Relationship Between Electronic Banking and Financial Performance of Commercial Banks in Kenya

Abstract

Commercial banks today face a number of challenges whose solution lies in adoption of electronic banking platforms. Customers today are demanding for banking products at their convenience without the need to physically access the banking hall. The growing level of competition emanating from other financial service providers require that commercial banks come up with the best strategy of retaining past customers while attracting new ones. The study had the objective of determining the relation between the electronic banking and financial performance of commercial banks in Kenya, and it worked with a descriptive method having 43 commercial banks as population. Secondary data was gathered on volume of M-banking and ATM transactions, the assets base and the income of ten year period 2008 all through to 2017. A multiple linear regression model was employed to analyze the relation among variables. From the result, there is an important relation among electronic banking and financial performance of commercial banks in Kenya. Indeed, the regression findings showed that 64.8% of the difference in the dependent variable is interpreted by the two independent variables. ATM volume was the main independent variable with a coefficient’s value of 0.76 which means that an increase by 1% in ATM transactions leads to 0.76% increase of financial performance. The study suggest that the top management of these banks should increase investing electronic banking to take part growing of financial performance of the banks. CBK should come up policies and principles to direct the growth of electronic banking among commercial banks in Kenya.