An investigation of interest rate communication strategies on customer decision-making in banking: a case study of Fortis Microfinance Bank
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Background of the Study
Interest rate communication is a vital aspect of customer engagement in banking, influencing how customers decide on deposit and loan products. Fortis Microfinance Bank has recently refined its communication strategies by using a blend of traditional and digital channels to convey interest rate information clearly and transparently. These strategies include targeted emails, SMS alerts, interactive website dashboards, and personalized notifications that explain the rationale behind rate adjustments and their expected impact on savings and borrowing costs (Adeniyi, 2023). Such clarity is believed to foster informed customer decision-making, as customers are better able to compare alternatives and assess the value proposition of various banking products.
Recent studies have shown that when customers perceive interest rate information as accurate and timely, their confidence in the bank increases, leading to a higher likelihood of engagement with financial products (Ikechukwu, 2024). Furthermore, an effective communication strategy helps mitigate uncertainty—especially during periods of economic fluctuation—by offering consistent and reliable updates on rate changes. Fortis Microfinance Bank’s approach integrates data analytics and customer feedback to continuously refine its communication practices, ensuring that messages are tailored to different customer segments. Nonetheless, challenges such as varying levels of financial literacy and the rapid pace of market changes can affect the overall impact of these strategies. This study will explore the relationship between interest rate communication and customer decision-making, seeking to identify the key drivers that lead to increased product uptake and improved customer satisfaction.
Statement of the Problem
Despite the bank’s efforts to communicate interest rate information effectively, Fortis Microfinance Bank faces challenges in achieving uniform customer understanding and engagement. One major issue is the variability in how customers interpret the communicated data; while some appreciate the transparency, others find the information complex and difficult to apply to their financial planning (Emeka, 2023). Additionally, inconsistent messaging across different channels may lead to confusion, thereby hindering sound decision-making. External factors such as economic uncertainty and competitor strategies further complicate the customer’s decision process. The gap between the intended clarity of interest rate communications and actual customer comprehension has resulted in suboptimal product adoption rates, potentially affecting the bank’s ability to mobilize savings and manage lending effectively. This study aims to assess whether current communication strategies sufficiently influence customer decisions and to pinpoint areas where enhancements could yield better outcomes.
Objectives of the Study
• To evaluate the impact of interest rate communication strategies on customer decision-making at Fortis Microfinance Bank.
• To identify factors that influence customer interpretation and responsiveness to interest rate information.
• To recommend improvements for optimizing communication channels to enhance informed decision-making.
Research Questions
• How do current interest rate communication strategies influence customer decision-making?
• What factors determine the effectiveness of these communications?
• How can Fortis Microfinance Bank refine its communication methods to boost customer engagement?
Research Hypotheses
• H1: Clear and timely interest rate communication significantly improves customer decision-making.
• H2: Inconsistent messaging across channels negatively affects customer understanding.
• H3: Enhanced personalization in interest rate communications leads to higher product uptake.
Scope and Limitations of the Study
This study focuses on Fortis Microfinance Bank’s interest rate communication strategies over the past three years using customer surveys, transaction data, and internal reports. Limitations include external economic volatility and variability in customer financial literacy.
Definitions of Terms
• Interest Rate Communication Strategies: Methods used to disseminate information regarding interest rates.
• Customer Decision-Making: The process by which customers evaluate and select banking products.
• Financial Literacy: The ability to understand and effectively use financial information.
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