The Effect of Mobile Banking on Financial Performance of Commercial Banks in Kenya

Abstract

Mobile banking is a service provided by financial institutions in cooperation with mobile phone operators. It allows customers to conveniently undertake their banking by using their phones. It entails disseminating banking services to the unbanked in addition to those who are at the bottom of the economic pyramid often living in remote areas. The study sought to determine the effect of mobile banking on financial performance of commercial banks in Kenya. Cross sectional descriptive survey was used in this study. This informed who, how and what about the mobile banking in commercial banks in Kenya and as a one-time event. The study adopted a census method where all the commercial banks practicing mobile banking in Kenya were studied. The study made use of secondary data from the Audited Financial statements of the Banks, those deposited at the Nairobi Securities Exchange and financial performance data from CBK annual banking survey reports. The data collected was cleaned, coded and analyzed using SPSS. Quantitative analysis was analyzed through descriptive statistics such as measure of central tendency that generated relevant percentages, frequency counts, mode, and median and mean where possible. To test for the strength of the model and the effects of mobile banking on the financial performance of commercial banks in Kenya, the study conducted an Analysis of Variance (ANOVA). From the regression model, the study found out that there were mobile banking variables influencing the financial performance of commercial banks in Kenya, which are annual amount of money transferred through mobile banking, number of users of mobile banking, capital adequacy, asset quality, bank liquidity and management efficiency. They influenced it positively. The study found out that the intercept was 0.019 for all years. The six independent variables that were studied (annual amount of money transferred through mobile banking, number of users registered on mobile banking platform, capital adequacy, asset quality, bank liquidity and management efficiency) explicate a substantial 15.4% of financial performance of commercial banks in Kenya as represented by adjusted R2 (0.751). The study therefore concludes that mobile banking positively and significantly affects the financial performance of commercial banks in Kenya. The study recommends that policy makers consider mobile banking in their formulation of policies as well as commercial banks.