Effects of Financial Innovation on Performance of Commercial Banks in Kenya

Abstract

The global business landscape is evolving quickly and is quite competitive. In this situation, the majority of firms are becoming aware that knowledge is the most crucial resource for establishing long-term competitive advantage. Therefore, financial innovation is created to offer strategy, procedure, and technology to improve corporate effectiveness. The research assessed the effect of financial innovations on financial performance of commercial banks in Kenya using a descriptive research design. The study population composed 42commercial banks in Kenya as at 31 December 2021. This research collected data for five years from 2017 to 2021. The regression method was preferred to analyze and determine the effects of every independent study variable. The study findings showed there exists a direct relation linking mobile banking to commercial banks performance (Beta= 0.113, P=.039). They revealed Internet banking had direct moderate influence on the Commercial banks ROA (Beta= 0.133, P=.000). Agency Banking had strong direct influence on ROA (Beta= 0.106, P=.008). They further indicated that capital adequacy positively influenced Commercial banks performance (Beta= 0.002, P= .069). The study results also indicated that there exists an inverse correlation between Asset quality and commercial banks performance (Beta= - 0.506, P= .000). Finally, bank size to commercial banks ROA (Beta=0.411, P= .000).