Influence of Digital Channels on Competitive Advantages of Commercial Banks in Kenya

Abstract

The banking sector in Kenya continues to face increased dynamism, most of which has affected most of the banks' competitiveness. With thirty-nine banks licensed to operate in the country, only three banks control more than 70% of the market. This shows a low, competitive strength of the majority of the banks, a matter that has threatened their continued operation. The main aim of the study was to establish the influence of digital channels on the competitive advantage of commercial banks in Kenya. The study was anchored on four theories: Assimilation Theory, Theory of Diffusion Innovation, Technology Acceptance Model, Unified Theory of Acceptance and Competitive Advantage Theory. The study employed a descriptive survey design. The study was done in Nairobi County, Kenya's capital city. It houses all the head offices of the 39 commercial banks granted to operate in the country. Cochran's formula was used to compute a sample of 347 participants, which was obtained using simple random sampling. The study utilized a questionnaire to collect primary data, which was analysed using SPSS. Both descriptive and inferential statistics were used for the analysis. The study found that most of the participants agreed that their banks offered various digital banking modes to our customers to enhance efficient service delivery, as indicated by a mean of 3.69 and a standard deviation of 0.81. Regression analysis was also conducted to determine the association between the variables. The findings of the study revealed that digital channels significantly influenced the competitive advantage of commercial banks in Kenya (P <0.05). The findings revealed that while commercial banks in Kenya have implemented various digital banking modes to enhance service efficiency, significant shortcomings hinder their competitive advantage. They noted that banks appear to lack adequate online platforms for customers to raise queries, indicating insufficient customer engagement mechanisms. The study recommends that banks invest in regularly upgrading their digital platforms to ensure reliability and improve user experience. They should establish comprehensive online platforms for real-time customer support and feedback, which will enhance customer engagement and satisfaction.