ABSTRACT
The research-project intended to probe the determinants of the adoption of internet banking project in financial institutions: a case of KCB bank, Nairobi County. The Central Bank of Kenya (CBK) regulates the operations of the banking industry in the country, including 42 for-profit banks and 12 microfinance among others. In addition, the regulatory body supervises a mortgage financial institution and finance organizations such as forex bureaus and credit agencies. The advent of innovative solutions in the information technology has expressively changed the operations and delivery of services by banks in addition to saving costs and improving efficiency. The intentions of the investigations was to scrutinize the elements that sway the uptake of internet banking programme by the institutions of finance in Nairobi County, with specific focus on the Kenya Commercial Bank (KCB). The objectives of the study include to establish the level that technology influences adoption of internet banking system at KCB Bank, determine weight of economic factors in adapting internet banking system, establish the degree that staff and customer contribute in adoption of internet banking systems and identify the extent to which the organization IT infrastructure determines the adoption of internet banking at KCB Bank group. The findings of this research were to highlight the trending customer behavior in regard to the introduction of internet banking thus help develop appropriate support policies and systems. The Technology Acceptance Theory (TAM) advised the theoretical understandings of the research. A descriptive research model guided the solicitation of data from 102 permanent KCB staff, drawn from 36 branches across the region of Nairobi. A questionnaire was the main research instrument used. Piloting of the tools targeted 12 individuals working in the KCB and the results were used to verify the reliability and validity. The empirical data from the main survey was organised, cleaned and analysed using SPSS version 22 to generate descriptive and inferential statistics that were presented in tables, charts and narratives. The descriptive statistics and regression analysis were performed to determine the association between predictor and response variables. The investigations were performed in lieu of ethical considerations. The economic factors, IT infrastructure and staff attributes were significant predictors in the adoption of internet banking by KCB. The findings indicated that the banks are more likely to accept internet- banking programs provided they are efficient and sustainable.
CHAPTER ONE INTRODUCTION
Background to the Study
The dynamic and evolutionary aspects of the world today require great organizations to constantly adapt and compete in the ever-changing business environment in order to remain relevant and efficient in delivery of customer service and products. The technological business models have dramatically changed the way institutions attract and retain customers and has eliminated the geographical bottlenecks that were a challenge in the previous generations. In cases where the structural and normative elements of a business have adopted technology, customers’ satisfaction in terms of convenience and delivery speed have greatly increased. White and Harrison (2004) supports this position by saying that the utilization and adoption of modern technologies by organizations have dramatically increased their businesses competitiveness and as such are able to develop very attractive services and products that meet customer needs. In the same regard, banks have digitized their products in order to remain efficient and relevant to customer demands.
Information and communication technology (ICT) projects have become a crucial tool for the banks. The effects of globalization have increased competition across the spectra forcing the institutes to be proactive in innovation. The ICT has redesigned the operational and delivery systems of banks. In order to compete with global competition and match the global development, the banks have to focus on the excellence of customer service delivery. Banks also have to invest and focus on ICT services for diminishing the operation cost. As ICT project implementation has many advantages as better, convenience and comfortable service, remote reach, time saving, deliver variety of value added products and services. There is a significant effect of flexible and user friendly banking service on the ICT growth and development.
Information and communication technology has reinvigorated the model of internet banking and customers find the medium more attractive and efficient as compared to the conventional modes of banking. The implementation of ICT platforms in business portfolio and expansion strategies has made the world a global village. Thus implantation of ICT
projects and integration with banking services has gained extensive ground around the globe. ICT project implantation in banks and financial institutions offers the banking industry a new leading edge of opportunities and challenges. Successful project implementation of ICT bank based practices depends on a number of factors both external and internal such as staff characteristics, economic factors and bank infrastructure.
Internet Banking
This is the utilization of internet in the delivery of services by banks. Customers use the innovations to open bank accounts and fulfill other vital needs through the technology (Owens & Robertson, 2000). Internet banking, also referred to as E-banking, has benefited both the banks and customers, as it is a “one step service and information unit”. The structures of the ICT has enable the E-banking to deliver consistent and efficient customer services due to its 24 hours availability coupled with very short customer service time and reduced error rates (Papazoglou & Georgakapoulos, 2003).
The revolution of information technology (IT) has changed every aspect of human being’s life including banking. For over a decade” (Abbasi and Weigand, 2017) Information technologies have significantly affected every industry including the banking industry (Kim et al., 2016). Multiple elements in the main body must cooperate under the Internet financial environment in order to realize the transfer of funds from supply to demand. The development of internet technology has had an impact in all businesses including the banking sector, which has somehow forced the adoption of internet banking by banks (Chiemeke et al., 2006).
Other scholars have varying views in the background of internet banking, according to Santouridis and Kyritsi (2014), the birth of internet banking can be traced back in 1990, when the first online banking service was offered by the Californian Bank Wells Fargo. According to Cronin (1998), online banking services started in New York in 1981 when four major banks; Citibank, Chase Manhattan, Chemical and Manufacturers Hanover offered home banking services for their customers. In the UK the first online banking services was in 1983, at the Bank of Scotland for customers of the Nottingham Building Society (NBS) (Cronin, 1998; Imola & Claudia, 2014).
In the 1990s internet banking services included viewing the statement of accounts, bill payments and bank transfers (Asifulla, 2016). Before 1995, only one financial institution had internet banking and after May 1995, fifty financial institutions had web banking and 5 million households using banking online services. By 2002, there were 14,000 financial institutions worldwide with web sites with more than 100 million households using internet banking (Anesti, 2004). The internet banking was established during the e commerce period. With the upsurge of internet For instance in the US, in the third quarter of 1999, 20% of the banks were offering internet banking which was expected to grow to 45% in 2001 (Anesti, 2004).
According to Romi (2015), in 2013 a 423.5 million people accessed online banking sites within an internet audience; by region North America 45%, Europe 37.8%, Latin America 25.1%, Asia 22% and the Middle East and Africa 8.8%. Several pieces of legislation have also been introduced in this area of internet banking to support the sector. The basic concept is a product of the e-commerce systems being used in several businesses world over. Currently there are several e-banking systems and websites all over the world (Aljawarneh, 2017).
According to Santouridis and Kyritsi (2014), The Banks belong to an information-intensive industry that is can be extensively influenced by information technology. In response the banking, industry has been particularly affected by the internet explosion by providing an additional conduit for both promotion and delivery of services. Incidentally, the perspective of banking products and services is nothing new than traditional banking services delivered through an electronic communication backbone which is the Internet.
Internet Banking Implementation in Commercial Banks in Kenya
ICT advancement in Kenya commercial banks has a noteworthy value on the finance industry. The programs are embedded in the institutions structural systems as well as culture. The ICT programs implanted by banks has recalibrated the models of designing and marketing of financial products. In addition, the internal control mechanisms have become more efficient, effective and better evaluators of risk and thus the banks have extended their reach geographically to customers and other diverse markets.
