Analysis of competition in traditional and digital banking services for the Kenya Banking Inquiry Phase II, 2015 - 2017

Sha’ista Goga and Ryan Hawthorne carried out phase II of a market inquiry into the banking sector for the Competition Authority of Kenya (CAK). This was focused on identifying and understanding factors that impact on competition dynamics in both traditional and digital banking services from a demand side or customer perspective. A key focus was understanding the ability of customers to impose competitive discipline on banks.  This involved  assessing facets such as price transparency and switching. The study assessed the extent to which banks provided adequate disclosure, the extent to which customers were able to meaningfully engage with information provided, and the ease,  ability and incentive for consumers to switch. Furthermore, the study looked at whether a lack of consumer engagement and barriers to switching undermined incentives for banks to compete in parameters such as price, quality of service and innovation. The study used  a combination of qualitative, quantitative and experimental methods. Behavioural economics experiments were  engaged in to understand barriers to switching and to determine whether prompts could be use to enhance competitive behaviour.