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Rage Halima - Master of Science (Finance), Jomo Kenyatta University of Agriculture and Technology, Kenya

Dr. Joshua Matanda Wepukhulu - Jomo Kenyatta University of Agriculture and Technology, Kenya


Commercial banks play a critical role in any nation in the world, primarily owing to their intermediation function. Poor performance can result in bank runs, bank crises and a significant financial crisis. The study aimed at investigating how financial innovations affect tier one commercial banks’ performance in Kenya. Specifically, the study sought to establish the effect of internet banking, mobile banking, agency banking and Automated Teller Machine (ATM) banking on the financial performance of tier one Commercial Banks in Kenya. The study was guided by financial intermediation theory, Silber’s Constraint Theory of Innovation and diffusion of innovation theory. This study adopted the cross-sectional descriptive research design. Study population was human resources, finance, marketing, research and development, and IT in tier one commercial banks (Kenya Commercial Bank, Equity bank, Co-operative Bank, Absa Bank plc, National Commercial Bank of Africa (NCBA), Standard Chartered Bank, Stanbic Bank and Diamond Trust bank (DTB)).The study used both primary and secondary data. A semi-structured questionnaire containing open and close-ended questions was used to collect primary data whereas secondary data collected from the Central Bank of Kenya and the commercial banks websites. The data collected was analyzed using the Statistical Package for Social Sciences (SPSS version 25.0) where both descriptive and inferential statistics were analyzed. The study found that internet banking provided unique products and services, and had low operating costs. The study also found that mobile banking lowered transaction costs by removing the need for customers visiting banks branches; mobile banking transactions transferring funds between customer-related accounts was simple and efficient; m-banking transactions increased the customer base; and customers were able to check an account balance or check recent transactions on their mobile phone devices. The study found that agency banking eased the conduct of business, and financial inclusivity was assured by agency banking. The research found low maintenance costs for ATMs; and investment in ATMs was mainly driven by bank income. The study concluded that agency banking had the greatest influence on the financial results of Tier One commercial banks in Kenya, mobile banking was followed by Automated Teller Machine (ATM) banking, while internet banking had the least effect on the financial performance of Kenya Tier One commercial banks. The study suggests that all tier one commercial banks should take advantage of lower internet rates to reduce their transaction costs, which in return would attract potential customers, thereby building consumer loyalty.  

Full Length Research (PDF Format)