INFLUENCE OF ELECTRONIC DELIVERY CHANNELS ON CUSTOMER SATISFACTION IN SAVINGS AND CREDIT COOPERATIVES

INFLUENCE OF ELECTRONIC DELIVERY CHANNELS ON CUSTOMER SATISFACTION IN SAVINGS AND CREDIT COOPERATIVES, A CASE FOR MWALIMU NATIONAL SACCO
JOANNE RUTH TAMBASI

A research project proposal submitted in partial fulfillment for the requirement of award of a degree of masters of Arts in project planning and management of the University of Nairobi
2018
DECLARATIONThis research project proposal is my original work and has not been presented for an academic award in this or any other university.

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SIGNATURE………………………………….DATE………………………….

JOANNE RUTH TAMBASI
L50/84780/2016
This research proposal has been submitted for examination with my approval as the University of Nairobi supervisor.

SIGNATURE……………………………..DATE………………………….

Dr. Mbugua, J.M. PhD
Department of open learning
University of Nairobi
DEDICATIONI dedicate this project to my spouse Mike, my children for their patience and understanding during my many hours of absence and my house manager Violet, who had to stand in making sure that there was food on the table.
You hold a special place in my heart and will forever be grateful. May God bless you always and grant you the desires of your hearts.

ACKNOWLEDGEMENTThis research proposal would not have come to its logical conclusion without the input, co-operation and support of several people, who in one way or another steered me towards my ultimate goal. I would like to extend my sincere gratitude to all the lecturers who were invaluable during my studies and project work, the librarians for tireless support in proving information needed for the topic and the entire administration of University of Nairobi for both their direct and indirect support.
My sincere gratitude to my supervisor Dr. J. M. Mbugua, Department of open learning; for his invaluable and tireless guidance at every stage of this project. My classmates at the University of Nairobi for their motivation to soldier on. To Mwalimu staff, thank you for contributing towards completion by the candid responses from the questionnaires.

TABLE OF CONTENTS TOC o “1-3” h z u DECLARATION PAGEREF _Toc522358896 h iiDEDICATION PAGEREF _Toc522358897 h iiiACKNOWLEDGEMENT PAGEREF _Toc522358898 h ivTABLE OF CONTENTS PAGEREF _Toc522358899 h vLIST OF TABLES PAGEREF _Toc522358900 h viiiLIST OF FIGURES PAGEREF _Toc522358901 h ixABBREVIATIONS AND ACRONYMS PAGEREF _Toc522358902 h xABSTRACT PAGEREF _Toc522358903 h xiCHAPTER ONE PAGEREF _Toc522358904 h 11.1INTRODUCTION PAGEREF _Toc522358905 h 11.2 Background of the Study PAGEREF _Toc522358906 h 11.3 Statement of the problem PAGEREF _Toc522358907 h 61.4 Purpose of the study PAGEREF _Toc522358908 h 71.5Objectives of the study PAGEREF _Toc522358909 h 71.6 Research questions PAGEREF _Toc522358910 h 81.7 Significance of the study PAGEREF _Toc522358911 h 81.8 Basic Assumptions of the study PAGEREF _Toc522358912 h 91.9 Limitations of the study PAGEREF _Toc522358913 h 91.10 Delimitation of the study PAGEREF _Toc522358914 h 91.11 Definition of significant terms used in the study PAGEREF _Toc522358915 h 101.12 Organization of the study PAGEREF _Toc522358916 h 10CHAPTER TWO PAGEREF _Toc522358917 h 12LITERATURE REVIEW PAGEREF _Toc522358918 h 122.0 Introduction PAGEREF _Toc522358919 h 122.1 Concept of electronic channels PAGEREF _Toc522358920 h 122.3 Concept of Customer satisfaction PAGEREF _Toc522358921 h 122.4 Technology Adoption and Customer Satisfaction PAGEREF _Toc522358922 h 142.2 ATM and customer satisfaction PAGEREF _Toc522358923 h 152.3 Point of sale and customer satisfaction PAGEREF _Toc522358924 h 172.4 Mobile banking and customer satisfaction PAGEREF _Toc522358925 h 182.5 Internet and customer satisfaction PAGEREF _Toc522358926 h 19.6 Theoretical framework PAGEREF _Toc522358927 h 212.7 Conceptual framework PAGEREF _Toc522358928 h 232.8 Gaps in literature reviewed PAGEREF _Toc522358929 h 252.9 Summary of Literature Review PAGEREF _Toc522358930 h 25CHAPTER THREE PAGEREF _Toc522358931 h 27RESEARCH METHODOLOGY PAGEREF _Toc522358932 h 273.1 Introduction PAGEREF _Toc522358933 h 273.2 Research design PAGEREF _Toc522358934 h 273.3 Target population PAGEREF _Toc522358935 h 273.4 Sample size and sampling procedures PAGEREF _Toc522358936 h 283.5 Data collection instrument PAGEREF _Toc522358937 h 293.5.1 Pilot testing of the instruments PAGEREF _Toc522358938 h 303.5.2 Validity of the instrument PAGEREF _Toc522358939 h 303.5.3 Reliability of the instrument PAGEREF _Toc522358940 h 303.6 Data collection procedures PAGEREF _Toc522358941 h 313.7 Data analysis techniques PAGEREF _Toc522358942 h 313.8 Ethical considerations PAGEREF _Toc522358943 h 313.9 Operationalization of Variables PAGEREF _Toc522358944 h 31References PAGEREF _Toc522358945 h 34APPENDICES PAGEREF _Toc522358946 h 42Appendix I: Letter of transmission of data collection instrument PAGEREF _Toc522358947 h 42Appendix II: Questionnaire PAGEREF _Toc522358948 h 43

LIST OF TABLES TOC h z c “Table” Table 3.1: Target Population PAGEREF _Toc511211294 h 29Table 3.2: Operational definition of the variables PAGEREF _Toc511211295 h 32
LIST OF FIGURES TOC h z c “Figure” Figure 1: Conceptual Framework PAGEREF _Toc511211298 h 24

ABBREVIATIONS AND ACRONYMSICT-Information Communication and Technology
SACCO- Savings and Credit Cooperative
WOCCU- World Council of Cooperative Union
ICA-International Cooperative Alliance
ATM- Automated Teller Machine
SAPS- Structural Adjustment Programs
POS- Point of Sale
CRM-Customer Relationship management
ABSTRACTTechnological innovations in the banking sector is the force behind adoption of electronic delivery channels aimed at enhancing service delivery. The purpose of this study is to investigate the influence of Electronic Delivery channels on customer satisfaction in Savings and credit cooperatives, a case of Mwalimu National Sacco. Specifically, the study will seek to determine how Automated Teller Machines delivery channel influence customer satisfaction in Mwalimu National Sacco, to establish the influence of Point of Sale delivery channel on customer satisfaction in Mwalimu National Sacco, to determine the influence of mobile banking delivery channel on customer satisfaction in Mwalimu National Sacco and to determine the influence of Internet delivery channel on customer satisfaction in Mwalimu National Sacco. The study is hoped to be valuable to Mwalimu National management in identifying and sealing gaps in provision of service through the electronic channels and the various stakeholders amongst them Mwalimu staff, policy makers, Mwalimu members and future researchers.

The study will be guided by assimilation theory. The population will consist of all 112 front office staff in 16 Mwalimu National Sacco branches in 13 counties. Yamane formulae will be used to determine the sample of 87 respondents, stratified sampling method will be used to select the sample. Questionnaires both closed and open ended will be used for data collection. Descriptive and inferential statistics will be used in data analysis. Before analysis the questionnaires will be edited for completeness and consistency, numerical data coded and analyzed using statistical package for social scientists (SPSS). Pearson Product Moment correlation coefficient will be used to determine relationship between the variables.

CHAPTER ONEINTRODUCTIONThis chapter consists of the background information on electronic delivery channels usage globally and narrows down to local use, statement of the problem, purpose of the study, objectives of the study, research questions, significance of the study, basic assumptions of the study, limitations of the study, delimitation of the study, definition of significant terms and finally organization of the study.

1.2 Background of the StudyIn today’s fast paced economy nearly half of financial and retail transactions are processed without human intervention. Technological innovations in the banking sector is the force behind adoption of electronic delivery channels aimed at enhancing service delivery. These innovations facilitate speedy processing and dissemination of information, enhances performance and productivity, reduction of operation costs, access to a wider customer base over multiple channels independent of distance and time limits, consequently improving customer satisfaction by provision of convenient services. Additionally, electronic transactions provide higher accuracy due to low human error resulting in increased effectiveness, and efficiency (Alhaliq ; Almuhiraf, 2016).

In the past, banking services were controlled by strict operating hours; there were no services during public holidays and Sundays. Customer needs were addressed at the bank and every transaction had to be signed and verified by the bank staff before payment. Services were characterized by long queues and bureaucratic procedures. The situation was worse in Savings and Credit Societies since most had not opened branches beyond their headquarters, thus in the event of delays a member had to visit the Sacco from very far for follow up.

Technological developments in Local Area Networks, Wide Area Networks, Wireless Technology and the Internet has facilitated innovation of EDC’s, automation of traditional banking operations, queue management systems and call centers. Strong (2011) in the study on alternative channels observed that 90% of daily transaction were electronic and those institutions with strong beliefs in branch networks will not be able to serve tomorrow’s customers who never visit counters. According to Rodgers (2012) in the study on the future of EDC’s argues that physical branches will still be relevant for relationship building and unique services that may not be offered electronically.

EDC’s extend the reach of services beyond the traditional bank branch channels and therefore there is need for financial institutions to ensure that channels are accessible and reliable to achieve relevance CITATION Kob15 l 1033 (Koblanck, 2015).They include ATM’s, mobile phones, internet banking, POS, Electronic funds transfer, Agency banking and call centers that relay financial and non-financial information amongst other channels. According to Driga and Isac (2014) even though Internet and mobile banking has overtaken the branch service, customers still need to visit the branch for regulatory requirements like Know Your Customer (KYC), financial advice and other complex needs that cannot be dispensed electronically nevertheless in the future electronic banking will overcome traditional banking.

A survey by Accenture Consulting (2016) for North America shows that online banking was the dominant channel with 60% of the users, the dominance is owed to customers focus on value and convenience, results showed that 87% of the customers still intend to utilize counter services in the future; thus, branches are still relevant therefore there is a need to balance and make the modern branch a mix of digital and physical.
Electronic banking became popular in 1980s first then later in New York and United Kingdom in 1983. It comprised of PC banking, home banking, internet banking and Mobile banking (Driga and Isac, 2014). Mobile banking is not popular in US supporting findings by Accenture. According to Federal Reserve consumer survey (2015), consumers felt they were being served well by other channels hence they found no reason to use mobile banking though there was an increase in usage in comparison to 2014 survey. In the United States ICT adoption in Credit Unions is at par with other financial institutions. Deregulation and globalization has blurred the differences between financial institutions in the United States, Navy Federal Credit Union (NFCU) has over 7 million members, customers access online banking, Mobile payments and funds transfer, they also have 9000 ATM’s that are free of charge and mobile web SMS accessible 24/7 (NFCU, 2017).

Credit Unions in Great Britain began in 1960s, they are nonprofit making and enjoy support from the government. In 1999 to 2011 transformations in credit unions aimed at operating a business focused model that meets modern financial needs of members commenced. Credit Union Expansion Project involving 82 credit Unions was initiated with the main focus on sharing IT resources, products and services across the country via electronic channels that automate membership and products on boarding (Jones, 2013).

A study in digital banking in Asia findings showed that growth in Ecommerce, Internet and Smartphone adoption has enabled the use of digital channels for personal financial service. The results show a 35% growth in use of Internet and mobile banking while there was a 25% reduction in branch use (Barquin ;Vinayak , 2015). A study on Irish Credit Unions by Mckillop and Quinn (2010) recognizes the use of technology in CU’s in Ireland, members can check information and transact online, confirmation of interest rates, account balance, view and print statements, bill payment, transfer money, loan applications, deposit, withdraw pay loans and transfer funds among different accounts. Jones (2013) in the study on financial inclusion findings showed that Northern Ireland credit unions lack human and financial resources to adopt modern systems that can fully utilize advancements in electronic channels.

In Africa and developing countries at large adoption of electronic service channels has been slow but there is noted progress especially in mobile adoption. According to World Bank (2016) report findings show that there are more people owning mobile phones than the basic needs such as electricity and water. African business magazine (2014) reports that ATM density in Africa is the lowest with a total of 36,000 ATMs 80% concentrated in Morocco, Egypt and South Africa. Developing countries are challenged in adopting technology due to inadequate ICT infrastructure, skills, unreliable equipment and high capital requirements in ICT investments.
Mobile money transfer services were pioneered by the non-banking institutions in a bid to overcome barriers inherent in traditional financial systems. Mobile Money Telecom and internet companies have facilitated the mobile banking application achieving financial inclusion of the poor who in most cases do not have access to bank accounts (World Bank, 2016). Kenyan banks have adopted electronic channels in form of ATM’s, POS, and Electronic Funds Transfer, Mobile banking and Internet banking, agency banking amongst others. Equity banks Ezzypay and Pesalink the latest banking innovation partnering with 22 banks offers customers money transfer services while bypassing the mobile network operators (Pesalink, 2017).

Sacco’s or Credit Unions as referred to by most developed countries are unique financial institutions that differ from commercial banks. They are not for profit making and thus interest rates are below the market rates, Sacco members are owners and account holders at the same time and services are offered to members only. Sacco’s offer similar banking services to the members but using different terminologies. Successful credit unions or Sacco’s need to direct their focus on customer service as a foundation for its decisions. Like banks, Sacco’s are pressed with demanding customer needs for improved service delivery. Emergence of modern technologies, competition and government regulations and deregulations have also compelled Sacco’s to change their mode of operation in a bid to satisfy these demands (Deshpande and Karl, 2014).

Hays and Ward (2013) in the study on Technology leader’s vs laggards argue that adoption of Technology may not guarantee reduction in cost and improvement in performance but the lack of it can cause mediocre performance in Credit Unions.
The financial sector in Kenya is driven by five major sub sectors namely; Banks, Insurance, Capital markets, Pensions and Sacco’s. According to FSD Kenya (2007) Sacco’s are excluded from the national payments systems and thus they rely on collaboration with commercial banks to access ATMs and interbank transfers. Most Sacco’s have partnered with banks to facilitate access to the channels for example, Mwalimu has partnership with Spire bank, Stima Sacco with Family bank, Unaitas Sacco with Commercial Bank of Africa and many others with Cooperative bank. Sacco’s are regulated by SASRA while Banks and micro finance institutions by the Finance bill and Banking Act.

Sacco’s play a significant role in development of the economy worldwide, WOCCU (2016) statistical report on 109 countries in 6 continents showed that there are 60,500 credit unions in the world, 223,000,000 members with savings of 1.5 trillion(USD) and loans worth 1.2Trillion (USD). In Kenya, there are over 22,000 active Sacco’s and unions with over 14 million members, total assets of 1.32 trillion total loans and advances of 329 billion aggregate savings and deposit worth 640 billion (Kenya Economic Survey ,2016). Innovations and ICT will be an impetus in the right direction for Sacco’s to operate in a liberalized competitive market.
Cooperative development in Africa has traversed two eras state controlled and liberalized era. With the advent of liberalization of the economy through the structural adjustment programs (SAPS) for the 1990s, governments disengaged from running cooperatives by allowing members to manage them. New policies and legislations were introduced to govern the operations of cooperatives to create commercially autonomous and member based cooperatives that would be professionally managed, democratically controlled and self-reliant (Wanyama and Pollet, 2009).

SASRA licensed Sacco’s operate banking services under their FOSA’s for deposit taking and withdrawal, current accounts, savings account, fixed deposit accounts, personal car and motor loan, mortgages, transfer of payments, foreign exchange, corporate banking, student’s savings, credit facility, overdraft, SMS banking, Investment loan and over drafts amongst many other services. These products were ones a preserve of commercial banks. Sacco’s have adopted several systems to improve efficiency and effectiveness in their services but due to inadequate financial resources, legal issues and skills gap they have not fully utilized the emerging technologies, they still don’t measure up to the standards set by banks in technology use.

Cooperative bank has 774,755 Sacco link customers and over 550 FOSA’s. Service’s offered include Debit and credit card, Electronic funds Transfers. Members can also access mobile money via M- coop cash, payment of bills and agency banking (Cooperative Bank of Kenya, 2015).

Considerable initiatives have been made by the government as an impetus towards ICT adoption by laying of the fiber optic infrastructure resulting to faster communication, reduced access costs, e-government platform and ecommerce ( Economic Survey, 2017).

Technological shortcomings as observed by Deloitte (2014) in the report on cyber security asserts that the financial sector is very susceptible to cyber threats resulting from increase in innovations such as the adoption of web, mobile cloud and social media. ICT requires massive investments in technical skills, infrastructure, hardware and software to fight cyber security risks, fraud causes significant challenge to the industry, interoperability between devices and systems, obsolescence of technology, system failures and down time amongst others. Huge investments are an obstacle to Sacco’s hence they don’t fully benefit from technology optimally because of inadequate finances for setting up the ICT infrastructure and skilled labor force as compared to the banking industry.
Mwalimu National Savings and Credit Co-operative Society Limited was founded and registered in 1974.Members were drawn from post primary teachers, TSC secretariat staff and Mwalimu staff. Open common bond now allows primary diploma teachers, member’s spouses in formal employment, ministries and public universities. It is licensed by SASRA to operate the front office (FOSA), back-office (BOSA) deals with savings and credit facilities, Micro unit deals with financing members engaged in businesses. The Sacco has an active membership of over 60,000, over 80% are drawn from the Teacher’s Service Commission (Mwalimu Sacco, 2017).

Mwalimu has invested in ICT infrastructure which connects all the sixteen branches and a Data Center, Management Information system, ATM connectivity with partner banks that offers point of sale, mobile banking, online loan application via the mobile platform, Web portal where members can access statements and a website for access of information on products and events, Customer relationship management system and document management system amongst other initiatives. However feedback from members shows that there are challenges in network availability, accessibility of services, delays in processing and general reliability of the services.

The study seeks to investigate the influence of automated teller machines, mobile banking, Point of sale and the internet channels on customer satisfaction in Mwalimu Sacco. Current Mwalimu strategic plan identifies customer focus as one of the key pillars towards improving service delivery.
1.3 Statement of the problemIn response to the changing business environment and customer demands, Mwalimu National Sacco has invested in ICT by upgrading its network and acquiring a management information system integrated with ATM and mobile banking services. The main objective was to reduce operation costs and improve service delivery to the customers by offering optional channels accessible 24 hours, provide speed and accuracy in transaction processing hence reducing queues in the banking halls (Nyambu, 2015).

Members are still experiencing long queues especially during end month caused by frequent downtimes. According to Mwalimu strategic plan (Mwalimu, 2016), service delivery scores were 73.5% against the target of 100% thus the need to come up with plans to improve the channels service delivery.

In Mwalimu national SACCO One problem associated with these financial innovation is card fraud, particularly on counterfeit cards. Fraudulently authorized EFTs and RTGSs are the other avenues through which financial losses occur as customers utilize these avenues of service delivery. Frequent system failure especially on ATM machines has also been of concern and affects quality customer service delivery especially during end month and during festive seasons when the service is most needed by customers.
Challenges faced while accessing ATM use include lack of connectivity, interoperability of ATM, inadequate coverage of ATM’s in rural areas, delays in issuing of new cards and replacement of old cards. Mobile services access is hindered by connectivity problems occasioned by network failures, member’s waiting for too long before service activation, delays in processing of transactions and untimely communication from the Sacco during service interruptions. Members who use the internet and mobile for communication have also reported incomplete or no feedback to members on email communication SMS and face book (Mwalimu, 2016).

Failure to access services when required leads to time wastage, inconvenience, embarrassment to the member or missed opportunities. The aforementioned challenges impact negatively on Mwalimu by dissatisfied members passing negative word of mouth to prospective members thus missed opportunities to attract new members, withdrawal of membership translating to reduced income and loss of revenue because members do not utilize the EDC’s.

Convenient and efficient service channels are among the most powerful tools that can be used to enhance customer satisfaction (Ernest and Young ,2014). While there is evidence that electronic channels improve customer satisfaction, failure of the channels can adversely affect customer utilization and satisfaction.

The researcher intends to investigate the existing channels and how they impact on customer satisfaction,
1.4 Purpose of the studyThe purpose of this study is to investigate the influence of Electronic Delivery channels on customer satisfaction in Savings and credit cooperatives, a case of Mwalimu National Sacco.

Objectives of the studyThis study will be guided by the following objectives;
To determine how Automated Teller Machines delivery channel influence customer satisfaction in Mwalimu National Sacco.

To establish the influence of Point of Sale delivery channel on customer satisfaction in Mwalimu National Sacco.

To determine the influence of mobile banking delivery channel on customer satisfaction in Mwalimu National Sacco.

To determine the influence of Internet delivery channel on customer satisfaction in Mwalimu National Sacco.

1.6 Research questionsThe study will be guided by the following research questions:
What influence does Automated Teller Machines have on customer satisfaction in Mwalimu National Sacco?
How does Point of sale channel influence customer satisfaction in Mwalimu National Sacco?
How does mobile banking delivery channel influence customer satisfaction in Mwalimu National Sacco?
What influence does the Internet channel have on customer satisfaction in Mwalimu National Sacco?
1.7 Significance of the studyThe study is hoped to be valuable to the various stakeholders amongst them Mwalimu Sacco management, staff, policy makers, members and future researchers.
The findings will inform management decision in resource allocation for ICT to facilitate research and innovation projects geared towards quality services and products that meet the customer needs. They will also be sensitized on staff and member involvement during projects design and testing to ensure that staff understands how the channels work for effective training and customer awareness. Customer participation ensures that the systems are not just designed to meet business function but that they meet the customer needs since they are the users of the channels. Findings will inform management on challenges that members encounter while accessing the delivery channels and take corrective action. The findings will facilitate recommendations to the management to improve customer satisfaction.

The findings will help the policy makers in the government specifically SASRA and the ministry of Industrialization and Trade to come up with ICT policies that will govern management information systems in Sacco’s to facilitate quality systems and sharing of information across financial institutions.
The staff will be sensitized on giving feedback and notifying customers on failures of channels to avoid frustrations. Members will experience better service delivery at their convenience, awareness of optional service channels, decongested FOSA’s and customer service centers on successful implementation of the findings. The findings will add additional information for future researchers interested in Sacco’s especially on a wider population since this study has focused on one Sacco.

1.8 Basic Assumptions of the studyRespondents will be willing to give answers to the questions truthfully the researcher will ensure anonymity and confidentiality of respondent’s information.

That the sample chosen will be representative of Mwalimu population of inference
1.9 Limitations of the studyThe researcher may be faced with the difficulty in accessing top level management of the organization owing to their busy schedule. The researcher will address the limitation by using emails and leaving the questionnaires at the respondents’ place of work to be collected after they are fully filled.

Availability and access to information may not be easy due to policies and procedures on disclosure of customer information to third parties. This will be overcome by adhering to the data confidentiality policy in Mwalimu regarding customer data. The population under study may not be generalized to other Sacco’s in the country because of the focus on exclusively Mwalimu Sacco.

Lack of honest feedback from respondents due to fear of victimization this will be mitigated by assuring respondents of confidentiality and anonymization.

1.10 Delimitation of the studyThe researcher is limited to study four out of the many available electronic delivery channels as the independent variables of study: automated teller machine, point of sale, mobile banking and internet banking while the dependent variable is customer satisfaction. The respondents will be drawn from Mwalimu National Sacco Fosa branches in thirteen counties thus the study will not involve staff from back office operations.
1.11 Definition of significant terms used in the studyThe terms electronic delivery channels, customer satisfaction, automated teller machine, point of sale mobile banking and internet banking have been defined as applied in the study.

Electronic delivery Channels: use of telecommunication networks computers and other digital
Electronic devices to perform service delivery to customers in financial institutions.

Customer satisfaction: The degree to which customers are pleased with goods or s services purchased or used from a firm
Automated teller machine: it is an electronic outlet that dispenses cash and any other banking
Operations outside the physical branch with no time or geographical location limitations.

Point of sale:it is an electronic device provided to a merchant establishment to allow customers to pay for.

Mobile Banking:it is a facility provided by financial institutions to allow customers access the bank details and transact using a cell phone or tablet through a downloadable application, a website or unstructured supplementary service structure (USSD).

Internet banking: it is a system that uses an institutions website hosted on the internet to allow customers to communicate to the bank, transfer funds, pay bills amongst others.

1.12 Organization of the studyThe study is organized in five chapters. Chapter one contains introduction and the background of the study that highlights the transformations in the banking industry, concept of electronic channels, its application in financial institutions, application in Sacco’s and challenges inherent in these channels. The statement of the problem section explores the problem under study and its impact in society. The purpose of the study, objectives of the study highlights the specific aspect of the researcher; the research questions will provide guidelines on feedback from the study. The chapter also contains a section on the significance of the study to other researchers and stakeholders, basic assumptions, the scope of the study that delineates the boundaries.

Chapter two presents a review of literature with reference to various authors and begins by explaining the concept of electronic channels and customer satisfaction, the next section focuses on the first objective up to the fourth and last objective citing, comparing and analyzing literature by various authors who studied various dimensions inherent in electronic channels and how they influence customer satisfaction. The next section is about the theories that are relevant to the study followed by a conceptual framework consisting of independent and dependent variables in the study. Finally, the gaps in literature review and a summary of the literature review.

Chapter three presents the research methodology, research design, target population, sampling procedure, sample size, research tools, data collection procedure, data analysis technique and the operational definition of variables in the study.

Chapter four shall contain analysis, presentation and interpretation of data in line with objectives of the study.

Chapter five will present summaries of findings, recommendations for corrective action and conclusion.

CHAPTER TWOLITERATURE REVIEW2.0 IntroductionThis chapter entails literature from several studies undertaken on electronic delivery channels and customer satisfaction by examining related theories and empirical studies. The literature review is guided by the study objectives and identification of research gaps.

2.1 Concept of electronic channelsElectronic banking as defined by Schaechter (2002) is the use of electronic delivery channels to deliver services and products to the customer. Electronic delivery channels include the internet, wireless communication, ATM, telephone and mobile banking. Electronic banking services are offered using a combination of traditional brick and mortar or via electronic channels referred to as brick and click. There are also virtual banks that do not operate a physical branch, services are offered remotely through delivery channels owned by a virtual bank. Electronic channels provide several options for customers to transact with their banks anytime anywhere anyhow.

IFC (2015) defines electronic delivery channels as those channels that expand the reach of services beyond the traditional branch channel anywhere anytime, anyhow. They comprise of ATM’s Mobile Phones, POS, and internet banking amongst others.

According to Goel (2017) electronic banking is a generic term that describes a process where banking services and products are delivered via electronic channels and allows customers to access services seamlessly. They include ATMs, online banking, EFT, Credit card, they help overcome time and distance barriers thus they bypass the traditional paper based processes. FDIC, (2015) analysis shows that branches are still relevant in meeting customer personalized services and relationship management. Though modern technologies have expanded service options and convenience, there is no evidence of replacement of brick and mortar banking. PWC (2016) digital banking survey supports the fact but argues that banking landscape will change in response to evolving customer expectations, regulations, technology, demographics and shifting economies.

2.3 Concept of Customer satisfactionCustomer satisfaction is the outcome of the experience after testing the performance of a service by a customer and the feeling that the expectations have been met. According to Hansemark and Albinson (2004) as cited by CITATION Bil11 l 1033 (Angelova, 2011) “satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some needs, goals or desire”. Gronroos (1984) as cited in (Leninkumar, 2016) defined service quality as the outcome of the evaluation process, where the customer compares his perceived service with the actual received.

Customer satisfaction is essential in business because a satisfied customer will make repeat purchases for the product or service and tell others about the pleasant experience while dissatisfied customers will tell more people about the unpleasant experience. Customer satisfaction is derived from individual judgment on perception and the actual service received. SERVQUAL service quality model has been used by authors to measure quality service in the banking industry. Competence, credibility, security, access, communication, knowing the customer, tangibility and responsiveness are dimensions used in the model (Parasuraman et. al.1988).

Ernest and Young (2014) survey on access and global banking found that customers valued convenience and simplicity as evidenced in their emphasis on easy access to branches, excellent online features, ease of conducting frequent banking and quick handling of transactions. Globally findings showed that digital channels functionality, ease of use, security, slow speed and poor infrastructure were some of the major challenges that customer’s encounter while seeking services.

Customer service is the art of taking care of the customer needs and desires by providing and delivering professional helpful high-quality service. Service is intangible, not measurable and more emotional than rational hence service reflects customer’s satisfaction or dissatisfaction.

The current digital world is characterized by electronic service where customer’s interaction is often by technology and not firm employees. According to Meuteret et al., (2000) in their study identified attributes that customers look for in electronic service as solution to an intensified need, a better option than the alternative, easy to use, accessibility and time saving. The dissatisfaction aspects are; technology failure, process failure, service design problem and customer driven failure. To satisfy the customer, management must understand their needs this can be achieved by involving the customer during design. Abubakar et al., (2001) notes that service delivery is a strategic tool in banking industry that differentiate a firm’s products and services in a fierce competitive environment. The study identified and supports other studies that behavioral factors, security of personal and financial information, convenience of service and cost of service equally contributes to effective service. They further mentioned that electronic channels define what can be offered to the customer but the customer defines the channel to use hence the need to know the customer.
According to Rodgers (2012) members in Credit Unions should be the focus for electronic channels design hence stakeholder participation is key to the success of the channels. Management should ensure staff are involved in implementation of these channels, patronize the service to provide support to the customers. Wamuyu (2015) affirms that users of an ICT infrastructure have some parameters that determine continued use of technology. Service quality cost of use and customer service influence were the parameters used. Absence of these characteristics may push customers to look for alternatives where available.
2.4 Technology Adoption and Customer SatisfactionThe improvement in information and communication technology (ICT) has enhanced the creation of new business models and has revolutionized the distribution channels of financial systems resulting in not only a reduction in the transaction costs but also has improved the convenience and accessibility for the customers (Devlin, 1995). According to Norton (1992) and Mishkin and Strahan (2009) this is a key factor that is transforming the financial system. On the same note, improvement in information technology also makes it easier for investors to monitor corporations, thus reducing asymmetric information. As such, banks which have not invested significant amounts in technology have consequently faced an erosion of their market shares to other nonbanking institutions. Technological advances facilitate the rapid transmission of digitized information within and across borders, which is becoming increasing important for successful banking transaction as financial services are largely informational in nature (Bradley and Steward, 2002).

Banks have largely implemented service delivery technology as a way of augmenting the services traditionally provided by bank personnel. Implementation results both from the need to reduce the cost of delivering service primarily through personnel, and, the corresponding need to meet the challenge posed by technologically innovative competitors (Byers and Lederer, 2001). Changes in the banking industry such as those resulting from deregulation, rapid global networking, and the rise in personal wealth have thus made the implementation of sophisticated delivery systems (e.g. online and telephone banking, remote site automated teller machines, etc.) a strategic necessity in many cases.

Financial services industry over time has opened to historic transformation that can be termed as e-developments which is advancing rapidly in all areas of financial intermediation and financial markets such as e-finance, e-money, electronic banking (e-banking), e-brokering, e-insurance, e-exchanges, and even e-supervision. The latest information technology (IT) is turning into the most important factor in the future development of banking, influencing banks’ marketing and business strategies. In recent years, the adoption of e-banking began to occur quite extensively as a channel of distribution for financial services due to rapid advances in IT and intensive competitive banking markets (Mahdi ; Mehrdad, 2010). These factors make it complicated to design a bank ‘s strategy, which process is threatened by unforeseen developments and changes in the economic environment and therefore, strategies must be flexible to adjust to these changes.

Technological developments have removed repetitive, time consuming tasks, reduced human error and extended access to banking related facilities. Technology also provides customer information that it would be much more expensive to provide on a person-to-person basis. Telephone banking facilities allow non-cash transactions to be carried out, which would have required a visit to a branch earlier. Similarly, Internet banking allows customers to perform tasks at a time and in a place convenient to them. Dabholkar (2009) suggests that direct contact with such technology also gives customers a feeling of greater control. Smith (1987) believes technology was introduced in banks originally to reduce costs but that, by dividing front and back office operations, technology can be targeted to enhance divergent functions. The dilemma remains, however, as to how to maintain a satisfactory number of face to-face interactions with the customers.

2.2 ATM and customer satisfactionAutomated teller machine (ATM) is a computerized telecommunication device that customers use to access bank services without the help of a teller (Hossain et al., 2013). A user inserts a magnetic striped card with a chip that contains security information and other information such as card expiry date, bank account and name, authentication is ascertained by entering personal identification number (PIN). ATM facilitates cash withdrawal, cash deposit, and cash recycling, accepts and dispenses cash in different denominations and currencies. Modern ATM’s can be used to stop payments, funds transfer to different accounts, bill payment, mini statements, enquiries on bank location, advertisements amongst other services. It offers convenience to customers by availing services 24/7, speed, reduced cost and privacy, benefits the bank by easing congestion, reducing operation costs and it is a source of revenue.

ATM’s are installed outside the banking halls, shopping malls, restaurants, petrol stations or any place that people gather this provides convenience to customers. Banks currently offer ATM services which accept deposits without the use of envelopes and credits instantly to the customer’s account in selected ATM’s (Goel, 2017).

Accenture (2016) ATM survey observed that ATM’s have evolved from basic to complex functionality, in the UK ATM’s are used for mobile top-up ,make charity donations, sell stamps, in Russia Multicarte offers internet services and credit card application using the ATM. Other services include loans application, western union remittances, currency exchange, cash and cheque deposits.

A study on online banking in Malaysia consisting of 500 university students found that 33% of the students use ATM while 29%use internet banking (Kadir et al., 2011). Islam (2015) findings on ATM services in Bangladesh using structured questionnaires observed that 61.22 % use the ATM to access money while 38% use other channels. Security, privacy and safety were ranked top in customer expectations. The respondents who do not use ATMs cited poor network performance and few ATM locations as a source of dissatisfaction.

ATM’s influence customer’s satisfaction by decongesting banking halls services are also faster and convenient, this are finding in a study carried out in Nigeria (Odusina,2014) . Mwatsika (2016) found that ATM satisfaction is influenced by fees charged, reliability, convenience, availability of cash and responsiveness by employees on resolution of ATM problems. Simon and Thomas (2016) on e-banking on customer satisfaction studies in selected commercial banks in Kenya showed that ATM’s affect customer satisfaction by its ease of access, user friendliness and privacy.

According to central Bank report ATMs deployed dropped from 2,718 to 2,656 a sign of banks moving to convenient cost effective digital platforms. Equity banks 90% transactions are digital and their plan is to migrate 80% of the transactions to digital platforms by 2018 Juma (1st September 2017 business daily).

ATM service has been around since 1967 and has evolved in complexities and functionality and thus is still relevant in cash demands. However the channel has challenges emanating from fraud counterfeit cards, card interception, stolen cards and fraudulent card applications this is in accordance to findings in a survey carried out by (Federal Reserve, 2016).

Service quality dimensions and customer satisfaction with online services in the study carried out by (Okeke et.al 2015) revealed that ATM’s malfunctions, running out of cash debiting un-dispensed cash and insecurity are some of the challenges that dissuade customers from using the service.

Service quality dimensions users focus are consistent with other studies (Singh, 2011). The questionnaires in the study were based on these attributes Cash availability ,Location and proximity of the ATM, time taken to process a request, cheque drop box, statement print outs and cash deposit facility ,response to queries and availability of shared ATMs.

2.3 Point of sale and customer satisfactionPOS is a device that connects through a telephone or a wireless communication to the bank server (Hossein & Mohammed, 2012). It is used to verify and process purchase value from the customer bank account to the vendors account. A customer has the option to use a debit, credit, mobile money or cash at the point of sale. Credit and debit cards are used for goods and service payment over the point of sale or over the internet.

POS is one of the newest channels in Kenya, internationally deployment costs are cheaper in comparison to the ATM. Merchants acquiring POS must have a bank account since the merchant is credited directly to the bank account. It benefits the buyer by reducing risks in cash handling and convenience. The merchant benefits by reduction of cash management risks, enhances reconciliation and fewer missed purchases. The bank benefits in reduced queues and revenue from fees charged to the merchants (FSD, 2007). In a study carried out in Iran bank, POS users consisting of 200 shoppers’ findings showed that the customers’ satisfaction is measured on security and the cost of service (Mirhosseini, Shaker, Foutuhi, 2015).

A banking survey by (KPMG, 2016 ) on customer satisfaction with banking services findings showed that Ghanaian’s still prefer branch banking but they also appreciate alternative channels due to its convenience and flexibility but there concerns are on security as a result of rampant frauds ,transaction timeliness, accurate and complete information. Assurances on Security will attract them to use the channels more. Findings from a population of 600 customers in Accra, Kumasi and Takoradi, revealed that 3% of the customer used internet weekly, 4% used mobile and only 2% used POS weekly. Compared to the findings in Kenya, access on a weekly basis showed that internet 3%, ATM 43%, mobile 26% while POS has the lowest preference of 5%.

Mobile point of sale (MPOS) is the newest channel gaining preference among customers. Retail paradigms are changing with the new innovations in technology and customer demands; the modern customer wants to shop where they want, when they want and how they want. A survey by Juniper predicts that 20% of retail transactions will be via mobile point of sale up from 4% in 2014.Attributes for customer satisfaction will focus on personalized service and convenience.

In Kenya Lipa na Mpesa is a porpular mobile POS payment system that allows customers to pay for goods at the point of sale, and also provides cash collection service for businesses. Recently a new product- Mpesa-Itap that is easy and faster to process payments was launched. A buyer pays by tapping on the device that comes in either Card, phone sticker or a wristband connected to the Mpesa account. The vendor keys in the amount to be paid at the point of sale device then customer taps the point of device and receives a message to enter the PIN via the cell phone to complete the transaction. Tap transaction processing is faster than LIPA na Mpesa (Safaricom, 2017).

2.4 Mobile banking and customer satisfactionMobile banking is the use of mobile devices such as cellular phones and smart phones to communicate and perform banking services such as checking account balances, search recent account activity, transfer funds, pay bills, find nearest ATM facility amongst others Shah (2009).

Banking industry is moving away from the traditional banking to electronic banking owing to changes driven by technological innovations, changing market environments and competition. Mobile banking adds business value, increased efficiency, cost reduction and improved customer service (Kahandawa and Wijayanayake, 2014).

It is the newest technology made possible by the availability and capacity of the mobile infrastructure around the world. According to a World Bank (2016) survey more households in developing countries have access to mobile devices than basic needs such as electricity and water. Kenya studies in e-payments singles out Kenya as the world leader in mobile money via Safaricoms Mpesa money, orange money and Airtel money platforms that has expedited financial inclusion to less penetrated rural population and the poor USAID (2011). Studies by (Economic Survey 2016) statistics show that there were 3.4 trillion Kenya shillings transferred through mobile phones, 46.3 billion SMS sent and 1.7 trillion worth of money sent under mobile commerce.

A study carried out in Sri Lankan state commercial bank (Kahandawa and wijayanaki, 2014) by use of questionnaires on 64 respondents found that usefulness, ease of use, relative advantage, perception of risk, user’s lifestyle and current needs influence customer satisfaction for mobile services. Findings showed that 87% respondents were concerned on perception of risk as a crucial factor to customer satisfaction however 90% of the customers are satisfied with mobile service. These findings are supported by (Saleem and Rashid,2014) in their study in Pakistan banks using non probability sampling in three banks based on a sample of 230 bank employees and 230 customers observed that customers put a high regard on security, authenticity and reliability of mobile services.

A study on effectiveness of mobile services in KCB bank Morogoro in Tanzania showed that customers are satisfied with mobile banking but were concerned with network challenges, delays in transaction processing and delay in resolutions of cases where customers sent money to wrong numbers (Haonga, 2015).

Findings in a study on customer satisfaction on mobile banking in Jordan by means of questionnaires distributed to 360 customers based on reliability, flexibility, privacy, accessibility, ease of navigation, efficiency and safety attributes that influence satisfaction showed that privacy and accessibility had the highest influence on customer satisfaction (Asfour & Haddad, 2014).
2.5 Internet and customer satisfactionInternet banking refers to provision of banking services and information on products over the World Wide Web (WWW). The bank website can be used to access account or product information, funds transfer between accounts, bill payment, access bills, online loan application and approval, business banking services, interaction, cross selling, personalized content and tools, accounts aggregation and electronic funds transfer from one bank to another (Shah, 2009).

The prerequisites of internet delivery channel are internet accessibility, a website, back and front end, customer relationship management (CRM), ICT infrastructure to link e-banking payments system and a middleware to integrate diverse systems. Internet exposes consumers to information from other financial service providers giving them options for comparisons, a platform for marketing and advertisement for service providers, e-commerce and formation of virtual organizations such as Amazon, Smile.co.uk (Shah ,2009).

Internet is the latest and cheapest technology used in online banking services. There are two forms that may be adopted namely information sharing and transaction processing or both. Financial institutions provide a website to its prospective and current customers where products and services information is displayed. Customers are issued with user names and passwords for access to personal information. Other forms of information sharing include via portals and email communication between the bank and its clients. Transactional processing is where the bank’s core banking system is accessed via the internet through a middleware and it enables the customers to perform banking services such as funds transfer, bill payment amongst others. It is cost effective and secure (Goel, 2017).

According to Young, (2001) More than 11,000 banks in the US utilize the click and mortar strategy where customers use transactional websites to perform banking without leaving their business or homes but customers visit banking halls for personalized services. It was predicted that internet banking adoption rate would be faster than ATM in 5 -10 years and that if banks failed to embrace internet banking they will lose their competitiveness to cyber banks (Yan and Paradi, 1998). This prediction is yet to be fulfilled thus brick and mortar strategy has not been replaced instead the physical branches have been customized to suit changing customer needs by provision of alternative channels. A survey by Accenture Consulting (2016) for North America showed that online banking is the dominant channel with 60%, but still 87% of the customers use branches and therefore the need to balance the modern branch with a mix of digital, by extension of operation hours and human interaction.

United Arab Emirates (UAE) banks have adopted Internet banking but traditional banking is still the preferred channel for customers. Multiple channels are utilized depending on the nature of the transaction, however the respondents’ highlighted trust and privacy concerns as a limitation to access online services (Jham & Ganderen, 2012).

Trust affects user’s willingness to use online money transfer, fear of passing sensitive information using technology therefore banks and consumers view security as a threat. There is need for managers in financial organizations to build trust by implementing strong security controls and convince customers of mechanisms put in place to guard security concerns to encourage use (Jham, 2016). Jham defines E-trust as the degree with which customers trust online exchanges. Customers look for reliability efficiency security and confidence while accessing online services.
These findings are further supported by Maroofi, and Nazaripour (2012) in the study on factors affecting customer loyalty in Iran, trust habit and reputation of the banks was found to highly affect customer loyalty and satisfaction. Trust can be inspired by provision of safe reliable websites and an attractive user interface coupled with security measures. According to (Arshad, et.al., 2005) the world over, users compare services and products offered by different firms and select one that meets their needs easily and at less cost compared to traditional means, thus there is need to give quality service. Some of the dimensions used are reliability-meeting expectations, completion of funds transfer, Access-ability to access without time and geographical limitations, and security – trust in online privacy.

Internet use for funds transfer is highly adopted by banks as compared to microfinance institutions and Sacco’s. A study by Okiro and Ndungu (2013) on financial institutions in Nairobi, banks had the highest internet usage at 43%. Balance enquiry was the most function used at 40% while bill payment was at 3.3 %.

.6 Theoretical framework
The study will be guided by Diffusion of Innovation Theory (DIT) by Rogers (1995).
Rogers Diffusion of innovation theory (1995) is a theory that explains reasons for adoption of an innovation aimed at reducing uncertainties about the unknown. Rate of adoption is the relative speed at which an innovation is adopted by members of a social system, measured as the number of individuals who adopt a new idea in a specified period.

Rogers (1995) identified five attributes that influence use of innovation. Relative advantage is the degree to which innovation is perceived to be better than the idea it supersedes”. Consumers are motivated by benefits gained from an innovation. The second attribute is Compatibility with the degree to which an innovation is perceived as consistent with existing values, past experiences and needs of adaptors. Experience with old ideas can either accelerate adoption or be a barrier to adoption. Complexity is the degree to which innovation is perceived as relatively difficult to understand and use. Trialability is the degree to which an innovation may be tested to determine how it works and may increases confidence and fastens the adoption. Observability is the degree to which the results of an innovation are visible to others. This can be attained by seeing others utilizing the technology leading to confidence for expected users.

Rogers (2003) also noted that communication is passed using mass and interpersonal channels as a means through which an organizations or individuals receive information. The nature of communication channels and agent’s promotion efforts influence rate of adoption either slowing down or slowing down.

Rogers (2003) identifies five stages of innovation adoption; Knowledge stage where an individual learns about an innovation and seeks further information on what it’s about, how it works. Persuasion stage; where an individual has a negative or strong attitude towards the innovation, persuasion may influence the user to change mind and adopt. Decision; where individual chooses to adopt or reject, rejection is possible in every stage in the innovation decision process. Implementation; where the innovation is put into practice, reinvention may occur to modify the existing idea. Confirmation where individual looks for support for his decision from peer’s later adoption or discontinuance happens at this stage.
Diffussion of innovation is relevant to this study in that customers look for attributes that either push or pull them towards adoption of technology.They raise such questions as what are the benefits?how easy it is to use? will channels give them better services as compared to visting the branch?Will they be compatible for example ability to transfer funds, pay bills and withdrawal funds. Customers will be concerned on the user friendliness in terms of how easy it is to use the channel, long steps, repeated information asked and unclear instructions will disuade a customer.The institution should demonstrate to the customer how a channel works especially when they visit or share instructions on the website for reference so that customer confidence can be won.Communication is vital, foremost the staff should be involved in implementation inorder to patronage use of channels and passover knowledge to customers. The institution should organise education forums and if possible advertise in the media.

2.7 Conceptual frameworkThe conceptual framework shows the relationship between the independent and the dependent variables.

Independent variablesDependent Variables
288925292735Automated Teller Machines
convenient location
interoperability
Reliability
Timely issues of new cards and replacement
00Automated Teller Machines
convenient location
interoperability
Reliability
Timely issues of new cards and replacement
Electronic delivery channels
334327552895500
270065513906500223393013970000
3818965221503Customer satisfaction
Customer retention
number of electronic transactions
number of failed transactions
new applications for electronic services
positive feed back
monthly revenue from fees charged
00Customer satisfaction
Customer retention
number of electronic transactions
number of failed transactions
new applications for electronic services
positive feed back
monthly revenue from fees charged

288925156210Point of sale
Acceptability
mobility
security
Efficiency
00Point of sale
Acceptability
mobility
security
Efficiency

223393010350500
270065511303000
““`
323850180975Mobile banking
Ease of use
cost
security
reliability
00Mobile banking
Ease of use
cost
security
reliability

221170516256000
288925328930Internet banking
Ease of navigation
security
accessibility
reliability
responsiveness
00Internet banking
Ease of navigation
security
accessibility
reliability
responsiveness

223393021971000
Figure SEQ Figure * ARABIC 1: Conceptual Framework
Independent variables are electronic delivery channels namely Automated Teller Machines, Point of Sale, mobile banking and internet banking while the dependent variable is customer satisfaction. The literature reviewed by several authors demonstrates attributes that leads to either satisfaction or dissatisfaction of the customers.
Customer satisfaction in this case will be subject to the quality ICT infrastructure that internally runs the core banking system interconnected to the various channels, the institutions support by provision of adequate financial resources and skilled human resource. Ones the ICT infrastructure is in place customer satisfaction will be evaluated by the actual service encounter with the channels, service dimensions such as usefulness, and ease of use, security, reliability and accessibility compared to the expected performance as perceived by the customer.

Indicators of Customer satisfaction on the use of the channels will be measured by increase in members using the channels and application of such services by new members, reduction of failed electronic transactions, increase in revenue collection from the electronic channels and increase in customer satisfaction scores in the strategic plan.
2.8 Gaps in literature reviewedNumerous studies have focused on electronic channels in Banks in other countries and Kenya but no sufficient studies have been carried out in the Sacco sector on the influence of electronic channels on customer satisfaction. Juma (2013) studied customer service delivery in banking industry in Bungoma County, Mburu (2015) studied adoption of mobile banking in Nairobi county Sacco’s, Ongori (2013) carried out a study on self-service technologies and effect on customer satisfaction in banking industry. Findings showed that channels reliability, responsiveness and security influence customer satisfaction.

The purpose of this study is to determine the influence of electronic delivery channels to customer satisfaction in Savings and Credit Cooperatives a case of Mwalimu National Sacco to address the gap and add more knowledge to Mwalimu and for future researchers willing to carry a study in Sacco’s.

2.9 Summary of Literature ReviewThe chapter consisted of the literature review from various authors pertaining to the electronic delivery channels and customer satisfaction based on the studies objectives. Theoretical review looked at Assimilation theory based on Festinger’s (1962) dissonance theory. Finally, a conceptual model of the study was developed by the researcher depicting the relationship between the independent and dependent variable.
The literature reviewed demonstrates that it is not enough for financial institutions to deploy electronic channels but they also need to ensure that the customer needs are considered in design to facilitate use. Various dimensions were mentioned; ease of use, reliability, ease of access, convenience, awareness, responsiveness, security of information, trust, availability of money in the ATM hence there is need to ensure services meet some attributes in order to enhance satisfaction.

CHAPTER THREERESEARCH METHODOLOGY3.1 IntroductionThe chapter outlines the research methodology used in the study, research design, target population, sample size and sampling procedures, data collection instrument, data collection procedures, data analysis techniques ,ethical considerations and operational definition of the variables.
3.2 Research designResearch design is the structure, plan or strategy adopted to obtain answers to the research questions, it sets out the framework (Gakuu, 2018).

The study will adopt descriptive research design, the researcher will design closed ended and ranking questionnaires to be distributed to respondents to gather required data for the study. The researcher will collect them after three days. According to Mugenda and Mugenda, (2003) in this design it reports things the way they are. Kothari (2004) observes that descriptive research includes surveys and fact-finding enquiries that state affairs as they are, the researcher has no control and can only report things as they are.

3.3 Target populationThe research is a case of Mwalimu National Sacco and the population will consist of all the 112 front office staff in 16 branches in 13 counties; namely TSC , Tom Mboya and Upper Hill (Nairobi County), Nyeri, Kitui, Embu, Machakos, Meru, Mombasa,Nakuru, Eldoret webuye Kakamega and Kisumu,. The results of this study will be generalized to the entire Mwalimu National membership. A sample will be selected from each branch to represent the population (Mwalimu National, 2016). The researcher chose the population from FOSA staff due to constraints in the budget and the time required for completion of study may not allow all members to be included in the study.

3.4 Sample size and sampling proceduresYamane formula will be used to determine the sample while stratified sampling technique will be used for sample selection.

3.4.1 Sample Size
Sample size refers to the number of items to be selected from the universe to constitute the sample while the sampling procedure is the technique used to select the sample (Kothari, 2014).

Yamane (1967) formulae will be used to determine the sample
84010524066500N=N
1+N (e) 2
n = the sample size
N = Population size
e = Level of precision
1 = the probability of an event happening
N = 112
e =5
Therefore
45720019049900112= 87.5 members
1+112(.05)2
Table 3.1: Target Population
Branch No of Staff Percent Sample Size
Nairobi 28 25% 22
Nyeri5 4% 4
Kisumu 10 9% 8
Webuye7 6% 5
Eldoret7 6% 5
Nakuru5 4% 4
Meru 6 5% 5
Embu 6 5% 5
Machakos7 6% 5
Kakamega6 5% 5
Kitui5 4% 4
Homabay6 5% 5
Mombasa 7 6% 5
Kisii7 6% 5
Total 112 100% 87
3.4.2 Sampling Procedure The population of 112 front office staff members represent staff in different branches, the number of staff depends on the size of the branch thus there will be a disparity in the sample selected in some branches. The researcher will use stratified sampling technique to select a representative sample in each branch to ensure that each member has a high possibility of being selected.
Choice of the procedure was informed by the fact that Mwalimu membership cuts across the country and thus stratified sampling was found to be ideal since the sample will be representative of members in different geographic locations.
3.5 Data collection instrumentPrimary data will be used in the study and the tool of data collection will self-developed questionnaires. The questionnaires will be circulated upon seeking and being granted data collection permit and authorization from the University of Nairobi. The letter stating the purpose of the study and assurance of confidentiality will be attached to each questionnaire. The questionnaires based on the objectives of the study will be send to the respondents via email then after completion they will be send back via to the researcher.
This tool was preferred due to its convenience in terms of cost and time of study. According to Kothari (2004) questionnaires are cost effective, free from bias of the interviewer; respondents who might be difficult to approach can be reached by the questionnaires conveniently.

3.5.1 Pilot testing of the instrumentsA pilot study will be conducted to test the reliability and validity of the questionnaires. According to Orodho (2003), a pilot test helps to test the reliability and validity of data collection instruments. Validity refers to the extent to which an instrument measures what is supposed to measure data, need not only to be reliable but also true and accurate. If a measurement is valid, it is also reliable (Joppe, 2000). 10 questionnaires will be circulated to 10 staff to fill and return, the feedback will help test clarity and identify ambiguity then correct where necessary. To ensure that the study findings will not be compromised, the employees who will take part in the pilot study will not be included in the final study. According to Mugenda and Mugenda (2003) a pilot study can comprise of between 4-10 members of the target population.

3.5.2 Validity of the instrumentValidity is described as the degree to which a research instrument measures what it intends to measure and performs as it is designed to perform (Cherry, 2015). In general, validity is an indication of how sound the research is. Validity refers to the procedure used to get answers to the questions from the respondents and the accuracy of the measurements produced by an instrument Gakuu (2017). To ensure validity the questionnaires will be discussed with the supervisor considered as an expert to ensure the study objectives have been covered and that the questions are clear and understood by respondents
3.5.3 Reliability of the instrumentReliability refers to the quality of the measurement instrument to maintain repeatability and consistency. The consistence, stability, or dependability of the data is referred to as reliability. Whenever an investigator measures a variable, he or she wants to be sure that the measurement provides dependable and consistent results (Mugenda & Mugenda, 2003). Test retest reliability will be used to determine reliability of the instruments. The researcher will distribute questionnaires to 10 staff and redistribute to them again after one week, the results will be compared to ascertain if the results are consistent.

3.6 Data collection proceduresBefore commencement of data collection the researcher will ensure that the data collection instrument has been tested for validity through pilot testing to ensure that all the variables of the study have been covered and any misconceptions in the questionnaires are resolved before distribution, thereafter seek approval from University of Nairobi and permit for data collection from Mwalimu authorities. The respondents will be briefed on the objectives of the study and assured that the data collected is for research purpose only .Questionnaires in Nairobi branches will be dropped and picked by the researcher for the branches outside Nairobi, they will be send to the respondents via courier services after the researcher briefs the branch manager on the purpose of the research and agree on designated time within two weeks to return them.
3.7 Data analysis techniquesIn preparation for analysis, collected data will be checked for completeness, consistency then coded and entered in the database for analysis using Statistical Package for Social Scientists (SPSS). Descriptive statistics will be used to quantify and describe the data using measures of central tendency specifically mean mode and median consequently measures of dispersion -range and standard will be used to analyses data. The researcher will employ correlation regression to determine relationship between the variables, Person correlation will be used
3.8 Ethical considerationsThe researcher will seek permission from Mwalimu Sacco before undertaking the study.

Assuring respondents of data confidentiality thus the data collected shall be used for the study and anonymity of respondents. The researcher will ensure the respondents that the questionnaires are non-invasive and the information gathered solely for academic purposes only and not for any other purpose.

3.9 Operationalization of Variables
The relationship of variables is illustrated in table 3.2 which shows their respective indicators.

Table 3. SEQ Table * ARABIC 2: Operational definition of the variablesObjective Variable Indicator Measuring scale Tools of Analysis
To determine how Automated Teller Machines delivery channel influence customer satisfaction in Mwalimu National Sacco. Independent
ATM channel Convenient location
Interoperability
Reliability
Timely issuance of new cards and replacement
Nominal and ordinal
Descriptive statistics
Inferential statistics
To establish the influence of Point of Sale delivery channel on customer satisfaction in Mwalimu National Sacco. Independent
POS channel Acceptability
Mobility
Security
Efficiency
Nominal and ordinal Measure of Central tendency; Mean
Inferential statistics
To determine the influence of mobile banking delivery channel on customer satisfaction in Mwalimu National Sacco. Independent
Mobile channel Ease of use
Cost
Security
Reliability
Nominal and ordinal Descriptive statistics
Inferential statistics
To determine the influence of Internet delivery channel on customer satisfaction in Mwalimu National Sacco. Independent
Internet channel Ease of navigation
security
accessibility
Reliability
Responsiveness
Nominal and ordinal Measure of Central tendency; Mean
Inferential statistics
Influence of Electronic Delivery channels on customer satisfaction in Mwalimu National Sacco. Dependent
customer satisfaction Customer retention
increase in electronic transactions
new members
positive feed back
Nominal and ordinal Descriptive statistics
Graphs and tables

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APPENDICESAppendix I: Letter of transmission of data collection instrument1st January 2018
Joanne Ruth Tambasi
Po Box 62641, 00200
NAIROBI
Dear respondent
LETTER FOR PARTICIPATION IN A RESEARCH STUDY
I am a postgraduate student at the University of Nairobi pursuing master’s degree in project planning and management. As a requirement for partial fulfillment of the study completion I am carrying out a study entitled “The influence of electronic delivery channels on customer satisfaction in savings and credit cooperatives, a case of Mwalimu National Sacco”.

I humbly request that you spare some time to fill the questionnaire. The purpose of the study is purely academic and therefore confidentiality will be observed.

I look forward to your positive consideration to fill the questionnaire.

Yours faithfully
Joanne R. Tambasi

Appendix II: QuestionnaireSection A: Background information
1 What is your gender?
2182495698500514985508000FemaleMale
2. What age group do you belong to?
31273757620004695190762000238188576200011677651524000Below 30 years 31- 40 41-50 Above 50 years
123698031496000353695323850003 Do you use electronic delivery channels to access banking services in the Sacco?
Yes No
1982470443865004. If yes which of the following channels do you use?
Automated Teller machine
4364355444500003004185762000Payment of goods at the point of sale (POS)
561579534503300Withdrawal and funds transfer using the phone (Mobile banking)
View statement and product information over the internet portal (Internet banking)
Section B: influence of Automated Teller Machine (ATM) on customer satisfaction
5. To what extent does the ATM influence customer satisfaction in Mwalimu Sacco using the attributes below?
Attribute Strongly Agree Agree Neutral Disagree Strongly disagree
Convenient location of the ATM Interoperability with other ATMs Reliability of the ATM Timely issuance of new ATM card Timely replacement of lost cards 6. In your own opinion, indicate the extent to which Automated Teller Machine (ATM) influence customer satisfaction?
To a very low extent To a low extent
To a moderate extent To a great extent
To a very great extent
7. To what extent do the following Point of sale (POS) attributes influence customer satisfaction in Mwalimu National?
Attribute Strongly Agree Agree Neutral Disagree Strongly disagree
Acceptability at various points of sales like supermarkets, hotels and petrol stations. It is convenient to shop with POS card you can shop anywhere anytime. POS is secure since I don’t have to carry cash Using POS saves time you don’t need to withdraw cash thus the card is efficient .

8. In your own opinion, indicate the extent to which Point of sale (POS) influence customer satisfaction?
To a very low extent To a low extent
To a moderate extent To a great extent
To a very great extent
9. To what extent do the following attributes for mobile banking channel influence customer satisfaction in Mwalimu National Sacco
Attribute Strongly Agree Agree Neutral Disagree Strongly disagree
It is easy to use mobile banking Cost of service Mobile banking is Secure because it is done at the privacy of the customer Reliability- a service can be done anywhere anytime 10. In your own opinion, indicate the extent to which mobile banking influence customer satisfaction?
To a very low extent To a low extent
To a moderate extent To a great extent
To a very great extent
11. To what extent does the Internet channel attributes below influence customer satisfaction in Mwalimu National Sacco?
Attribute Strongly Agree Agree Neutral Disagree Strongly disagree
Ease of navigation Security Accessibility Reliability Responsiveness 12. In your own opinion, indicate the extent to which internet channel influence customer satisfaction?
To a very low extent To a low extent
To a moderate extent To a great extent
To a very great extent
13. To what extent do the following statements on Electronic delivery channels influence customer satisfaction?
statement Strongly Agree Agree Neutral Disagree Strongly disagree
Convenient location of the ATM affect customer satisfaction Interoperability with other ATMs affect customer satisfaction Reliability of the ATM affect customer satisfaction Timely issuance of new ATM card affect customer satisfaction Timely replacement of lost cards affect customer satisfaction Acceptability at the point of sale affect customer satisfaction It is convenient to shop with POS card affect customer satisfaction Using POS is secure Using POS is efficient Internets ease of use affect customer satisfaction Internets cost of service affects customer satisfaction Internet security affects customer satisfaction Reliability of the internet affect customer satisfaction Ease of navigation between different internet services affect customer satisfaction Accessibility affect customer satisfaction Responsiveness affect customer satisfaction 14. To what extent are you satisfied with the available electronic channels in Mwalimu national sacco?
Electronic channel Very unsatisfied unsatisfied Neutral Satisfied Very satisfied
You are satisfied with the available electronic channels in Mwalimu National? You are satisfied with the service to withdraw money, check balance and find information using the channels. You are satisfied with the help you get from the Sacco whenever you have a problem with the channels.

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