Determinants of Digital Innovations Adoption by Financial Institutions in Kenya

Abstract

This study‟s objective was to examine the determinants of digital innovations adoption by financial institutions in Kenya. This study used descriptive survey research design and data was analyzed using Statistical Package for Social sciences (SPSS). The target population of this study was financial institutions in Kenya undertaking deposits, payment services and lending with specific focus on commercial banks, microfinance banks and deposit taking Savings and Credit Cooperatives (SACCOs). This study sampled 30% of the population applying stratified proportionate random sampling method from the three strata namely commercial banks, MFBs and SACCOs. Survey questionnaires were used to collect primary data while secondary data was obtained through document analysis of reports, journals and other published works. This study yielded both quantitative and qualitative data. Descriptive and inferential statistics were used to analyze quantitative data; they included percentages, mean, frequencies and standard deviation. Inferential statistics included regression and correlation analysis which was used to identify the determinants of financial innovations adoption. Results of quantitative data analysis were presented in tables and charts. Qualitative data analysis was done using content analysis where documents and open-ended responses on the six variables of this study were examined. Emerging themes were categorized to supplement quantitative results and helped in making conclusions. The results reveal that organizational resources positively contribute to adoption of digital innovations by financial institution and that technological changes negatively contribute to use of digital innovations by financial institutions in Kenya. Findings further reveal that competitive pressure and the drive for new sources of revenue growth contributed positively to adoption of digital innovations by financial institutions in Kenya. Customer behavior changes were also found to contribute positively to use of digital innovations in financial institutions. This study concludes that organizational resources especially monetary resources are important determinants of digital innovations adoption by financial institutions. Technological changes form an important category of determinants of digital innovations adoption. Competitive pressure was found to have forced financial institutions to adopt digital innovations. Customer behavior changes were found to be the most critical determinant of digital innovations adoption by financial institutions. These changes have pushed financial institutions to adopt digital innovations in order to meet customer demands and align with their preferences. This study recommends that financial institutions should invest monetary resources in digital innovations adoption. Financial institutions should seek expert advisory in their digital innovations adoption pursuit to avoid the risk of obsolete technology in form of software and hardware. Financial institutions should first assess the security of their data and information before adopting digital innovations and despite being competitors, explore ways to collaborate in gainful digital innovations. The government and other stakeholders should help and support financial services industry to establish a framework that can be followed by organizations seeking to adopt digital innovations. The government should also support digital innovations adoption by improving internet and mobile networks infrastructure, online security and curbing cybercrime. Financial institutions should also embrace market research so that they are aware of the customer preferences and how they can meet those preferences using digital innovations. Generally, the institutions should strategize for digital and align their strategies to among others, these determinants.