MOBILE MONEY TELEPHONY

CHAPTER ONE

INTRODUCTION OF THE STUDY

1.1Introductionwww.flamencoengineers.co.ke

The introductory chapter covers the foundation of the study with the details of the background information, statement of the problem, objectives of the study, research questions and significance of the study limitations and concludes with the scope of the study.  In this regard therefore, the aim of the study was to investigate various variables that determine the customer’schoiceof mobile money transfer services and how they can impact an overall performance of business organizations and assists in addressing the challenges faced by enterprises while trying to build sustainable future in the context of our national vision 2030.  

1.2 Background of the Study www.mirgaconsultancies.wordpress.com

Organizations offering mobile phone money transfer services, both private and public, in today’s dynamic market place and market space are increasingly leaving antiquated marketing philosophies , policies and strategies to the adoption of more custom-driven  initiatives that seek to understand , attract and build intimate long term relationship with profitable customers(Kotler,2006) .

This paradigm shift has undauntedly led to the growing interest in strategic customer relationship management initiatives that aim at ensuring customer perception, identification, interaction, customization and personalization and unreservedly lead to the customer satisfaction, retention and ultimate profitability (Thomson, 2004). The organizations are therefore  increasingly being more customer-centric and interested not just in acquiring new customers but more importantly retaining existing customers . This is because the cost is more to attract new customers than to retain existing ones (Reichheld, 2006).

The mobile Money sector in Kenya and globally is growing at a tremendous rate and each and every month new aggressive rate innovative players enter the sector with new standards ways of providing customer satisfaction solutions (Munyoki and Mutua,2010) . It is therefore important for every player in the sector to understand the factors that determine the customers’ choice of mobile money transfer services through an understanding of the kind of business we are in and the challenges facing it. This study was set to identify the factors that determine the customer’s choice of mobile money customers during utilization of the services that come along with the product.

Stiff competition in Kenya’s financial sector is forcing institutions into adopting new forms of technology to reduce the costs of doing business and widen customer outreach for enhanced profitability. Use of MMT technology in the banking industry has become usual in recent years as a way of maintaining customer loyalty and increasing market share. The new innovative systems (such as mobile banking) are especially targeting the earning but unbanked population in rural and hard to reach areas.

According to Nasikye (2009). Mobile banking (m-banking) involves the use of a mobile phone or another mobile device to undertake financial transactions linked to a client account. According to (Owen, 2008) m-banking refers to provision and availing of banking and financial service with the help of mobile telecommunication device. Services include balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as mobile phone which is most used in developing countries or Personal Digital Assistant (PDA).

The technology innovations have influenced the banking sector in one way or another. Kassim (2005) explains that the technological revolution has produced new developments in the banking industry. According to Oryiek (2008) the first ATM in Uganda was brought by SCI for Standard Chartered Bank in 1997 and SCI has been an active catalyst in the rapid growth and development of electronic banking in the country hence the introduction of m-banking few years ago and this explains why Standard Chartered Bank is ranked as one of the performing banks in Uganda.

Mobile banking has transformed the way people in the developing world transfer money and now it is poised to offer more sophisticated banking services which could make a real difference to people’s lives. This type of banking can offer a wide variety of services ranging from account information, which has to do with alerting the customers on the updates and transactions on their account through their mobile phones. People receive short messages on their phones informing them of their immediate transactions in their bank accounts. Also, they help in payments (utility bills), deposits, withdrawals, transfers, purchase airtime, request bank statements and perform other crucial banking tasks all in real time over their mobile phones. Banks including Standard Chartered Bank (Uganda) (Buyer and lenders, 2001) have largely implemented service delivery technology as a way of augmenting the service traditionally provided by personnel, Howcraft, Bacett,(1996) .    

Mobile money transfer services were launched at different times by the communication service providers. Safaricom launched the M-Pesa Service in 2000, Zain now Airtel, joined in 2008 with its ZAP services, and other companies namely YU and Orange have the services in its pilot stages. Mbogoh (2010), points out that Airtel has partnered with leading international and regional banks including housing finance, cooperative and standard chartered to offer ZAP services which has allowed Airtel customer in Kenya, Uganda and Tanzania use their mobile phones to carry out transactions across the borders. Mobile banking has become an important channel to sell products and services perceived to be a necessity in order to stay profitable and successful. A study released by Bill and Mulinda Gates foundation said mobile operators are investing in the field of mobile payments to compete with banks “the mobile particularly for telecom operators and banks” a sector of the report said, (Donna 2007). A customer relations is all about creating understanding through knowledge and communication with the customers in the in the provision of mobile money transfer services.

Providing quality services to customers is the prime focus of any business organization. The overall focus of most organizations are finding, attracting and winning new customers to their services, nurturing and retaining existing customers, enticing former customers back into the fold and reducing the costs of marketing and customer service. Though customer perception is subjective component of consumer satisfaction, it is very critical for any business to understand how customers perceive the services it offers. Studies on customer satisfaction and perception are many and address various aspects of customer decision-making process.

 Indeed, over the years, theorists have attempted to explain the reasons why customers enjoy the services offered. Accordingly, issues of perception and issues of the role of stimuli have been explained by various authors. For instance, according to Ashford and Beamish(2008), the nature of physical stimuli tends to influence the degree of perception for example, an ordered array of objects on display or a sudden loud noise are almost sure to attract attention.

The senses are stimulated by unexpected or unusual objects or events. In a fairly predictable routine of everyday life, an individual tend to seek variety and change in a bid to get satisfaction.

1.2.1 Profile of Thika

Thika is a good distributed area. It is in the central province of Kenya, in Kiambu County, Juja constituency, in Thika sub-county it has developed because it is an industrial town also known as the Birmingham of Kenya because of development of industries and because of the people who are also entrepreneurs. This has motivated many people to set many businesses in the area. The main economic activity is however coffee which has contributed greatly in the enlargement of other businesses. We all need to send money and save money easily so there are money transfer services like M-Pesa this is very vital for each an every one leading to development of banks like equity which has mobile services called M-Kesho and M-Shwari and the most recent E-quitel which is a link between them and safaricom. However there are other business like agro vet , bars and restaurant , petrol stations, hardware, butchery , barber shops, e.t.c which they all need the money transfer services. Which are quite plenty to provide quality transactions and which have provided efficiency and good time management.

1.2.2 Map of Thika

1.3 Statement of The Problem

According to Mutua and Munyoki (2010), a number of studies have been done in Kenya on the responses to challenges and factors encountered in restricted banking hours and the accessibility to the banks and other money transfer institutions in Kenya; for example Maina (2000) focused on, perceived quality and value preposition by customers but failed to study the factors that determine the customer’s choice of mobile money transfer services (MMTS) such as prices, technology, services and competition.

Another study done by Odhiambo(2003) focused on factors that influence customers’ satisfaction and services offered by mobile money firms but failed to focus on one product or service to find out the exact reaction of the customers on the effectiveness of such a product.

The problem of this study was propelled by the need to empirically identify and analyze the factors that were facing or affecting the users (customers) of mobile money transfer services in Kenya.

1.4 Objectives of The Study

The main objective of this study was to identify the factors that determine the customer’s choice of mobile money transfer services in Kenya with a particular focus of Thika sub-county in Kiambucounty.

1.4.1 Specific Objectives

(i) To determine how competition affects customers choice of mobile money transfer services.

(ii) To investigate whether services offered determines customer’s choice of mobile money transfer services.

(iii) To find out whether prices offered to customers determines customer’s choice of mobile money transfer services.

(iv) To access whether technology determines customers choice of mobile money transfer services.

1.5 Research Questions

(i) How does competition determine customer’s choice of mobile money transfer services?

(ii) How does the provision of quality services influence customer’s choice of mobile money transfer services?

(iii) How does offering good prices determine the customer’s choice of mobile money transfer services?

(iv) What is the effect of technology in determining the customer’s choice of mobile money transfer services?

1.6 Significance of the Study

1.6.1To Mobile Money Transfer Product Developers

To the Mobile Money Transfer companies such as Safaricom, Orange Kenya and Airtel Kenya, the study findings and results that have been reported in this study provides more reliable scientific measure and perspective for describing and evaluating the level of their customer perception and satisfaction with the services they deliver. The study also serves as an invaluable source of information that brings to limelight on the switching intentions of their respective customers. It uncovers dimensions of service quality that customer consider as important as well as customers intention to switch other competitors networks.

1.6.2  Customers

To enlighten customers on mobile services delivery for those who don’t use it and for those who use the service on how well they have embraced the service and how they feel about it.

1.6.3  Other researchers.

The study will be very significant to the other researchers who will be interested in conducting research in the same field because it will act as a point of reference. The other researchers will also benefit since they will have a broad understanding on customer relationship and therefore research on areas which are covered. This will enrich existing literature as other researchers will use it in their studies and for analysis purposes.

1.6.4Organizations

The results of the study will also enable other communication service providers to understand how mobile money transfer services delivery can enhance that performance. They will benefit from the research because they will be able to identify the gaps on customer relationship and those effects on organization’s performance.

1.7 Limitations of the Study

1.7.1Non Cooperation

In pursuit of this study, several limitations were encountered. Some employees didnotanswerall the questions in the questionnaire. Some employees feared that the information theywillgive could be accessed by their supervisors and this affected their willingness to fill all the questions honestly. This was solved by assuring them that their names will remain private and also the names of their business.

1.7.2 Language Barrier

One of the limiting factors of the study was language barrier where respondents wereissued with written questionnaires but some were not able to understand the language well. The researcher solved this by analyzing the written questionnaire to their local language or taking an interpreter with them when required.

1.7.3 Noise pollution

In the central business district (CBD) where the information wasgathered the environment was very noisy hence the communication was not clear due to high music playing and the vehicles passing & hooting and due to the noise thus a limitation was experienced in the study. The researcher solved this by allowing the most affected respondents to take the questionnaire with them to their homes and then return them once fully filled.

1.7.4 Fear

Initially some of the respondents that were issued with questionnaires did not return them. During data collection, some of the respondents were not willing to give the data due to fear of data privacy especially in the mobile money transfer sector. As a result, at first i was unable to get access to some valuable information and other records which would have enabled me to access the views of other individuals in this mobile money sector. But this was solved by assuring them that the collected data was to be used only for research purposes and not beyond that.

1.7.5 Biasness

Lack of etiquette, during the questionnaire sessions was experienced as most of thepeople don’t like questions and some tend even to be rude to you instead of giving you the required information. The researcher solved this by showing the respondents that the collected data was vital for each an every user of the mobile money transfer services.

1.8 Scope of the study

This study was carried out to identify the factors that determine the customer’s choice of mobile money transfer services users in Thika, KiambuCounty. The information was gathered from the service providers’ agents like M-Pesa and Zap agents and also from customers such as businessmen & women who enjoys the service. The target population was120respondents. Questionnaires containing close ended questions were used as instruments for collecting data. The researcher then narrowed down the sample size to 30 respondents sincesurveysampling design was employed. The research took place between January to June 2016.

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

In this chapter, literature, which is related to and significantly relevant to the objectives of this study, is reviewed. Important theoretical literature and practical problems are reviewed and their input to mobile banking service.

2.2 Review of Theoretical Literature

Over the last decade, mobile money transfer access has experienced a strong growth across the globe. Over 57 percent of adult population in developing world has access to these services. Over90 percent of adult population in western world have access. The widespread adoption of mobile phones for example in developing countries offers many opportunities for the use of information and communication technology (ICT) in mobile banking.

As a result of this trend, mobile money transfer technologies have attracted various industries to use mobile infrastructure and networks for their product and service offerings. The fact that there is about a population of  2.8 billion adults worldwide without access to financial services, but the use of mobile phones as a medium for mobile money transfer for instance offers a significant opportunity for telecommunication companies to step in and provide a much needed service. In the convergence of banking and telecommunication companies, the operators have the required technical expertise as well as a wide network of agents to realize this endeavor.

Mobile banking (m-banking) refers to provision of banking and financial services through the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, administer accounts and to access customized information. Mobile networks in Kenya offer m-money services in the name of M-pesa by Safaricom, Orange money by Orange, Yu-cash by Essar, and Airtel money by Airtel. There are over 15 million customers using Mpesa services in Kenya for example. M-money providers have partnered with MFIs commercial banks such as faulu Kenya, Kenya women, rafiki among others to offer mobile based financial products that aim to reach the unbanked.

2.2.1 Competition

According to Bickerton (1998) Competition is a contest between individuals, groups, nations, animals, etc. for territory, a niche, or a location of resources. It arises whenever two or more parties strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For example, animals compete over water supplies, food, and mates, etc. Humans compete for water, food, and mates, though when these needs are met deep rivalries often arise over the pursuit of wealth, prestige, and fame. Business is often associated with competition as most companies are in competition with at least one other firm over the same group of customers. This is the ability to race rival partner by having an organized test of comparative skills and performance. Hence when a company develops a product, the major objective is to make the product a preference in the market. The company must therefore ensure those products demand increases so as to make more sales. The demand therefore will be influenced by price, overall size of the population and the distribution of income. Competition is probably the most dynamic of all the environmental factors. In a free economy, a new organization enter where others exist, therefore causing unpredictability in the market careful monitoring and evaluation of the competition enables marketing management to make informal decision.

Bickerton (1998) Continuous new product development is the driving force for economic growth and the social welfare improvement. Firms introduce new products or brands to crowd the product space so as to cannibalize market share and profit from rival firms and to deter the potential entry, while consumers benefit from having more products with difference attributes to meet their demand and from the lower price on existing brands due to new product introduction. There is estimation of the effects of a new product introduction, east Africa breweries limited (EABL), on market competition and consumer welfare change in soft drink industry in United States from a combined household level and store level dataset. The overall competitive effects are decomposed into two parts: the effect on the prices of existing products from increased competition, and the effect of having additional product variety.

     However, Stephen (2006) and others have argued that as one ascends the evolutionary hierarchy, competitiveness (the survival instinct) becomes less innate, and more a learned behavior. The same could be said for co-operation: in humans, at least, both co-operation and competition are considered learned behaviors, because the human species learns to adapt to environmental pressures. Consequently, if survival requires competitive behaviors, the individual will compete, and if survival requires co-operative behaviors, the individual will co- operate. In the case of humans, therefore, aggressiveness may be an innate characteristic, but a person need not be competitive at the same time, for instance when scaling a cliff.On the other hand, humans seem also to have a nurturing instinct, to protect newborns and the weak. While that does not necessitate co-operative behavior, it does help. The term also applies to econometrics. Here, it is a comparative measure of the ability and performance of a firm or sub-sector to sell and produce/supply goods and/or services in a given market. The two academic bodies of thought on the assessment of competitiveness are the Structure Conduct Performance Paradigm and the more contemporary New Empirical Industrial Organization model. Rother (1997) defines competitive advantage as the company’s ability to perform in one or more ways that competitors will not match. William Perreant and Jerome also define competitive advantage as a firm having marketing mix that the largest market sees as better than a competitor’s mix. Predicting changes in the competitiveness of business sectors is becoming an integral and explicit step in public policymaking. Within capitalist economic systems, the drive of enterprises is to maintain and improve their own competitiveness. The tendency toward extreme, unhealthy competition has been termed hyper competitiveness. This concept originated in Karen Horney's theories on neurosis; specifically, the highly aggressive personality type which is characterized as "moving against people". In her view, some people have a need to compete and win at all costs as a means of maintaining their self-worth. These individuals are likely to turn any activity into a competition, and they will feel threatened if they find themselves losing. Researchers have found that men and women who score high on the trait of hyper competitiveness are more narcissistic and less psychologically healthy than those who score low on the trait. Hypercompetitive individuals generally believe that "winning isn't everything; it's the only thing"

Martin, Julian (1988) competition in the mature stage comes from several sources one of which is well and improved product. A direct competition forms other service providers is not only the competitive disadvantage that the mature product suffers. Saleemi (1997) argues that competition relates to rivalry or attempt to gain advantage market place. The term usually denotes two or more sellers or service providers and two or more customers exchanging a product with buyers and sellers acting independently.He also continues and says that competition can be looked at a number of ways: economists consider competition as a struggle among companies in the same industry. They often differentiate perfect from imperfect and oligopoly from monopoly. However, the marketers view the competition in a broader perspective e.g., competition exists not only between similar products but between also dissimilar products too. Therefore, it is an established fact over the years that marketing system has become increasingly competitive. Saleemi finally says that competition is a reality, which cannot be avoided.According to Berkowitz, et al (2007), there are four basic forms of competition: Pure competition-Every company has a similar product. Monopolistic competition-the sellers compete with their products on a substitutable basis. Oligopoly competition-A common industry structure occurs when a few companies control the majority of the industry sales or services. Monopoly competition-occurs when only one firm sells or offers the product i.e. goods or services.

According to Porter (competitive strategy 1980), there are five primary competitive factors within any industry as described below: Firms entering an industry bring new capacity and a desire to gain market share and profit. Nevertheless, whether new firms enter an industry depends on the barriers to entry which includes; economies of scale, brand identity, switching cost, capital requirement, government policies among others.        

However, established firms in an industry may benefit from ―experience curve ―effects i.e. their cumulative experience in producing and marketing a product often reduces per unit cost below those of inexperience firms. Powerful suppliers reduce the profitability of an industry if companies in the industry cannot pay higher prices to cover price increases that the supplier imposes. Buyers compete with the industry by forcing prices down, bargaining for higher quality or more services and playing competitors off against each other like was the case in the oil industry. All these are at the expense of industry profitability.

 All firms in an industry are competing with industries providing substitute products. Substitute limit the potential returns in an industry by making a ceiling on the prices that firms in the industry can profitably charge. This is the convectional type of competition in which firms try to take customers from one another. They employ strategies suchas price competition, advertising patterns, new products introduction and increased customer activities. According to Porter (1980), whether a company’s competitors can carry out their strategies and reach their goals depends on each competitor’s resources and capabilities. A company should gather recent information on each competitor’s business. Industry data on sales or loading incase of transport industry, market share, profit margin, return on investment, cash flows, new investment and capacity utilization. Companies should do this through secondary data; personal experience etc. They can argue their knowledge by conducting primary marketing research with customers, suppliers and dealers.

All these sources helps a company decide whom to attach in the programmatic control market and who to avoid. Financial risk management is the driving force for economic growth and the social welfare improvement. Manufacturing Firms introduce new products or brands to crowd the product space so as to cannibalize market share and profit from rival firms and to deter the potential entry, while consumers benefit from having more products with difference attributes to meet their demand and from the lower price on existing brands due to new product introduction. This paper estimates the effects of a new product introduction; the overall competitive effects are decomposed into two parts: the effect on the prices of existing products from increased competition, and the effect of having additional product variety.

Competition policy across different countries indicates that in most jurisdictions, the basic objectives are to maintain and encourage the process of competition in order to promote efficient use of resources while protecting the freedom of economic action of various market participants. Competition policy has been generally viewed to achieve or preserve a number of other objectives as well: pluralism, de-centralization of economic decision-making, preventing abuses of economic power, promoting small business, fairness and equity and other socio-political values. It has been noted that these “supplementary” objectives tend to vary across jurisdictions and over time. The latter reflects the changing nature and adaptability of competition policy so as to address current concerns of society while remaining steadfast to the basic objectives.

Earl, P. (2007). Competition policy is a term that has been used loosely to describe a wide range of government measures directed at affecting the behavior of suppliers and the structure of the industry with the aim of facilitating competitive markets. With competition policy in telecommunications being increasingly characterized by complex and diverse approaches taken by different countries, it has become necessary to take stock and to draw out the lessons of experience in order to identify key elements that can be used by a growing number of countries that have introduced varying degrees of competition in their telecommunications market. This paper is intended to provide a framework for understanding some of the evolving competition policy approaches that have been taken and the competition issues they have been designed to address.

Competition is often thought of a fairly obvious thing, a rivalry. In a market context the meaning of competition is usually taken to be a rivalry among the sellers. In competitive terms this includes the familiar competition among sellers but there is also the possibility of competition between sellers and consumers, as well as competition among consumers. According toWaterson, M. (2003)the term competition can call to mind different thoughts, depending on how an individual thinks about it. A competition can be a test. For some it appears as an opportunity to succeed; for others the threat of failure looms. In markets, it may mean a salubrious contest to better serve customers, or may mean a ruinous bout of cutthroat price wars.(Scherer and Ross 1990)Emphasize that telecom market is characterized by imperfect competition, regulation, advanced technology, network externalities, strategic gaming, and entry. Policymakers who substitute their intuition for careful modeling of this market do so at their own peril.  Competition is seen as beneficial for consumers, and is thus evaluated as a positive state of affairs. Indeed, competition among sellers is widely seen as necessary to secure the benefits of market exchange to consumers. The concept of seller vs. seller competition is embodied in the neoclassical economics that forms the basic assumption about markets and frames the understanding of many, probably most, market observers and policymakers. Incorporated in this notion is a belief in the self-regulating property of markets. Under this assumption markets are held to be efficient in the allocation of resources and effective in delivering consumer benefits when driven by competition, in contrast to regulation by government or domination by a large firm or cartel.

2.2.2 Services

Frempong (2009) mobile phone ownership increased access to markets, contributed to efficiency in conducting business. However, this study revealed limited capacity to operate other financial services that are possible through the system and related to mobile money services such as sending and receiving money.

To subscribe to mobile money services a phone Subscriber Identity Module (SIM) card must be purchased and activated in a mobile device. This is followed by creating or registering a mobile money account with the mobile money provider of choice which allows the client to make a cash deposit from mobile money provider agents or receive deposit from other subscribers. The cash deposited creates electronic money credit in the customer’s account. Once a deposit is made, the subscriber can send money electronically to another person registered in the same or different network, or withdraw the deposit from a mobile money network provider agent.

Additional features in the mobile phones allows the customer to use the electronic credits for other transactions like paying bills, purchasing goods at shops, supermarkets and virtual stores, purchase airtime, purchase mobile phone services like ring tones and songs amongst other uses. The customers receive a text message on the phone regarding the transaction made, the recipient information for the purchase and the account balance.

It is currently possible to make direct electronic transfers to mobile money accounts from certain banks that have established systems to do so. Network providers charge a fee for transaction which include; a fee from the sender who is initiating the transaction and a fee charged from the recipient when withdrawing or subsequently sending the money to another person.

The growth of mobile money services in Kenya has been particularly dramatic because it has overtaken the banking network in a very short time. This has been made possible through the expansion of financial agents who enabled growth to exceed the traditional banking outlets by a wide margin. For example, by August 2010, M-Pesa had enlisted 12.6 million customers and nearly 20,000 agents countrywide compared to only 1510 ATMs and 1,030 banks and bank branches (Zutt, 2010).The great number of mobile money agents located in almost all parts of the country has increased the convenience of the service which is one of the attributes that has resulted in increased number of subscribers. Mobile money has achieved penetration across all age groups which is a phenomenal achievement of new technology unlike others which often focuses on a certain age group. Despite this, older customers are more likely to use the service only to receive money. The usage is highest in subscribers between the ages of 25 to 29 and reduces thereafter. But even amongst the oldest Kenyan (above 65 years), half use mobile money (Zutt, 2010).

On the other hand, women are less likely than men to use mobile money, and are more likely to only receive and not send funds, a finding by Zutt (2010). He further notes that in 2009, mobile money was initially concentrated among the wealthy in Kenya but has since grown rapidly to include the poor. Other demographic information related to mobile money usage indicates that it is highest among urban Kenyans, but with substantial penetration among rural residents.As of August 2009, 47% of rural Kenyan adults and 69% of urban Kenyan adults had used mobile money (Zutt, 2010). The most common use of mobile money has remained receiving money followed by sending money. Other uses slowly gaining pace include purchase of airtime, save money, purchase during traveling, make donations, receive payments, purchase of goods and services, ATM withdrawals, pay bills, and receive or pay salaries/wages. These other uses have gained momentum over time, but do not as yet compared to receiving or sending money. The recent trends are usage of mobile money more to pay school fees, to remit electricity and other monthly bills and recently as means of payment in supermarkets. Mobile money is quickly taking the place of alternatives methods of sending money previously used. By 2009 for example, mobile money transfer had almost entirely displaced transfers via the post office and via bus or minibus, which were previously popular methods (Zutt, 2010). The percentage using alternatives like bank transfers, Western Union money transfer, Money Gram and friends has been decreasing significantly and has almost been completely replaced by mobile money services.

M-Pesa from Safaricom has been studied in detail by Mbiti& Weil (2011) who observed certain patterns of usage. Even though the M-Pesa is not used for money storage, it has this potential even though the primary purpose has been to send and receive money. Access and use of more sophisticated financial services through mobile money services like savings, credit, and insurance could prove more beneficial (Donovan, 2011). Mobile money services can also be viewed as a variation of branchless banking with the potential for delivery of financial services outside conventional banking. can have a number of useful benefits which include access to financial services like making deposits and savings, accessing the formal banking sector through mobile money services and accessibility of mobile payment services, transaction costs, convenience and security, perceived support from mobile payment operators, satisfaction with mobile payment services, and actual usage of mobile payment and business performance .

Savings money through mobile money is another feature currently being explored. The low number of people willing to save money via mobile money has been due to the lack of interest earned compared to other forms of savings. Thus, the chief advantage of keeping savings in mobile money rather than in cash has been the increased security associated with having the funds in mobile money (Zutt, 2010). Savings via mobile money are expected to grow especially since most mobile networks are increasing mobile phone and bank collaborations that will enable mobile phone savers to earn certain benefits like interests and loans on savings. A good example is the Safaricom and Equity Bank introduction of a form of account called M-Kesho that can be accessed via M-Pesa and pays an interest on savings. Similar products include M-Shwari with is a product between M-Pesa and Commercial Bank of Africa (CBA)

The turn of the century has seen profound changes in the global economy. Services have played a crucial part in these changes, because services are becoming the way organizations meet with their markets (Irons, 1997:4) Already organizations have discovered that their survival no longer exclusively depends on the products they offer, but also on the additional offerings they make to their customers that differentiate them from their competitors. Innovative organizations, offering new services as well as unique customer services, are now succeeding in markets where established organizations have failed (Lovelock and Patterson, 1998:4). Manufacturing and technology industries recognized services as a prerequisite to complement their products, in order to compete successfully in the market place. Therefore it can be argued that, in most industries, providing a service is no longer an option but a necessity.

Providing a service is a people business. The interaction between customers and service employees is vital for the actual success of service delivery. Rendering excellent quality service depends very much on the way service employees behave. In this regard, service competencies and service inclination contribute towards the success of services (Kasper, van Helsdingen, deVries, 1999:513). Customers are becoming more educated and demand not only quality products but also high levels of services to accompany them. Service organizations therefore need to adapt to customers’ views on services in order to assess whether the services they provide are perceived by customers as better than those provided by other service providers

(Kasper et al., 1999:139).

A wide variety of activities labeled as services are practiced by both profit-orientated organizations and non-profit orientated organizations. The success of these organizations depends on delivering excellent service quality and creating value to customers (Kasper et al., 1999:13). Defining services is therefore not a simplistic task. Over the years’ service marketing literature has provided readers with an assortment of service definitions. According to Irons, (1997:12) pure services are intangible but they do usually add value to, or make available, a tangible product. They do not result in transfer of ownership and may leave only memories.

Zeithaml and Bitner (1996) claim that in the simplest terms services are deeds, processes, and performances. Their broader definition states that services include all economic activities whoseoutput is not a physical product, is generally consumed at the time it is produced, and provides added value in forms that are essentially intangible concerns of the purchaser.

Kotler (1996) defines service as an activity that one party offers another that is essential intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Grönroos (1990) identifies a service as an activity or series of activities of a more or less intangible nature that normally, but not necessarily, takes place in interaction between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems.

The conclusion derived from the above definition is that services deal with intangible components. The purchase of services does not necessarily result in physical transfer or ownership but still creates a bundle of benefits during or after the service interaction or experience. Distinguishing between the tangible and intangible components of a service is extremely difficult. Therefore, separating the core service from the augmented service helps to simplify this task. The core service represents the fundamental benefits the service provide to satisfy customers’ needs. The augmented service incorporates the core service in addition to the tangible elements and all additional benefits of the service employed to satisfy customers’ needs. The core services are mostly intangible because of their lack of physical attributes, while augmented services provide the customer with the impression of the services’ tangibility component, because it can be seen, touched, and transferred to the customer. Mostly the result of the service interaction is a product of a tangible nature (Kasper et

al., 1999:139; Palmer, 1994:127). The bundle of benefits is the customers’ expectations from the service. Customers experience positive consequences of service processes as benefits, while negative consequences are experienced as perceived risks. The bundle of benefits and the way the services are delivered is aimed at creating customer satisfaction. In most service processes, consumption and production of services take place at the same time. This procedure requires interaction between the service provider and the customer to complete the service process. The success of the service process is subsequently dependent on the success of the interaction.

From the above discussion Kasper et al., (1999:13) have constructed a broad definition of service in which the relevant topics will be recognized: Services are originally intangible and activities which are relatively quickly perishable activities whose purchase takes place in an interaction process aimed at creating customer satisfaction, but this interactive consumption does not alwayslead to material possession. Over time, services and the service sector have been defined in many different ways, which add to confusion and disagreement when discussing services and service marketing. For the purpose of this study, the above-mentioned broad definition of services will apply and it will be acknowledged that there are very few pure services, in other words totally intangible offerings.

In today’s market place, companies focused on goods find that their core competencies include service offerings. (Brown, 2000:10). Currently the two largest service organizations, IBM and General Electric, arerecognized by most, for their strong brand names. Before 1992, IBM services were strictly directed at the support of IBM products. Today IBM regards services as a business in its own right; therefore they use service offerings such as information technology operations, systems integration, networking, consulting, and product support to differentiate tem from their competitors. “Services are now the pumping heart of IBM” (Brown, 2000:10)

However, this transformation is not limited to the IT industry. Organizations in service dominated industries such as insurance, health care, education and financial services are focusing on their service offerings to differentiate them in the marketplace. These organizations realize that by providing the customer with specialized service offerings, they create a more strategic and deeper relationship with their customers. The intimacy of this relationship helps them to become the preferred provider.

In summary services have become an integral part of the world economy. Over the past decade the role of services marketing has become a dominant feature in the service industry.

The continuous shift to an information society lead to an increase in service demand from customers, meaning that organizations no longer regard services as an option but rather as a necessity to gain a competitive advantage.Broad definition of services implies that it is originally intangible and relatively quickly perishable activities whose buying takes place in a process of interaction aimed at creating customer satisfaction, but during this interactive consumption it does not always lead to material possession. Services have five unique characteristics that are not founds in goods, namely intangibility, inseparability, variability, perishability and ownership. The intangibility characteristic of servicesseems to be the dominant one in the definition of services. These unique characteristics create numerous challenges for service marketers to attract new customers and retain current customers.The service marketing triangle and the service mix are but two concepts used to address the challenges of service marketing. The service marketing triangle focus on three marketing processes that need to be successfully carried out to ensure service success. Firstly, external marketing takes place between the organization and the customers and represents the service promises the organization makes to customers. Secondly, interactive marketing implies the actual contact between service employees and customers and represent the fulfillment of the promise made by the organization. Thirdly, internal marketing enables the service marketer to deliver promises made to customers and is the result of interaction between the organization and its employees. The service mix concept has been developed because of the limitation of the traditional marketing mix components in their application to services.

The components of the service mix are; service offerings, price, and distribution, promotions, people, process and physical evidence. The three new components of the service mix, i.e., people, process and physical evidence, have the advantage that they can be fully controlled by the organization.

The success of services relies on the success of the interaction between service providers and customers. Customers perceive services in terms of service quality, customer satisfaction and value. Very few organizations have succeeded without taking customer needs into consideration. Individual customers have individual expectations of services. From the customers’ point of view the interaction with the service provider is the most vivid impression they have of the service quality, therefore the initial interaction of customers with the service employees can be critical for the organization in any repeat purchase and in achieving a reputation for superior quality.Customers consider reliability, responsiveness, assurance, empathy, and tangibles as the most essential dimensions in their assessment of service quality. Customer satisfaction includes service quality, product quality, and price. Customer satisfaction cannot be determined without an actual experience with the organization. The customers’ perception of value relates to the benefits received from the offering in term of money, time, and effort. Service organizations are dependent on service employees and it is, therefore, imperative that they recruit, train, supportandretain good service employees. Service employees must have the skills, abilities, and attitude to provide customers with quality service.Service organizations realize the importance of the role that service employees play in the success of the service process. Therefore, it is important that they understand the value employees add to an organization.

2.2.3 Technology

Dahlberg T. , N. Mallat, (2007),  Internet and mobile technology have become a part of everyday life for some in the emerging and developing world. Cell phones, in particular, are almost omnipresent in many nations. People around the world are using their cell phones for a variety of purposes, especially for calling, texting and taking pictures, while smaller numbers also use their phones to get political, consumer and health information Mobile technologies are changing economic life in developing countries, wheremany people are using cell phones for a range of financial transactions, such asreceiving and sending money transfers. Indeed, mobile money is already beingused by banks and mobile network operators to provide millions of unbankedconsumers a way to store and access money digitally. The limited informationavailable suggests that for millions of consumers in developing countries,mobile money is transforming lives by providing access to financial servicesand the ability to pay and be paid electronically—sometimes for the firsttime in their lives. Mobile financial services, known as “mobile money”, allowunbanked people to use their phones as a bank account: to deposit, withdrawand transfer money with their handset. People can also use mobile systems topay utility bills and pay for goods in merchant shops.

Sarma (2007 and 2008) observes that Operator-Centric Model: The mobile operator acts independently to deploy mobile payment service. The operator could provide an independent mobile wallet from the user mobile account(airtime). A large deployment of the Operator-Centric Model is severely challenged by the lack of connection to existing payment networks. Mobile network operator should handle the interfacing with the banking network to provide advanced mobile payment service in banked and under banked environment. Pilots using this model have been launched in emerging countries but they did not cover most of the mobile payment service use cases. Payments were limited to remittance and airtime top up.

Bank-Centric Model: A bank deploys mobile payment applications or devices to customers and ensures merchants have the required point-of-sale (POS) acceptance capability. Mobile network operator are used as a simple carrier, they bring their experience to provide Quality of service (QOS) assurance.

Collaboration Model: This model involves collaboration among banks, mobile operators and a trusted third party.

Peer-to-Peer Model: The mobile payment service provider acts independently from financial institutions and mobile network operators to provide mobile payment. For example, the MHITS SMS payment service uses a peer-to-peer model.

The M-Pesa case in Kenya according to a 2006 survey by FinAccess, only 27% of the population of Kenya has a banking account, half of the population owns a mobile-phone Safaricomthe local branch ofVodafone operate the mobile network managingM-Pesa in Kenya. In this context an Operator Centric m-payment model has been implemented every time a user makes a transfer, he pays a fee to the operator, depending on the amount ofthe transfer. The receiver is not obliged to be registered with M-Pesa, but the transferwill be slightly cheaper if he is. Users tend to consider this new system as a new way toaccess to banking and financial services. For this reason, theM-Pesa system is currently a great success because the transfers are almost instantaneous, simple and secure.

According to Leeladhar (2005),M-Pesa information is stored in the SIM card which is theproperty of the operator. Itthen depends on the location of the secure element whichdetermines the operator centric" nature of this model. The nature and brand of themobile is not of importance. The SIM card of each customer must beSafaricominKenya(orVodacomin Tanzania): this is the only necessary condition to participate to thepayment system in the best conditions (to have both the possibility to pay and to bepaid). Users open accounts near a certified agent. They pay this agent in cash; thecertified agent creates as a counterpart an amount of virtual M-Pesa. At all moment,the same certified agent realizes also the conversion of virtual currency in cash and payback the agents at the end of their transactions. Fees and transaction costs are paid to the certified agent when a new account is opened or closed. Registration is free but eachtransaction is submitted to the payment of fixed fees to the operator.

2.2.4 Price

Price has been observed as an important element affecting the diffusion of new products and services, but pricing of a new product or service is particularly difficult (Foxall, 1995). To enable accurate pricing decisions for new products or services, a detailed knowledge on the potential customers’ perceptions and characteristics is needed. However, though it is known that price is an integral part of diffusion enhancement activities, we have a very limited knowledge on its actual effects on the diffusion of mobile services. It is also more or less unknown how customers of mobile services perceive the charged prices and what are the dynamics affecting to price perceptions. The perceived price is formed from the bases of a customer’s experience about mobile services and in comparison to prices of other optional service delivery channels.

Further challenges for pricing of mobile services is brought by the fast evolving new wireless technologies and business practices. In this new service environment traditional pricing strategies have brought unsatisfactory results, a need to develop pricing has generated. For that purpose it is necessary to study the customers’ subjective price perceptions to enable the creation of more effective pricing schemes. At an aggregated level, price sensitivity is often used as a synonym for price elasticity (Link, 1997) and thus also in thisstudy these two terms are seen to as synonyms. Sensitivity ofdemand refers to how volume-sensitive a product or a serviceis to price changes. Sensitivity represents a valuable strategictool in pricing (Tucker, 1966).Price sensitivity on the individual adopter level appears tobe equivalent to the concept of price consciousness for apotential buyer of any product. Price consciousness has beendefined as the degree to which he or she is unwilling to pay a high price for a productand willing to refrain from buying a product whose price is unacceptablyhigh (Monroe, 1990).Price consciousness is related to the price acceptability level aswell as to the width of latitude of price acceptability(Lichtensteinet al., 1988). Individuals, who are price conscious, are generally not willing to pay high prices forthe product in question. Furthermore, the range of acceptableprices is relatively narrow for price conscious individuals(Link, 1997).In studies on price sensitivity in telecommunicationindustry three different consumer segments have beenidentified (e.g. Kollmann, 2000). It has been found that inboth ends of pricing (high-end versus low-end) the pricesensitivity is substantially lower, in other words insensitive.Influencing on these two market segments with pricing wouldbe most probably ineffective. Thus, for these marketsegmentsit would be most effective to pursue quality-focusedmarketing strategies (e.g. improvement of service/speechquality).

Price perceptionis the process by which people select, organize,and interpret information to form a meaningful picture of theworld. Although Nagle and Holden (2002) believe that pricemerely represents the monetary value a buyer must give to aseller as part of a purchase agreement, we go on suggestingthat customer’s price perception is closely related on herperception of quality, value and other beliefs. The work onprice perceptions and adoption of innovations has produced alarge number of contradicting research findings. Related toprice perceptions, Goldsmith and Newell (1997) foundshopping innovators to be less price sensitive than laggardswhereasKorgaonkarandSmith (1986) reported noassociations between purchase behavior and priceconsciousness. However, earlier Korgaonkar (1984) hadconcluded that non-store shopping would be most appealingto price oriented individuals. Along with consumer attitudes and shopping orientation,there has been significant weight given to price perceptions ofconsumers, and its impact on the adoption of product andservice innovations. This body of work on price perceptionsand adoption of innovations has produced significantlydiffering findings. Related to price perceptions, Goldsmithand Newell (1997) found shopping innovators to be less pricesensitive than later buyers, whereas Korgaonkar and Smith(1986) reported no associations between purchase behavior and price consciousness. However, earlier Korgaonkar(1984)had concluded that non-store shopping would be mostappealing to price oriented individuals..

A consumer’s level of knowledge about price and pricesensitivity of any given product or service may be influenced by Demographiccharacteristics such as age, income, and gender are oftenassumed to affect one’s level price sensitivity and priceperception, and are therefore frequently used as the basis formarketsegmentation.Lack of demographically-driven differences in priceknowledge may be due to the equal ability of the variousdemographic groups in processing product-relatedinformation (e.g. Meyer-Levy and Sternthal, 1991). Alternative explanation might be that the limited incentivesgiven to respondents, and the demographically homogeneoussamples used in previous studies, may have led to theobserved null effects of demographics (Estelami, 1998).Therefore, the role of demographics on price knowledge andprice sensitivity remains open for further empirical inquiry.While high exposure to price information may result inmore precise knowledge on prices, a high level of variability inprices may lead to low quality knowledge. Such variability canbe introduced due to significant product differentiation effortsby sellers, and perceived or actual product/service quality variations. (Estelami, 1998) It is therefore anticipated thatacross service/product categories, significant variations inconsumers’ sensitivity of prices exist.

Customers’ price sensitivity is also influenced by intermediaryservices available online and offline. Two intermediary factorsare likely to affect the degree of price sensitivity: price comparison using intermediary; and price bundling.If customers use intermediaries, which provide comparative prices of competitors, their price sensitivity could increase.Comparative prices increase the salience of price as a decisioncriterion and reduce the costs of price search. Although pricecomparison tends to increase price sensitivity, this effect islikely to be lower online than offline. Comparative pricesprovide reference prices for customers. When the search costsare low, as in the online environment they are, the referenceprices have little effect on price search tendency (Urbanyet al.1988).

Product bundles are typically offered by intermediaries andoften involve savings on individual items. If customers’choosefrom a product bundle, they may focus more on the value ofthe bundle and less on prices of individual components. Thisis because the value of the bundle has a strong impact oncustomers’ perceptions of transaction value (YadovandMonroe, 1993). To this extent, bundles may lowerimportance of price. Customers also typically use the“psychophysics-of-price” heuristic in that they perceive theexpected savings from price search in relative terms ratherthan in absolute amounts (Grewall and Marmorstein, 1994).Because the value of a bundle is higher than that of acomponent, customers expect higher absolute savings on abundle than on its components. Because the savings on thecomponent are smaller than the savings on the bundle as awhole, customers attach less importance to price and are lesslikely to search for better prices for the component.Therefore, we expect the online medium to intensify thetendency of price bundling to decrease price sensitivity.

Pricing is one of the most important marketing mix decisions, price being the only marketing mix variable that generates revenues. Pricing is not a single concept, but a multidimensional one with different meanings and implications for the manufacturer, the middleman and the end-customer. Pricing strategy is of great importance because it affects both revenue and buyer behavior. The whole pricing environment is therefore considered, first from the point of view of the company and its strategies and then from the aspect of the consumer. However, it must not be forgotten that there are other, external influences on pricing - not just a firm’s competitors but also from government and legislation. Once these factors have been taken into account, various pricing strategies are reviewed and some attention is given to how best to implement those strategies; how pricing levels can be adjusted and how such tactics do affect buyer behavior and company revenue.Klompmaker, J.E., Rodgers, W.H. and Nygren, A.E. (2003). The multidimensional character of price should be taken into account for the pricing of products and services. Pricing involves the determination (and adjustment) of a price structure and price levels, as well as decisions on short-term price changes. A more effective, goal-oriented approach to pricing is needed that explicitly takes into account the role of price as a marketing mix instrument and as a profit generator. This provides a framework for effective, goal-oriented pricing, and to highlight the major aspects and factors of the pricing decision.

A key parameter affecting pricing decisions is essentially customer based. The upper limit to the price to be charged is set by the market - unless, of course, the customer must purchase the product and we are the sole supplier. Effectively, then, at least in competitive markets, demand, i.e. the price which customers are both willing and able to pay, is a major consideration in the selection of pricing strategies and levels. Ideally, the marketing manager needs to know the demand schedule for the products and services to be priced. This means that we must take into consideration the time factor, i.e. demand must be specified for a given time period. For example, it is conventional to distinguish between “short”, “medium” and “long run” time horizons when discussing demand. Certainly demand can, and does, vary over these different time periods. The time period must be explicit when evaluating demand concepts in the context of marketing.Demand for a product or service, and indeed the price the customer is willing to pay, is related to the attributes of competitive products being offered. Demand for a product is therefore closelyrelated to how the customer perceives the various attributes of competitive products. These attributes include physical/tangible attributes of the product or service in question: for example, quality features, packaging etc., and “intangible “attributes, such as brand/corporate image and status. So far, we have emphasized the complexity of consumer reactions toward prices, and the psychological factors affecting the role of price in the decision process. An even more important observation is the enormous heterogeneity in price reactions among potential buyers. This heterogeneity is already apparent at the level of price awareness and knowledge. In addition, consumers may evaluate prices differently, because they are more or less informed about prevailing prices and product characteristics. Decision makers should recognize these differences, and positively “exploit” consumer heterogeneity in the development of pricing strategies and tactics.

Simon, H. and Butscher, S.A. (2001). The pricing strategy will not only depend on consumer response, but also on the reaction of competitors. Competitive behavior varies considerably with market structure, intensity of competition, and the existence and nature of significant competitive advantages. Competitors’ prices are therefore more decisive for own pricing decisions in markets with many undifferentiated competitors. Market structure and intensity of competition change over the product life-cycle (PLC) as new competitors enter the market and products become more homogeneous. Competition intensifies in most cases, and becomes especially severe in the maturity and decline stage, because sales growth can now only be accomplished at the expense of the competitors’ sales volume. Intense competition implies an increased likelihood of competitive reactions to pricing decisions (adjustments in price and/or other marketing mix variables). Besides market structure, the distribution of market shares, the sources and types of competitive advantages and the marketing goals and strategies of competitors affect the likelihood and nature of competitive reactions. Competitive retaliation may attenuate pricing effects, and sometimes provoke real price wars (prices are continually reduced, even to unprofitable levels). The analysis of competitive behavior is therefore a prerequisite for effective pricing.

Unique product value results from (tangible or intangible) product characteristics that are valued by consumers and differentiate the product from its substitutes. Unique product value reduces the price sensitivity of consumers, thereby enabling the firm to set prices above the competitors’level without experiencing a considerable decrease in demand. This is an example of M-Pesa by Safaricom, statistics indicate that their mobile money transactions are slightly higher than the competitors but by the virtue of consumer confidence it remains the market leader in mobile money.In addition to customers and competitors, a number of other publics influence pricing decisions. The most important is government (legal constraints). Other individuals, groups or institutions may also have an impact on the pricing decision (e.g. financial institutions, workforce) but they are not discussed here. A number of government laws set legal constraints to competitive pricing behavior, consumer pricing, international pricing and (the control over) retailer pricing. Prohibited or restricted competitive pricing practices are price fixing, price discrimination, and predatory pricing. Important legal constraints on consumer pricing are regulations against deceptive pricing and consumer price discrimination. Moreover, in specific product categories like pharmaceuticals, or bread, governments exert direct price controls and establish ranges of legally acceptable consumer prices.

Pricing decision is only one part of the general marketing strategy. Pricing decision must therefore be integrated with the other Ps of the global marketing mix. Price is the only area of the marketing mix where policy can be changed rapidly without large direct cost implications. However, this characteristic also results in the danger that pricing action may be resorted to be as a quick fix instead of changes being made in accordance with the other elements of the overall international marketing strategy. It is thus important that management realizes that constant fine-tuning of prices in international markets should be avoided, and that many problems are not best addressed with pricing action. In addition to broader corporate objectives, pricing decisions must also reflect and support specific marketing strategies. In particular, pricing strategies need to be in line with market targeting and positioning strategies.Clearly, if a company produces a high quality product or service aimed at the top end of the market, with a prestige image, it would not make much sense (indeed it would probably be a major mistake) to set a low price on the price on the product even it cost efficiency allowed this. Pricing therefore must be consistent with the other elements of the marketing mix and the selected positioning strategy.

Pricing strategiesdetermine long-term price structure and price levels, and their evolution over time in response to long-term changes in the environment; while pricing tacticsconsist of short-term price decisions (mostly price reductions from the normal or long-term level) to induce immediate sales increases or to respond to short-term changes in the environment.

Hanlon, D. and Luery, D (2002). The service providers of mobile money use the measurement of sales promotion effects have generated a great deal of interest in recent years. While a variety of promotional activities is available, the bulk of sales promotion actions take the form of either a straight price cut, or a more indirect price reduction. Typical of such price promotions is their temporary character; a large portion of the observed sales increase stems from brand switching. All in all, temporary price reductions have about the weakest positive long-term effects of any below the line activity since they appeal to rational (financial) arguments rather than building brand image or franchise.

While the evidence on positive long run implications on brand sales is limited, there are indications that price deals lead to purchase acceleration and stock building, followed by sales dips in the post-promotion period. In other words, sales promotions may partly “borrow sales from the future”. More importantly, frequent price cuts may reduce the consumer's willingness to buy the product at the regular price eventually damage product image.

A whole set of complex factors affect pricing decisions, making this in fact one of the most complex and difficult areas of market planning. Pricing decisions are more than just a “mechanical” exercise of adding margins for profit on to costs. Price setting must become an integral part of the marketing strategy of the company and must be consistent with corporate and marketing objectives and other elements of the mix. In addition to these inputs to pricing decisions, the marketer must also consider demand, cost and competitors.Based on the environmental factors (customers, competitors and publics) and general marketing strategy.

2.3 Critical Literature Review

As noted earlier, Mobile banking (m-banking) is a subset of branchless banking and involves access to a range of banking services through mobile telephony. One of its main advantages is that it addresses the cost of outreach and the cost of handling low-value transactions by using agents instead of banks. M-banking channels are primarily used for transfers and payments, even when they offer a broader range of services.

The development of m-banking has so far been driven not only by mobile network operators (MNOs) but also to some extent by some large banks. Mobile money transfer plays a major role in the overall banking sector. An illustrative example is M-Pesa that started as a pilot in 2005 between Safaricom and the microfinance institution (MFI) Faulu Kenya to facilitate microfinance loan disbursement and repayments. Safaricom learned how customers used the service beyond loan repayments and, as a result of the pilot, launched M-Pesa, which is today's most successful m-payment service worldwide.

Countries with a low banking infrastructure and a high percentage of rural population, financial institutions consider mobile money transfer as one way to promote financial inclusion. Mobile money transfer allow for collection and disbursement of cash in a safe and timely manner.

However, no prior analysis had been done concerning the practicability of the viability of mobile money transfer as put forward by the initial adopters of mobile money transfer. Some parameters like social factors such as security and customer acceptability were ignored or immeasurable by then.

2.4 Summary

When customers decide to buy a service to meet an unfulfilled need, they weigh options posed by various mobile phone money transfer providers. To stay in business today, the product/service provider must give back to the customer as much as he receives from him/her. Customers are more educated and informed than ever, and they have the tools to verify the company’s claims and seek out superior alternatives. This has a major influence on the choices they make. Customers estimate which offer will deliver the most perceived act on it; whether or not the expectation affects customer’s satisfaction and the probability that he or she will purchase the product again. This study therefore sought to determine the factors that determine the customer’s choice of mobile money transfer services.

2.4.1 Mobile banking

Recent literature has a narrow focus and ignores mobile money transfer parameters almost entirely; it equates this service with the substitution of currency with communication gadget. For instance Santomero and Seater (1996), and Shy and Tarkka (2002) present models that identify conditions under which alternative payments substitute for currency. Most of these models indicate that there is at least a possibility for mobile money substitutes for currency to emerge and flourish on a wide scale depending on the characteristics of the various technology and those of the potential users.

Also, the enormous investments and seemingly incomprehensible valuations of mobile banking services particularly the upcoming financial institutions are scarily reminiscent of the dotcom boom of the 1990s. This has led to warnings that this is a new tech bubble waiting to (Burst Business insider Jan 2014).

As noted earlier however, the research on the rate of adoption of mobile money transfer services by the consumers has been vast, while there has been very limited research on the general impacts of these services on the public and private finance efficiency of cost cut, reliability and consumer utility levels.

Figure 2.5 Conceptual Framework

Independent Variables                                                   Dependent

 

                                                                             

                                                              

                                                              

                                                              

 

Source: Author (2016)

Interpretation of Variables

2.5.1 Competition

Competition produces positive self-esteem between the competitive parties. The fair competition between the competitors ensures that the competitor’s rights are respected.

2.5.2 Services

A service is an economic activity where an immaterial exchange of value occurs. You have to know how to deliver quality services to customers so as to satisfy them fully. The service should be simple and fast.

2.5.3 Prices

Price of the service is one of the factors that affects the mobile money services ie. withdrawal costs affect the sustainability of competition. This being the key factor it should be well handled since it can act as a determinant of how the beneficiaries of the services will respond. 

2.5.4 Technology

Superior technology is important in guiding the mobile money transfer service users when choosing between otherwise seemingly similar service providers. Poor technology leads to delays in mobile money transfer services such as sending and receiving money.

CHAPTER 3

RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

A research methodology guides the researcher in collecting, analyzing and interpreting observed facts (Bless and Achola, 1988). This chapter introduces the logical framework to be followed in the process of conducting the study. It is divided into: research design, population and sample, data collection and data analysis.

3.2 Research Design

Based on the purpose of this study and the type of data involved, descriptive and qualitative research designs were used. The goal was to provide a clear understanding of mobile money transfer services as it relates to consumer choice, and its impact on general financial actors. Qualitative technique was used to collect data from the managers, subordinate staff as well as from customers.

This was to ensure convenience in data collection and an easier way to deduce relationships between the findings and the hypothesized objectives.

3.3 Target population

Cooper and Emory (1995) define population as the total collection of elements about which the researcher wishes to make some inferences. The population of interest in this study consisted of three mobile money transfer services offered in Thika Kenya. The mobile money agents, managers, employees and customers were targeted as the key respondents. There was a need to sample the population because not all the population elements use mobile banking. The study therefore used stratified sampling.

Table 3.1 Target Population

Category	Number of People	% Represented
Safaricom M-Pesa	60	50
Airtel Money	45	37
Yu- Cash	15	13
Total	120	100

Source: Author (2016)

3.4 Sample design

Purposive sampling design was used. This was to ensure validity of data and save time and other resources .Questionnaires were only distributed to the most relevant population.

Table 3.2 Sample Size

Category	No. of People	Sample Size	Percentage %
Safaricom M-Pesa	50	20	42
Airtel Money	40	15	34
Yu- Cash	30	10	24
Total	120	45	100

Source: Author (2016)

3.5 Data Collection instruments

Primary sources were used in data collection. Open and close-ended questionnaires alongside with one on one interview wereconducted to target respondents.In total two questionnaires weredelivered, one to managers and employees and another to customers. This instrument allowed for cost and time savings for the respondents as well as the researchers.

3.5.1 Validity and reliability of data collection instruments

The researcher obtained written permission to enable him collect research data from different MMTS. The researcher then proceeded to the field for the data collection exercise. The researcher used stratified random sampling technique to identify their sample. The researcher approached the mobile phone users who were issued with questionnaires and returned after duration of two weeks. The questionnaires were both closed and open ended questions. The open ended questions helped in expounding responses to some closed ended questions that were asked to help give a wider perspective of the issue being addressed by the specific question.

3.6 Data Analysis

For the purpose of establishing important and objective information, all relevant methods were employed where necessary in line with the objective of the study. The questionnaires were received and edited for accuracy, competence, uniformity, consistence and acceptability. Errors and omissions detected were corrected. The data collected was edited, coded, tabulated, and interpreted in relation to the research objectives. The analysis of quantitative data was carried out using excel computer package and presented inform of tables, graphs and pie charts and qualitative data was analyzed using word package.

CHAPTER FOUR

DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF FINDINGS

4.1 Introduction

In this chapter the researcher carries out an analysis of data using both quantitative and qualitative methods. The analysis process is done on the basis of the variables of the research objectives. The analysis and interpretation of data is done by the help of analyzed tools such as graphs, pie charts and through judgment due to observations made.

4.2 Presentation of Findings

4.2.1 Response Rate

Table 4.1 Response Rate

Category	Frequency	Percentage
Response	40	88.89
Non Response	5	12.11
Total	45	100

Source: Author (2016)

Figure 4.1 Response Rate

Source: Author (2014)

The response rate was the actual representation of the population. Out of 45 questionnaires distributed 40vwere returned, that is 88.89% of the total population and only 5 which is 11.11% was not returned.

4.2.2 Gender Analysis

Table 4.2 GenderAnalysis

Category	Frequency	Percentage
Male	22	55
Female	18	45
Total	40	100

Source: Author (2016)

Figure 4.2 Gender Analysis

Source: Author (2014)

Analysis from the above table & figure shows that 55% of the respondents were male while 45% were female. This can be interpreted that majority of the respondents were male in the mobile money transfer industry and their customers. 

4.2.3 Respondents Category                     

Table 4.3 Respondents Category

Category	Frequency	Percentage
Customers	13	30
Mobile money transfer operators	18	45
Mobile money transfer owners	10	25
Total	40	100

Source: Author (2016)

Figure 4.3 Respondents Category

Source: Author (2016)

Table 4.3 and figure 4.3 indicate the response of the category of persons who filled the questionnaires. Mobile money transfer customers  responded by 30%, mobile money operators 45 % and mobile money transfers owners responded with 25 %   This can be interpreted that majority of the respondents were mobile money transfer operators  staff followed by mobile money transfer customers  and finally mobile money transfer owners.

4.2.4 Age Group

Table 4.4 Age Group

Category	Frequency	Percentage
18-25 years	21	52.5
26 – 35 years	10	25
36 – 50 years	6	15
Above 51 years	3	7.5
Total	40	100

Source: Author (2016)

Figure 4.4 Age Group

Source: Author (2016)

Table 4.4 and figure 4.4 above indicate the analysis of age group. 52.5% were aged between 18-25years, 25% were aged between 26-35 years, 15% 36 – 50 years, and finally above 51 years were 7.5%. It can be interpreted that the biggest age group was between 18-25 years who were actively involved in the research.

4.2.5 Highest level of Education

Table 4.5 Highest level of Education

Category	Frequency	Percentage
Secondary	20	50
College	12	30
University	8	20
Post Graduate	0	0
Total	40	100

Source: Author (2016)

Figure 4.5 Highest level of Education

Source: Author (2016)

Many of the respondents, that is50% were secondary school graduates. 30% of respondents had college education while 20% had graduate education (University). 0% of respondents were post graduates. This indicates therefore that most of the respondents were literate and were well informed of the variables being tested in the questionnaires .They had background information on the mobile money transfer industry.

4.2.6 Length of time using mobile money transfer services

Table 4.6 Length of time using mobile money transfer services

Category	Frequency	Percentage
Less than 5 years	12	30
6-10 Years	26	65
Over 10 Years	2	5
Total	40	100

  Source: Author (2016)

Figure 4.6 Length of time using mobile money transfer services

Source Author 2016

4.2.7 Competition

Table 4.7Whethercompetition determines customers’ choice of mobile money transfer

Category	Frequency	Percentage
Yes	28	70
No	12	30
Total	40	100

Source: Author (2016)

Figure 4.7 Whethercompetition influences customers’ choice of mobile money transfer provider

Source: Author (2016)

Analysis from the table 4.15 and figure 4.15 above indicates that 70% of the respondents agreed that  competition affects choice of mobile money transfer service while 30 % of the respondents  felt that competition does not to a great extent affect choice of mobile money transfer service provider.

4.2.8 Competition

Table 4.8 Rating of competition effect on choice of mobile money transfer service

Category	Frequency	Percentage
Very good	26	65
Fair	10	25
Poor	4	10
Total	40	100

Source: Author (2016)

Figure 4.8 Rating of competition effect on choice of mobile money transfer service

Source: Source: Author (2016)

From table 4.16 on rating of competition on mobile money transfer service, it can be deducted that completion has a good ratings by respondents as having effect on mobile money transfer service. 65% of the respondents said that it had very good ratings while 25% felt that competition has fair rate on influence of customers.

Only 10% felt that competition had poor ratings on customer’s choice of mobile money transfer service.

Hence companies need to compete amongst themselves so that customers can get better options of products

4.2.9 Services offered

Table 4.9 whether service offered determines the choice of mobile money transfer service

Category	Frequency	Percentage
Yes	30	75
No	10	25
Total	40	100

 Source: Author (2016)

Figure 4.9 whether service offered determines the choice of mobile money transfer service

Source: Author (2016)

Majority of the respondents felt that service offered determines the choice of mobile money transfer service 75% while 25 % felt that service offered did not determine the choice.

4.2.10 Frequency use of mobile money transfer services

Table 4.10 Rating Frequency use of mobile money transfer services

Category	Frequency	Percentage
Regularly	38	95
Rarely	2	5
Total	40	100

  Source: Author (2016)

  Figure 4.10 Frequency use of mobile money transfer services

Source: Author (2016)

Table 4.9 and figure 4.10 indicate the frequency use of mobile money transfer services. In the analysis, 95% of the respondents agreed that they regularly use the mobile money transfer services while 5% do not use the mobile money transfer services regularly. This represented only a small percentage of the population.

Table 4.11 Preferred mobile money service provider

Category	Frequency	Percentage
Mpesa	34	85
Airtel Money	4	10
Yu Money	2	5
Total	40	100

(Source Author 2016)

   

(Source Author 2016)

Figure 4.11 Preferred mobile money service provider (Above)

85% of respondents use Mpesa as their mobile money transfer service while 10% preferred using Airtel money while 5 % preferred Yu money as their mobile money transfer service.

From this data it is evident that Mpesa was the most preferred mobile money transfer service in Thika town.

4.2.11 Pricing 

Table 4.12 whetherprice determine customers’ choice of mobile money transfer service

Category	Frequency	Percentage
Yes	4	10
No	36	90
Total	40	100

Source: Author (2016)

Figure 4.12 whether pricing of products Effects customer’s choice of Mobile money transfer

Source: Author (2016)

From the above table 4.11 and figure 4.12, 90% of respondent, indicated that pricing does not affects the choice while making mobile money transfer service while 10% indicated that pricing does affect affects the choice of mobile money transfer service provider . It can be interpreted that majority of the respondents agreed that pricing considerations does not affect the choice of mobile money transfer service provider.

Table 4.13Extent price determines customer’s choice of mobile money transfer services

Category	Frequency	Percentage
Very great extent	2	5
great extent	8	20
Low extent	20	50
Not at all	10	25
Total	40	100

Source: Author (2016)

Figure 4.13 The extent price determines customer’s choice of mobile money transfer services

Source: Author (2016)

Fromthe above table majority of the respondents 50% said that price has a low extent on the determination of mobile money transfer service followed 25% who felt price does not at all determine the choice of mobile money transfer service. 20% felt that price has a great extent on the customer’s choice of mobile money transfer service.

Only 5% of the respondents felt that price has a great extent in determining the choice of mobile money transfer service. This can be interpreted that price does not affect the choice of mobile money transfer service and mobile money transfer service providers should concentrate on the other factors influencing their customer’s choice

4.2.12 Technology

Table 4.14Whethertechnology determines customers’ choice of mobile money transfer provider

Category	Frequency	Percentage
Yes	21	52%
No	19	48%
Total	40	100

Source: Author (2016)

Figure 4.14 Whether Technology determines the customers’ choice of mobile money transfer

From the above findings 52% of the respondents felt that technology determines the customers’ choice of mobile money transfer service while 48% felt that technology does not determine the choice of mobile money transfer provider.

Table 4.15The extent that technology determines the choice of mobile money transfer service.

Category	Frequency	Percentage
Large extent	26	65
Moderate extent	10	25
Low extent	4	10
Total	40	100

Source: Author (2016)

Figure 4.15 Rating of technology determination on customer’s choice of Mobile money transfer services

Source: Source: Author (2016)

From the table 4.8 and figure 4.8 above majority of respondents indicated that technology determines the choice of mobile money transfer service. This was represented by 65% who indicated large extent, 25% moderate extent while 10% indicated that it affected by low extent. It can thus be interpreted that majority agreed that technology determines the choice of mobile money services by a very large extent.

4.3 Summary of Data Analysis

4.3.1 General Information

Out of 45 questionnaires distributed 40 were returned, that is 88.89% of the total population and only 5 which is 11.11 % were not returned. Analysis shows that 56% of the respondents were male while 44% were female. This can be interpreted that majority of the respondents were male. Respondent’s category was represented by mobile money customers 34% mobile money operators and employees 45% while owners and agents represented the remaining21% this shows that all stakeholders were well represented and all categories responded . Majority of the respondents 50% were secondary school graduates while 34% of the respondents were college graduates. 16% of respondents had university education. Age group of the respondents based on the analysis found that 52 % were aged between 18-25years, 22%% were aged between 26-35years, 19% were aged between 36-50years, and finally above 51 years had 7%.

4.3.1 Competition

The views of many respondents were that competition determines the customers’ choice of Mobile Money Transfer Services (MMTS) in order to help the service provider to improve their services. This was indicated by 68% who agreed that it does determine while 32% of them disagreed. Most of the customers are drawn by the product that is actively in competition. This is in terms of advertisements and discounts.

4.3.2        Services

The costs of gaining new customers are much higher than the costs of maintaining the existing ones. Hence customers consider that to be able to maintain them the mobile money sector should always consider the quality of the services they offer to their customers. From the data that was collected it was noted that services are greatly used to enhance the relationship between the user and the service provider of the service. This was indicated by the response of 74% for those who agreed that services offered determines the choice of MMTS while 26% of them indicated that they disagree.

4.3.3Prices

According to the findings of the research that was conducted, price of the service that is provided was not one of the factors that determine the customer’s choice of MMTS, the price of the service remains irrelevant provided the quality of the service provided is not compromised. This was indicated by the response of 89% for those who agreed that price of the services provided does not determine the choice of MMTS while 11% of them indicated that they agree that it affects. Hence the mobile money service providers should keep in consideration other factors rather just think of offering the services at a lower cost.

4.3.4        Technology

The views of many respondents was that most of them were preferring technology  to be used as a good mode to advertise, their services and also to reach further and deeper areas. Hence technology was one of the factors that affect the MMTS. This was indicated by the response of 52% for those who agreed while 48% of them indicated that they disagreed. Due to this MMTS providersshould strive towards attaining cooperation and promotion to their image. This makes the users of the service to have full confidence of using their services. They can also promote their service through the media which many users of the service can afford to fit all people in the society. The technology employed in the mobile money transfer is important not only to safe guard customer’s wealth and secrets but also to ensure customers have a responsive system.

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter summarizes, discusses and makes conclusions on the findings of this study in relation to the objectives put forward in chapter one. It also discusses the recommendations for further research as well as recommendations for policy and practice.

5.2 Summary of findings:

5.2 .1 How does competition determine customers choice of mobile money transfer?

From the study it was noted that competition does affect the mobile money transfer in the mobile money industry. From the findings a response of 67% indicated very good effects, 23% indicated fair effects while 10% indicated poor effects. On the question above, the researcher found out that the higher the competitive a service provider is, the higher the customer approval and therefore competition determines the customer’s choice of mobile money transfer service provider.

5.2.2 How does the provision of quality services influence customer’s choice of mobile money   transfer services?

The researcher identified that the respondents frequently used M-pesa, the mobile money transfer services provided by safaricom represented 85%, those who enjoyed the Airtel money services were 10% , while those who used the Yu Money represented 5%. Relating this to the data already collected and analyzed, the researcher observed that there is a positive relationship between mobile money service provider distribution and customers’ choice of the service. Hence services provided by a service provider affect its approval. The better the service the higher the approval.

5.2.3 How does offering good prices determine the customers’ choice of mobile money transfer services ?

The researcher identified that the respondents rated price as a factor that does not affect the mobile money transfer service. 59% represented those who believe that price affects the MMTS at a low extent, 19% believed that it does not affect at all, 18% believe it affects at a great extent, whereas 4% believe it affects at a very great extent.

The researcher observed that SafaricomMpesa service charges are relatively higher than that of other mobile money service providers. SafaricomMpesa charges its customers higher when they are transferring money. This is not the case for other mobile money service providers.

From the theory of demand and supply, it is expect that demand of M-pesa be lower relative to other service providers ceteris paribus. Hence the researcher concluded that the level of pricing does not affect the customer’s approval and therefore pricing does not affect the customers’ choice of mobile money transfer service.

5.2.4 What is the effect of technology in determining the customer’s choice of mobile money transfer services?

The researcher identified that the respondents rated technology large extent which was represented by 65%, moderate extent 25% and low extent at 10%. All mobile money service providers had a level working in terms of gadgets that their services supported. Hence the researcher concluded that the better the technology, the higher the customer approval and therefore technology affects the customers’ choice of mobile money transfer service.

5.3 Conclusions

The researcher concluded that if the service providers are to achieve competitive advantage among each other, they will have to improve technology and competition in order to improve their performance. According to the research the level of education plays a vital role therefore since they also need to educate those people on importance of using the mobile money transfer services appropriately. The researcher also concluded that the organizations should also use services as it is a very good weapon to fight for relationship between the user and the service provider. This is to establish the customer satisfaction and make sure there is effect on the feedback in order to satisfy their wants.

The research concluded that if organizations are actively involved in competition against each other, they will have to improve on all the factors as discussed such as quality, prices and also have an up to date technology. The research concludes that if service providers are to achieve competitive advantage among each other, they will have to provide quality services. This hence will ensure total satisfaction. The research concluded that if the organization provides services at an affordable price they will be assured to keep the customers for a long run only provided the quality of the service is also attached to it as the case ofSafaricom not only the prices. The researcher concluded that improved technology improves efficiency in terms of speed, accessibility and improved network in relation to this matter.

5.4 Recommendations

5.4.1Competition

This is the way through which the organizations contest for the market. They should make sure that the competition is advantageous for both the service provider and the user of the service not only to the service provider. Hence the service provider must be aware that competition is the best way if reaching its voice to the customer.

5.4.2 Services

The researcher  recommended that improved services and should be effectively implemented in order to create a good personal contact .This will help the provider know what kind of services the customer want and also help them improve their services and become better .The service provider should always strive for the total customer satisfaction, this is through the services they provide.

5.4.3 Price

The research also recommended that although prices do not affect the customer’s choice of  mobile money transfer services, good & fair prices is vital she also recommended that the prices charged to the customers should be good and fair that will leave the customer happy and be ready to come again.

5.4.4 Technology

Being a 21^st century where the digital world is always on the move the research also recommended that improved technology is a necessity to good performance of organizations. They should come up with improved systems that will satisfy the customers fully this will include developing updated technology.

5.5 Suggestions for further Study

This study focused on four variables only. There are other factors that affect customers’ choice of mobile money transfer services in the mobile money industry in Kenya which were not part of my study. It is suggested therefore that the future researchers should carry out further research on the other factors that affect customers’ choice of mobile money transfer services whichwill help in future to get more information on how to improve the mobile money sector.

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QUESTIONNAIRE

SECTION A: PERSONAL INFORMATION

                                    Name of respondent (Optional)

1. Gender

Male                                        Female

2. What is your age bracket?

Below 2.5 yrs.                                     26-35 yrs.

            36-45 yrs.                                46-60 yrs.

3. What is your education level?

Masters degree                                    Degree

Certificate                                           Diploma

Others (Specify)

4. For how long have you been using the mobile money transfer service?

Less than 5 yrs.                                   Over 10 yrs.

6 to 10 yrs.

SECTION A: COMPETITION

1. Does competition determine the customer’s choice of mobile money transfer services in Kenya?

Yes

No

2.  How can you rate competition effect on choice of mobile money transfer service?

Very good                                                               Poor    

Fair

3. Suggest ways in which competition can be improved?

………………………………………………………………………………………………………………………………………………………………..

SECTION B:SERVICE

4.  Do services offered determine the customer’s choice of mobile money transfer service?

Yes

No

5.  How often do you use your mobile money transfer services?

Regularly

Rarely

6. Which of the mobile money transfer service do you prefer?

Safaricom

Airtel

Orange  

7. Have you attended any training program in any mobile money transfer services?

Yes

No

.SECTION C: PRICE

8. Does price determine customers’ choice of mabile money transfer service?

Yes

No

9. To what extent does price determine customer’s choice of mobile money transfer services?

To a very great extent

To a great extent

To a low extent

Not at all

10. In your own opinion how can the service providers improve their prices?

……………………………………………………………………………………………………………………………………………………………….

SECTION D:  TECHNOLOGY

11. Does technology determine the customer’s choice of mobile money transfer services

Yes

No

12. Does technology improve the relationship between the users and the service providers?

Yes

No

13. To what extent does technology determine customer’s choice of mobile money transfer services?

To a very great extent

To a great extent

To a low extent

Not at all

14. Suggest any way the service providers can do to avoid technology hiccups like failure in networks ………………………………………………………

……..…………………………………………………………………………………………………………………………………………………………

ü  Thank you for taking your time to answer the questionnaire.