Effect of Electronic Banking on the Financial Performance of Commercial Banks in Kenya

Abstract

The banking industry has been tremendously influenced by technological advancements just like the other aspects of life. The emergence of e-banking has significantly redefined and transformed banks’ operations. Technology is viewed as the major driving force in firms’ performance success. All banks irrespective of whether local or foreign are investing heavily on emerging technologies that assure customer satisfaction, effective and efficient service delivery in e-banking. This is done in an effort to achieve reduction in operating costs, increase volumes of transactions processed and attraction of new clientele. The study aims at discerning effect of electronic banking on the financial performance of commercial banks in the Kenyan banking industry. The study relied on descriptive study. The study was centred on all the 42 commercial banks governed and licensed in Kenya. The study made use of secondary data for the period 2011 to 2015 obtained from reports and publications. Statistical package for the social sciences (SPSS) used to analyse the data’s descriptive statistics. To determine the associations between the return on assets and the electronic banking variables (ATM value of transactions, mobile banking value of transactions and internet banking value of transactions), a multiple linear regression model was put to use. The study established that electronic banking has contributed positively to the financial performance of Kenya’s commercial banks. The study also showed that mobile, internet banking and use of ATM cards positively and significantly influenced the financial performance of Kenya’s commercial banks as measured by the return on assets. The study recommends that commercial banks in Kenya increase their efforts towards adoption of e-banking to automate their service delivery to customers and that the banking industry’s policy makers and regulators consider electronic banking as a major input when crafting guidelines to regulate the industry.