Effect of Financial Technology on Financial Performance of Commercial Banks in Kenya
DOI:
https://doi.org/10.53819/81018102t6063Abstract
Performance in the financial markets is an essential component in the study of finance. Over the last decade, Kenya's commercial banks have increased their use of different types of financial technology (2011-2021). Mobile banking, agency banking, internet banking, and automated teller machines are just some of the various forms of financial technology available today. The purpose of this study was to evaluate the impact that financial technology has had, if any, on the overall financial performance of commercial banks in Kenya. The specific goals were to establish the effect of mobile banking on financial performance; to determine the effect of internet banking on financial performance; to determine the effect of agency banking on financial performance; to determine the effect of ATMs on financial performance; and to establish the moderating role of bank size on the relationship between financial technology and the financial performance of commercial banks. The research was predicated on the technological adoption model, the financial intermediation theory, the diffusion of innovation theory, and the profit maximization theory. The positivist research philosophy was used for this study, and a panel longitudinal research methodology was used for the research. The population of the study was the 38 commercial banks that have been in continuous operation throughout the last decade. The study was a census. Secondary information was gathered on an annual basis, and it covered a span of ten years (January 2012 to December 2021). The data was evaluated making use of descriptive statistics as well as inferential statistics entailing correlation and panel multiple linear regression analysis. The current research conclusions revealed that financial technology fairly explains financial performance and the current research discoveries also revealed that the financial technology is sufficient in predicting financial performance. Additional study findings were that mobile banking, internet banking, agency banking, adoption of ATMs, and bank size had positive significant correlations with financial performance. Moreover, findings were that adoption of ATMs had a significant negative link with financial performance. Meanwhile, mobile banking and agency banking had negative insignificant link with financial performance. Finally, both internet banking and bank size had a positive insignificant relationship with financial performance. Policy recommendations to the government officials and policy formulators in the Treasury and the CBK to not mainly advocate for financial technology policy as a means of boosting bank financial performance and it is recommended to the policy makers to utilize other policies when aiming to boost bank financial performance. Recommendations are also generated to the bank management and consultants not to mainly consider financial technology will significantly boost the banks’ financial performance.
Keywords: Financial Technology, Financial Performance, ATM, Mobile banking, Internet banking, Agency Banking
References
Bochaberi, O. E. S., & Job, O. (2021). Mobile banking and financial performance of selected commercial banks in Kenya. International Research Journal of Business and Strategic Management, 2(1).
Fisher, R.F. (1998). The elastic constants of the human lens, Journal of Physiology, 212 (2), 147-180 https://doi.org/10.1113/jphysiol.1971.sp009315
Hossain, M. I. (2021). Effects of e-banking adoption on the financial performance of state-owned commercial banks in Bangladesh. Information Resources Management Journal (IRMJ), 34(4), 1-20. https://doi.org/10.4018/IRMJ.20211001.oa1
Hsiao, H.-C., & Lin, M.-H. (2017). Taiwan second financial restructuring and commercial bank productivity growth: M&As impact. Review of Accounting and Finance
Hussien, M. I., & Aziz, R. (2017). Investigating e-banking service quality in one of Egypt’s banks: a stakeholder analysis. The TQM Journal, 1791), 45-52
Jagathi, P. H. (2021). A study on correlation between ATMs and financial performance of select banks with reference to virtual banking. Asian Journal of Management, 12(1), 1-5.
Kamande, J. (2018). Effect of electronic banking on financial performance of commercial banks in Kenya, Unpublished MBA project, University of Nairobi
Kariu, W. (2017). Effect of financial innovations on financial performance of commercial banks in Kenya, Unpublished MBA project, University of Nairobi
King’ang’ai, P. M., Kigabo, T., Kihonge, E. &Kibachia, J. (2016). Effect of Agency Banking on Financial Performance of Commercial Banks in Rwanda. A Study of Four Commercial Banks in Rwanda. European Journal of Business and Social Sciences, 5(01), 181 – 201
Kingori, E. &Gekara, M. (2015). Effects of Agency Banking on the Performance of Bank Agents Business in Thika Municipality, Kenya. The Strategic Journal of Business and Change Management, 2 (79), 940- 972
Kohali, A. &Sheleg, A. (2011).Alternative Banking Channels. Tefen Tribune, Spring Issue, 2011
Koki, K. (2018) Effect of mobile credit on bank performance: Evidence from commercial banks in Kenya. USIU Digital Repository
Mutinda, F. (2018). Effect of financial innovations on financial performance of public commercial banks in Kenya, Unpublished MBA project, University of Nairobi
Mwando, S. (2017). Contribution of Agency Banking on Financial Performance of Commercial Banks in Kenya. Journal of Economics and Sustainable Development. 4, (20), 13-28.
Mwangi, M., & Angima, C. (2016). Actuarial Risk Management Practices and Financial Performance of Property and Casualty Insurance Firms: Identification of a Moderating Variable. International Journal of Humanities and Social Science, 6(2), 126 – 132
Ocharo, W. & Muturi, W. (2016). Effect of alternative banking channels on financial performance of commercial banks a case study of commercial banks in Kisii County, Kenya. International Journal of Economics, Commerce and Management United Kingdom, 4(4), 12-19
Ogweno, W. (2019). Effect of financial innovations on financial performance of licensed microfinance institutions, Unpublished MBA Project, University of Nairobi
Sheleg, O., & Kohali, A. (2015). The impact of internet banking on the performance of Romanian banks: DEA and PCA approach. Procedia Economics and Finance, 20, 610-622. https://doi.org/10.1016/S2212-5671(15)00115-X
Sindani, W. M., Muturi, W., Ngumi, P. (2019). Effect of financial distribution channels evolution on financial inclusion in Kenya, Nairobi, Kenya
Sujud, H., & Hashem, B. (2017). Effect of bank innovations on financial performance of commercial banks in Lebanon, International Journal of Economics and Finance, 9(4), 35-50 https://doi.org/10.5539/ijef.v9n4p35
Sun H. & Zhang P. (2006). The role of moderating factors in user technology acceptance, Journal of Human-Computer Studies, 64(1), 53-78 https://doi.org/10.1016/j.ijhcs.2005.04.013
Tomal, D.R., & Jones, K.J. (2015). A comparison of core competencies of women and men leaders in the manufacturing industry, The Coastal Business Journal, 14, 1, 13-25
Zhang, T. (2017). The value of group affiliation: evidence from the 2008 financial crisis. International Journal of Managerial Finance, 17(5), 67-78