The Effect of Financial Technology on the Performance of Commercial Banks in Kenya

Abstract

Commercial banks' financial performance serves as a key economic barometer due to its significance in the financial intermediation necessary for economic development. When Covid-19 first appeared, the world's financial system was shocked by decreased economic activity and social isolation requirements mandated by health regulations. The majority of banks were forced to switch to digital customer care. Kenya's banking sector had diminishing profitability from the start of the Covid-19 epidemic in March 2020. Therefore, this study aimed to examine the impact of financial technology (FinTech) on the financial performance of commercial banks in Kenya. The specific objectives are: to find out how the financial performance of commercial banks is affected by mobile banking technology, internet banking technology and ATM technology. The study is oriented towards the dissemination of innovation theory, technology adoption models and financial intermediation theory. This study uses an explanatory research approach. In this study, the 36 commercial banks in Kenya made up the population. A census method is used in this study to gather information from 36 commercial banks. Between 2017 and 2021, the researcher gathered panel data from commercial banks. The researcher employed a data extraction form to gather the secondary data required for this investigation. Descriptive statistics, correlation analysis, and regression analysis were used to analyze the data. The results of the study show that mobile banking technology, internet banking technology and ATM technology have a positive and significant effect on the financial performance of commercial banks. This study concludes that financial technology makes a significant contribution to improving the financial performance of commercial banks. The recommendation of the study is that the bank management should review protection policies to ensure that customers’ data is safe while transacting using mobile phones. The management should create awareness to customers on the use of online systems to access financial services. The bank management should invest in improving internet banking systems to ensure efficiency in service delivery. The bank management should review safety policies to ensure that customers are safe while using ATMs. This could involve enhancing security around the ATMs as well as locating ATMs in secure environment.