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

Abstract

Numerous changes that have taken place in the Kenya banking sector necessitates each commercial bank to act diligently to increase its financial performance. One of the areas where commercial banks should capitalize is financial technology that looks at the innovations brought by technological advancement to bring throughput and enhance financial performance. This study aims to look at the effect of financial technology on financial performance of commercial banks in Kenya. The study was based on Technology acceptance model, diffusion innovation theory and resource based theory. Financial technology was determined by the number of transactions that were undertaken through mobile banking and transactions undertaken through internet banking. Data was, however, only found in 35 commercial banks that represented a response rate of over 80%. Size of the commercial bank and capital adequacy ratio acted as the control variables of the study. Secondary data was collected for all the commercial banks in Kenya for descriptive research design that was used in the study to summarize the data using SPSS 21. Pearson moment correlation was conducted to establish the linear relationship between study variables. Regression analysis was conducted to establish the nature of the relationship. The study concluded that a positive significant effect of financial technology on financial performance was observed while the model predicted 45.4% of the dependent variable. The study recommends that commercial banks should continue investing in financial technology.