Effect of Mobile Banking Services on Financial Performance of Deposit-taking Savings and Credit Cooperative Societies in Nairobi County, Kenya

Abstract

This study addresses the evolving landscape of the banking sector by examining the impact of mobile banking services on the financial performance of 11 commercial banks listed at the Nairobi Securities Exchange. The increasing prevalence of mobile banking services presents a transformative opportunity for the industry, but its implications on financial outcomes warrant thorough investigation. The study is motivated by the need to comprehend the dynamics of this technological shift and its influence on financial metrics, particularly Return on Assets (ROA). The main objective of this study was to determine the effect of mobile banking services on financial performance of commercial banks listed at the NSE. The control variables were; credit risk, liquidity, capital adequacy, and firm size. The study was anchored on technology acceptance model, disruptive innovation theory, and the theory of financial inclusion. The study employed a descriptive research design, utilizing secondary data extracted from annual financial reports of the sampled banks from 2018 to 2022. The target population comprises the 11 commercial banks listed at the NSE. Descriptive, correlation as well as regression analysis were undertaken, and outcomes offered in tables followed by pertinent interpretation and discussion. The research findings yielded a 0.477 R square value implying that 47.7% of changes in commercial banks listed at the NSE ROA can be described by the five variables chosen for this research. The multivariate regression analysis further revealed that individually, mobile banking services has a positive and significant effect on ROA of commercial banks listed at the NSE (β=0.114, p=0.001). Credit risk had a negative effect on ROA of commercial banks listed at the NSE as shown by (β=-0.150, p=0.000). Firm size exhibited a positive and significant ROA influence as shown by (β=0.286, p=0.000). Capital adequacy and liquidity exhibited a positive but not statistically significant influence on ROA. The study concludes that mobile banking services plays a significant role on financial performance of commercial banks listed at the NSE. The study recommends the need for policymakers to encourage and support the adoption of mobile banking services solutions within the banking sector. The study recommends fostering a conducive regulatory environment for mobile banking services and emphasizes the importance of robust credit risk management practices. Suggestions for further research include longitudinal studies, cross-country comparisons, qualitative investigations, and explorations into the evolving landscape of fintech collaborations within the banking sector