Measuring the Adoption of Risk and Compliance-based Fintechs in Commercial Banks in Kenya

Abstract

Kenya's Fintech industry confronts obstacles such as technological, regulatory, customer, and market systems concerns. While certain efforts have been made to foster the growth of Fintechs through regulatory sandboxes, these interventions have yet to have a significant influence on adoption, particularly for AML/CFT-focused Fintechs. Motivated by the premise that the financial sector is not adopting risk and compliance-based technology at the rate anticipated, the study aims to empirically examine and analyze the adoption of risk and compliance-based Fintech in Kenyan commercial banks using the suggested framework to establish the factors that favor fintech adoption in the management of AML/CFT. The study builds on the diffusion of innovation (DOI) theory and the technology-organization-environment (TOE) framework to analyze the parameters that impact the adoption of risk and compliance-based Fintech. A questionnaire was utilized to collect data from 37 Kenyan commercial banks. The data were examined using factorial analysis, and the hypotheses were evaluated using logistic regression. The findings demonstrated that the compatibility of risk and compliance-based financial technology, perceived barriers, and government regulations significantly impact on the adoption of this type of technology. As a limitation to the study, adopters and non-users are characterized in this study by applying the logistic regression technique. However, this just investigates one relationship between the independent and dependent variables and does not investigate the connections between the independent factors, control variables, or moderators in any depth. The findings provide a deeper insight into the factors that influence risk and compliance-related fintech adoption features for commercial banks, policymakers, and regulators.