Financial Innovations and Performance of Commercial Banks in Kenya
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Date
2020
Authors
Ireri, Naomi Wanja
Kimutai, Gladys
Journal Title
Journal ISSN
Volume Title
Publisher
IJCAB Publishing Group
Abstract
Commercial banks in Kenya have embraced alternative banking channels which represent a shift
in delivery of banking and financial services since the alternative banking have become
synonymous with commercial banks in Kenya. While banks have succeeded in leveraging
available technology and provide alternative avenues to customers for banking services, the
challenge it faces today is optimizing the usage of these channels so as to improve on their
performance. The general objective of this study was to investigate the effects of financial
innovations on the performance of commercial banks in Kenya. The specific objectives of the
study were to examine the influence of internet banking, mobile banking, agency banking and
ATM banking on the performance of commercial banks in Kenya. The study was guided by
agency theory, balanced score card and diffusion of innovation theory. This study employed a
descriptive research design. The study targeted44 commercial banks in Kenya as at 2017. The 16
banks which embrace all the four financial innovations from 2013 to 2017were selected using
purposive sampling method. The sample size was 80 respondents who comprised of 5 senior
management employees in each of the selected banks.This study used questionnaire to collect
primary data from the respondents. Content analysis technique was used to analyze qualitative
data collected from open ended questions in and reported in narrative form. Descriptive
statistics such as mean and standard deviation were used to analyse the quantitative data.
Multiple regression analysis was used to show the relationship between independent variables
against dependent variable. The study revealed that internet banking, mobile banking, agency
banking and ATM banking had a positive and significant effect on the performance of
commercial banks. Thisstudy concludes that the banking industry has benefited tremendously
from the development of the Internet. The Internet fundamentally changed the way in which
banking networks are designed to meet the client demands and expectations. Mobile banking
provides a good opportunity to commercial banks in Kenya to reach many mobile phone
subscribers in Kenya who had remained unbanked and unreached due to limited access to bank
branch networks in the country. The access to the large masses through mobile banking of the
population gives banks the opportunity to grow by reaching the unbanked population. Agency
banking has led to accessibility of financial service to many customer in remote areas and hence
an increase in effectiveness and efficiency in service delivery. Customers are satisfied with the
automated teller machine services because of ease of use, transaction cost and service security
but not satisfy with automated teller machine dispense of cash. The study recommends that the
public and businesses must be encouraged to use Internet banking in their daily activities,
including deposits, payments and money transfers. Commercial banks in Kenya should ensure
convenience and security of mobile banking through written guidelines on convenience and
security of mobile banking. Commercial banks in Kenya should increase the number of agents in
estates and in the rural areas. This can be done by reducing the requirements of becoming a
bank agent. The banks should employ customized software that records relevant information on
automated teller machine cards so that banks can establish whether unauthorized transaction
has taken place or not.
Description
An Article Published in International Journal of Current Aspects in Finance, Banking and Accounting
Keywords
Financial Innovations, Internet Banking, Mobile Banking, Agency Banking, Automated Teller Machine
Citation
Ireri, N., & Kimutai, G. (2020). Financial Innovations and Performance of Commercial Banks in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 2(2), 21-33. https://doi.org/10.35942/ijcfa.v2i2.128