Effect of Mobile Banking On the Financial Performance of Commercial Banks in Kenya

Abstract

The study focused on investigating the effect of mobile banking on financial performance of commercial banks. Specifically, the study aimed to; establish the effect of mobile banking access has on the financial performance of commercial banks, establish the effect of mobile banking loans on financial performance of commercial banks, and establish the effect of mobile banking risks on financial performance of commercial banks. The study employed descriptive research designs. The targeted population for the study comprises of senior employees of (43) commercial banks licensed under the Central Bank of Kenya. Simple random sampling was used to draw a sample of three hundred and thirty five employees of commercial banks. Primary data was gathered through structured questionnaires which were administered in person. Whereas, secondary data was retrieved from the publications from the Central Bank of Kenya, Communication Authority, and the Kenya Bankers Association. Data analysis was performed through SPSS Version 22.0. Descriptive statistics was expressed as frequencies, percentages, mean, mode, and median. Inferential statistics was presented through regression analysis and Pearson Correlations. Simple linear regression between each of the three and the dependent variable was performed. Output of the findings was presented in the form of, charts, tables and figures. Regarding the first study objective, the study revealed that mobile banking access and financial performance of commercial banks have a strong positive correlation (r = 0.677, p<0.05). It was found that clients had access to mobile banking 24/7, reduction it time required to make banking transaction, ease of transacting through mobile banking, limitation of physical barriers in conducting financial transactions including remote areas, and the overall aim of service delivery in financial transactions were key to the success of mobile banking. The second research objective sought to establish the effect of mobile loans on financial performance. Results suggested a very weak positive correlation. The Pearson correlation coefficient value was r= 0.531 and the significance level p<0.05, implying a significance of the findings at 5% significance level. The findings generally reveled that banks are increasingly innovating digital lending platforms as an alternative to provide clients with quicker loans.Lastly, the third research objective focused on establishing the effect of mobile banking risks on financial performance of commercial banks in Kenya. The findings revealed a significant negative relationship between mobile banking risks and financial performance of commercial banks. The Pearson correlation coefficient value was r=-0.325 and the significance level p< 0.05 implying significance of the findings at 5% significance level. Poor network coverage in the remote areas was a major obstacle to faster transactions on mobile banking platforms. Backdoor attacks, spywares, malwares, and unauthorized access were major security concerns on mobile banking platforms. Based on the findings of the first research objective, the study concludes that as commercial bank increases their mobile banking coverage, has enhanced awareness among consumers and trained them on the applications of mobile banking, reducing the threats and risks of mobile banking. This way banks would attract more customers to their banking platforms and therefore improved financial performance. The study concludes that many consumers are embracing digital loans offered by banks, providing an opportunity for the banks to strengthen digital lending as the next strategic source of competitive performance in the bank’s loan portfolio. Lastly, the study concludes that although mobile banking has enhanced financial performance of commercial banks, the risks associated with the internet and technology advancement possess danger to the success of mobile banking. The study recommends that there is need for banking sector to enter into a partnership arrangement with the telecommunication service providers so that the internet and network coverage countrywide can be strengthened. The study further recommends that commercial banks should invest in consumer awareness with regard to emerging products and services in the mobile banking window. Additionally, the study urges that commercial banks should deploy adequate resources in conducting research that could aid product innovation on existing mobile banking platforms. On the third objective, the study urges that Central Bank of Kenya should ensure adequate implementation of the Guidance Note on Cybersecurity it issued 2017. The guidance laid out the regulatory standards to industry participants on assessment and mitigation of Cybersecurity threats.