RELATIONSHIP BETWEEN DIGITAL FINANCE TECHNOLOGIES AND PROFITABILITY OF BANKING INDUSTRY IN KENYA
Florence Cherono Bett - Master of Business Administration (Finance Option), Jomo Kenyatta University of Agriculture and Technology, Kenya
Dr. Jared Bitange Bogonko - Lecturer, Department of Business, Jomo Kenyatta University of Agriculture and Technology, Kenya
ABSTRACT
Many people still travel long distances to get to bank branches, which involves the cost of travel, as well as time spent for travel and waiting in long queues. To address these challenges, in 2010, Bank started its agency banking business model using mobile phone and point-of-sale (POS) technology. However, the adoption of technology into a firm requires high initial capital to invest which affects the profits of the firm in short run. This is the reason as to why this study was conducted with the main aim of investigating the relationship between digital finance technologies and profitability in banking industry. The study was guided by the following research objectives: to; establish the relationship between of operational efficiency and profitability; examine the relationship between market share and profitability; and assess the relationship between brand loyalty and profitability of Equity Bank. The study used descriptive survey research design. The desired sample size was 261 respondents. The study collected the information for the study using questionnaires and interview schedules. The study analyzed data quantitatively. Descriptive and inferential statistics was employed. Descriptively, data was analyzed using frequencies, percentage and means. Inferentially, data was analyzed using multiple linear regression analysis to test the statistical significance of the various independent variables. The main findings of the study were as follows: Findings of the study on Equitel digital information system operational efficiency revealed that majority of the respondents were of the opinion that digital finance technologies adopted have minimized operational costs hence impacting on overall Banks’ profitability. The regression model revealed that there was a significant relationship between operational efficiency and profitability, there was a significant relationship between market share and profitability, and that there was a significant relationship between brand loyalty and profitability. In relation to H01: the study rejected the null hypothesis with a p value of (p≤0.05). Based on H02: the study rejected the null hypothesis with a p value of (p ≤ 0.05). Concerning H03: the study rejected the null hypothesis with a p value of (p ≤ 0.05). On profitability, the result was (mean=4.07) that digital finance technologies has enabled the increase of financial returns, (mean=2.1) were of the opinion that the level of shareholder value has greatly improved, (mean=2.13) of the responses were of the opinion that there is high share price, (mean = 2.25) of the respondents were of the opinion that the bank’s capital capacity has expanded while (mean = 2.57) were of the opinion that generally, profitability of the company has greatly increased since introduction of digital finance technologies. This study will be of great importance to Equity Bank in identifying and monitor challenges facing electronic banking adoption in bid to earn profits and also evaluate the development and growth of Electronic banking. Academicians will also benefit from this research work since it will suggest possible solutions and strategies to the problems in electronic banking and have thorough knowledge of electronic banking.
