Financial Technology, Bank Size and Financial Performance of Commercial Banks in Kenya
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Date
2024-05
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Publisher
Kenyatta University
Abstract
Performance of commercial bank is an essential component in the study of finance. A
number of studies in the field of finance have been dedicated to the purpose of
unraveling the enigma of why the performance of two companies that are operating in
the same environment may be so drastically different from one another. 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. There are a number of fundamental issues that need to be
researched before commercial banks can confidently integrate new types of financial
technology into their business operations. There are a number of issues that customers
have with mobile banking, including the price, security, speed, and expertise needed.
The purpose of this study was to evaluate the effect that financial technology has had,
if any, on the overall financial performance of commercial banks in Kenya. The specific
goals were as follows: 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 four different theoretical
frameworks: 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 38 commercial
banks as at December 2021. 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 and mobile banking had a significant
positive link with financial performance. Meanwhile, agency banking and internet
banking had a positive insignificant relationship with financial performance. Finally,
bank size was found to have a significant moderating effect on agency banking, mobile
banking and ATM banking. For practice, banks should invest in expanding and
optimizing financial technology to enhance customer convenience and operational
efficiency. Ensuring financial technology reliability and accessibility can improve
customer satisfaction. For policy, regulators should promote financial technology
infrastructure development and interoperability to facilitate widespread access to
banking services.
Description
A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirements for the Award of Degree of Master of Science in Finance of Kenyatta University, May 2024
Supervisors:
1.Charity Njoka
2.Bancy Muchira