Mobile Banking Services, Risk Management, Firm Characteristics and Performance of Commercial Banks in Kenya

Abstract

An intensified number of Kenya banks are initiating new mobile banking related architecture, heightening rivalry in the banking segment. Each bank strives to maintain its competitive edge and attract more clientele by bringing mobile banking services (MBS) closer to users. Nonetheless, the influence of firm characteristics (FC) and risk management (RM) on the relationship between MBS and the performance of commercial banks in Kenya remains unclear. The primary aim of this research was to explore the relationships between MBS, RM, FC, and the performance of commercial banks in Kenya. The specific objectives were: to examine the impact of MBS on the performance of commercial banks, to analyze the mediating role of RM on the relationship between MBS and bank performance, to assess how FC moderate the link between MBS and performance, and to evaluate the joint influence of MBS, RM, and FC on bank performance. The study utilized the CAMELs Model, which evaluates capital adequacy, asset quality, management capacity, earnings, and liquidity to determine the overall health of banks as a measure of performance. The research followed a positivist philosophy and employed a descriptive research design. The study covered 43 commercial banks and utilized correlation and regression analysis to investigate the relationship between MBS and bank performance. The Baron and Kenny (1986) approach was used to test the mediating and moderating effects of RM and FC, respectively, on the relationship between MBS and bank performance. Additionally, multiple regression analysis was used to assess the combined effects of MBS, RM, and FC on performance. Descriptive statistics and diagnostic tests were performed on the data, followed by inferential statistics, including correlation and regression analysis, to test the hypotheses. The results showed that: H01 confirmed a significant relationship between MBS and performance; H02 found a significant mediating effect of liquidity risk on the nexus between MBS and performance, while the relationship between MBS and performance was not mediated by market risk; H03 indicated that FC significantly affects the relationship between MBS and performance; and H04 confirmed that MBS, RM, and FC jointly have a significant effect on bank performance. This study contributes to the theory of information systems by demonstrating how the increased adoption of mobile banking services improves the performance of commercial banks. The study recommends that regulators ensure proper risk management protocols for MBS are followed by commercial banks in Kenya to enhance performance.