Influence of Service Digitalization on the Performance of Commercial Banks in Kenya

Abstract

The banking industry in Kenya has seen tremendous growth during the last few years. There has been growth in assets, deposits, products and profitability. Competition has also intensified both from local banks and international banks as a result of new entrants into the industry and heighted innovations. The competition impacts on the wealth of companies and consumers affecting the banks’ financial performance. This study sought to establish the level of digitalization and the influence of service digitalization on the performance of commercial banks in Kenya. Specifically, the study sought to establish how ATMs, internet banking and mobile banking influence the performance of commercial banks in Kenya. Theories the study was based on were Disruptive Innovation Theory and Innovation Diffusion Theory. A descriptive cross-sectional design was adopted for this study and the population for this study was commercial banks in Kenya. The study used both primary and secondary data. Primary data was obtained from respondents through the use of structured questionnaires. Documented previous research done by other scholars, CBK journals, media circulations, newsletters, internal circulars, banks reports as well as their websites were used to obtain secondary data. Descriptive statistics was used to analyze the information obtained. Linear regression analysis was used to evaluate the relation between the independent variables ATMs, internet banking and mobile banking, against the dependent variable, performance. The inferential findings from the correlation and regression analysis showed that ATMs, internet banking and mobile banking had positive effect on the performance of commercial banks in Kenya. The study concludes that ATMs, internet banking and mobile banking led to increased earnings, higher growth in market share, reduced costs, faster delivery of banking services, high quality services among Kenyan banks, enhanced customer experience, more accurate records, improved convenience in business delivery time, faster services and enhanced banks’ image. The study recommends that commercial banks should incorporate all the main platforms of service digitalization so as to operate both effectively and efficiently in order to enhance the overall performance.