Effect of technology adoption on operational efficiency of commercial banks in Kenya

Abstract

Banks, like other service organizations, strive to improve customer service level and tie their customers closer. Technology is one leading driving force nowadays, in different businesses. Technology has become an intrinsic part of banking, making it easier and cheaper to develop and deliver financial services. As a consequence of the highly technological environment developed around the world in the banking industry, the expansion of distribution channels for financial services relies on a very complex network of partnerships. With competition in the banking sector becoming intense and new financial service providers emerging all the time, this could result into the banks inability to function effectively and efficiently. The purpose of the study was to establish the effect of technology adoption on operational efficiency among commercial banks in Kenya. This study adopted the descriptive research design based on the key areas of interest. The population of interest in this study comprised of the 43 commercial banks operating in Kenya as at December 2013. The study took a census approach since the population was not big. In this study emphasis was given to secondary data which was obtained from the financial results filled at Central Bank of Kenya and Annual Banking Survey reports. The data included the actual financial statements data covering the period between 2009 and 2013. The study used both descriptive and inferential statistics in analyzing the data. Analysis was done with the help of Statistical package for social sciences (SPSS version 21). Descriptive statistics such mean score, frequencies and percentages for each variable was calculated and tabulated using frequency distribution tables and graphs. In order to test the relationship between the variables the inferential tests including the regression analysis was used. Regression analysis was therefore used to determine the relationship between variables in the study. From the regression model, the study found out that there were technology adoption variables influencing the operational efficiency of commercial banks in Kenya, which are ATM cards, debit and credit cards, internet banking and mobile banking. They all influenced it positively. The study found out that the intercept was 0.514 for all years. The four independent variables that were studied (ATM cards, debit and credit cards, internet banking and mobile banking) explain a substantial ATM cards, debit and credit cards, internet banking and mobile banking 70.5% of operational efficiency among commercial banks in Kenya as represented by adjusted R2 (0.705). The study established that the coefficient for ATM cards was 0.724, meaning that ATM cards positively and significantly influenced the operational efficiency of commercial banks in Kenya. The study also established that the coefficient for debit and credit cards was 0.368, meaning that debit and credit cards positively but significantly influenced the operational efficiency of commercial banks in Kenya. The study further revealed that the coefficient for internet banking was 0.405 meaning that internet banking positively and significantly influences the operational efficiency of commercial banks in Kenya. The coefficient for mobile banking was 0.529, this shows that mobile banking significantly and positively influences the operational efficiency of commercial banks in Kenya. The study therefore concludes that technology adoption positively and significantly influences operational efficiency of commercial banks in Kenya.