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Banking industry must avoid complacency to be competitive

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Customers at a banking hall in Nairobi. FILE PHOTO | NMG

The Kenyan banking industry makes for an interesting case study in exemplifying advancements that have defined commercial banking in Africa’s 21st century. It is among the few industries in the Kenyan economy that overtly exhibit both liberal and co-ordinated market economy attributes.

These characteristics have led to the adoption of isolating mechanisms geared towards market stability, the aftereffect of which has over the years resulted to protected prosperity. Unfortunately, this state of affairs predominantly serves to accentuate a latent existence of banks within the economy.

In layman speak, commercial banks in Kenya have for the longest time enjoyed a conducive operating environment, so much so that many of them became complacent as financial intermediaries.

This complacency has seen a number of divergent industry players innovatively erode the pole position that banks erstwhile held in financial intermediation; a classic example being the mobile money transfer phenomenon by telecommunication industry mobile operators

As a result, many banks find it easier to highlight extrinsic factors, such as perceived overregulation, as a reason for their dwindling fortunes. They do this while conveniently overlooking equally important intrinsic aspects that contribute to their performance.

In so doing, such banks inadvertently seek to maintain rather than challenge a status quo that was previously theirs for the taking.The question consequently begs, how can commercial banks in Kenya internally trigger a renaissance that will herald a paradigm shift back to their favour?

The answer lies in the creation of shared value, only achievable through an overhaul of the banking practice on three fronts – processes, people and systems. The predominant quandary in the Kenyan banking industry happens to be the monolithic approach instinctively adopted by most banking industry players.

This has seen a majority of banks in Kenya delineate their business lines and product offerings into generic segments, regardless of their inherent competences, or lack thereof, to service the customers categorized therein. This form of competitive parity ultimately leads to the detriment of the imitating institutions when disconnects between what they portend to offer and what they actually can become apparent.

To mitigate such adverse occurrences, banks could crowd-source their value propositions by periodically conducting research in a bid to identify inherent market gaps that can be successfully exploited.

This due diligence sensitizes banks on market realities, thereby enabling them to reconceive customers’ needs and rebuild their operational capabilities towards offering unique and sustainable customer value propositions.

Alternatively, banks can engage reliable companies that employ data analytics in a bid to access target customers’ purchase data, thereby tailoring banks’ marketing activities to customer spending patterns.

Commercial banking traditionally rewards productivity over creativity all the world over, a position derived from the manufacturing industry where focus is on maximizing throughput.

BERNARD GACHURI is a banker.