The effect of mobile banking on the financial performance of commercial banks in Kenya

Abstract

The use of mobile banking has been necessitated by the rapid change in technology. The banking industry has adopted new strategies of sustaining their growth due to stiff competition. Most banks have adopted mobile banking applications allowing customers to conveniently do their banking using their mobile devices anytime and anywhere (Tchouassi, 2012). The objective of the study was to determine the effect of mobile banking on the financial performance of commercial banks in Kenya. The research reviewed theories and empirical studies that explains the relationship between mobile banking adoption and financial performance. This included efficient structure versus market power theory, prospect theory, mental Accounting theory and financial intermediation theory, which are theories governing the performance of commercial banks. The population of the study was 44 commercial banks in Kenya. The study used secondary data from the Audited and published Financial Statements of the licenced commercial banks. The data collected relate to the number of customers registered in the mobile banking networks of the commercial banks, volume of transactions handled through mobile banking technology, natural logarithm of total assets and % GDP growth. Data analysis was done using Statistical Package for Social Sciences (SPSS) version 21 where inferential statistics were applied and multiple regressions employed to test the relationship between mobile banking adoption and the financial performance of commercial banks in Kenya. The study concluded that mobile banking has a positive effect on financial performance. The study also concluded that the volumes of transactions that can be processed on mobile banking are high as compared to delivering such transactions using manual processes. The study recommends that banks as well as the regulatory bodies should strive to implement mobile banking for better and cheaper ways of serving customers.