An examination of interest rate communication effectiveness on customer decision-making in banking: a case study of Fortis Microfinance Bank
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Background of the Study
Effective communication of interest rate information is essential in influencing customer decision-making in the banking sector. Fortis Microfinance Bank has placed a strong emphasis on enhancing its interest rate communication strategies to ensure that customers are well informed about changes in interest rates on savings, loans, and other financial products (Afolabi, 2023). The bank employs a variety of channels, including digital platforms, branch notices, and targeted messaging, to convey timely and accurate interest rate information. This communication strategy is designed to empower customers to make informed financial decisions, thereby promoting financial literacy and trust in the bank’s services (Ikechukwu, 2024).
The evolving competitive landscape requires banks to not only set competitive interest rates but also to effectively communicate these rates to their customers. Research shows that clear, transparent, and timely communication can significantly impact customer perceptions and influence their choices regarding deposits, loans, and investment products (Chinwe, 2023). Fortis Microfinance Bank’s approach includes regular updates on interest rate trends, interactive online tools for rate comparisons, and personalized notifications that cater to individual customer profiles. Despite these initiatives, challenges persist in ensuring that all customer segments, particularly those with limited digital literacy, receive and understand the information accurately.
This study aims to examine the effectiveness of Fortis Microfinance Bank’s interest rate communication on customer decision-making. It will analyze customer feedback, usage data from digital platforms, and comparative analysis of decision outcomes before and after enhanced communication initiatives. The findings will provide insights into how interest rate communication can be optimized to better support customer financial decisions and improve overall satisfaction.
Statement of the Problem
Fortis Microfinance Bank’s efforts to communicate interest rate changes effectively have not fully translated into informed customer decision-making. A key problem is that while digital channels provide real-time updates, a significant segment of the bank’s customer base may not have sufficient digital literacy or access to these platforms, leading to information asymmetry (Emeka, 2023). Moreover, inconsistent messaging across different channels can create confusion, causing customers to question the reliability of the interest rate information provided. This inconsistency may lead to suboptimal financial decisions, such as choosing less advantageous loan products or deposit schemes.
Furthermore, the rapid fluctuation of interest rates in a volatile economic environment complicates the communication process. Customers are often faced with rapidly changing information, which can lead to decision fatigue and reduced trust in the bank’s communications. Additionally, there is a lack of standardized metrics to measure the effectiveness of interest rate communication, making it difficult to evaluate its impact on customer behavior. This study seeks to investigate whether current communication strategies effectively influence customer decision-making and what improvements are needed to bridge the information gap.
Objectives of the Study
• To assess the effectiveness of interest rate communication strategies on customer decision-making at Fortis Microfinance Bank.
• To identify barriers that prevent accurate understanding of interest rate information.
• To recommend strategies for optimizing interest rate communication to enhance customer decision-making.
Research Questions
• How effective are the current interest rate communication strategies in influencing customer decisions?
• What barriers hinder the accurate reception and understanding of interest rate information?
• How can communication methods be improved to support better financial decision-making?
Research Hypotheses
• H1: Effective interest rate communication positively influences customer decision-making.
• H2: Digital literacy levels significantly affect the understanding of interest rate information.
• H3: Standardized and consistent communication enhances customer trust and decision outcomes.
Scope and Limitations of the Study
This study examines Fortis Microfinance Bank’s interest rate communication practices over the past two years, using customer surveys, digital analytics, and branch feedback. Limitations include variations in customer digital literacy and external economic fluctuations.
Definitions of Terms
• Interest Rate Communication: The dissemination of information regarding interest rates through various channels.
• Customer Decision-Making: The process by which customers choose financial products based on available information.
• Digital Literacy: The ability to effectively use digital tools and platforms to access information.
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