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Digital transformation strategy: the quest for competitive advantage among commercial banks in Kenya

Author

Listed:
  • Nthenya Nelly Musau

    (Kenyatta University)

  • Stephen Muathe

    (Kenyatta University)

Abstract

The banking industry in Kenya must adopt digital transformation to sustain competitiveness and improve customer experience in the context of rapidly evolving digital technologies. Despite the increasing focus on digitisation in the sector, the particular initiatives undertaken by commercial banks and their resulting impact on competitive advantage are not sufficiently comprehended. This study analysed the impact of digital transformation strategies on competitive advantage within commercial banks in Kenya. The primary aim was to evaluate the impact of service automation, data analytics, mobile banking applications, employee upskilling, and digital payment solutions on the competitiveness of banks. The study employed a descriptive design, focussing on 39 commercial banks categorised by tiers, which included 412 functional heads. A multi-stage sampling method integrating proportionate stratified and simple random sampling techniques was utilised to guarantee equitable representation. Employing Yamane’s formula, a sample of 203 respondents was determined. Primary data were collected using structured questionnaires that were pretested with 15 participants and validated by subject experts to ensure content relevance and clarity. Reliability testing employing Cronbach’s Alpha produced satisfactory results (? ? 0.7), signifying robust internal consistency. The analysis of data encompassed both descriptive and inferential statistics. The results were presented visually through charts, graphs, and tables to facilitate interpretation. The findings indicated that all five digital transformation strategies impacted competitive advantage, although their contributions differed in magnitude. The findings indicate that commercial banks must move beyond the simple implementation of digital technologies and prioritise strategic integration to improve customer experience and value creation. Banks ought to implement targeted automation that preserves human engagement for intricate services while improving feedback systems. Banks must enhance data governance and invest in sophisticated, customer-centric analytical tools. Ongoing innovation in mobile banking is advisable, encompassing feature enhancements and improved interoperability, underpinned by robust cybersecurity standards. Prioritising employee upskilling is essential through structured training, digital leadership development, and industry-wide certification. Finally, banks must reassess their digital payment strategies to prioritise user experience, fraud prevention, and differentiated services, while regulators encourage secure and innovation-friendly environments. Key Words:Competitive Advantage, Commercial Banks, Data Analytics, Digital Payments, Digital Transformation Strategy, Employee Upskilling, Mobile Banking Applications, Service Automation.

Suggested Citation

  • Nthenya Nelly Musau & Stephen Muathe, 2025. "Digital transformation strategy: the quest for competitive advantage among commercial banks in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 14(5), pages 01-24, July.
    • Handle: RePEc:rbs:ijbrss:v:14:y:2025:i:5:p:01-24
    DOI: 10.20525/ijrbs.v14i5.4308
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    References listed on IDEAS

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