IMPACT OF SERVICE INNOVATION ON THE COMPETITIVENESS OF COMMERCIAL BANKS IN MOMBASA COUNTY, KENYA

Abstract

Strategic innovation has become central to competitiveness in banking as rapid technological change and growing pressure from financial technology firms reshape the industry. In Kenya, commercial banks continue to face operational inefficiencies and intense competition, increasing the need for effective service innovation. This study examined the influence of service innovation on the competitiveness of commercial banks in Mombasa County. It was guided by Innovation Diffusion Theory, Resource-Based View Theory, Strategic Alignment Theory, and Dynamic Capabilities Theory. The study adopted a cross-sectional survey design. The target population comprised 333 managers from 111 commercial bank branches in Mombasa County, including branch managers, customer service managers, and relationship managers. Using stratified random sampling, 135 respondents were selected. Data were collected through structured questionnaires and analysed using descriptive and inferential statistics. The findings showed that service innovation had a significant positive effect on bank competitiveness. The study concludes that when commercial banks adopt service innovations, they become more competitive by improving service delivery, strengthening customer satisfaction, and enhancing market differentiation. The study recommends that banks should strengthen digital service capabilities, improve customer-focused platforms, and build staff capacity to enhance service delivery and sustain competitive advantage.