
respondents from the 9 commercial banks. Questionnaires were used in collecting data it was
administered for validity. Data was coded, analyzed using descriptive statistics and it was
presented in form tables with frequency and percentages table. The study revealed that there was
a relationship between ICT adoption and customer service delivery. Finding indicated that
Commercial bank had service provider from mobile subscriber like safaricom, Orange, Zain, and
YU which help customers check their accounts balance, statement using mobile phone. Finding
on effect of Mobile banking, customer were using M-pesa services and branchless banking; this
was an indication that it helps the customer to avoid delays and inconveniences. Customers with
account holder were encouraged to have ATM whenever they open account; the advantage of it
was faster, paperless and convenient at time. There was use electronic fund transfer; Money can
be sent or received using various types of EFT. From the study it can be concluded that Internet
banking had a relationship on service quality Commercial bank had service provider from
Orange, Zain, YU and safaricom and therefore they had internet connection which was used as
communication channel between banks and customers. The study recommended that Mobile
banking such as M-PESA, Zap, and YU-cash. The commercial bank should encourage the use of
agent banking (branchless) service which provides access to the bank 24 hours a day, 7 days a
week anywhere you may be. Further area of study can be done on the effect of regulating
transformational branchless banking mobile phones and other technology to increase access to
finance.

TABLE OF CONTENTS

DECLARATION..........................................................................................................................ii

DEDICATION.............................................................................................................................iii

ACKNOWLEDGEMENT..........................................................................................................iv
v
ABSTRACT..................................................................................................................................v

TABLE OF CONTENTS............................................................................................................vi

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

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

LIST OF ABBREVIATIONS.....................................................................................................xi

DEFINATION OF TERMS.......................................................................................................xii

CHAPTER ONE...........................................................................................................................1

1.1 INTRODUCTION OF THE CHAPTER..............................................................................1

1.2 BACKGROUND OF THE STUDY.......................................................................................1

1.3 STATEMENT OF THE PROBLEM.....................................................................................4

1.4 PURPOSE OF THE STUDY.................................................................................................4

1.4.1 RESEARCH OBJECTIVES...............................................................................................4

1.4.2 RESEARCH QUESTIONS.................................................................................................5

1.5 SIGNIFICANCE OF THE STUDY.......................................................................................5

1.6 JUSTIFICATION OF THE STUDY.....................................................................................5

1.7 LIMITATIONS.......................................................................................................................6

1.8 DELIMITATION OF THE STUDY.....................................................................................6

1.9 SCOPE OF THE STUDY.......................................................................................................6

1.10 ASSUMPTION OF THE STUDY........................................................................................6

1.12 CONCEPTUAL WORK......................................................................................................7

CHAPTER TWO..........................................................................................................................8

LITERATURE REVIEW............................................................................................................8

2.1 THEORETICAL REVIEW...................................................................................................8

2.1.1 INNOVATION DIFFUSION THEORY............................................................................8

2.3 EMPIRICAL REVIEW.........................................................................................................9

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2.2.1. EFFECT OF INTERNET BANKING ON SERVICE QUALITY ON COMMERCIAL
BANKS........................................................................................................................................10

2.2.2. THE EFFECT OF MOBILE BANKING ON SERVICE QUALITY IN

COMMERCIAL BANKS...........................................................................................................12

2.2.3 USE OF ATM AND ITS AFFECTS ON SERVICE QUALITY ON COMMERCIAL

BANKS........................................................................................................................................13

2.2.4 EFFECTS OF ELECTRONIC FUND TRANSFER ON SERVICE QUALITY IN

COMMERCIAL BANKS...........................................................................................................15

2.4 SUMMARY...........................................................................................................................15

CHAPTER THREE....................................................................................................................17

RESEARCH DESIGN AND METHODOLOGY.....................................................................17

3.1 INTRODUCTION................................................................................................................17

3.2 RESEARCH DESIGN..........................................................................................................17

3.3 TARGET POPULATION....................................................................................................17

3.4 STUDY AREA......................................................................................................................18

3.5 SAMPLE SIZE AND SAMPLE DESIGN...........................................................................18

3.5.1 SAMPLE SIZE...................................................................................................................18

3.5.2 SAMPLE DESIGN............................................................................................................19

3.6 DATA COLLECTION INSTRUMENTS...........................................................................19

3.6 DATA COLLECTION PROCEDURE...............................................................................20

3.7 RELIABILITY AND VALIDITY OF INSTRUMENTS...................................................20

3.7.1. VALIDITY........................................................................................................................20

3.7.2. RELIABILITY..................................................................................................................20

3.8 DATA COLLECTION PROCEDURES.............................................................................20

3.9 DATA ANALYSIS AND PRESENTATION......................................................................20

3.10 ETHICAL CONSIDERATIONS.......................................................................................21

CHAPTER FOUR:.....................................................................................................................22
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DATA ANALYSIS, PRESENTATION AND INTERPRETATION......................................22

4.1. INTRODUCTION...............................................................................................................22

4.1 DEMOGRAPHIC CHARACTERISTICS..........................................................................22

4.1.1 GENDER............................................................................................................................22

4.1.2 AGE OF RESPONDENT RESPONSE............................................................................22

4.1.4 LENGTH IN BANK OF RESPONDENT........................................................................23

4.1.6 INTERNET BANKING.....................................................................................................24

4.1.7 MOBILE BANKING.........................................................................................................26

4.1.8 ATM SERVICES...............................................................................................................28

4.1.9 ELECTRONIC FUND TRANSFER................................................................................30

CHAPTER FIVE........................................................................................................................32

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS.....................32

5.1 INTRODUCTION................................................................................................................32

5.2 SUMMARY OF THE FINDINGS.......................................................................................32

5.3 CONCLUSION.....................................................................................................................33

5.4 RECOMMENDATION........................................................................................................34

5.5 SUGGESTION FOR FURTHER STUDY..........................................................................35

REFERENCES...........................................................................................................................36

APPENDIX 1: QUESTIONNAIRE..............................................................................................40

LIST OF TABLES
TABLE 3.1 TARGET POPULATION...............................................................................................18

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 TABLE 3.2 SAMPLE SIZE...........................................................................................................19
TABLE 4.1 GENDER OF RESPONDENT........................................................................................22
TABLE 4.2 AGE OF RESPONDENT RESPONSE..............................................................................23
TABLE 4.3 LEVEL OF EDUCATION OF RESPONDENT..................................................................23
TABLE 4.4 LENGTH IN BANK OF RESPONDENT..........................................................................24
TABLE 4.5 INTERNET BANKING.................................................................................................24
TABLE 4.6 MOBILE BANKING....................................................................................................26
TABLE 4.7 ATM SERVICES.......................................................................................................28
Table 4.8 Electronic Fund Transfer Respondent.......................................................................30

LIST OF FIGURES
Figure 2.1 showing Conceptual Framework...................................................................................7

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 LIST OF ABBREVIATIONS
ATM: – Automated Teller Machine

EFT : Electronic Fund Transfer

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EPOS: – Electronic Point of Sales System

ICT: – Information Communications Technology

IS :– Information System

IT: – Information Technology

MIS – Management Information System

PC: – Personal Computer

R & D: – Research and Development

RTGS: Real Time Gross Settlement

SPSS: Statistical Programme for Social Sciences

SWIFT: Society for Worldwide Interbank Financial

WWW: – World Wide Web

DEFINATION OF TERMS
Customer Service: A term that describes all the supplementary services provided by an
organization to satisfy customers and combat competitors such as technical
assistance and information, order taking, complaint handling, refunds or
substitutions.

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Customer Satisfaction: Customer satisfaction involves determining the degree to which
equipment has reached individuals expectation.

Quality: Fitness for use, freedom from deficiencies, meeting/exceeding customer’s expectation.

Target Market: A fairly homogenous (similar) group of customers to whom a company wishes
to appeal. The proposition of the total market that the organization has decided to
serve. A fairly homogenous (similar) group of customers to whom a company
wishes to serve. Which a company’s products and services meet the requirements of
the end user.

Commercial banks: It is an institution which accepts deposit, makes business loan and offer
banking services

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 CHAPTER ONE

INTRODUCTION OF THE STUDY

1.1 INTRODUCTION OF THE CHAPTER

1.2 Background of the Study

There is an intense debate in the literature regarding the effect of developing the information and
the communication technology (ICT) infrastructure on the pace of customer service delivery in
the banking sector (Baliamoune, 2004). A report of the World Bank (McNamara, 2003) outlines
that ICT development is not an end in itself, but rather a tool that can be used to increase the
capacity of poor and underdeveloped countries to accelerate economic development, to connect to
the world, and to increase the opportunities offered to their citizens (Hadidi, 2003). On the other
hand, the development of ICT has to be directed toward areas where it can create the maximum
economic and social effect; therefore, the ICT policy has to use a strategic approach, identifying
the main priorities at national and regional levels (Baliamoune, 2003).

The development of Internet Banking Application after 1995 in most developed countries has
revolutionized the distribution strategy of commercial banks and transformed the needs and wants
of customers (Mols, 1999). Hanna, (2004) suggested that high technology innovators should
strive to involve customers in the R & D process by inviting them to participate as early as
possible. This is consistent with the views of Radeck, Wenninger and Orlow (2007) that early
product development is most successful when the customer needs and wants drive the
technological characteristics of the product during the developmental phases. By adopting a
service perspective based on a relationship marketing approach the customer does not have to be
invited, but is, by definition, present in the process already and at its very early stages. This is in
fact what happened during the development of the Boeing 777 aircraft when the firm invited
United Airlines’ pilots, crews and even frequent flyers to be actively involved in the early stages
of the design of the aircraft. (Rogers . 2003).

Services have become a fundamental means of competition advantage and profit for firms, not
just in retailing and hospitality, but also in technology. It has become necessary for all types of
firms to understand the service processes. Service competition is partly customer-driven, partly
competition-driven, and partly technology-driven. Services are no longer add-ons to products
provided by a certain type of firms. Services have become an inherent part of all goods
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manufactured and can occur before manufacturing, during manufacturing as part of selling,
during consumption, and after consumption and usage. More importantly, service can be a
critical part of the value capture process within a functioning business model (Baliamoune, 2003).

During the past to decades the world’s high technology business community has witnessed an
unprecedented high growth and an overwhelming optimism, which seems to have turned into
either stagnation or decay. Markets have been growing at double-digit annual growth rates in
especially two areas: - Information and Communications Technology (ICT) and customer service.
ICT received a turbo-boost through the proliferation of the World Wide Web starting in 1989 but
reaching ultra-high speed around the mid 1990’s with the emergence of Electronic Commerce
(EC) and the resulting avalanche of small start-up IT companies pursuing success and wealth.
The later, biotechnology started in 1980 with the first Initial Public Offering (IPO) by Genentech
and experienced its first wave of success during the early 1980’s, only to meet its first decline
towards the end of the decade and then to jump-start the growth trend again by the mid-1990s.
( Kottler,2000).

Today, both sectors are in trouble again, which is due to an overestimation of what technology
can accomplish by it and a fundamental underestimation and ignorance of market dynamics
including customer needs, wants, fears and expectations. Market-orientation and the importance
of marketing for business success are not new. Kottler (2000) argued that the only purpose for a
business is to create a customer and that is achieved through marketing and innovations in this
particular order and that marketing is largely ignored because top management is wholly
transfixed by the profit promises of technological R&D (Kottler 2000).

Kottler (2000) also argues that product-orientedness in high technology works well where firms
are pushed into new frontiers where they did not necessarily have to find markets but to fill them.
It is almost ironic that these statements almost serve as tailored characterizations of what we can
observe a quarter of a century later within both ICT and customer service.

Buyer-seller relationships have always been at the heart of marketing and it seems obvious that
the field of marketing would be able to provide some solutions with respect to relationship
management with the help of ICT. Not surprisingly, there is a stream of marketing known as
relationship marketing often known as the Nordic School of thought. However, to our knowledge
ICT has yet attempted to apply this framework as a basis for managing high technology
innovations in a relational context (Kottler 2000).

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Relationship marketing has a different view, which is based on the understanding that services are
produced and consumed simultaneously in an ongoing process, i.e. process consumption
(Gronroos, 2000). As pointed out by Gronroos this means that “There is no gap between
production and consumption that needs to be closed as a separate activity or function. There is no
room for marketing’s traditional bridge-building role in this situation”. Marketing has to be
included into the system in a different way. “The heart of marketing services is how the service
process and service consumption process match each other, so that consumers and users perceive
good service quality and value and are willing to continue the relationship with the service
provider”. Thus, relationship marketing is a process concept, which includes three important sub-
processes: The interaction process, the dialogue process and the value process.

The interaction process is the core of relationship marketing consisting of four levels of
aggregation Kottler (2000), acts or actions, episodes, sequences and relationships. It is prudent for
an organization to maintain the customers it has. It is considerably more expensive to recruit a
new customer than it is to retain an existing one, and therefore many organizations are actively
seeking to improve the service they provide to their customers as part of their strategy to develop
long term customer relationships. An organization seeks to build customer loyalty through
satisfaction, which will in turn bring reduced costs and improved customer retention (Gronroos,
2000).
More recently in Kenya too, a wider array of financial products and services have become
available over the Internet (Malhotra and Singh, 2004), which has thus become an important
distribution channel for a number of banks. Banks boost technology investment spending strongly
to address revenue, cost and competitiveness concerns. For some activities, banks hope to see a
near-term impact on profitability. Other investments are motivated more by a desire to establish a
competitive position or avoid falling behind the competition. The purpose of present study is to
analyze such effects of Internet banking in Kenya, where no rigorous attempts have been
undertaken to understand this aspect of the banking business.

1.3 Statement of the Problem

Banking is one of the many service industries; characterized by high customer contact with
individually customized service solutions, where customer satisfaction has been an increasing
focus of research (Gilaninia et al, 2011) E-banking has been welcomed by many financial
institutions in recent years. With the rapid growth of information and communication

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technology, electronic banking has a central role in the field of electronic payment in the field of
online transactions to support many applications, such as electronic fund transfer, use of
automated teller machine (ATM), Web (internet), Mobile and point of sale (POS). (Ming, 2009)
acknowledges that as an application of the Internet, depends on information infrastructures and
telecommunications for its development.

According to market intelligence (2007), in the last 5 years, many financial institutions have
implemented advanced technological platforms, yet there is customer complaints, the number of
the customers have not increased instead the number is declining, making banks to be caught in
cut-throat competition that creates a huge problem in service delivery.

Although there is a growing body of literature dedicated to the analysis of the technical and
operational aspects of e-banking, there is little empirical research on topics relating to the factors
that would lead to the successful adoption of this emerging technological innovation and business
practice. Moreover, there is little empirical research to date that examines the success of e-
banking deployments in organizations once the technology has been adopted. However there are
some situations where financial institution fails to fulfill perceived usefulness of customer,
loyalties in terms of speed of transaction and lack of awareness and lead to customer
dissatisfaction. The study aims to investigate the effect of effects of ICT adoption on service
quality in commercial banks, a case of banks in Nairobi CBD.

1.4 Purpose of the Study

The purpose of the study was to investigate the effects of ICT adoption on service quality in
commercial banks in Eldoret town.

1.4.1 Research Objectives

The study was guided by the following objectives

i. To find out the effects of internet banking on service quality in commercial banks
ii. To asses the effects of mobile banking on service quality in commercial banks
iii. To find out the use of ATM on service quality in commercial banks
iv. To investigate the effect of electronic fund transfer on service quality in commercial
Banks

1.4.2 Research Questions

The specific Research Questions of the study are:-
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 i. What’s the effect of internet banking on service quality in commercial banks?
ii. How does mobile banking affect service quality in commercial banks?
iii. Does the use of ATM affects service quality in commercial banks?
iv. What is the effect of electronic fund transfer on service quality in commercial Banks

1.5 Significance of the Study

This study was of useful in the following ways:-
Financial institutions’ managers will use findings of the research to improve ICT and service
delivery in their institutions to improve their performance. The government will also beneficial in
that it formulate a policy that touches on ICT and customer service that guide the commercial
banking sector in setting standards to the benefit of the customers. Researchers and scholars
benefited from the study, as they used the findings of the study as a source of information.

The findings of the study will help the management of commercials Banks to identify factors that
are critical to the ICT and customer service that boosted their performance.

The research findings provided the customers with ICT information that will be useful to retrieval
and use of their banking information.

1.6 Justification of the Study

The researcher`s knowledge, there seems to be a gap in the studies that have been conducted in
the past in these area. This study reveals new insights on the actual performance of the financial
institutions that uses online businesses.
The findings will also validate and disapproves some of the empirical evidence that is already
present about the apparent benefits and challenges of ICT on quality of projects.
In the area of academic research, this study contributed to the existing literature on the theoretical
framework and approaches of analyzing ICT websites in developing countries like Kenya.

1.7 Limitations
It was a hectic task trying to access and gain information from all the expected respondents
because of rigid policies of the bank. The researcher sought approval to access the premise and
might deterred from entering some offices because the researcher is not well known at the
organization. The majority of the respondents were busy at the time when the researchers were
conducting the research.

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1.8 Delimitation of the Study
The researcher raised funds to cater for data collection, data analysis and transport costs. It was
difficulty to code the qualitative data that was collected in the field using the open-ended
questions.

1.9 Scope of the Study

The study intended to find out the effect of ICT adoption on commercial bank performance, a
survey study of commercial banks in Nairobi CBD. The study undertook between the month of
February and June 2016. The study targeted the employees in the sampled commercial banks in
Nairobi CBD.

1.10 Assumption of the Study

The study was based on the following assumptions:-

 The financial institution were allowed us to collect data

 Respondents of the study will be willing to respond to the questions asked.

1.12 Conceptual Work

Figure 2.1 showing Conceptual Framework

Independent Variable Dependent variable

Mobile Banking

Internet Banking
Service Quality
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ATM

Fund transfer

Source: (Author 2017)

Internet banking is defined as the automated delivery of new and traditional banking products and
services directly to customers through electronic, interactive communication channels hence
customer satisfaction and quality

Mobile banking helps in taking banking services closer to the people. The fact that banks
promote mobile service initiative with the attitude of caring for people contributed a great deal in
marketing of there services and products
The advantage of using ATM is that it has given new impetus in dimensions of service quality
and banks are offering new choices to customers of transactions and saved time for customers.

Fund transfer has increased the speed at which money is passed between parties. Where
transactions previously took days to complete, they now can be completed in minutes. Fund
transfer transactions have also significantly reduced the need to handle physical currency.

CHAPTER TWO

LITERATURE REVIEW

2.1 Theoretical Review

2.1.1 Innovation Diffusion Theory

This study adopted Innovation diffusion theory as a foundation for this study. Rogers (1983)
defined organizational innovation as the development and implementation of ideas, systems,
products, or technologies that are new to the organization adopting it. The adoption of
innovations is a process that includes the generation, development, and implementation of new
ideas or behaviours (Rogers, 1983). The innovation does not necessarily have to be new in terms
7
of discovery or invention; it only has to be perceived as new by the firms’ .Thus, innovation
diffusion theory is well suited for researching the adoption of e-commerce in developing
countries (Rogers , 1983).

The theory proposed 4 main elements that influence the spread of a new idea: the innovation,
communication channels, time, and a social system. That is, diffusion is the process by which an
innovation is communicated through certain channels over time among the members of a social
system. Individuals progress through 5 stages: knowledge, persuasion, decision, implementation,
and confirmation. To use Rogers’ model in banking industry it requires us to assume that the
innovation in classical diffusion theory is equivalent to scientific research findings in the context
of practice, an assumption that has not been rigorously tested (Austin, 2003).

2.1.2 The Theory of Planned Behavior (TPB)

The Theory of Planned Behavior (TPB) founded by Ajzen, (1991) this is one of the most widely
used models in explaining and predicting individual Behavioral Intention (BI) and acceptance of
IT. TPB is an attitude-intention-behavior model, which posits that an individual’s behavior is
determined by perceived behavioral control and intention. An attitude subjective norm and
perceived behavioral control, in turn, determine intention. The TPB proposed that an individual’s
intention to perform an act is affected by his attitude toward the act, subjective norms and
perceived behavioral control. According to TPB, an individual’s behavior is determined by BI
and perceived behavioral control and BI is determined by attitude toward behavior (A), subjective
norm (SN) and perceived behavioral control (PBC). Attitudes toward behavior reflect one’s
favorable or unfavorable feelings of performing a behavior. SN reflects one’s perception of
others’ relevant opinions on whether or not he or she should perform a particular behavior. PBC
reflects one’s perceptions of the availability of resources or opportunities necessary to perform a
behavior.
The Technology Acceptance Model (TAM)

Davis (1989) presented the TAM to explain the determinants of user acceptance of a wide range
of end-user computing technologies. In TAM Researchers and practitioners have widely used the
Technology Acceptance Model (TAM) to help to predict and make sense of user acceptance of
information technologies. TAM, introduced by Davis (1989), adapts the TRA model, specifically
to model user acceptance of information technology (IT). The goal of TAM is to explain what
determines computer acceptance capable of explaining user behavior across a broad range of end-
user computing technologies and user populations, while being both cost-conscious and

8
theoretically justified. TAM adapted the TRA model to the domain of user acceptance of
information technology, replacing the TRA model’s attitudinal determinants with two beliefs:
perceived usefulness and perceived ease of use. TAM was found to be a simpler, easier to use and
more powerful model to uncover what determines user acceptance of IT, while both models
where found to satisfactory predict an individual’s attitude (satisfaction) and behavioral intention.
In addition, TAM’s attitudinal determinants outperformed the TRA model’s much larger set of
measures.

2.3 Empirical Review

Studies done by Bamodu (2003), on effects of ATM on service quality, have also identified
customers’ dissatisfaction with ATM service quality dimensions. Large numbers of customers
are resistant to this new mode of service delivery and prefer more personalized service. The
researchers noted that customers do not like ATMs because of impersonality, vision problem,
fear of technology and reluctance to change and adopt new mode of delivery of service
(Hanna, 2004).

One main result of EFTs on money is the increased regulations and guidelines affecting
parties who send and receive money. Regulations became necessary with the increased
accessibility to information and the ability to use that information for illegal means. Theft by
electronic means became a reality when EFT methods became common. Proof of ownership to
accounts has become more complex requiring security questions, passwords, authentication
codes and sometimes photo identification along with account numbers and routing
information.
Hanna, (2004) indicated that the first disadvantage of computer and its attached language learning
programs is that they will increase costs and harm the equity of training. Expensive hardware and
software also becomes the big obligations for some commercial banks and customers. Second, it
is user to have basic technology knowledge before they apply computer technology No employee
can utilize computer if he or she lacks training in the uses of computer technology.
Unfortunately, most managers today do not have sufficient technological training to guide their
staff exploring computer and its assisted language learning programs.

2.2.1. Effect of internet banking on service quality on commercial banks

Aosa Evans (2002) opines that the challenge to expand and maintain banking market share has
influenced many banks to invest more in making better use of the Internet. The emergence of e-

9
banking had made many banks rethink their IT strategies in competitive markets. This findings
suggest that the banks that fail to respond to the emergence of e-banking in the market are likely
to lose customers and that the cost of offering e-banking services is less than the cost of keeping
branch banking.

This notion was also confirmed in a study conducted by Bateson, (2004) examined the role of e-
banking in Saudi Arabia. He indicated that the majority of Saudi banks had taken advantage of
Internet technology to establish web sites but few offered e-banking services. He suggested that if
the Saudi Arabian banking industry wished to be successful in the global economy it would need
to integrate Internet technology into its banking strategy. Armistead, Harrison (2005) investigated
the prospects of e-commerce based on ability, motivation and opportunities (AMO) model and
observed that virtually all companies have online presence. The paper reported the motivation and
opportunities for e-commerce as low based on lack of e-Payment infrastructure and access to
information and communication technology (ICT) facilities. Also, in an empirical assessment of
customer acceptance of e-Applications of Quantitative Methods to e-Commerce

Another study on commerce was carried out in Germany Berry, Parasuraman, Zeithaml, (2004)
observed that: the highest mobile users are top management, followed by self employed, salaried
class, students and others. Government employees were found not to patronize mobile banking;
the most favoured reason for carrying out mobile banking is ubiquity, next is overview of bank
account, followed by immediacy; and the highest fear of customers about mobile banking is that
of insecurity, next is cost, and uncomfortably. Bowman Ambrosini.2007 used chi-square to
determine the impact of e-banking in Iran and there findings from the view points of customers is
that, e-banking cause higher advantages to Iranians. In other words, Iran banks provide services
that the customers are deriving satisfaction with particular reference to the use of e-banking.

In a similar study, Bitner, Brown,, Meuter (2000) explore e-banking as a new delivery channel
arguing that e-banking may help to overcome the inherent disadvantages of traditional banks; it is
very clear that if e-banking conducted successfully it leads to big volume of transactions. Further,
Avison (2005). Argued, that the internet may be exploited as a new delivery channel by the
financial services industry to completely reorganize the structure of banks. It means that
conducting e-banking in Iran leads more usage of ATM in Iran. The authors came to conclusion
that the active ATM in banking sectors will cause cash circulation decreases, the efficiency of
banking sector will increase, as: a. client banking costs decreases (less cash fees to pay), shop
keeper / service provider costs will decrease, and. bank costs decrease (cash storage, less

10
checking and processing costs), consumers have not enough knowledge related to e-banking in
Iran. Accordingly the null hypothesis is rejected also. The authors believe that the lack of enough
information on e-banking in Iran may cause less efficiency of Iranian banks. To achieving high
efficiency both bankers as well as Iranian legislators should introduce e-banking services at mass
level.

Bateson (2004) conducted an empirical investigation on adoption of e-banking in Nigeria. The

study identified the major inhibiting factors to Internet banking adoption in Nigeria such as,
insecurity, inadequate operational facilities including telecommunications facilities and electricity
supply, and made recommendations on how Nigeria banks can narrow the digital divide. Also,
the report revealed that Internet banking is being offered at the basic level of interactivity with
most of the banks having mainly information sites and providing little Internet transactional
services. Similarly, Dabholkar(2006), investigated electronic payment systems and telebanking
services in Nigeria. The findings revealed that there has been a very modest move away from
cash. Payments are now being automated and absolute volumes of cash transactions have
declined. The result of the study revealed that tele-banking is capable of broadening the customer
relationship, retain customer’s loyalty and enable banks to gain commanding height of market
share if their attendant problems such as, ineffectiveness of telecommunications services,
epileptic supply of power, high cost, fear of fraudulent practices and lack of facilities necessary
for their operation were taken care of. Thus, going by the findings of most studies, we can argue
that the literature on the impact of e-banking is inconclusive especially in developing countries.

2.2.2. The effect of Mobile banking on service quality in commercial banks

M-Pesa from Safaricom has been studied in detail by Mbiti & Weil (2011) who observed certain
patterns of usage. Even though the M-Pesa is not used for money storage, it has this potential
even though the primary purpose has been to send and receive money. Access and use of more
sophisticated financial services through mobile money services like savings, credit, and insurance
could prove more beneficial (Donovan, 2011) even to SMEs.

Mobile money services can also be viewed as a variation of branchless banking with the potential
for delivery of financial services outside conventional banking. This observation made by
Wambari & Mwaura (2009) can have a number of useful benefits to SMEs which include access
to financial services like making deposits and savings, accessing the formal banking sector
through mobile money services and many others.

11
Closer to home, the work of effect of internet banking on service quality on commercial banks.
Mbogo (2010) tested different variables effect of internet banking on service quality on
commercial banks. The study results revealed positive correlation with the behavioral intention to
use the mobile payment services and associated actual usage but low correlation between
perceived support and actual usage.

In their study on mobile money transfer use among MSEs in Tanzania, Bångens & Söderberg
(2011), focused on business usage such as paying suppliers or receiving payments from
customers. The results were based on MSEs mainly located in Dar es Salaam but partly in
Morogoro, Singida, and Mwanza, the impact was mainly seen in time saved and improved
logistics though there were indirect effects on liquidity.

According to, Mbiti, & Weil (2011), the service comprises a simple registration process to set-up
a customer’s new M-PESA account into which they can upload (deposit) and download
(withdraw) cash at a large number of Safaricom’s re-seller airtime distribution agents. Making a
deposit is a similar process to topping up their airtime pre-pay balance the account identifier is
the mobile phone number and the customer goes to the very same place that they would go to buy
airtime. There the similarity ends; the M-PESA account is entirely separate to the pre-pay airtime
credit. Once registered, the customer can send funds to any other phone number, on any network
Nardi (Steve, 2000). A customer can also use their M-PESA account balance to buy goods and
services (including airtime credit for any other Safaricom pre-payphone). It comes with a full
transaction tracking and reporting system, customer care support and anti-money laundering
measures, and is being developed to allow international use for remittances, allowing Kenyans
overseas to send money home quickly and much more cost effectively than most alternative
means (Mbogo, 2010).

2.2.3 Use of ATM and its affects on service quality on commercial banks

Use of ATM has become extremely popular among customers as convenient mode of
transactions. The technological innovation has transformed the banking business. Banks are
aggressively adopting this mode. The advantages of using ATM have given new impetus in
dimensions of service quality and banks are offering new choices to customers.

Whinston (2000) carried a study on investment opportunities, reduction in costs, satisfaction

of customers and competitiveness as motives to install and add new ATM to the existing
network. From the findings it was established that ATM facility resulted in speed of
12
transactions and saved time for customers. Literature review indicates different dimensions of
ATM service quality.

Baliamoune, (2003) further carries a study on ATM usage on customer adoptability, in the
study it was identified that ATM was secure and convenient location, adequate number of
ATM, user-friendly system, and functionality of ATM. Bateson, (2004) further carried a study
by examining the factors that influence customers’ satisfaction about ATM service quality.
These factors include costs involved in the use of ATM, and efficient functioning of ATM.
Baliamoune,( 2003) examined the United States customers’ perception of ATM quality and
found that user-friendly, convenient locations, secure positions, and the numbers of ATM
provided by the banks are essential dimensions of ATM service quality.

A case study of Botswana, Kittler, (2000) established speed of operation, and waiting time as
the important predictors of ATM service quality. European Journal of Social Sciences has
divergent views about the use and effectiveness of ATMs. Kottler (2000). Stressed the
positive dimension of ATMs based on freedom of transaction. Effective service delivery in
ATM system guarantees quality excellence and superior performance and provide autonomy
to the customers (Lovelock, 2000).

Based on the prior studies, Aosa (2002)compiled a list of five major items about ATM service
quality that include convenient and secured locations, functions of ATM, adequate number of
machines and user-friendliness of the systems and procedures. An empirical study found that
these items constitute important aspects of ATM service quality.

Aosa (2002) examined the satisfaction level of ATM card holders of a leading bank (HBSC)
in Bangladesh. The study found significant relationship of ATM service quality with
customers’ satisfaction. The study identified that location, personnel response, quality of
currency notes, promptness of card delivery and performance of ATM were positively and
significantly related to customer’ satisfaction. The security, frequent breakdown of machine,
and insufficient number of ATM were major contributors of customers’ dissatisfaction. In
another study in Bangladesh, Bateson (2004) found that 24 hours service, accuracy, and
convenient locations were the main predictors of customer satisfaction. The study also
indicated lack of privacy in executing the transaction, fear of safety and complexity of the
machine were the major cause of concern for the customers. Bateson, (2004)), through focus
group study in the United States, found that easy access to location, user-friendly ATM, and

13
security are important factors that influence majority of bank customers’ perception of ATM
service quality.

Bateson, (2004) undertook a qualitative study of a Portuguese bank regarding customers’ use
of multi channel offerings. The study identified accessibility and speed of operation as strong
predictors of customers’ satisfaction, whereas security dimension and technical failures were
main causes of dissatisfaction.
Previous researches have found that reliability feature of ATM is essential to consumers’ use
of electronic channels of banking (Davis, 2009). Debevoise, Neilson (2005), studied perceived
attributes of ATM on service quality and marketing implication. They found that convenience,
reliability, and ease of use are important aspects, whereas complexity and unreliability (risk)
were causes of dissatisfaction.

Evans, (2000) in a study of ATM users in Canada, established that major reasons for using
ATM were accessibility, freedom to do banking at all times, and to avoid waiting lines. The
study also found the users’ apprehension about the risk associated with its use and complexity
of the machine in executing the transaction.
Moutinho (1992) examined relationship of dimensions of usage rate and performance
expectation with customers’ prolonged satisfaction with ATM services. The results indicated
that usage rate had a negative association with customer perceived prolonged satisfaction
whereas performance expectations found to have positive and significant predictor of
customers’ prolonged satisfaction. Evans, Wurster (2000) found that accessibility and location
of ATMs significantly affect users’ satisfaction. The research found that customers were
willing to accept new offerings through ATMs. Waiting in queue to use the ATM was the
major cause of dissatisfaction among the users.
2.2.4 Effects of electronic fund transfer on service quality in commercial Banks

Siam (2006) examined the impact of electronic fund transfer on service quality in commercial
Banks. Jordanian banks and concluded that majority of the banks are providing services on
internet through their websites and his findings show that the attention is more to achieving e-
banking as satisfying and fulfilling customers’ needs. He also concluded that there should be a
well articulated strategy to achieve success and profits in the long run.

In their research, De Young et al (2007) analyzed the effect of electronic fund transfer on the
performance of banks by studying US community banks markets and compared the performance

14
of virtual click and mortar banks with brick and mortar banks. Their findings concluded that
Money can be sent or received using various types of EFT. The more common types used are
electronic bill payment, receipt of government benefits, purchase of goods and bank transfers.
These types of transfers can often be conducted by the use of a plastic card with a metallic strip
on back containing the account information of the account holder; the two most common cards
are debit and credit cards issued by financial and government institutions.

Polatoglu and Ekin (2001) concluded that e-banking decreases operational costs and it amplifies
customers’ satisfaction and retention. EFTs has increased the speed at which money is passed
between parties. Where transactions previously took days to complete, they now can be
completed in minutes. EFT transactions have also significantly reduced the need to handle
physical currency. The accuracy of transaction amounts has also increased because there is a
reduced need to rely on handwritten or hand-counted transactions.

2.4 Summary
Prior studies have noted that the Bateson, (2004) examined the role of e-banking in Saudi Arabia,
it was suggested that if the Saudi Arabian banking industry wished to be successful in the global
economy it would need to integrate Internet technology into its banking strategy. The study does
not look at the effect of internet banking on service quality on commercial banks which study aim
to fill.

Bitner, Brown, Meuter (2000),explore e-banking as a new delivery channel arguing that e-
banking may help to overcome the inherent disadvantages of traditional banks; it is very clear that
if e-banking conducted successfully it leads to big volume of transactions. The authors believe
that the lack of enough information on e-banking in Iran may cause less efficiency of Iranian
banks. But our study is on effects of ICT on service quality in commercial bank.

Bateson, (2004) undertook a qualitative study of a Portuguese bank regarding customers’ use
of multi channel offerings. The study identified accessibility and speed of operation as strong
predictors of customers’ satisfaction, whereas security dimension and technical failures were
main causes of dissatisfaction. The study aims at filling the gap left by Bateson.

15
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

This chapter focused on the research methodology that the researcher used in collecting the data
for the study, discusses the research design, data collection techniques, sample size and sampling
method and the data analysis of the study.

3.2 Research design

The study used a descriptive survey as a research design. The basic idea behind survey
methodology is to measure variables by asking people questions and then to examine
relationships among the variables. In most instances, surveys attempt to capture attitude or
patterns of past behavior (Fowler, 1993). Surveys are relatively inexpensive (especially self-
administered surveys). Surveys are useful in describing the characteristics of a large population.
No other method of observation can provide this general capability. Usually, high reliability is
easy to obtain by presenting all subjects with a standardized stimulus, observer subjectivity is
greatly eliminated.

3.3 Target population

The target population refers to the group of people or the study subjects who are similar in one or
more ways and which forms the subject of the study. The researcher targeted a total of 12
commercial banks whose asset is above 25 billion Kenya shillings (tier 1 banks) and the

16
researcher concentrated with commercial bank at their headquarters with a population of 338
customers.

Table 3.1 Target population

Banks targeted Number of customer
Kenya Commercial Bank 45
National bank of Kenya 25
Standard chartered bank 32
CBA bank 18
NIC Africa 20
Barclays Bank of Kenya 40
Cooperative bank 35
Equity bank 50
CFC stanbic Bank 20
Citibank 15
Diamond trust 13
Investment & mortgages 25
Total 338

Source: Survey Data (2017)

3.4 Study Area

Eldoret town is located in Uasin Gishu County. The researcher targeted a total of 12 commercial
banks whose asset is above 25 billion Kenya shillings (tier 1 banks) and the researcher
concentrated with commercial bank at their headquarters with a population of 338 customers.

17
3.5 Sample size and Sample Design

3.5.1 Sample size

. On the other hand simple random gives all the respondents a chance to be picked as the method
is not biased. According to Morgan and Krejcie (1970) when the target population is 338 the
sample size was 165.

Table 3.2 Sample Size

Banks targeted Number of Customers Sample size
Kenya Commercial Bank 45 22
National bank of Kenya 25 12
Standard chartered bank 32 15
CBA bank 18 9
NIC Africa 20 10
Barclays Bank of Kenya 40 19
Cooperative bank 35 17
Equity bank 50 24
CFC stanbic Bank 20 10
Citibank 15 7
Diamond trust 13 6
Investment & mortgages 25 12
Total 338 165

Source: Survey Data (2016)

3.5.2 Sample Design

Stratified random sampling and simple random sampling techniques used in the study. The
advantages in stratified random sampling is that it ensures inclusion in the sample of subgroup
which otherwise would be omitted entirely by other sampling methods, because of their small
numbers in population. On the other hand simple random gives all the respondents a chance to be
picked as the method is not biased

3.6 Data collection instruments

The instruments were used for collecting both primary and secondary data was obtained from use
of structured questionnaires. The questionnaire contained both open and close-ended questions
Open-ended questionnaires are those questions that give the respondent a complete freedom of

18
response the way he/she feels about what is being asked. These questions give the respondent to
express his/her opinion freely by filing in the questions asked. Close-ended questionnaires are
questions that are accompanied by a list of possible alternatives given by the researcher by
putting a tick appropriately.

3.6 Data collection procedure

The researcher used questionnaire as the main data collection instrument. The questionnaires
consisted of open ended and closed ended questions and were subdivided into sections to capture
the responses and details that are required. Questionnaires were administered by the researcher
directly to the respondent and a follow up was conducted by the researcher to ensure the
questionnaires are filled in accordance with the research.

3.7 Reliability and validity of instruments

3.7.1. Validity

McMillan and Schumacher (1993) assert that validity is the extent to which the inferences made
on the basis of scores from an instrument are appropriate meaningful and useful. The researcher
prepared questionnaires and presented them to the supervisor for scrutiny comments and
suggestions on the relevance of the information and validity. The supervisor then compared the
questionnaires and made suggestions which were incorporated in the final draft.

3.7.2. Reliability

Reliability on the other hand, refers to the same response or carries the same meaning to an
individual or group of people over time. To ensure validity of the research instruments, the
researcher ensured that the questionnaires were prepared and submitted to the superior and other
relevant experts to be checked for validity and also access the relevance of the context used in
questionnaires.

3.8 Data Collection Procedures

The researcher used questionnaire to collect data. The questionnaire contained pre-designed items
where by the respondents were given a chance to fill in there answers. The researcher used open
and closed ended questions because of its advantage of simplification.

19
3.9 Data analysis and presentation
The data for the study was entered and coded for completeness and accuracy of information. .
Data was analyzed using descriptive and inferential statistics that include frequency distribution
tables, charts, percentages and other measures of central tendency i.e. means and standard
deviations.

3.10 Ethical Considerations

The research genuinely concerned about other people’s quality of life hence the researcher
undertook the study while exercising utmost integrity to prohibit unethical behaviour. The
researcher had ethics by maintaining personal, original and first hand data collection, data
analysis and in making honest and original presentation of research methodology and results.

20
 CHAPTER FOUR:

DATA ANALYSIS, PRESENTATION AND INTERPRETATION

4.1. Introduction

4.1 Demographic characteristics

4.1.1 Gender
From the study gender distribution indicated that male were the majority with 53.8 % employed
in the banking sector. Whereas female were represented by 46.2%.In the commercial banks there
was gender sensitivity.

Table 4.1 Gender of Respondent

Frequency Percent
Male 89 53.8
Female 76 46.2
Total 165 100.0

Source :( Survey Data, 2017)

4.1.2 Age of Respondent response

Age response revealed that respondent on ages 21-25 years were 16.7%, 26-30 years were 29.5%,
ages 31-35 were 28.8%, 36-40(6.1%), 44-41(9.1%) and above 45 were 9.8%. from the above age
distribution it can be revealed that majority of the employees are in their youthful age and there
very energetic and they are knowledgeable about ICT, thus they contribute to service quality in
their various commercial banks.

21
Table 4.2 Age of Respondent response

Frequency Percent
21-25 years 27 16.7

26-30 49 29.5

31-35 48 28.8

36-40 10 6.1

41-44 15 9.1

45 and above 16 9.8

Total 165 100.0

Source :( Survey Data, 2017)

Table 4.3 Level of Education of Respondent

Frequency Percent
K.C.S.E/K.P.E 0 0.0
Diploma 34 20.5
Degree(Undergraduate) 90 54.5
Masters 35 21.2
PHD 6 3.8
Total 165 100.0

Source :( Survey Data, 2017)

The level of education reveals the employee competence in the organization, since were are living
in the world of technology, majority of the respondent were undergraduate 54.5% meaning that
there were aware on the importance of ICT usage, this was followed by masters with 28%.

4.1.4 Length in Bank of Respondent

The work experience was of importance because in the study because it reveled the experience
one had in the organization. The study revealed that majority of the respondent had experience
less than 5 years with 16.7%, this implies that majority of the employees were recently employees
in the organization and had the technology and use of ICT within them.

22
 Table 4.4 Length in Bank of Respondent

Frequency Percent
less than 5 year 28 16.7
6-10 years 69 41.7
11-15 years 34 20.5
over 16 years 17 10.6
5.00 17 10.6
Total 165 100.0

Source :( Survey Data, 2017)

4.1.6 Internet Banking

The study sought to asses the effects of Internet Banking on service quality.

Table 4.5 Internet Banking

Strongly Agree Undecided Disagree Strongly

agree disagree
Internet Banking
statements Freq % Freq % Freq % Freq % Freq %

My bank has an internet 61 37.1 89 53.8 15 9.1 0 0.0 0 0.0

provider
The bank staff 67 40.9 86 52.3 11 6.8 0 0.0 0 0.0
communicates with each
other through emails
The bank transfers funds 86 52.3 78 47.0 1 0.8 0 0.0 0 0.0
through EFT
The bank advertises its 47 28.8 90 54.5 28 16.7 0 0.0 0 0.0
product through its
website.
The bank uses email to 16 9.8 40 24.2 78 47.0 24 14. 7 4.5
contact its customers 4

The bank communicates to 78 47.0 71 43.2 16 9.8 0 0.0 0 0.0

other staff in other
branches through email

Source :( Survey data, 2017)

The study was interested on whether banks had an internet provider, majority strongly agreed
with 53.3%, and strongly agreed on 37.1%. Majority of the response said the service provider that
there using were from Orange, Zain, YU and safaricom.

23
The bank staff communicates with each other through emails, the study reveals that majority of
the bank within the bank use email, face book and office outlook. This was supported by the
majority of the response agree with 52.3% and strongly agree 40.9%.
The researcher was interested to know whether the banks transfer’s funds through EFT, the
response revealed that strongly agree were 52.3% and agree 47.0%. This implies that majority of
this commercial bank use EFT to pay employees.
The study revealed that, majority of 54.5% agreed on that bank have website and that they use
this site to advertise their product through its website.
The bank uses email to contact its customers, the majority of respondent were undecided with
47.0% this is an indication that not all customer have email and therefore does not use email to
communicate to their customers.
On issue of ICT adoption on service delivery the study was interested to know whether bank
communicates to other staff in other branches through email the response strongly agreed with
47.0% that the mode of communication was through office outlook and emails.

4.1.7 Mobile Banking

The study sought to asses the effects of Mobile Banking on service quality.

Table 4.6 Mobile Banking

Strongly agree Agree Undecided Disagree Strongly

Mobile Banking
24
 disagree

Fre Fre
statements Freq % Freq % q % q % Freq %

The banks customers 44 26.5 111 67.4 10 6.1 0 0.0 0 0.0

check their accounts
balance using mobile
phone
The banks customers uses 3 1.5 1 0.8 78 47.0 0 0.0 44 26.5
mobile phone to transfer
funds from one account to
another
Mobile banking helps 24 14.4 54 32.6 57 34.8 14 8.3 14 9.8
customers to check their
bank statements
Mobile banking provides 55 33.3 89 53.8 20 12.1 1 0.8 0 0.0
customers with bills
payment services
Mobile banking enables 89 53.8 76 46.2 0 0.0 0 0.0 0 0.0
customers to purchase
airtime
Banks customers uses 64 38.6 86 52.3 15 9.1 0 0.0 0 0.0
mobile phones to withdraw
cash
Mobile banking enables 26 15.9 72 43.9 64 38.6 24 1.5 0 0.0
customers to receive
service request from the
bank i.e. cheque books

Source :( Survey Data, 2017)

The study revealed that the banks customers check their accounts balance using mobile phone,
the response were as follows 67.45 agreed , this implied that mobile banking is being used to
attract far away customers to be able to transact with their banks and this reduces traveling costs.
The banks customers’ uses mobile phone to transfer funds from one account to another undecided
and strongly disagreed with 47.0% and 26.5% respectively. This was an indication that the issue
of mobile banking had not been adopted the issue of money transfers.
Majority of the respondent were undecided with 34.8 % on Mobile banking which helps
customers to check their bank statements, the employee were not sure whether the customers
have been able to access their statement.

25
 The respondents were asked whether mobile banking provides customers with bills payment
services 33.3 % agreed and 35.0% strongly agreed. This was an indication that it helps the
customer to avoid delays and inconveniences that could have been caused by long queues at point
of payment’s M-PESA was majorly used in paying water, electricity and other utilities.
Mobile banking enables customers to purchase airtime the response were as follows agreed were
53.8%and strongly agreed were 46.2%.majorityof the customer have M-PESA account and can
easily access the services at time of the day.
On the same note the respondent were asked whether banks customers use mobile phones to
withdraw cash majority of the respondent agree with 52.3%,this was result of many commercial
bank have a link mobile service providers.
The response on whether mobile banking enables customers to receive service request from the
bank i.e. cheque books, majority agreed with 43.9 %. My banks have provided this services to
their customer this has easen their service delivery.

4.1.8 ATM Services

The study sought to asses the effects of ATM Services on service quality

Table 4.7 ATM Services

Automatic Teller Strongly Agree Undecided Disagree Strongly

Machine(ATM) statements agree disagree

26
 Freq % Freq % Freq % Freq % Freq %
Account holders have ATM 86 52.3 66 40.2 0 0.0 7 4.5 5 3.0
cards
The bank customers can 72 43.9 74 44.7 13 7.6 4 2.3 2 1.5
withdraw cash with an ATM
The bank customers uses ATMS 36 22.0 55 33.3 34 20. 26 15. 14 8.3
to pay bills 5 9
The banks customers use ATMs 51 21.2 55 33.3 33 19. 29 17. 14 8.3
for deposit 7 4
The banks customers use ATMs 25 15.2 73 44.7 63 38. 24 1.5 0 0.0
to check balance 6
Use of ATM is a convenient 14 8.3 35 21.2 78 47. 32.5 19. 6 3.8
mode of transactions 0 7
The banks customers use ATMs 17 10.6 33 19.7 60 36. 50 30. 4 3.0
for money transfer 4 3
ATMs offers speed in 39 23.5 61 37.1 26 15. 26 15. 13 7.6
transactions 9 9
ATMS gives customers freedom 64 38.6 86 52.3 15 9.1 0 0.0 0 0.0
of transaction
Effective service delivery in 37 22.7 54 32.6 35 21. 25 15. 14 8.3
ATM system guarantees quality 2 2
excellence and superior
performance and provide
autonomy to the customers

Source :( Survey Data, 2017)

The responses were asked on whether account holders had ATM cards, the majority of
respondent agreed with 52%. Many commercial banks encourage their customer to have ATM
whenever the open an account which is faster, paperless and convenient ant time.
Customer having ATM had knowledge on the use of ATM withdraw cash at any point of sale this
was to easen their work with the majority of the response agree with 44.7%.and it was customer
friendly processes have the ability to attract customers.
The response were asked whether the bank customers use ATMS to pay bills and deposit cash
with 33.3% agreed on it ,it of significant benefits in terms of cost, reliability, safety, flexibility,
and immediacy associated with m-banking/m-payments systems.
The advance require of technology require one to access their balances of their banks with the use
of ATMs with the majority agreed on that 44.7%.
Use of ATM is a convenient mode of transactions majority of the respondent were undecided
with 47.0% on issue since it only involve the skilled and knowledgeable persons were the one
who could use the ATM comfortable without complains.

27
The banks customers use ATMs for money transfer, the respondent were Undecided with 36.4%
and disagree were 30.3%.ATMs offers speed in transactions and customers freedom of
transaction the response agreed on 52.3%
The study wanted to investigate the effective service delivery in ATM system whether it
guarantees quality excellence and superior performance and provide autonomy to the customers
the response were as that agreed on 32.6%.

4.1.9 Electronic Fund Transfer

The study sought to asses the effects of Electronic Fund Transfer on service quality

Table 4.8 Electronic Fund Transfer Respondent

Agree Undecided Disagree Strongly

Strongly agree disagree
Electronic Fund
Transfer Freq % Freq % Freq % Freq % Freq %

The bank uses EFT for 31 18.9 49 29.5 41 25.0 33 19.7 11 6.8
28
payment of its staff
salaries.

Currency exchange is 35 21.2 55 33.3 33 19.7 29 17.4 14 8.3

simplified because the
money is automatically
changed to the correct
currency at the proper
exchange rate

The bank pays the 32 19.7 34 32.6 45 27.3 25 15.2 88 5.3

salaries of their clients
with different accounts
in different banks using
EFTs

Cheque Truncation is a 55 33.3 89 53.8 20 12.1 1 .8 0 0.0

more secure system

Truncation is an 89 53.8 76 46.2 0 0.0 0 0.0 0 0.0

important efficiency
enhancement initiative in
the Payments Systems
area

RTGS can substantially 64 38.6 86 52.3 15 9.1 0 0.0 0 0.0

reduce the duration of
credit and liquidity
exposures

Source :( Survey data, 2017)

The bank uses EFT for payment of its staff salaries. Payment system where you can pay any other
person that is bank which has service provider. Majority of the respondent agreed on it with
29.5%.
Currency exchange is simplified because the money is automatically changed to the correct
currency at the proper exchange rate agreed with 33.3%.
On whether bank pays the salaries of their clients with different accounts in different banks using
EFTs agreed with 32.6%. Many employers who have bank account use EFT to pay them.
Cheque Truncation is a more secure system than the current exchange of physical documents in
which the chaque moves from one point to another majority of the respondent agreed with 53.8%.
The truncation was importantly efficiency since it enhances initiative in the Payments Systems
area with strongly agreed being 53.8%.

29
RTGS substantially reduced the duration of credit and liquidity exposures the respondents agree
on 52.3%.

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

5.2 Summary of the findings

The researcher sought to established the effect of internet banking on service quality on
commercial banks .The study revealed that majority of commercial bank had service provider
from Orange, Zain, YU and safaricom and therefore there were using ICT since there internet
connection. The communication channel within the bank was through emails, face book and
office outlook. Banks uses transfer’s funds through EFT, to pay employees. Evans (2002) agrees
that indicated that banks have the choice to offer their banking services through various electronic
distribution channels technologies such as Internet technology, video banking technology,
telephone banking technology.

The study sought to determine the effect of Mobile banking on service quality in commercial
banks. Mobile banking was found to have played a very big role as far as service delivery was
concern. Banks customers check their accounts balance, statement using mobile phone this
30
implied that mobile banking is being used to attract far away customers to be able to transact with
their banks and this reduces traveling costs. The study also revealed that mobile banking provides
customers with bills payment services. This was an indication that it helps the customer to avoid
delays and inconveniences that could have been caused by long queues at point of payment’s M-
PESA was majorly used in paying water, electricity and other utilities and it reduces the costs of
making remittances from one individual to another, especially across large distances. Moreso,
Mobile banking enables customers to purchase airtime, mobile banking enables customers to
receive service request from the bank. Avison (2005) argue that the internet may be exploited as a
new delivery channel by the financial services industry to completely reorganize the structure of
banks.
The study sought to determine how the use of ATM affects service quality on commercial banks.
Customers with account holder were encouraged to have ATM whenever they open account; the
advantage of it was faster, paperless and convenient at time. The ATM helped the customer
withdraw cash at any point, pay bills and deposit cash, to access their balances of their banks.
However, ATM usage was not convenient to all customer it was only used by knowledge
customer and they had no knowledge and ATM was not used to transfer money. Whinston
(2000), noted investment opportunities, reduction in costs, satisfaction of customers and
competitiveness as motives to install and add new ATM to the existing network, Frischtak (2002)
established that ATM facility resulted in speed of transactions and saved time for customers.

The study sought to determine effect of electronic fund transfer on service quality on commercial
Banks. Bateson,(2004) agreed that with the use of electronic fund transfer Money can be sent or
received using various types of EFT. The more common types used are electronic bill payment,
receipt of government benefits, purchase of goods and bank transfers. The bank uses EFT for
payment of its staff salaries this is where you can pay any other person that is bank which has
service provider. It was also used as Currency exchange, Cheque Truncation and RTGS.
Literature provides support to the idea that pleasant experience of automated services provides
enhanced value to the customers and attracted them to undertake improved business with their
banks (Gronroos, 2001).

5.3 Conclusion
As the developed world begins to rebuild the recently collapsed global financial system, the
financial architecture in parts of the developing world is being rapidly transformed.  As the costs
of mobile phone technology have fallen, and as the technology have been adapted to support
financial services, mobile banking innovations have begun to spread across and within poor
31
countries.  The low cost, and the widespread unmet demand for financial services, as captured by
low rates of bank access, means that mobile banking has the potential to reach remote corners of
the socioeconomic, as well as geographic, spectrum.

From the study it can be concluded that Internet banking had a relationship on service quality
Commercial bank had service provider from Orange, Zain, YU and safaricom and therefore there
were using ICT since they it had internet connection which was used as communication channel
between banks and customers. Mobile banking had significant relationship on service quality on
commercial banks in Eldoret town Banks customers check their accounts balance, statement
using mobile phone, bills payment services like paying water, electricity and other utilities. More
so, Mobile banking enables customers to purchase airtime, mobile banking enables customers to
receive service request from the bank. Use of ATM had a significant relationship on service
quality, ATM were used to the advantage of it was faster, paperless and convenient at time. The
ATM helped the customer withdraw cash at any point, pay bills and deposit cash, to access their
balances of their banks. However despite the advantage of ATM, there was needed to enlighten
customer on its usage. The electronic fund transfer had no relationship on service quality; on
currency exchange, Cheque Truncation and RTGS it was hard for customer to be convinced on
usage.

5.4 Recommendation

Based on the above discussion the following recommendation can be enumerated

Effect of internet banking on service quality on commercial banks, despite that many commercial
bank were using the internet service, it can be recommend that Service providers might be better
of availing the service at lower costs to net more users rather than insisting on high levies which
frighten off some possible participants. By so doing they will be able to boost their revenue
streams by promoting the volume of transactions.

The study recommended that Mobile banking such as M-PESA, Zap, Orange money and YUcash.
The commercial bank should encourage the use of agent banking (branchless ) service which
provides access to the bank 24 hours a day, 7 days a week anywhere you may be ,therefore there
is need for commercial bank to work hand in hand to enlighten their customers who may wish to
become a an agent.

There is need to balance technology with a reasonable human interface. These findings coincide
with those of Lyman et al. (2008) which assert that low income and education individuals attach a

32
high premium to interaction and interpersonal relationships. 73 percent of non users and
infrequent users of M-banking prefer face to face financial dealings rather than electronic devices
even though the devices are faster and convenient.

Cost of phones and services also remains a significant drawback. The fact that a vast proportion
of the population still relies on pay phones is an indicator of the financial challenges faced by
many potential users of the new banking system. The distribution of mobile phones and
consequently ability of service use can also be regarded as inequitable. More men have phones
than women, thereby indicating a dominance of ownership and consequently the access.

It can be recommended that the use of ATM affects service quality on commercial banks and
therefore there is need to enlighten customer to frequently use it for example in depositing their
money, withdrawing and paying bills and checking their balances and this was to avoid long
queues that some commercial bank were experiencing.

On electronic fund transfer it was to enhance service quality on commercial Banks,

recommendation can be on enlightening customers on importance of EFT and how its
applicability and usage to both customers and bank.

5.5 Suggestion for further study

Further area of study can be done on:-The effect of regulating transformational branchless
banking mobile phones and other technology to increase access to finance. The importance of
branchless banking on customer service efficiency. The study was limited to four variables which
had a change on dependant variable (service quality) further study can be done on other factor
that affect service quality in commercial bank.

33
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 APPENDIX 1: QUESTIONNAIRE

Dear Respondent,

. I am undertaking a research on EFFECTS OF ICT ADOPTION ON SERVICE QUALITY IN

COMMERCIAL BANKS. A SURVEY OF COMMERCIAL BANKS IN ELDORET TOWN as
a part of fulfillment for the award of Bachelor’s Degree in Commerce (Accounting and Finance
Option) and therefore, humbly requests you to fill in the questionnaire provided here below to
enable me successfully complete my research project

You are humbly requested to answer the questions. Your information will be confidential since
data will only be used for academic purposes.

SECTION A: BACKGROUND INFORMATION OF THE RESPONDENTS

Please tick the appropriate box that best describes your answer
1. Your gender
Male Female

2. Your age bracket

21-25 36-40 26-30
41-44 31-35 45 and above
3. Your highest level of academic qualification
Certificate (K.C.S.E, K.C.P.E) Diploma
Degree (Undergraduate) Masters

PhD

How long have you been working in the bank (Tick one)
Less than 5 year 6-10 years

11-15 years More than 16 years

SECTION B: INTERNET BANKING

38
This section deals with information pertaining internet banking please indicate the level of your
agreement with the following statements by ticking the appropriate box

Strongly agree (5) Agree (4) Undecided (3) Disagree (2) Strongly Disagree (1)

Internet Banking statements 5 4 3 2 1

My bank has an internet provider
The bank staff communicates with each other through emails
The bank transfers funds through EFT
The bank advertises its product through its website.
The bank uses email to contact its customers
The bank communicates to other staff in other branches through
email
SECTION C; MOBILE BANKING

This section deals with information pertaining mobile banking. Please indicate the level of your
agreement with the following statements by ticking the most appropriate box.
Where strongly agree (5) Agree (4) Undecided (3) Disagree (2) Strongly Disagree (1)

Mobile Banking statements 5 4 3 2 1

The banks customers check their accounts balance using mobile phone
The banks customers uses mobile phone to transfer funds from one
account to another
Mobile banking helps customers to check their bank statements
Mobile banking provides customers with bills payment services
Mobile banking enables customers to purchase airtime
Banks customers uses mobile phones to withdraw cash
Mobile banking enables customers to receive service request from the
bank i.e. cheque books

SECTION D: ATM SERVICES

My organization encourages the use of ATM to facilitate service quality in the bank. Please
indicate the level of your agreement with the following statements by ticking the most
appropriate box.
Where: Strongly agree (5) Agree (4) Undecided (3) Disagree (2) Strongly Disagree (1)

Automatic Teller Machine(ATM) statements 5 4 3 2 1

Account holders have ATM cards

The bank customers can withdraw cash with an ATM

The bank customers uses ATMS to pay bills

39
The banks customers use ATMs for deposit

The banks customers use ATMs to check balance

Use of ATM is a convenient mode of transactions

The banks customers use ATMs for money transfer

ATMs offers speed in transactions

ATMS gives customers freedom of transaction

Effective service delivery in ATM system guarantees

quality excellence and superior performance and provide
autonomy to the customers

SECTION E; ELECTRONIC FUND TRANSFER

This section deals with the information pertaining Electronic Fund Transfer. Use the rating
provided. Please indicate the level of your agreement with the following statements by ticking
the most appropriate box.
Where; strongly agree (5) Agree (4) Undecided (3) Disagree (2) Strongly Disagree (1)

40
Electronic Fund Transfer 5 4 3 2 1
The bank uses EFT for payment of its staff salaries.

Currency exchange is simplified because the money is automatically

changed to the correct currency at the proper exchange rate

The bank pays the salaries of their clients with different accounts in
different banks using EFTs

Cheque Truncation is a more secure system than the current

exchange of physical documents in which the cheque moves from
one point to another

Truncation is an important efficiency enhancement initiative in the

Payments Systems area

RTGS can substantially reduce the duration of credit and liquidity

exposures

41