Effect Of Mobile Banking On Cost Efficiency Of Commercial Banks In Kenya

Abstract

The advancement in technology has made some tasks cheaper and efficient but it also has its fair share of challenges. This has seen firms in the banking sector use technology to develop online banking channels to reduce costs and enhance efficiency and convenience but still fail. This study sought to establish the effect of mobile banking on cost efficiency among commercial banks in Kenya. 42 commercial banks in operation in Kenya as at 31st December 2018 were the population of the study. Data from 38 banks was availed for the study which was 90.48% response rate. The predictor variables were mobile banking, bank size, asset quality and liquidity. Cost efficiency was the dependent variable. Secondary data was acquired for 5 years (January 2014 to December 2018) on an annual basis. Research design was descriptive cross-sectional design whereas association between variables was determined by multiple linear regression model. SPSS version 22 was used in data analysis. An R-square value of 0.345 that can be translated to mean 34.5% of the variations in cost efficiency among banks in Kenya can be related to the four chosen predictor variables whereas 65.5% in the changes of cost efficiency among banks was linked to other variables that did not form part of this study. From the study it was further revealed that the predictor variables strongly correlated with cost efficiency (R=0.582). ANOVA results show that the F statistic was significant at 5% level with a p=0.000. Therefore, the model was appropriate in providing an explanation of the relationship between the variables. Additionally, results demonstrated that mobile banking and liquidity were positively and statistically substantial values in the study. Asset quality was found to have a negative and statistically significant influence on cost efficiency. The study discovered that bank size have a statistically insignificant influence on cost efficiency of banks. The recommendation is that measures should be set up to increase mobile banking and liquidity and to reduce credit risk as these three have a significant influence on cost efficiency.