Product Innovation Strategy and Financial Performance of Commercial Banks in Kenya. Case Study of ABSA Bank Kenya

Abstract

The modern banking environment is characterized by high rate of product innovation which has led to a wide variety of banking services and product options. The services are regularly reviewed and the less effective ones are often scraped in favor of new innovative ones. The product review processes is largely supported by market data and financial performance metrics directly attributed to the new product. The objective of this study was to establish the effects of product innovation on financial performance of commercial banks in Kenya. The findings indicate that business process management, market research, automation/digitization and globalization all have an influence on financial performance of commercial banks in Kenya. Each of the themes was ranked using the weighted average method based on the prominence of responses provided. Business Process Management (100%) was more prominent followed by Market Research (80%), then Automation/Digitization (60%) and finally Globalization (40). ROA, Net Asset, Gross and Net Profit were used as indicator units of measurement of financial performance. The results further showed that there was a significant improvement in financial performance attributed to specific new innovative banking services released in the market. Due to unique challenges for each commercial bank operating in Kenya, this study recommends a quantitative study on the effect of technology and all the above variables on the financial performance of a census of all the commercial banks in Kenya so as to enable generalization of the findings