E-BANKING SERVICES AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Odhiambo Solomon Olwande - Master of Business Administration (Finance), Kenyatta University, Kenya
Dominic Ngaba - Department of Business Administration, School of Business, Kenyatta University, Kenya
ABSTRACT
Financial performance of Commercial banks has been mixed in the past few years despite the advent of technology. Banks assaulted by the pressure of globalization and competition from nonbanking functions must find new ways to add value to the services. Substantial research efforts have gone into addressing this question, starting from the strategic level and going down to operational details. The rapid advancement in technology and increased forces of competition has remained challenging to performance of commercial banks. This situation is worsened by the ever changing business environment and the dynamic legal environment resulting from formulation of different regulations and policies governing the way banks. Several regulations for instance the capping of the interest rates and increasing the minimum capital requirement have been passed in the recent past that have called on these institutions to come up with innovative strategies and ways of survival. Thus, as a response to these changes, most commercial banks have embraced e-banking strategies. Most commercial banks have adopted e-banking majorly to serve customers better, widen the revenue channels and grow the level of profits. However, the pace at which each bank is investing and adopting innovation is alarming. Most commercial banks have invested in agency banking model, internet banking, ATMs and mobile banking. With time, the marginal benefits and costs of adoption of e-banking strategies are likely to be neutralized if no new e-banking strategies are formulated. This study sought to establish the effect of e-banking strategy on the financial performance of commercial banks in Kenya. The specific objectives of the study included; to establish the effect of mobile banking, agency banking, internet banking and use of ATMs on financial performance of commercial banks in Kenya. The study was anchored on the diffusion innovation theory, technology acceptance theory and agency theory. A descriptive research design was employed. The population of the study was the 43 commercial banks in Kenya whose headquarters are in Nairobi City. The unit of analysis was the 124 operations and e-banking managers at the banks’ headquarters. A census was adopted. The study used both primary and secondary data. Data was analyzed using both descriptive and inferential statistics with the aid of SPSS. The analyzed data was presented using tables, charts, graphs, frequencies and percentages. The study established that mobile banking, agency banking, internet banking and use of ATMs as e-banking services were sufficient embraced by commercial banks in Kenya and significantly influenced the financial performance of the financial institutions. The study concluded that mobile banking, agency banking, internet banking and use of ATMs had a positive and significant effect on the financial performance of commercial banks in Kenya. The study recommends that the commercial banks should invest more on new technology, innovations and capacity building to improve the uptake of e-banking services. The study recommended that the banks should sensitize, inform and remind their clients on the availability, accessibility, usage and value of e-banking services at their disposal to improve their uptake and use. Similar study should be conducted among other financial institutions like MFIs and SACCOs to establish whether there is a variance or convergence on the effect of e-banking and financial performance.
