THE INFLUENCE OF CUSTOMER BEHAVIOUR ON ADOPTION OF

ALTERNATIVE BANKING CHANNELS AT THE CO-OPERATIVE BANK

OF KENYA, NAIROBI COUNTY

NGUMO WA KAHIGA

A RESEARCH PROJECT SUBMITTED IN FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTERS
OF SCIENCE IN MARKETING, THE UNIVERSITY OF NAIROBI.

OCTOBER 2015
 DECLARATION

This research project is my original work and has never been presented to any other University
for the award of degree/diploma/certificate

Signed ___________________________ Date _____________________

NGUMO WA KAHIGA REG NO: D65/67619/2013

Supervisor

This research project has been submitted for examination with our approval as the University
supervisors

Signed _________________________ Date _______________________

Moderator; Professor Justus Munyoki

Chairman Business Administration Department

Signed_______________________ Date__________________________

SUPERVISOR: VICTOR NDAMBUKI

Senior Lecturer; Department of Marketing

School of Business University of Nairobi

2
 DEDICATION

I dedicate this project to the memory of my late father, Mzee John Kahiga Ngumo, Hsc a great

man of honour whose love for education and service knew no boundaries

3
 ACKNOWLEDGEMENT

First, I thank the University of Nairobi lecturers in the department of Business Administration for

facilitating and supporting my studies at the university, you taught me well. Most of all, I am very

grateful to my supervisor, Victor Ndambuki for his strict guidance throughout the project

development. I thank my family and particularly my wife Dr. Ruth Wangui Mugo for being a

strong encouragement on this journey.

4
 Table of Contents
DECLARATION......................................................................................................2

DEDICATION ..........................................................................................................3

ACKNOWLEDGEMENT .......................................................................................4

LIST OF TABLES ...................................................................................................8

LIST OF FIGURES .................................................................................................9

ABSTRACT ............................................................................................................10

CHAPTER ONE: INTRODUCTION ..................................................................11

1.1 Background of the Study .............................................................................................................. 11

1.2 Research Problem ........................................................................................................................ 16

1.3 Research Objective ...................................................................................................................... 17

1.4 Value of the study........................................................................................................................ 17

CHAPTER TWO: LITERATURE REVIEW.....................................................19

2.1 Introduction................................................................................................................................. 19

2.2. Theoretical Background .............................................................................................................. 19

2.3 The concept of alternative channels............................................................................................. 21

2.4 Alternative channels and consumer behaviour............................................................................. 23

2.5 Consumer awareness and adoption of alternative channels ......................................................... 24

2.6 Consumer demographics and adoption of alternative channels. .................................................. 24

2.7 Consumer security concern and adoption of alternative channels ................................................ 25

2.8 Consumer attitude and adoption of alternative channels ............................................................. 26

2. 9 Convenience, cost saving and adoption of alternative channels .................................................. 26

CHAPTER THREE: RESEARCH METHODOLOGY ....................................28

3.1 Introduction................................................................................................................................. 28

3.2 Research Design .......................................................................................................................... 28

5
 3.3 Target Population ........................................................................................................................ 28

3.4 The Sample Size and Sampling Procedures ................................................................................... 28

3.5 Research Instrument.................................................................................................................... 29

CHAPTER FOUR: DATA ANALYSIS, PRESENTATION AND

DISCUSSION .........................................................................................................30
4.1 Introduction................................................................................................................................. 30

4.2 Response Rate ............................................................................................................................. 30

Table 4.1: Response Rate ................................................................................................................... 31

4.3 Pilot Test Results ......................................................................................................................... 31

4.3.0 Demographic Information ......................................................................................................... 32

4.3.1: Gender of the Respondents ..................................................................................................... 32

Figure 4.1 Education level .................................................................................................................. 32

4.5 Monthly income range ................................................................................................................. 33

Figure 4.2 Monthly income range ...................................................................................................... 33

4.6 The channel used frequently ........................................................................................................ 34

Table 4.2 The channel used least frequently ...................................................................................... 34

4.7 Services used frequently .............................................................................................................. 35

Table 4.3 Services used frequently ..................................................................................................... 35

4.8 Frequency of using Banking services ............................................................................................ 36

Table 4.4 Frequency of using Banking services ................................................................................... 36

4.9 Familiarity with Channel .............................................................................................................. 37

Table 4.5 Familiarity .......................................................................................................................... 37

Figure 4.3 Familiarity ......................................................................................................................... 38

Table 4.6 Channel Selected ................................................................................................................ 38

4.10 Channels Least Frequently Used ................................................................................................ 39

Table 4.7 Channels least frequently used ........................................................................................... 39

6
 Table 4.8 Channels Least Frequently Used ......................................................................................... 39

Figure 4.4 Channels Least Frequently Used ........................................................................................ 41

4.9 Considering the channel to use .................................................................................................... 41

Table 4.9 considering the channel to use ........................................................................................... 41

4.11 Channel one was most often likely to use in the future .............................................................. 42

Table 4.10 Channel one was most often likely to use in the future ..................................................... 42

CHAPTER FIVE: DISCUSSION, CONCLUSION AND

RECOMMENDATIONS .......................................................................................43
5.1 Introduction................................................................................................................................. 43

5.2 Summary ..................................................................................................................................... 43

5.3 Conclusion ................................................................................................................................... 44

5.4 Recommendations ....................................................................................................................... 45

REFERENCES .......................................................................................................46

APPENDICES ........................................................................................................50

7
 LIST OF TABLES

Table 4.1: Response Rate .......................................................................................................... 31

Table 4.2 The channel used least frequently ............................................................................. 34

Table 4.3 Services used frequently ........................................................................................... 35

Table 4.4 Frequency of using Banking services ....................................................................... 36

Table 4.5 Familiarity ................................................................................................................. 37

Table 4.6 Channel Selected ....................................................................................................... 38

Table 4.7 Channels least frequently used .................................................................................. 39

Table 4.8 Channels Least Frequently Used............................................................................... 39

Table 4.9 considering the channel to use .................................................................................. 41

Table 4.10 Channel one was most often likely to use in the future .......................................... 42

8
 LIST OF FIGURES

Figure 4.1 Education level ........................................................................................................ 32

Figure 4.2 Monthly income range ............................................................................................. 33

Figure 4.3 Familiarity................................................................................................................ 38

Figure 4.4 Channels Least Frequently Used ............................................................................. 41

9
 ABSTRACT

Since the advent of the internet, intelligent telephony and e-logistics, there have been rapid and
substantive changes in channels of distribution of goods and services in the world and significantly
in developing economies. The main objective of the survey was to study the influence of customer
behaviour on adoption of alternative banking channels at the co-operative bank of Kenya, Nairobi
County. This study employed a cross-sectional survey design. This study involved a systematic
collection and analysis of data in order to examine the influence of consumer behaviour on
adoption of alternative banking channels in Co-operative Bank of Kenya in Nairobi County. This
study involved all Co-operative Bank branches in Nairobi County. The total number of branches
studied was 40, as established from the Banks’ website. The study targeted individual customers
of the Nairobi branches. The data for this study was collected using questionnaires. Findings from
the study established that mobile banking channels from telecommunication companies are more
popular for financial transactions with co-operative bank customers than the bank own mobile
banking channel. The survey also established that those channels that are consistent with the
consumer behaviour needs for security, recognition by peers, cost containment and ease of use, are
adopted better. Customer preference for low cost transactional channels supersedes channel
convenience as a criteria for selection and adoption. The study also established that although the
banks’ customers are familiar with alternative channels like the internet banking channels and
agent banking outlets and the services offered there, this familiarity is not a key driver for adoption.
The study establishes that the consumer behaviour of doing banking and financial transaction at
the eleventh hour determines the selection and the consequent adoption of various alternative
channels. Internet banking at Co-operative Bank has not been adopted by the customers
interviewed. The study establishes that internet banking as an alternative channel doesn’t meet the
customer behaviour desire for ease of use and trust in relation to security. Channels that don’t
deliver a clear relative advantage as perceived by the customer, like the internet banking, have not
been adopted. The consumer behaviour of avoiding complex service delivery channels and
avoiding risk makes Automated teller machines (ATMS) remain the most adopted alternative
channels after banking in the physical branches. There is no discernible gender disparity noted in
the selection and adoption of alternative channels as both men and women, across income levels
demonstrated similar channel adoption behaviour patterns. The study established that desire for
privacy of transaction, ease of use and security are key drivers for alternative channels. Alternative
channel unreliability is the single biggest reason why customers at Co-operative Bank avoid
Internet and agent banking. Branch banking was the most preferred mode of banking by the
respondents. Recommendations are made that Cooperative bank should run marketing programs
that sell alternative channels not a convenient alternative to branches, but as cost saving
alternatives useful for emergency transactions. Secondly the marketing strategies should be
developed to reassure consumer that the alternative channels are not only physically secure, but
that the consumer transactions are protected from external interference even inside independent
agents. The bank should demonstrate to customers that it supervises and monitors the transaction
that happen in all its outlets and the same security standards that exist inside a physical branch also
exist in the alternative channels

10
 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Since the advent of the internet, intelligent telephony and e-logistics, there have been rapid and

substantive changes in channels of distribution of goods and services in the world and significantly

in developing economies. The mobile phone has particularly challenged the traditional role of the

intermediary and presented consumers with a real choice in terms of service access channels to be

used. Consumers now face not only a choice between indirect and direct channels, but also a choice

between different types of direct channels (Jo Black, Lockett, Ennew, Winklhofer&McKaechnie,

2002). With the increase of these access channels, reliance on a single channel is likely to be the

exception rather than the rule.

Consumers today are not only using the conventional channels of branches in the financial sector

but are also consolidating their transactions around alternative channels like Mobile Phones,

Agencies, Automated teller machines, Internet banking and Point of Sale terminals (POS). In the

presence of this consolidation, there is a growing need to understand how consumer behaviour

influences how consumers choose between channels and the reasons for which one channel is

selected over another.

In an attempt to optimize services and minimize costs, banks are migrating towards 24-7 service

using technology and are expecting customers to enjoy the greater sense of freedom and

convenience and therefore reward them with more business. This sector in Kenya has been

revolutionized over the past 10 to 20 years by an onslaught of new technologies and a widespread

change in the regulations governing the use of this technology. As a result, many banks have started

11
adapting their distribution channels and shifting from frontal personal service to direct sales and

marketing via phone, email or electronic transactions.

Alternative channels at Co-operative Bank include ATMs, Telebanking, Internet banking, Agent

banking, mobile phone banking, website banking, and social media banking. These are alternative

to the traditional frontal person to person service.

1.1.1 Consumer Behaviour

Consumer behaviour has been defined as the totality of consumers’ decision with respect to the

acquisition, consumption, and disposition of goods and services, over time (Hoyer & MacInnis,

2010). According to Kotler (1999), consumer behaviour includes mental, emotional and physical

activity that people use during selection, purchase, use and disposal of products and services that

satisfy their needs and desires. The implication here is that consumer behaviour is the entirety of

physical, mental and emotional influences that a customer goes through in the making of a

transaction and the consequent relations between the consumer and the service. The second critical

aspect is the concept of time.

Behaviour is not a one-off activity but rather a repeated exhibition of an activity or practice whether

physical, mental or emotional. The definition formed by Solomon et al (1995) describes consumer

buying behaviour as a process of choosing, purchasing, using and disposing of products or services

by the individuals and groups in order to satisfy their needs and wants. Similar definition of

consumer buying behaviour is offered by Schiffman and Kanuk (2000) in which they describe it

as the behaviour that consumers express when they select and purchase the products or services

using their available resources in order to satisfy their needs and desires.

12
Consumer buying behaviour is defined by Stallworth (2008) as a set of activities which involves

the purchase and use of goods and services which result from the customers’ emotional and mental

needs and behavioural responses. It is further stated by Gabbot and Hogg (1998) that the process

may contain different activities and stages. Consumer behaviour researchers agree that consumer

behaviour is neither static nor an easy subject. According to Blackwell et al (2006), consumer

buying behaviour is itself a complex, dynamic issue which cannot be defined easily and

commonly.

Although the definitions given above vary, they all lead to a common view that consumer buying

behaviour is a process of selecting, purchasing and disposing of goods and services according to

the needs and wants of the consumers using their available resources in order to satisfy their needs

and desires. However, there is a general consensus among the researchers and academics that this

process is subject to continual change over time as the purchase characteristics of the customers

change due to their physical and psychological needs. It is therefore important that the processes,

physical, psychological and emotional that consumers utilize while selecting a distribution channel

in the purchase of financial services are taken into account in any consideration of consumer

behaviour.

1.1.2 Concept of Innovation

Vadim (2008) defines innovation as the process of creating a product or service that delivers

significant new customer value. Leonard (1999) on his part defines innovation as the creation of

something that improves the way we live our lives. These two definitions while capturing the

13
essence of innovation as the process of creating or the end effect of creating something that

improves life do not encompass the critical element of marketability.

Rogers (1962) conceived innovation as “an idea perceived as new by the individual.” It doesn’t

matter whether the idea is objectively new as measured by the amount of time elapsed since its

first discovery. Innovation can be classified into four broad areas, architectural and component

innovation, competence enhancing innovation, radical and incremental innovations and product

and process innovation.

The service channels innovation in the financial sector in Kenya demonstrates various aspects of

these innovation approaches. Architectural innovations is where a changes of the product system

has happened without significantly affecting the overall service design. In the loan application

process for example, loans application takes place on phone but the approval process is still

manually done by human intervention. Radical innovation is evident on the other hand where the

traditional deposit and withdrawal services previously stringently provided by bank owned

infrastructure of branches has now been opened up to third party agents who include privately

owned kiosks and hardware shops.

1.1.3 Adoption of Innovation

Adoption has been defined as the acceptance and the continued use of an innovation (Robertson

1971:56). Alternatively, Rogers (1962) views adoption as a decision to continue full-scale use of

an innovation. According to Klonglan and Coward (1970), adoption refers to the incorporation of

an innovation into the behaviour pattern. Rogers and Shoemaker (1971) defines adoption as

"making full use of a new idea as the best course of action available" and also as “a decision to

continue full-scale use of an innovation”.

14
These definitions agree that adoption of innovation involves acceptance, decision to act, continuity

in acting and the final step of incorporation of that repeated action into the behaviour pattern.

Rogers (1969) identifies the following generalizations about adoption; adoption depends on (a) the

nature of the innovation, (b) the method of communication used (c) the social environment in

which the adoption takes place (d) the time dimension. He observed that adoption and

communication are closely linked.

Adoption of innovation becomes easier where a relative advantage is clear and the innovation is

compatible with the consumer social practices and expectations. It also gets adopted in relative

ease if it is not complex, can be tried out without undue risk to the consumer and is easily

communicable.

1.1.4 Service Channels

Decisions about distribution channels are very important because they affect all other marketing

mix choices. A service distribution channel is defined as a set of interdependent systems or

organizations that help make a product or service available for use or consumption by the consumer

or business user (Kotler, Gary, Agnihotri (2010).

According to the economic distribution channel theory, the ideal distribution system is determined

by exploring what the consumers want in terms of service outputs from the distribution channel,

how much they are willing to pay for a given service level, how service can be provided to them

and what the costs of the alternative distribution channels are (Stern et al.2006).The distribution

channel strategy decision is usually based on finding the most profitable way to reach a market

(Ford &Mottner, 2003) . Successful channel strategy selection, implementation and management

cannot only help to meet the shopping needs and habits of target customers under the cost

15
constraints of the seller; they must also mitigate the disadvantages caused by distribution channel

conflicts.

1.2 Research Problem

Multi-channel service access within the financial sector in Kenya is a relatively new phenomenon.

Previous to the introduction of the internet and mobile telephony consumers of financial services

were served through bank owned branches where customers visited and transacted over the

counter. There are many studies that have been done on the banking models and a few on the

emerging model that is internet and electronic based. As a result, there are research findings

available on factors influencing consumer choice of bank products and recently, studies have been

done on consumer choice of individual channels like ebanking, internet, ATM teller machines etc.,

and even evaluations whether these channels contribute to profitability or not .

However there is little research information to show why consumers, though buying similar

financial products, perhaps from the same bank brand will use one channel against another even

where rational economic logic would expect the consumer to go for the less expensive and more

convenient channel of access.

Humphrey et al (2014) studied Co-operative Bank of Kenya on the Effects of Alternative Banking

channels on profitability of commercial banks which observed that when convenience of accessing

banking services through alternative banking channels increases the profit of the bank increases in

the same direction. Wambui (2012) researched on Distribution Strategies and Competitive

advantages in Kenya Commercial bank and observed that competitive advantage is found in those

innate organizational capabilities that makes its products and services easily available in the

market.

16
One of these organizational capabilities is its distribution strategies. Schoviah (2012) has also

researched on the effect of Marketing Distribution Channel Strategies on a Firms Performance

among commercial banks in Kenya, and concludes that a multiple channel strategy is the most

popular distribution channel strategy among banks in Kenya.

Muchiri (2012) studied the growth strategies adopted by Co-operative bank as an operational

orientation while Musili (2011) examined the market segmentation practices employed by banks

for competitive advantage in Co-operative bank in Kenya and reported that financial institutions

use segmentation strategies to gain competitive advantage as there is little to differentiate one

bank’s product from another’s. Magero (2012) in a study on the adoption of mobile money

transfers by Co-operative bank to settle international debts reported that adoption of this

technology was slow in the beginning.

This study seeks to answer the following research question: what is the influence of consumer

behaviour on the adoption of alternative banking channels by Co-operative bank in Kenya

customers in Nairobi?

1.3 Research Objective

The objective of the study is to establish the influence of consumer behaviour on adoption of

alternative banking channels at the Co-operative Bank of Kenya in Nairobi County.

1.4 Value of the study

This study is important to researchers, the financial sector, scholars and policy makers. To the

researchers, it will enlighten them and offer a practical chance to discover how consumer

17
behaviours influence selection and adoption of service channels in the banking sector. To the

banker, particularly to channel designers and managers it will inform on what consumers look for

when deciding what service channel to use. The study will inform policy makers to enable decision

making on the basis of on-ground empirical and practical information. To Co-operative Bank, the

study will be of immense value because it will provide specific information on how the banks’

customers choose and adopt service channels.

18
 CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

The chapter reviews the available related literature under the following headings; Theoretical

background, the concept of alternative banking channels, Alternative Banking Channels and

Consumer Behaviours, Consumer awareness and adoption of alternative banking channels,

Consumer attitude and adoption of alternative banking channels, Consumer security concerns and

adoption of alternative banking channels, Influence of Consumer demographics and adoption of

alternative banking channels.

2.2. Theoretical Background

The study of consumer behaviour seeks to understand how consumers make decisions on how to

spend their available resources in regard to purchase, usage and disposal of purchased goods and

services (Kotler, 2006). Researchers suggest five typological models of man, and emphasize the

need to examine quite different variables (Foxall 1990); these are Economic Man,

Psychodynamic, Behaviourist, Cognitive and the Humanistic.

The economic man approach proposes that consumers make choices based on the expected

outcomes of their decisions. They are viewed as rational decision makers who are only concerned

with self-interest (Schiffman and Kanuk 2007,). The stimulus-response model of buyer behaviour

(Kotler, 2006). Shows that marketing and other stimuli enter the consumer’s mind and stimulate

certain responses. Therefore, marketers must figure out what is in the buyer’s Black Box (mind).

The Black Box model assumes that observable behaviour is the only valid object of study and that

psychological constructs are part of an impenetrable box which should not be opened.

19
Marketing stimuli consists of the product, price, place, and promotion. Other stimuli include major

forces and events in the buyer’s environment such as economic, technological, political and socio-

cultural influences. All these inputs enter the buyer’s black box, where they are turned into a set

of observable buyer responses such as product choice, brand choice, dealer choice, purchase

timing, and purchase amount (Kotler, 2006). .

The marketer wants to understand how the stimuli are changed into responses inside the consumer

black box, which has two parts. The first part includes the buyers’ characteristics that influence

how he/she perceives and reacts to stimuli. The other part includes the buyers’ decision process

(Armstrong, 2006). This research project is concerned with the first part that deals with buyer

behavioural characteristics.

The other models include economic view, passive view, cognitive view, and emotional view. The

economic view model is the where consumer is seen as a rational decision maker. It’s the classical

economic model of how individuals make decisions. The criticisms of the view are that: for one to

be rational, he should have all the information on the available products. Secondly, one has to be

capable of currently ranking each alternative available (John C, 1995).

Passive View Model depicts that consumers are basically submissive to the self-interests and

promotional efforts of marketers. Consumers are perceived as impulsive and irrational purchasers

ready to yield to the arms of marketers (Schoof, 1995).

However, this view fails to recognize that the consumer plays an equal, if not dominant, role in

buying situations. Consumers sometimes seek information about product or service that satisfies

the mood or emotion of the moment. Also motivation, perception, and learning serves to support

that consumer are rarely objects of manipulation (Schoof, 1995).

20
Cognitive View Model portrays a consumer as a thinking problem solver. Here consumers are

depicted as either receptive to or actively searching for products and services that fulfill their needs

and enrich their lives. It focuses on the process by which consumers seek and evaluate information

about selected brands in retail outlets. Consumers are also seen as information processors who then

form preferences and ultimately arrive at purchase intentions (John, 1995).

Marketers often prefer to think of consumers in terms of either economic or passive models. In

reality, consumers relate deep feelings or emotions such as joy, fear, hope, and love with certain

purchases. For example a person who misplaces a favorite fountain pen may go to great lengths to

look for another despite the fact that he may have six others at hand. Consumer moods are also

important to decision making because impact of where, when and whether to shop along with

others (John, 1995).

Consumer behaviour is of importance to the marketers as it helps them understand why and how

individuals make decisions so that they can make better marketing decisions to have a great

competitive advantage at the market place (Armstrong, 2006). The critical question for marketers

is: How do consumers respond to various marketing efforts the bank might use? The starting point

is

2.3 The concept of alternative channels

Increasing market and technological complexity has placed unprecedented pressure on financial

institutions. The demand for a digital lifestyle and the technological revolution it brings, coupled

with significant demographic shift and new regulatory framework, are subjecting the finance sector

to a host of new challenges.

21
To address these challenges provision of services to customers is now supported by a network of

interactive technologies, such as the internet, mobile applications, or interactive online systems,

leading to the emergence of multichannel or multi- interface service systems (Patrício et al, 2009).

According to Shrotriya (2007) and Kumbhar(2009), customers are now looking for multiple

delivery channels and flexible as well as convenient working hours. Therefore, commercial banks

are providing services through various alternative channels.

Alternative channels are also defined as the newer method of carrying on banking operations. It

includes all non-traditional means of financial services access (World Retail Banking Report,

2008, Ogilvie, 2008; Shrotryiya, 2007; Mohan, 2002; Sathye, 1999) such as Automated Teller

Machines, internet banking, bank automation, core banking, credit cards, debit cards, mobile

banking and EFT.

Alternative banking has also been described as branchless banking; a distribution channel strategy

used for delivering financial services without relying on bank branches. While the strategy may

complement an existing bank branch network for giving customers a broader range of channels it

can also be used as a separate channel strategy that entirely forgoes bank branches (Kumbhar,

2009).

Alternative banking is also known as e-banking or electronic banking, online banking, virtual

banking, direct banking and high tech-banking. This is contrasted with traditional banking system

where customers need to visit branches to make transactions and getting information about banking

services and account information, (Kumbhar, 2009). According to Howcroft (1993) alternative

distribution channels provides convenient alternatives to branch banking. IBM Global Services

22
have defined alternative banking as a set of alternatives improving competitiveness, but also with

ability to retain the existing customer as well as to attract new customers (Kimball &Gregor, 1995).

The alternatives include personal computer banking, internet banking, own managed network, TV

banking, Telephone banking and mobile phone banking. This type of access to banking services

is also known as quasi-banking, alternative remittance systems, and parallel banking. According

to Devlin et al (2003), direct banking is the generic term that has been adopted to encompass

telephone and Internet banking, as well as interactive television and most recently m-banking.

Authors vary with respect to their conceptualization of this new age banking. Some call it internet

banking (Dalia, 2009; Sujana, 2009; Serkan, 2004), while some refer to it as online banking

(Tommi& Mika, 2008). Despite these conceptual discrepancies in the literature, the most important

thing about alternative banking is that it is a banking system fostered via the new market space.

On this note, the researchers seem to have ignored the controversy surrounding its nomenclature

and to interchangeably use any of the aforementioned terms to mean the same thing as alternative-

banking since each of the term in one way or the other makes an input that comes under the

umbrella of alternative banking.

2.4 Alternative channels and consumer behaviour

The financial sector has an established multi-channel heritage compared to other sectors in the

market. According to Jo Black et al (2002) the financial services sector, has a long history in multi-

channeling, suggesting a reasonable degree of consumer familiarity with multi-channels. This is

opposed to the dominant single channel model of distribution in consumer goods market where

different types of consumer goods require different types of channels. Wendy et al. (2005) studied

customers' adoption of banking channels in Hong Kong. Their study covers four major banking

23
channels of automated teller machines,branches, telephone banking and internet banking and it

segments customers based on demographic variables and psychological beliefs about the positive

attributes possessed by the channels. The psychological factors they consider are ease of use,

transaction security, transaction accuracy, speed, convenience, time utility, provision of different

personal services, social desirability, usefulness, economic benefits and user involvement. The

study concluded that social desirability is significant in the adoption of alternative banking

channels

2.5 Consumer awareness and adoption of alternative channels

A study conducted in Thailand examining customers' discernment of using mobile banking found

that a significant number of customers are either not aware of the mobile banking services or do

not trust the mobile banking as a channel to conduct their banking transactions, and have found

that customers may adopt the mobile banking technology only if they perceive the technology to

be useful (Supathanish, 2010).

With bank customers becoming more technology savvy and aware in recent years, their usage of

alternate channels of banking is increasing (Kohil & Sheleg, 2015).

2.6 Consumer demographics and adoption of alternative channels.

Tommi and Mika (2008) examined how mobile banking innovators and early adopters differ from

other users of online banking services in Australia. The results indicate that only age and gender

differentiate these two groups of customers, while education, income, occupation and size of the

household were found to be insignificant in differentiating the groups in usage of mobile banking.

A gender psychographic study of banking customers in Karnataka, India found that men and

women customers exhibit different behaviour in their preferences of banking channels. Women

24
prioritize on channel convenience and savings, whereas men prefer safety and convenience of

electronic channels when it comes to bank selection. Internet banking finds favour with women

whereas men are branch banking loyalists. Women seek value from a credit card usage whereas

men value the value of a loan product (Srivatsa & Srinivasan, 2007).

2.7 Consumer security concern and adoption of alternative channels

Wai-Ching (2007) explored the determinants of users' adoption momentum of e-banking in

Malaysia. Ten attributes were tested namely convenience of usage, accessibility, features

availability, bank management and image, security, privacy, design, content, speed, and fees and

charges. Results indicated that all elements for the ten identified factors are significant with respect

to the users' adoption of e-banking services. Privacy and security are the major sources of

dissatisfaction. These results also reveal that privacy; security and convenience are factors that

play an important role in determining the users' acceptance of e-banking services with respect to

different segmentation of age group, education level and income level.

An empirical study investigating adoption of e-banking in Nigeria, identified the major inhibiting

factors to internet banking adoption as, insecurity, inadequate operational facilities including

telecommunications facilities and electricity supply (Chiemeke et al, 2006).In Kenya, Munyoki

and Eva (2011) study on the challenges of e-banking adoption among the commercial banks in

Kenya established that banks had only partially adopted e-banking as a strategy. They agreed with

Wai-Ching (2007) on security stating that security was found to be the most critical factor

influencing e-banking adoption.

25
2.8 Consumer attitude and adoption of alternative channels

Dalia (2009) research aimed at understanding and explaining customers continued intention to use

Internet banking in Egypt established that perceived ease-of-use was found to be the strongest

predictor of intentions to continued usage of Internet banking services. Findings equally show that

demographic variables had no significant effect on continued usage of Internet banking services.

Munyoki and Eva (2014) observed that Customer driven factors such as customer intention drivers,

customer attitude, ease of usage by customer, usefulness of e-service to customer and customer

trust respectively rated highly influencing adoption of e-banking.

2. 9 Convenience, cost saving and adoption of alternative channels

Studies demonstrate that there are two fundamental reasons underlying electronic banking

development and diffusion; cost saving and customer service necessity. Sathye, 1999; Robinson,

2000,state that it has been proved that electronic banking channel is the cheapest delivery channel

for banking products once established. According to Karjaluoto et al (2003) banks have reduced

their branch networks and downsized the number of service staff, which has paved the way to self-

service channels as many customers felt that branch banking took too much time and effort.

Therefore, time and cost savings and freedom from place have been found to be the main reasons

underlying electronic banking adoption.

Where research has focused attention on consumers instead of actions of institutions, the patterns

that emerge broadly indicate that convenience, flexibility and control tend to encourage adoption

of new channels, and concerns about security and channel complexity discourage adoption. (Cazier

et al, 2006). According to Ahmad (2008) Electronic banking minimizes the cost of transactions,

saves time, minimizes inconvenience, provides up-to-date information, increases operational

efficiency, reduces HR requirements, facilitates quick responses, improves service quality and

26
minimizes the risk of carrying cash. Mukhongo et al (2014) study on the effects of alternative

banking channels on the profitability of commercial banks, a case study of the Co-operative Bank

of Kenya, concluded that banks should ensure that Alternative Banking channels services are

designed in a way that customers can easily use them and that they should use modern technology

to make them user friendly, faster and convenient.

There is a lot of research information on the factors influencing consumer adoption of various

areas of e-banking but nothing, on why the adoption of alternative banking channels is low despite

demonstrable advantages of e-banking over traditional banking. There is a need to study how

consumer behaviour influences channel selection between traditional branch banking and

alternative banking channels.

27
 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction

This section deals with the methods and procedures which were used in carrying out this study.

These include; research design, target population, sample size and sampling procedures, research

instruments, data collection procedures, data analysis and ethical concerns.

3.2 Research Design

This study employed a cross-sectional survey design. According to Kothari (2004) a cross-

sectional study is a one-time research or a study confined to a single time-period. This research

design is appropriate for this study as it involves collecting data at one point in time and the

researcher does not manipulate the variables or arrange the events that follow. This study involves

a systematic collection and analysis of data in order to examine the influence of consumer

behaviour on adoption of alternative banking channels in Co-operative Bank of Kenya in Nairobi

County.

3.3 Target Population

Target population or universe of a study is all the members or objects involved in the study

(Kothari, 2004). This study involved all Co-operative Bank branches in Nairobi County. The total

number of branches in Nairobi County is 40, as established from the Banks’ website. The study

targeted individual customers of the Nairobi branches.

3.4 The Sample Size and Sampling Procedures

Simple random sampling was used to obtain a sample of 10 customers per branch Co-operative

Bank branches for this study. According to Best and Khan (2010) simple random sampling allows

individuals to be chosen in such a way that each has an equal and independent chance of being

28
selected. Fraenkel and Wallen (2002) recommend a minimum of 100 subjects and a maximum of

1,000 for descriptive studies. This recommendation was used as a guide for the respondents sample

size of 400 people, split equally between female and male. According to Mugenda and Mugenda

(2003), a sample size of between 100 and 1000 is a good representative of the target population

and hence the 40 target sample is adequate for analysis.

3.5 Research Instrument

The data for this study was collected using questionnaires. The customer questionnaire (Appendix

I) was constructed by the researcher and it had open-ended and close-ended items. It was structured

to attract the information required to examine the influence of consumer behaviour on adoption of

alternative banking channels. The questionnaire was divided into two sections: Section A captured

the demographic information of the customers; the customers’ gender, age, academic background,

professional training, etc., Section B addressed attitude towards alternative channels on the areas

of security, convenience and performance. It also measured awareness, reasons of usage and none

usage and customer transaction patterns.

29
 CHAPTER FOUR: DATA ANALYSIS, PRESENTATION AND

DISCUSSION

4.1 Introduction

This chapter is a presentation of results and findings obtained from field responses and data, broken

into two parts. The first section deals with the background information, while the other section

presents findings of the analysis, based on the objectives of the study as explored by the

questionnaires where both descriptive and inferential statistics have been employed.

4.2 Response Rate

From the data collected, out of the 400 questionnaires administered, 368 were filled and returned.

This represented a 92% response rate, which is considered satisfactory to make conclusions for the

study. According to Mugenda and Mugenda (2003) a 50% response rate is adequate, 60% good

and above 70% rated very good. This also collaborates Bailey (2000) assertion that a response rate

of 50% is adequate, while a response rate greater than 70% is very good. Based on this assertion;

the response rate in this case of 90% is very good.

The high response rate was attributed to the data collection procedures, where the researchers

physically administered the questionnaires to the Cooperative bank customers inside the branch as

they seated waiting to be served or immediately after service while exiting the branch.

30
Table 4.1: Response Rate

Frequency Percentage

Completed questionnaires 368 92%

Uncompleted questionnaires  32  8%

Total  400  100%

Source: Research Findings

4.3 Pilot Test Results

To establish validity, the research tools were given to specialists who were experienced to assess

the relevance and validity of each item in the tool in regard to the study variables. The same were

rated on the scale of 1 (very relevant) to 4 (not very relevant). The most trusted method to

determine the validity is by use of content validity index (CVI). CVI was obtained by adding up

the items rated 3 and 4 and dividing this sum by the total number of items in the questionnaire. A

CVI of 0.759 was obtained. In this reference to Oso and Onen (2009), state that a validity

coefficient of at least 0.70 is acceptable as a valid research hence the adoption of the research

instrument as valid for this study.

The questionnaires used had Likert scale items that were to be responded to. For reliability analysis

Cronbach’s alpha was calculated by application of SPSS. The value of the alpha coefficient ranges

from 0 to 1 and may be used to describe the reliability of factors extracted from dichotomous (that

is, questions with two possible answers) and/or multi-point formatted questionnaires or scales (i.e.,

rating scale: 1 = poor, 4 = excellent). A higher value shows a more reliable generated scale. Cooper

& Schindler (2008) indicated 0.7 to be an acceptable reliability coefficient. Since, the alpha

coefficients were all greater than 0.7, a conclusion was drawn that the instruments had an

acceptable reliability coefficient and were appropriate for the study.

31
4.3.0 Demographic Information

The study sought to find out the demographic information of the respondents which included;

Gender, age and level of education of respondents.

4.3.1: Gender of the Respondents

The study sought to determine the gender disparity between the male and female respondents

among the selected cooperative bank customers.

From the findings, majority (72%) were male respondents with (28%) being female respondents.

This implies there were more male than female among the respondent taken onto account.

However, both genders were well represented to effectively carry out the study.

4.4 Education level

The figure below shows the education level of the respondents.

Figure 4.1 Education level

40

35

30

25

20 38
31
15
24
10

5 7

0
Primary Secondary College University

32
The figure above shows that 38%of the respondents had primary education, 31% had secondary,

24% had college education while the minority had a university degree at 7%.

The respondents could therefore read and interpret the questionnaire effectively as they all have

primarily education and above.

4.5 Monthly income range

The figure below indicates the Monthly income range of the respondents.

Figure 4.2 Monthly income range

29
30 24
25 20
15 17
20 12
15
10
5
0

The analysis study above shows that 20% of the respondents had a monthly income of between 1-

5,000, 29% had income of 5,000 and 10,000, 24% had between 10,000 to 20,000, 15% had a

monthly income of 20,000 to 50,000, 17% had an income of 50,000-100,000 while 12% had an

income of above 100,000.

Each respondent is therefore capable of using any of the available banking channels

33
4.6 The channel used frequently

The researcher had to establish the channel used frequently. The results are recorded below.

Table 4.2 The channel used least frequently

Frequently

Frequently

Frequently
STATEMENT

frequently

deviation
Partially

Neutral

Mean
Least
Most

Used

Used
used

used

Std
Automated Teller Machine 17 40 16 9 0 2.11 1.01
Branch 5 47 36 0 0 2.13 0.634
Mobile banking 0 7 0 57 23 4.26 0.494
Internet banking 0 57 16 18 0 2.12 0.601
Agent banking 11 41 15 8 0 2.20 1.00
Source: Research Findings

The study above indicates that respondents that used Automated Teller Machine were represented

by a mean of 2.11 and standard deviation of 1.01. On the other hand, those directly banking at the

cooperative bank branches were represented by a mean of 2.13 and standard deviation of 0.634.

Mobile banking with a mean of 4.26 and standard deviation of 0.494. Internet banking with a mean

of 2.12 and standard deviation of 0.601. Agent banking with a mean of 2.20 and standard deviation

of 1.00.

The study above shows that majority of the respondents highly adopted mobile banking as shown

with the highest mean of 4.26 and standard deviation of 0.494. These results were in line with

Wai-Ching (2007) who posits that access to financial services on the mobile phone will certainly

lower the cost of transfer of remittances, improving the safety and security of cash and make

payments more convenient. With the transfer of electronic value from Safaricom’s M-Pesa money

transfer platform to a customer’s bank account, a synergetic relationship is created in terms of

deposit mobilization for the bank while the customers benefit in building up their savings for future

investment.

34
4.7 Services used frequently

The researcher had to establish the services used frequently. The results are recorded below.

Table 4.3 Services used frequently

STATEMENT

Frequently

Frquently

deviation
Frequently
frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

used

Std
Deposits 0 4 0 47 33 4.00 0.591

Withdrawal 0 54 15 17 0 3.11 0.501

Loan application 14 40 16 7 0 2.20 1.00

Bill payment 0 50 13 14 0 2.12 0.601

Account query 10 42 16 7 1 1.20 1.00

Source: Research Findings

The study shows that deposits was the service that was most frequently used with a mean of 4.00

and standard deviation of 0.591. Followed by withdrawal with a mean of 3.11 and standard

deviation of 0.591. Loan application with a mean of 2.20 and standard deviation of 1.00. Bill pay

ment with a mean of 2.12 and standard deviation of 0.601. While Account query with a mean of 2

.20 and standard deviation of 1.00. Account query came last with a mean of 1.20 and standard de

viation of 1.00.

35
4.8 Frequency of using Banking services

The researcher had to establish the frequency of usage of banking services. The results are recorded
below.

Table 4.4 Frequency of using Banking services

STATEMENT

Frequently

Frquently

deviation
Frequently
frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

used

Std
Once a month 3 45 34 0 0 2.03 0.534

Once a week 1 56 15 19 0 2.10 0.500

Twice a week 0.0 7.1 14.2 16 27.5 4.33 0.23

Three times a week 7.1 14. 18 14.2 14.2 3.98 0.29

Daily 0.0 7.1 21.4 42.8 28.5 2.23 1.02

Source: Research Findings

The study above indicates that the banking service was used once a month with a mean of 2.03

and standard deviation of 0.534. Once a week with a mean of 2.10 and standard deviation of 0.500.

Twice a week with a mean of 4.33 and standard deviation of 0.23. Three times a week with a mean

of 3.98 and standard deviation of 0.29. While those that used the banking services on daily basis

with a mean of 2.23 and standard deviation of 1.02.

The study above shows that the respondents mostly used the bank service once in a month as

shown by a mean of 0.534.

36
4.9 Familiarity with Channel

The researcher also established the banking service channels the respondents were familiar with.

The results are recorded below.

Table 4.5 Familiarity

STATEMENT

Frequently

Frquently

deviation
Frequently
frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

used

Std
ATM 3 45 34 0 0 2.03 0.534

Internet banking 1 56 15 19 0 2.10 0.500

Branch 0.0 7.1 14.2 16 27.5 4.33 0.23

Agent banking 7.1 14. 18 14.2 14.2 3.98 0.29

Mobile banking 0.0 7.1 21.4 42.8 28.5 2.23 1.02

Source: Research Findings

The study above shows that respondents were familiar with ATM with a mean of 2.03 and standard

deviation of 0.534.Internet banking with a mean of 2.10 and standard deviation of 0.500.Branch

with a mean of 4.33 and standard deviation of 0.23.Agent banking with a mean of 3.98 and

standard deviation of 0.29. While Mobile banking with a mean of 2.23 and standard deviation of

1.02. The respondents are quite familiar with the alternative banking channels of Agent Banking.

37
Figure 4.3 Familiarity

5 4.33
3.98
4

3 2.1 2.23
2.03 Mean
2
1.02 Std deviation
1 0.534 0.5 0.29
0.23
0
ATM Internet Branch Agent Mobile
banking banking banking

The researcher sought to establish why the respondents used the above named channels as
indicated in table 4.4 below.

Table 4.6 Channel Selected

Statement
Strongly Strongly
agree Agree Undecided Disagree Disagree
Convenient 6% 49% 0% 29% 16%
Affordable 17% 55.5% 2.5% 11% 16 %
Reliable 6% 16% 34% 20% 26%
Good for urgent transactions 11% 39 32% 14% 6%
My friends also use 34% 36% 22% 12% 0%
Available 41% 51% 5% 5% 0%
Easy to use 15% 53.5% 2.5% 8% 20 %
Source: Research Findings

The study above indicates that 92% of the respondents either agree or strongly agree that

availability of banking channels is a strong driver of usage. 55% of the respondents either strongly

agreed or agreed with convenience as the reason for usage, while 72% agreed or strongly agreed

that affordability is an important driver of usage. 70% of the respondents agreed or strongly agreed

that friends or social pressure is a strong reason for selecting a banking service channels

38
4.10 Channels Least Frequently Used

The researcher had to establish the channels least frequently used. The results are recorded below.

Table 4.7 Channels least frequently used

STATEMENT

Frequently

Frquently

deviation
Frequently
frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

used

Std
ATM 3 35 32 0 3 3.01 0.500

Mobile banking 2 45 13 17 3 1.10 0.401

Internet banking 0.3 4.6 10.2 10 20.5 4.20 0.19

Agent banking 7.1 14.0 14 10.3 15.5 3.93 0.20

Branch 0.0 7.2 23.4 44.8 30.5 2.23 1.06

The study above indicated that Internet Banking and Agent banking channels were the two

alternative banking channels that were least frequently used by the respondents with a mean a

score of 4.20 and a standard deviation of 0.19 and a mean of 3.93 and a standard deviation of 0.02

respectively. ATM was more frequently used with a mean of 3.01 and standard deviation of

0.500.Mobile banking with a mean of 1.10 and standard deviation of 0.401 was the most frequently

used channel. The branch was used at a higher frequency with a mean of 2.23 and standard

deviation of 1.06.

The researcher sought to establish the reason why the respondents least used the channels as
indicated in table 4.6 below for interpretation purposes.

Table 4.8 Channels Least Frequently Used

frequently used

STATEMENT
Frequently

Frquently

deviation
Frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

Std

Unreliable 6 34 24 0 0 2.03 0.534

39
 Difficult to use 1 56 15 19 0 2.10 0.500
Unpopular 0.0 7.1 14.2 16 27.5 4.33 0.23
Expensive 7.1 14. 18 14.2 14.2 3.98 0.29
Not good for emergencies 0.0 7.1 21.4 42.8 28.5 2.23 1.02
I don’t know 7.14 7.14 7.14 57.1 21.4 4.34 0.22
Not secure
About it 0.00 14.2 21.4 42.8 21.4 4.33 0.23
Source: Research Findings

The table above indicates that respondents pointed at unreliability as the reason to why they least

frequently used the channels above with a mean of 2.03 and standard deviation of 0.534. Difficult

to use is the second reason for low usage with a mean of 2.10 and standard deviation of 0.500.

Unpopular with a mean of 4.33 and standard deviation of 0.23. Expensive with a mean of 3.98 and

standard deviation of 0.23. Not good for emergencies with a mean of 2.23 and standard deviation

of 1.02. Those with no idea with a mean of 4.34 and standard deviation of 0.22. Not secure with a

mean of 4.33 and standard deviation of 0.23. This analysis indicates that the biggest reason for low

usage of the channels used least frequently is respondents feeling that the channels are not popular

or with other users or are expensive and other consumer behaviour concerns summarized as “I

don’t know” why I don’t use this channel.

40
Figure 4.4 Channels Least Frequently Used

4.33 4.34 4.33

4.5 3.98
4
3.5
3 2.03 2.1 2.23
2.5
2 1.02
1.5 0.534 0.5
1 0.23 0.29 0.22 0.23
0.5 Mean
0
Std deviation

Source: Research Findings

4.9 Considering the channel to use

The researcher had to establish the criteria used by the clients when deciding which banking
channel to use and what they consider most. The results are recorded below.

Table 4.9 considering the channel to use

STATEMENT
Frequently

Frquently

deviation
Frequently
frequently

Neutral
Partially

Mean
Least
Used

Used
Most

used

used

Std
Convenience 6 34 24 0 0 2.03 0.534
Availability 1 56 15 19 0 2.10 0.500
Cost 0.0 7.1 14.2 16 27.5 4.33 0.23
Popularity among my friends 7.1 14. 18 14.2 14.2 3.98 0.29
Security 0.0 7.1 21.4 42.8 28.5 2.23 1.02
Urgency of transaction 7.14 7.14 7.14 57.1 21.4 4.34 0.22

The study above indicates that convenience with a mean of 2.03 and standard deviation of

0.534.Availabilitywith a mean of 2.10 and standard deviation of 0.500.Cost with a mean of 4.33 and

standard deviation of 023.Popularity among my friends with a mean of 3.98 and standard deviation

41
of 0.29.Securitywith a mean of 2.23 and standard deviation of 1.02. While urgency of transaction

with a mean of 4.34 and standard deviation of 0.22.Popularity among friends of the respondents

and urgency of transactions are critical determinants of the service channel usage.

4.11 Channel one was most often likely to use in the future

The researcher had to establish the channel they thought they will be using in the future most often.

The results were recorded in the table below for interpretation purposes.

Table 4.10 Channel one was most often likely to use in the future

STATEMENT

Std devia
Partially lik

Least like
Most likely

Neutral

Mean
likely

tion
ely

ly
ATM 6 34 24 0 0 4.03 0.534
Branch 1 56 15 19 0 3.98 0.500
Agency banking 0.0 7.1 14.2 16 27.5 3.59 0.23
Mobile banking 7.1 14. 18 14.2 14.2 3.18 0.29
Internet banking 0.0 7.1 21.4 42.8 28.5 2.23 1.02

The results above indicate that respondents were likely to use ATM with a mean of 4.03 and

standard deviation of 0.534. Branch with a mean of 3.98 and standard deviation of 0.500. Agency

banking with a mean of 3.59 and standard deviation of 0.23. Mobile banking with a mean of 3.18

and standard deviation of 0.29. While internet banking with a mean of 2.23 and standard deviation

of 1.02.

The results in the table above indicate that ATM is the most popular choice for future banking as

shown by the majority of the respondents. This can be attributed to the fact that respondents find

the ATM as cost efficient, secure and convenient.

42
 CHAPTER FIVE: DISCUSSION, CONCLUSION AND

RECOMMENDATIONS

5.1 Introduction

This chapter presents the summary of the findings, discussions of the findings, conclusions,

recommendations and suggestions for further studies.

5.2 Summary

The purpose of the study was to establish the influence of customer behaviour on adoption of

alternative banking channels at the co-operative bank of Kenya, Nairobi County. There were more

male than female among the respondents, however, both genders were well represented to

effectively carry out the study. All respondents had a minimum of primary education and were

therefore able to read and interpret the questionnaire effectively.

It is noted from the study that the respondents have highly adopted mobile banking as shown with

the highest mean of 4.26. However Mobile banking usage frequency has a low mean score of 1.1

with a standard deviation of 0.4. It is likely that respondents have adopted Safaricom Mpesa

services and therefore the high adoption scores. Safaricom may have met their primarily need for

Mobile banking services and therefore they don’t use the banks mobile banking services as much

therefore the low frequency mean.

The respondents uses banking services most often at one (1) time a month. This low usage provides

an explanation for low adoption of alternative channels. Since they use banking services only once

43
a month they have no propensity or opportunity to experiment with various alternative banking

channels.

Although respondents are familiarity with the channels like Bank Agents this familiarity doesn’t

translate to usage. Other consumer behaviour concerns of security, costs avoidance override

familiarity. Alternative banking channels are positioned as convenient outlets for banking services

when the bank is selling them to the consumers. However this research indicates that respondent

concerns for cost and security of their transaction overrides their desire for convenience and

therefore the low usage of alternative channels proposed by the bank as convenient.

The respondents pointed at unreliability as the reason to why they least frequently used the

alternative channels with a mean of 2.03. Reliability of services is the most frequent determining

factor of choice of a particular channel. Respondents select channels that are good for emergency

payment. The consumer behaviour of waiting to make transaction last minute determines the

channel they will select for late payments. The more reliable a channel is for late payments the

higher the chances of usage.

Popularity of banking channel among friends and peers of the respondents is a key driver of usage.

The more socially popular a channel is the higher the frequency of usage. Popularity among friends

only comes third as a reason for channel selection after urgency of transaction and cost. Social

acceptance of a channel is therefore a key drive of usage.

5.3 Conclusion

The researcher concludes that consumer behaviour factors have a high contribution to selection

and adoption of alternative banking channels. Those channels that are consistent with the consumer

44
behaviour needs for security, cost containment, social recognition and convenience are used and

adopted more frequently than those inconsistent with the respondent’s behaviour.

5.4 Recommendations

Recommendations are made that Cooperative bank should prepare strategies to marketing

alternative channels not as convenient alternative to branches, but as cost saving alternative useful

for emergency transactions. Secondly marketing strategies should be developed to reassure

consumers that the alternative channels are not only physically secure, but that consumer

transactions are protected from external interference even in inside independent agents.

The bank should demonstrate to consumers that it is in charge of the transactions that happen in

all its outlets and that the same security and customer experience standards in the branches are

available in the alternative outlets.

Co-operative Bank should also should seek to use independent peer influencers to get them to

advocate for alternative channels since the respondents rely on these social networks for

certification.

45
 REFERENCES

Best, C. and Khan, A (2010), Research Methods in Education, Allyn and Bacon Publishers, (2010)

Blackwell, R., Miniard, P. and Engel, J. (2006) “Consumer behavior”, Mason: Thompson
Calder, B.J. (1977), ``Focus groups and the nature of qualitative marketing research'', Journal of
Marketing Research, Vol. 14, August, pp. 353-64.

Chiemeke, S.C., Evwiekpaefe, A. Chete, F. (2006). The Adoption of Internet Banking in Nigeria:
An Empirical Investigation. Journal of Internet Banking and Commerce. 11(3), Retrieved
March 25, 2011

Dalia El- Kasheir, Ahmed, S.A. Omneya M.Y. (2009). Factors Affecting Continued Usage of
Internet Banking Among Egyptian Customers International Business Information
Management Association. 9, pp. 252-263.

Daniel, E. and Storey, C. (1997), On-line banking: strategic and management challenges'', Long
Range Planning Journal, Vol. 30 No. 6,pp. 890-8.

Ford, J.B. and Mottner, S. (2003), Retailing in the non profit sector: an exploratory analysis of
Church-connected retailing ventures, International Journal of Non Profit and Voluntary
Sector Marketing, Vol 8 pp 337-48

[Fraenkel, J. &Wallen, N. (2002). How to Design and Evaluate Research in Education. New York:
McGraw Hill.]
Gabbott, M. and Hogg, G. (1998). “Consumers and services”, Chichester: John Wiley & Sons.

Hewer, P. and Howcroft, B. (1999), Consumers distribution channel adoption and usage in the
financial services industry: a review of existing approaches'', Journal of Financial Services
Marketing, Vol. 3 No. 4, pp. 344-58.

Humphrey, O, Maokomba C, Musiega Douglas, The Effects of alternative banking channels on

profitability of commercial banks – Case of the Co-operative Bank of Kenya, International
Journal of Engineering and Science. Vol 3, Issue 3 Pages 29-34, 2014.

Kaleem, A. (2008) Journal of Internet Banking and Commerce An open access Internet journal
Journal of Internet Banking and Commerce, April 2008, vol. 13, no.1 Bankers’ Perceptions
of Electronic Banking in Pakistan

Kimball, C. and Gregor W. 1995. “How Distribution Is Transforming Retail Banking: Changes
Leading Banks Are Making.” Journal of Retail Banking Services, vol. XVII, no. 3,
Autumn.

46
Klongan and Coward 1978, the concept of symbolic adoption: a suggested interpretation. Rural
Sociology, pg 35 March

Kohali, A. &Sheleg, A (2011) Alternative Banking Channels. Tefen Tribune Spring Issue 2011.

Kotler, P (2000) Marketing Management, analysis, planning and implementation 2nd Edition,
Millenium Edition, Prentice hall.

Kotler, Gary, Agnihotri and EhsanUlHaque., (2010) Principles of Marketing: A south Asian
Perspective. Pearson Education.

Kumbhar, Vijay M, Alternative Banking Channels and Customer Satisfaction; An empirical Study
of Public and Private Sector Banks (October 2011) International Journal of Business and
Management Tomorrow, Volume 1, No 1, P October 2011

Leblanc, G. 1990), Customer motivations use and non-use of automated banking'', International
Journal of Bank Marketing, Vol. 7, pp. 47-62.

Liang, T.P. and Huang, J. 1998, An empirical study on consumer acceptance of products in
electronic markets: a transaction cost model'', Decision Support Systems, Vol. 24, pp. 29-
43.

Liao, S., Shao, Y.P., Wang, H. and Chen, A. 1999), The adoption of virtual banking: an empirical
study, International Journal of Information Management, Vol. 19, pp. 63-74.

Lockett, A. and Littler, D. (1997), ``The adoption of direct banking services'', Journal of Marketing
Management, Vol. 13, pp. 791-811.

Morgan, D.L. 1997, Focus groups as qualitative research'', Qualitative Research Methods Series
16, 2nd ed., Sage Publications, Newbury Park, CA.

Morrison, P.D. and Roberts, J.H. 1998, Matching electronic distribution channels to product
characteristics: the role of congruence in consideration set formation'', Journal of Business
Research, Vol. 41,
pp. 223-9.

Moutinho, L. and Meidan, A. 1989), Bank customers perceptions, innovations and new
technology, International Journal of Bank Marketing, Vol. 7 No 2, pp. 22-7.

Mugenda, O.M., &Mugenda, A. G. (2003). Research methods. Quantitative and qualitative

approaches. Nairobi: Acts Press.]

Munyoki, J., and Ngigi Eva, Challenges of ebanking adoption among Commercial Banks in
Kenya. 7thOrsea Conference Paper October 2011.

Patricio, L. Frisk, R. Cunha J. (2009) Improving satisfaction with Bank services offerings.
Managing Service quality, 13 (6) 471 - 482

Pikkarainen, T Karijauto H. (2004) Customer acceptance of on-line banking: An extension of the

47
 acceptance, Internet research 3 pp 224-235

Karjaluoto, H., Mattila, M., & Pento, T. (2002). Factors underlying attitude formation towards
online banking in Finland. International Journal of Bank Marketing, 20(6), 261-272.
Kotler, P. and Keller, K. (2011) “Marketing Management”(14th edition), London: Pearson
Education
Kumar, P. (2010) “Marketing of Hospitality & Tourism Services” Tata McGraw-Hill Education
Rogers, E M (1995) Diffusion of Innovation, New York Free PressRoger E, M and Shoe Marker,
Communication of Innovation, a cross-cultural approach. New York Press 1971 476p

Saythye. M, (1999) Adoption of Internet Banking by Australian Consumers; an empirical

investigation. International journal of bank marketing 17(7) 324-334,

Srivatsa. H. S. Srinivasan. R. (2007). Banking Psychographics- An Indian Empirical study.

International Journal of Business Research. 7(5), 80-88.

Schiffman, L., Hansen H. and Kanuk L. (2007) “Consumer Behaviour: A European Outlook”,
London: Pearson Education

Solomon, M. (1995) “Consumer Behaviour” (3rd edition), New Jersey: Prentice Hall
Stallworth, P. (2008) “Consumer behaviour and marketing strategic”, online, pp.9.

Stern, L W, Sturdivant, F. D (2006) Customer-driven distribution systems, Harvard Business

Review, Vol 68 NO. 5, pp 146-55

Sujana A., Jennifer R. Ray C. Fredy, V. (2009). Consumers’ Continued Usage of Internet Banking:
Australian Context. ANZMAC, 1-9.

Supathanish, T. (2010). Customers' Discernment of Mobile Banking Business: Northern Region

of Thailand. International Trade and Academic Research Conference. (ITARC) - London
, 2010.

Tommi, L. Mika, P. (2008). Mobile Banking Innovators and Early Adopters: How they differ from
other Online Users? Journal of Financial Services Marketing. 13, 86–94.

Venkatesh, V., and Morris, M.G. (2000). Why do not Men ever Stop to ask for Directions? Gender,
Social Influence, and their Role in Technology Acceptance and Usage Behavior. MIS
Quarterly. 24 (1), 115–139.

Wai-Ching P. (2007). Users' Adoption of E-banking Services: The Malaysian Perspective. Journal
of Business and Industrial Marketing. 23(1), 59–69.

Wambui, C. (2012), Distribution strategies and competitive advantage in Kenya Commercial

Banks

48
Wang,Y.S., Wang, Y.M., Lin, H.H. Tang, I. (2003). Determinants of User Acceptance of Internet
Banking: An Empirical Study. International Journal of Service Industry Management. 14
(5), 501-519.

Wendy, W. N., Wan., C. L. Cheris, W. C. C. (2005). Customers' Adoption of Banking Channels

in Hong Kong. The International Journal of Bank Marketing. 23(2/3), 255-272.

49
 APPENDICES

APPENDIX I: QUESTIONNAIRE FOR CO-OPERATIVE BANK CUSTOMERS

SECTION A

Age Gender: M/F

Education level: Primary Secondary College University

Monthly income range ksh1- 5,0005,000-10000 10,000-20,000

20,000-50,000 50,000-100,000, Above 100,000

SECTION B

1. Rank the following channels in terms of frequency of usage from1-5., where 5 is for the c
hannel used most frequently and 1 for the channel used least Frequently
CHANNEL FREQUENCY OF USE

1 2 3 4 5

ATM

BRANCH

MOBILE BANKING

INTERNET BANKING

AGENT BANKING

OTHER

2 Rank the following services in terms of frequency of usage from1-5., where 5 is for the s
ervice used most frequently and 1 for the channel used least Frequently

CHANNEL FREQUENCY OF USE

1 2 3 4 5

DEPOSITS

50
 WITHDRAWAL

LOAN APPLICATION

BILL PAYMENT

ACCOUNT QUERRY

OTHER

3 How often do you use Banking Services?

ONCE A MONTH

ONCE A WEEK

TWICE A WEEK

THREE TIMES A WEEK

DAILY

4 Which banking service channels are you familiar with? Rank your answer from 1-5
, Where 5 is most familiar and 1 is least familiar
_
FAMILIARITY

1 2 3 4 5

CHANNEL

ATM

INTERNETBA
NKING

BRANCH

AGENT BANKI
NG

51
 MOBILE BAN
KING

OTHER

5. WHY DO YOU USE THE CHANNEL SELECTED ABOVE? RANK YOUR ANS
WER BETWEEN 1-5 WHERE 1 MEANS I STRONGY DISAGREE AND 5 MEAN
S I STRONGLY AGREE

REASON FOR USAGE RANKING

1 2 3 4 5

CONVENIENT

AFFORDABLE

RELIABLE

GOOD FOR URGENT TRANSACTIONS

MY FRIENDS ALSO USE

AVAILABLE

EASY TO USE

6. What comes to your mind when you hear the following terms; ATM Branch
Mobile banking Internet Banking Others____________________

7. Which ones of these Channels do you use least frequently? Rank your answer 1 – 5 w
here 5means rarely used and 1 means frequently used
FREQUENCY

1 2 3 4 5

ATM

MOBILE BANKING

INTERNET BANKING

52
 AGENT BANKING

BRANCH

Other

8. WHAT IS THE STRONGEST REASON FOR NOT FREQUENTLY USING THE C

HANNEL YOU HAVE STATED ABOVE? Rank your answer from 1 – 5 where 1 is stal
est agree and 5 is strongly agree

REASON FOR NOT USING 1 2 3 4 5

UNRELIABLE

DIFFICULT TO USE

UNPOPULAR

EXPENSIVE

NOT GOOD FOR EMERGENCIE

S
I DON’T KNOW
ABOUT IT
NOT SECURE

9. When you are deciding which banking channel to use, what do you consider most? R
ANK YOUR ANSWER FROM 1 – 5 WHERE ONE MEANS DISAGREE AND 5 MEA
NS STRONGLY AGREE

CHANNEL FREQUENCY OF USE

1 2 3 4 5

CONVENIENCE

AVAILABILITY

53
 COST

POPULARITY AMONG
MY FRIENDS
SECURITY

URGENCY OF
TRANSACTION

10. Which channel do you think you will be using in the future most often? RANK YOUR A
NSWER BETWEEN 1-5 WHERE 1 IS LEAST UNLIKELY AND 5 IS MOST LIKELY

CHANNEL LIKELY TO USE IN THE FUTURE

1 2 3 4 5

ATM

BRANCH

AGENCY BANKING

MOBILE BANKING

INTERNET BANKING

OTHER

54