Digital Finance Revolution in E. Africa: Retail Bank's Adaption to a changing Marketplace

The question of how retail banks adapt to a changing market place that is driven by disruptive Fintech firms is increasingly becoming important. This is especially critical in East Africa where banks have traditionally had limited presence. This paper examines the impact of digital technologies such as mobile money and mobile banking on retail banks' channel strategy. We introduce a technology and innovation adaptation model for retail banks; consisting of digital channel adoption, changing consumer preference and how these factors influence banks' adaptation strategies and distribution channels. A SEM analysis based on a survey of over 100 bank managers from mainly cross border retail banks in East Africa was carried out. The study results suggests that digitization and consumer preferences have statistically significant impact on retail banks' adaption strategy. Our findings show that, for retail banks to remain competitive and relevant in the new digital marketplace, they must think beyond traditional distribution strategies such as branch banking and embrace new possibilities provided by digitization like digital banking services. While some banks that offer a mixture of traditional and multi-channel models are attractive to the consumers, others that partner with new players such MNOs to offer digital banking stand at a higher competitive edge. The key implication is that digitization is tied to success of retail banks in the new market place.