Service Automation, Data Analytics and Digital Payment Solutions: The Future of Competitive Advantage of Commercial Banks in Kenya

Abstract

In an era of rapidly evolving technologies, the banking industry in Kenya must adopt digital transformation to enhance competitiveness and improve customer experience. This study examined the effect of digital transformation strategies on the competitive advantage of commercial banks in Nairobi City County, Kenya, with a focus on three key dimensions: service automation, data analytics, and digital payment solutions. Theoretically, grounded in the Generic Competitive Strategies Framework, the Resource-Based View, the Dynamic Capabilities theory, the Technology Acceptance Model and the Diffusion of Innovation theory, the study employed a descriptive research design targeting 412 functional heads across 39 commercial banks stratified by size. A multi-stage sampling approach that combined proportionate stratified and simple random sampling techniques was used to select a sample of 203 participants determined by Yamane’s formula. Primary data were collected through structured surveys, with the research instrument validated by subject matter experts among 15 respondents to ensure reliability.  Cronbach’s Alpha Coefficient confirmed internal consistency (threshold ≥ 0.7). Data analysis utilised descriptive and inferential statistics, with findings presented visually for clarity. Results demonstrated that service automation, data analytics and digital payment solutions strategies significantly influenced competitive advantage, although their individual effects varied.  These findings highlight the need for a strategic customer-centric approach to digital transformation, advocating for selective automation that preserves human interaction in high-value services, improved feedback mechanisms, robust data governance and advanced analytics tools.  In addition, banks should refine digital payments, promoting user experience, fraud prevention and service differentiation supported by regulatory frameworks that foster security and innovation.

Key Words: Competitive Advantage, Commercial Banks, Data Analytics, Digital Payments Solutions, Digital Transformation Strategy, Service Automation.

DOI: 10.7176/EJBM/17-6-03

Publication date: July 30^th 2025