Rotich, Davis Kipngeno2025-04-032025-04-032024https://ir-library.ku.ac.ke/handle/123456789/29903A Research 7Project 7Submitted to 7the 7School of 7Business, 7Economics and 7Tourism in 7Partial 7Fulfillment of the 7Requirement for the 7Award of 7Degree of 7Masters of 7Business 7Administration (Finance) of 7Kenyatta 7University, 2024. Supervisor Dr. MuturiThe Kenyan financial system has witnessed massive transformations over the previous two decades. Numerous changes have been made to the industry that have boosted the number of financial products, operations, and organizational structures, as well as enhanced and raised the financial system's efficiency and profitability. The driving forces behind this shift have been shifting economic conditions and technological advancements. Profitability trends of commercial banks in Kenya however, show high variability. Some banks have consistently posted increased profits whereas others have reported losses and even collapsed or were placed under receivership. This research aimed to determine the influence of 7financial 7innovation on the 7profitability of Kenya's 7commercial banks. The study specifically investigated the effect of debit card banking, mobile banking, ATM banking, and agency banking on profitability in Kenya's banking sector. The analytical framework for this study leaned on the Agency 7Theory, 7Diffusion of 7Innovation Theory, 7Transaction-Cost 7Innovation Theory and 8Technology 8Acceptance 8Model. Adopting a 8descriptive 8research approach, the study targeted all 38 8commercial 8banks in 8Kenya that are 8licensed by the 8Central 8Bank of 8Kenya (CBK). Census sampling was used and therefore, all the 38 commercial banks 8were 8included in the 8sample. The data for this 8research was sourced from secondary means, specifically the CBK's quarterly reports and the financial statements of banks from 2019 to 2023. Through time-series modeling, the study identified trends and dynamics to ascertain the role of 8financial 8innovation in shaping the profitability of 8commercial 8banks in 8Kenya. The analysis employed E-views statistical software, and the findings were 7presented using 7tables, 7charts, and 7graphs for clear understanding and 7interpretation. The findings revealed that, debit card banking, mobile banking, ATM banking, and agency banking had a positive and significant influence on profitability in Kenya's banking sector (β =0.0007, p=0.0003, β =4.5947, p=0.0004, β =0.0001, p=0.0301, β =0.0250, p=0.0002) respectively. From the study results, it was recommended that Banks should actively promote the use of debit cards among their customers, continue to invest in and upgrade their mobile banking platforms, seek to optimize their ATM networks and expand their agency banking networks, particularly in underserved and rural areas.enThesis