Paperless Banking and Financial Performance of Commercial Banks in Kenya
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Date
2018-04
Authors
Muhoro, Duncan Iregi
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The banking industry has been undergoing a significant process of transformation. Novelty in
information technology has been the force behind this transformation. Paperless banking
which is a wide concept in banking is the automatic distribution of new and outdated banking
merchandises and amenities straight to clients through paperless supportive networks. These
channels include, and not limited to; internet investment, mobile financial transactions, and
real time gross settlements. It’s from this contextual that the study sought to investigate the
outcome of paperless banking on the financial performance of commercial banks in Kenya.
The research specifically sought to investigate if there is a correlation between the reliant
mutable financial performance as measured by return on assets (ROA) and return on
equity(ROE), with the independent variables; internet investment, mobile investment and real
time gross settlement which were measured by percentage of adoption of service and
percentage of transactions. The following hypotheses were developed for empirical testing;
internet banking, mobile banking and real time gross settlement lacks significant result on
monetary performance of commercial bank in Kenya. A census research was done on all
Banks in Kenya as regulated by CBK. The study used secondary data from 43 commercial
banks operational in Kenya. The research used both inferential and descriptive statistics.
Diagnostic tests were carried out to test for Normality and Heteroscedasticity tests. Data was
coded and sorted using SPSS to produce descriptive statistics which was presented in form of
tables. The study found out that mobile banking positively affect ROA but at 0.084
significance, RTGS come strong on affecting ROA at 0.022 significance and internet was the
least contributor at 0.295, 1% increase in RTGS volumes increase ROA by
0.7985%.Therefore Internet and Mobile Banking has a positive outcome on financial
performance of commercial banks though not at 5% significant. Further the results indicated
that there was no strong correlation between the variables given that there was no matrix id
greater than 0.7 for both models. This indicates lack of significant correlation between
paperless banking and fiscal performance of Commercial banks in Kenya. Based on this
conclusion, the study recommends that Commercial banks use RTGS to achieve on
profitability and at the same time revamp mobile and internet banking platforms for customer
service and loyalty.
Description
A Research Project Submitted to the School of Business, in Partial Fulfillment of the Requirements for the Award of Master of Business Administration (Finance) of Kenyatta University