Effect of Financial Technology on Financial Services Development in Kenya

Abstract

Fintech continues to change and shape the financial sector in Kenya. The Kenyan banking sector has focused increasingly on mobile banking and internet banking as a strategic instrument to achieve organization goal of reducing costs and maximizing returns. The major issue is if the adoption of fintech contributes to financial sector development in Kenya. This research aimed to bring out the effect of financial technology on the financial services development in Kenya. The research established the effect of mobile banking, ATMs and internet banking on financial services development in Kenya. Economic growth and interest rate were used as the control variables in the model. Descriptive research design was used. Research variables data were derived from CBK and KNBS quarterly reports from 2011 to 2020. Regression and correlation analysis were used to test the study hypotheses by establishing the relationship between financial technology and FSD. The results indicated R2 of 0.751 which implied that the selected independent variables contributed 75.1% to variations in FSD. The study further found that mobile banking (β=0.419, p=0.001), ATMs (β=0.498, p=0.000) and internet banking (β=0.243, p=0.017) recorded a positive and significant association with FSD in Kenya while economic growth and interest rates were not statistically significant. Thus the research recommends the need for policy makers to provide a conducive environment for financial service players to undertake financial technology as this enhances financial services development in Kenya. Managers and directors of commercial banks should also work on improving their financial technology coverage in a bid to enhance their performance as this will in effect contribute to financial development in Kenya.