A better measurement model for post adoption user perception of mobile banking services with a keen interest in the key driving factors for mobile banking services adoption and continued use

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A better measurement model for post adoption user perception of mobile banking services with a keen interest in the key driving factors for mobile banking services adoption and continued use



With liberalization and internalization in the financial market and progress in information technology, banks and other service industry players face dual competitive pressures to provide service quality and administrative efficiency. Mobile Commerce is gaining increasing acceptance amongst various sections of the society as a service channel of choice. Mobile Banking, the offering of bank-related financial services via mobile devices, builds a cornerstone of Mobile Commerce. Kenya has in the recent years witnessed tremendous growth in the use of mobile money transfer services. This growth can be partly traced back to technological and demographical developments that have been influencing important aspects of the socio-cultural behavior in today’s world. The need/wish for mobility seems to be the driving force behind Mobile Commerce in general. However, taking it that these recent developments are fueled by technology alone might misleadingly suggest that the adoption of mobile banking is largely based on technological criteria. This study therefore seeks to establish a better measurement model for post adoption user perception of mobile banking services with a keen interest in the key driving factors for mobile banking services adoption and continued use. The study will make use of a descriptive research design where a sample of m-banking services users and potential users will be used as the population for the study. The study will be carried out in two geographical locations; Nairobi and Busia representing urban and rural population respectively.






1.0         INTRODUCTION.. 5

1.1         Background of the Problem.. 5

1.2         Statement of the Problem.. 9

1.3         General Objective. 10

1.4         Specific Objectives. 10

1.5         Importance of the study. 11

1.5.1       To Businesses, Investors and Individuals. 11

1.5.2       To the Banks. 11

1.6         Scope of the study. 12

1.7         Definition of Terms. 12

1.8         Chapter summary. 13


2.0         LITERATURE REVIEW… 14

2.1         Introduction. 14

2.2         Mobile Banking Awareness. 14

2.2.1       Employment of Mobile Technologies in the Banking Sector 14 Mobile Accounting. 15 Mobile Brokerage. 16 Mobile financial information. 16

2.2.2       Mobile banking Business models. 18 Bank-focused Model 18 Bank-led model 18 Non-Bank-led model 19

2.2.3       Mobile Banking Regulations. 20

2.2.4       Effect of awareness on Mobile banking usage. 22

2.3         Perceived Security of mobile banking Services. 22

2.3.1       General Security features of mobile banking products. 22

Figure 2.1 GSM components. 23

2.3.2       General Security Concern in GSM.. 23

2.3.3       The risk barrier to m-banking usage in Kenya. 23

2.4         Perceived Usefulness of M-banking products. 24

2.4.1       Match between offerings and need. 27

2.4.2       Pricing vis-à-vis alternate channels. 27

2.4.3       Reliability with respect to informal channels. 28

2.5         Ease of use. 28

2.5.1       Technology Discomfort 30

2.5.2       Self-efficacy. 30

2.5.3       Ease-of-use as a barrier to M-Banking usage. 31

2.6         Chapter Summary. 31


3.0 Research methodology. 32

3.1 Introduction. 32

3.2 Research Design. 32

3.3 Population and Sampling Design. 33

3.3.1 Population. 33

3.3.2 Sampling Design. 33 Sampling Frame. 34 Sampling Technique. 34 Sample Size. 35

3.4 Data Collection Methods. 35

3.5 Research Procedures. 36

3.6 Data Analysis Methods. 36

3.7 Chapter Summary. 37



Appendix 1: COVER LETTER. 44

Appendix 2: QUESTIONNAIRE. 45

Appendix 3: RESEARCH BUDGET. 51

Appendix 4: WORK PLAN.. 51













ATM:              Automated Teller Machines

CBK:               Central Bank of Kenya

Et al:                (et alia): and others

FIs:                  Financial Institutions

G.o.K:             Government of Kenya

ICT:                 Information Communication and Technology

Ksh:                 Kenyan Shilling

PC:                  Perceived cost

PEOU:            Perceived Ease of Use

PR:                  Perceived risk

PU:                  Perceived usefulness

RAs:                Research Assistants

SE:                  Self efficacy

SMS:               Short message service

SPSS:              Statistical Package for Social Scientists

TAM:              Technology Acceptance Model



1.1    Background of the Problem

While mobile services and mobile service consumption have lately become a hot topic among information systems and marketing scholars, service providers are putting great efforts to take advantage of the business opportunities offered by wireless technology. This may be due to the fact that value-adding mobile services are becoming increasingly important in gaining a competitive edge in the marketplace (Wang, Guriting, Ndubisi, 2006).

In the financial services sector mobile banking represents an additional service for certain occasions adding the element of true mobility to Internet banking used over fixed networks. Some bank customers, for example, find mobile banking valuable when being out of home on a country cottage, on the road or in case of acute need for money transfer (Laukkanen and Lauronen, 2005). Indeed, while Internet banking services provide economic benefits for the banks, mobile services serve rather as a way to offer customers value added (Laukkanen et al., 2005). In Finland, already two thirds of the population pays their bills primarily over the Internet (Federation of Finnish Financial Services, 2007) but the adoption rates of mobile phones for banking are in their infancy.

Kenya’s financial system is among the largest and more developed in Sub-Saharan Africa, with a fairly large banking sector. The sector is a cutthroat business arena, with over 44 players including multinationals all scrambling for a slice of the pie. According to World Bank estimates, the banking sector accounts for up to about 40% of the country’s GDP.  Notable however is the fact that much of the Kenyan banking sector’s activity is concentrated among the richest 20% of the population (World Bank, 2008).

According to Financial Sector Deepening Kenya (2008), the most recent data available indicates that only 19% of adult Kenyans reported having access to a formal, regulated financial institution while over a third (38%) indicated no access to even the most rudimentary form of informal financial service. This leaves more than 80% outside the bracket of the reach of mainstream banking. The population is massively under-banked, largely because more than half of the people in Kenya live in rural areas where banking services are non existent and their earnings are paltry.

Recent indication of growth in incomes and rapid urbanization in Kenya however is already pushing up demand for banking services. Financial services growth, which was muted in the recent past, is clearly poised for a take-off in Kenya, on the back of a strengthening economy, advent of technology and systematic reforms of the sector.

An appropriate banking environment is considered a key pillar as well as an enabler of economic growth (Koivu, 2002). Initially, banks in Kenya responded to the growing demand for banking services by opening up new bank branches at the grass roots closer to their potential customers. However, with the continuously emerging wave of information driven economy, the banking industry in Kenya has inevitably found itself unable to resist technological indulgence in order to meet customer needs. Koivu asserts that the need for convenient ways of accessing financial resources beyond the conventional norms has seen the recurrent expansion and modernization of banking patterns. Given the huge demand for finance oriented services, even institutions beside the historical banks such as the mobile phone service providers have joined the fray in an attempt to grab a piece of the perceived cake of opportunity within the banking industry.

The challenging business process in the financial services pressurized banks to introduce alternate delivery channel to attract customers and improve customers’ perception. Electronic Banking or simply e-banking due to its flexibility and perceived convenience has increasingly become the distribution channel of choice for most retail banks. E-banking is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution (FinCen, 2000). E-banking encompasses the use banking services delivery channels such as ATMs, telephone, use of plastic money, mobile phone banking and electronic funds transfers.

According to the GSM Association and Ovum, over the last few years, the mobile and wireless market has been one of the fastest growing markets in the world with over 2.4 billion cell phone users and it is still growing at a rapid pace. In Kenya, there are more than 20 million mobile phone users slightly over half the population of the country (KNBS, 2009).

The unprecedented uptake of mobile phones in Kenya and rapid absorption of mobile-based banking services is of vital significance. This trend of continued reliance on mobile devices to execute monetary transactions is steadily gaining momentum. Mobile Banking or simply M-banking is one of the newest approaches to the provision of financial services through ICT, made possible by the widespread adoption of mobile phones even in low income regions of Kenya.

Mobile banking takes several dimensions of execution all representing a new distribution channel that allows financial institutions and other commercial actors to offer financial services outside traditional bank premises. M-banking services in Kenya started with the creation of mobile phone sms services by banks. These services included Top-up of mobile phone air time, Minimum/Maximum Threshold Balance Notification, Bills payment, Overdraft notification, Fraud alerts and notification, Daily transaction limit notification, Monthly transaction limit notification, Daily balance notification, Account debit notification, Account withdraw, Transaction status updates for non real time transactions, Loan process status updates, Loan transaction summary, Monthly interest summary etc. These facilities were aimed at enabling customers’ access information relating to their accounts.

Subsequent innovations have seen the mobile banking phenomena continue to grow steadily in Kenya. M-PESA, a mobile money transfer service for instance is one such land mark innovation. M-PESA was first piloted in 2005 where the service was used to disburse loans from a Faulu Kenya to its clients and then to collect repayments via designated Safaricom airtime agents. The commercial version of M-PESA was launched in early 2007 and its success paved the way for numerous mobile banking schemes. Today, different institutions and business are offering m-banking services in Kenya. Some are offered entirely by banks, others entirely by telecommunications providers, and still others involve a partnership between a bank and a telecommunications provider. Regulatory factors play a strong role in determining which services can be delivered via which institutional arrangements (Mortimer-Schutts, 2007).

The mobile banking services are available to mobile phone users of the three main mobile service providers namely Safaricom, Zain and Econet wireless. Safaricom’s service is branded “Mpesa”, Zains service goes by the “Zap” brand name whereas Econet’s services is called U-Cash. The other mobile service provider Telkom wireless/Orange is also expected to roll out its mobile banking service in the course of time. Partnership between Banks and these telecommunication firms to develop mobile applications is in top gear. Products such as M-Kesho of Equity bank’s, Family Bank’s Pesa Pap, and Standard Chartered Bank’s mBanking are just but a few m-banking applications arising out of these partnerships.

While mobile banking applications are rapidly gaining popularity within the banking sector in Kenya, there is not enough evidence of its acceptance amongst consumers. Robinson (2000) reported that half of the people that have tried e- banking services would not become active users. Another author claims that e-banking is not living up to the hype (Weeldreyer 2002). According to Njenga (2009), the effects of usage associated with mobile phone banking in Kenya are yet to be consolidated or quantified in a well-documented fashion.

Lee and Lin (2005) highlighted the need for further research to measure the influence of e-service on customer-perceived service quality and satisfaction (Ibrahim et al, 2006). The perception is formed as a result of interpreting the customer’s experience with the services. (Hiltunen et al., 2002) notes that there is a growing interest in understanding the users’ experience since it has been observed to be a larger concept than user satisfaction. This study seeks to ascertain the users’ perception of M-banking in Kenya by considering four factors; perceived usefulness, perceived ease of use, consumer awareness about m-banking and perceived risks associated with mobile banking. The study aims at examining the impact of these four factors in the move to embrace m-banking in Kenya.

1.2    Statement of the Problem

The pervasiveness of the mobile phone in developing countries has recently instigated the development of applications, which are designed to enhance customer service. One of the most recent is m-banking—a platform for the delivery of financial services via the mobile phone. The main concern within the m-banking literature however is related to its adoption. Many studies pose the question of whether or not these applications have the potential to be appropriated by a large segment of the population. Mols et al., (1999) stated that the diffusion of any form of e-banking is more determined by customer acceptance than by seller offerings. According to Bauer et al (2005), Customer satisfaction and customer retention are increasingly developing into key success factors in e-banking. Any form of e-banking requires perhaps the most consumer involvement, as it requires the consumer to maintain and regularly interact with additional technology. Consumers who use e-banking use it on an ongoing basis and need to acquire a certain comfort level with the technology to keep using it (Servon and Kaestner, 2008) hence the need for regular feedback about their experiences.

Research on consumer attitude and adoption of e-banking showed that there are several factors predetermining the consumer’s attitude towards e-banking such as person’s demography, perceived risk, ease of use of the service and ones behavior towards technology. It has also been found that consumer’s attitudes toward e-banking are influenced by the prior experience of computer and new technology (Laforet and Li, 2005.

Though customer acceptance is a key driver determining the rate of change in the financial sector, empirical studies on what may be hindering total embrace of e-banking by customers have been few (Sathye, 1999). To date, there is very little empirical work examining the customer experience and adoption of m-banking applications in Kenya and discussing the numerous barriers to this process. This survey therefore seeks to bridge that gap by establishing what the users’ perception of the mobile banking products is and what are the main driving factors towards/against the use of the mobile banking products in Kenya. Besides, this study is founded on the knowledge that assessing user experience is an essential part of any new technology product and services particularly in a highly risky and competitive industry such as banking.

1.3    General Objective

The general objective of this study is to determine customers’ perception of the various mobile-banking services in Kenya.

1.4    Specific Objectives

  • To assess the customers’ level of awareness and their knowledge about m-banking services.
  • To establish the customer’s perceived ease of use of the m-banking services.
  • To establish customers perceived usefulness of the mobile banking services/products in Kenya.
  • To determine customer say regarding the risk associated with use the m-banking services.

1.5    Importance of the study


1.5.1   To Businesses, Investors and Individuals

The survey will also provide a platform through which users and non-users of mobile banking services will voice their concerns and complements. So far, there are no clear channels through which consumers of potential consumers of m-banking services can voice their concerns and therefore this study will present them with that much needed platform.

1.5.2   To the Banks

This research may help banks to better strategize and better see the future opportunities relating to m-banking. The findings of this study will help decision makers in the banking sector to identify gaps between their expectations of the mobile banking services and the actual customers’ experience. This will go a long way in assisting banks understand better their customer needs and in designing other mobile products and services hence offering better services to their customer, an important ingredient of strategic advantage.

1.5.3 To the Government

Through the Central Bank of Kenya, the Government could greatly benefit from this study. The findings and recommendations could help the Government to better tap and fully explore the opportunities of the mobile Banking models and assist in establishing any missing regulatory needs necessary for the smooth running of these services.

1.5.4 To Academicians and Researchers

For this group, the outcome of this research will inspire further research in the area. It can constitute a starting point of reference and a source for secondary data for further scrutiny in the area. More importantly, the study will at least fill a knowledge gap in that the findings and conclusions will identify some important factors that would affect the adoption of mobile banking in Kenya. As for students of finance and banking and Marketing, this study will be of great help as it will assist them to clearly understand the concept of mobile banking and its applicability.

1.6    Scope of the study

The key intention of this study is to evaluate those factors that determine the perception of retail banking customers towards mobile-banking products in Kenya. The study will focus on the m-banking customers around Nairobi area and the survey will be conducted between the month of June 2011 and July 2011.

1.7    Definition of Terms


    • E-Banking -The process by which a customer may perform banking transactions electronically without visiting a brick-and-mortar institution (FinCen, 2000)
  • M-Banking -The use of a mobile phone or another mobile device to undertake financial transactions linked to a client’s account (Anderson, 2009)
  • Mpesa – Mobile money transfer service provided by the leading mobile phone service provider Safaricom (Indrani M. et al, (2009).
  • Mkesho– Equity banks’ m-banking product that link customer account Mpesa service. (Indrani M. et al, (2009)
  • Customers– Consumers and potential consumers of Mobile Banking products

1.8    Chapter summary

This study seeks to offer an insight into the customer experience with the mobile banking services in Kenya that has not previously been investigated. It focuses on customers’ perception of the various mobile-banking services in relation to usefulness, ease of use, risks and customer awareness of m-banking. The study recognizes the prior research efforts to establish the status of mobile banking usage in Kenya but builds on these findings by seeking the customers’ feedback on the usage of the services. A survey based on the objectives of the study will be conducted between the month of February 2011 and March 2011 in Nairobi.

The subsequent chapter reviews the existing literature on the concept of mobile banking and consumer adoption of m-banking products and Chapter three is a narrative of the research methodology.





2.1  Introduction


This chapter presents a review of the literature related to the purpose of the study; “Towards Mobile Banking in Kenya- a customer perspective”. The chapter is organized according to the four specific objectives developed in the previous chapter which include assessing customers’ level of awareness and knowledge about m-banking services and establishing customers’ perceived usefulness and ease of use of the m-banking services/products in Kenya. Finally, chapter discusses customers view regarding the risk associated with use the m-banking services. At the end of the chapter, a chapter summary is provided to give an overview of the related literature review and a description of what the next chapter will cover.

2.2  Mobile Banking Awareness

2.2.1   Employment of Mobile Technologies in the Banking Sector

According to Tiwari, Buse and Herstatt (2006), a cornerstone of Mobile Commerce is built on Mobile Banking which is the provision of bank-related financial services via mobile devices. It comprises of services in the field of accounting, brokerage and financial information. He further notes that Mobile Banking is increasingly being employed by many banks around the world to generate additional revenues, reduce costs or to increase customer satisfaction, often with greater success.

Unlike in the past, when banks offering mobile services suffered a severe setback due to lack of customer interest and unripe technologies, the time seems to be now ripe for (re-)launching mobile services(Tiwari R., et al 2006). Mobile Banking is usually defined as carrying out banking business with the help of mobile devices such as mobile phones or PDAs. The offered services may include transaction facilities as well as other related services that cater primarily to informational needs revolving around financial activities. Mobile Accounting


Mobile Accounting is sometimes characterized as transaction-based banking services that revolve around a bank account and are availed using mobile devices (Georgi and Pinkl 2005). Not all Mobile Accounting services are however necessarily transaction-based. A more precise definition of Mobile Accounting would therefore characterize it as “availment of account-specific banking services of non-informational nature (Tiwari et al). Mobile Accounting services may be divided in two categories to differentiate between services that are essential to operate an account and services that are essential to administer an account.

Table 2.1: Services in Mobile Accounting

Mobile Accounting

Account Operation

Account Administration

Money remittances & transfers

Access administration

Standing orders for bill payments

Changing operative accounts

Money transfer to sub-accounts

Blocking lost cards

Subscribing insurance policies

Cheque book requests

Source: Tiwari R.,et al (2006) Mobile Brokerage

Brokerage, in the context of banking- and financial services, refers to intermediary services related to the bourse, e.g. selling and purchasing of stocks. Mobile Brokerage can be thus defined as transaction based mobile financial services of non-informational nature that revolve around a securities account (Georgi and Pinkl, 2005). Mobile Brokerage, too, may be divided in two categories to differentiate between services that are essential to operate a securities account and services that are essential to administer that account. (Georgi and Pinkl, 2005).

Table 2.2: Services in Mobile Brokerage

Mobile Brokerage

Account Operation

Account Administration

Selling & purchasing financial instruments (e.g. securities)

Access administration

Order book administration

Source: Tiwari et al (2006) Mobile financial information


Mobile Financial Information refers to non-transaction based banking- and financial services of informational nature (Tiwari, R. and S. Buse). Mobile Financial Information services include subsets from both banking and financial services and are meant to provide the customer with anytime, anywhere access to information (Georgi, F. and J.Pinkl 2005). The information may either concern the bank and securities accounts of the customer or it may be regarding market developments with relevance for that individual customer.

According to Georgi and Pinkl (2005), this information may be customized on the basis of preferences given by the customer and sent with a frequency decided by him. The information should be provided, ideally, on both, pull and push basis. Information services are an integral part of Mobile Accounting and Mobile Brokerage but they may also be offered as a stand-alone, independent module, i.e. Mobile Financial Information can be offered without offering Mobile Accounting or Mobile brokerage but vice versa is not feasible.

Table 2.3: Services in Mobile Financial Information

Mobile Financial Information

Account Information

Market Information

Balance inquiries / Latest transactions

Foreign exchange rates

Statement requests

Market and bank-specific interest rates

Threshold alerts

Commodity prices

Returned cheques / cheque status

Stock market quotes and reports

Credit card information

Product information & offers

Branches and ATM locations

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