Adoption of Digital Banking Technology and Financial Performance of Commercial Banks in Kenya

Abstract

Commercial banks play a leading role in the economic development of a country and this role of can be achieved only if the banks are stable. Digital banking technology has thus emerged as a way through which the commercial banks can be able to improve their financial performance by enhancing retail and corporate banking activities. From the inception of digital banking, banks have improved their networks in areas of deposits, withdrawals and other banking activities. However, despite the innovative ideas in digital banking, there still exists gaps as some banks still fail and face imminent collapse. The objective of this study was to establish how digital banking technology innovations affects the financial performance of commercial banks. The study took a descriptive survey design and was driven by three objectives namely; determining the effect of access to digital banking technology, turnaround time and digital banking technology costs on financial performance. This study was anchored on financial intermediation theory, innovation diffusion theory and modern economics theory. A questionnaire was used to collect primary data over a target population of 42 commercial banks in Kenya. The study involved a census of the commercial banks in Kenya as at September 2018 and encompassed collection of data through self-administered questionnaires targeting the finance and IT managers of the banks in their headquarters in Nairobi. The data collected was analysed using a descriptive method. The responses were tabulated, coded and processed by use of a computer statistical package for social scientists. The findings of the study were analysed and presented using statistical methods including pie charts and bar graphs and frequency tables. From the findings and summary, the study concluded that the ease of access to digital banking through digital-banking technology innovations had a positive influence on the financial performance of commercial banks in Kenya. The study also concludes that the turnaround time of digital banking technology innovations had a positive impact on the financial performance of commercial banks in Kenya with many of the banking institutions recording high amount of deposits and improved loan values thus creating an opportunity of increasing their customer base.