The Effect of Technological Innovations on Financial Performance of Commercial Banks in Kenya

Abstract

The use of new technologies is causing substantial shifts in Kenya's banking and finance industry. The business is in the midst of enormous and notable developments that brought about in and will keep on perplexity the banking industry with a variety of customer-focused financial solutions. The desire to dominate the economy and surpass the cunning of their rivals is the driving force behind all or some of these changes. The institution has welcomed potential technological developments upheavals in order to boost its revenue margins and make sure that the changing market place is fully utilized. These modifications have forced commercial banks to resurrect its financially motivated philosophy within the face of an increasingly cutthroat international financial industry. This study's primary objective was to figure out how financial innovations affected the fiscal health of Kenya's commercial banks. The study adopted descriptive research design. A comprehensive census of all 43 commercial banks in Kenya was employed, obviating the need for sampling procedures. Secondary data was used for this Study. A data collection sheet was used to collect data and the records of the data collected was entered there before being subjected to a set of analytical tools. To gather data on the amount and frequency of alternative channels of banking transactions, the researcher made reference to Central Bank of Kenya annual supervisory reports, published reports, and other documents like the banking sector publications for the years 2018 to 2022.The findings of the study were that; From the regression analysis it was determined that: the beta value for mobile banking was 0.775 at a 0.00 degree of importance. The result was an indication that mobile banking was a positive and significant predictor of financial performance. The beta value for online banking was 0.172. This meant that if all other variables were held constant a rise in digital banking units led to a 0.172 improvement in the monetary outcomes. It also meant that online banking was a positive and significant predictor for financial performance. Size had the beta value of 1.327. This was an indication that a unit increase in size led to a 1.327 increase in financial performance. It also meant that size was also a positive and significant predictor of financial performance. Agency banking had a beta value of 0.611. This was an indication that agency banking was a positive and significant predictor of financial performance of the banks. Based on the findings, it was recommended that; commercial banks ought to employ fiscal creativity in order to improve business operations. For the purpose of improving financial success, it is advised that commercial banks keep establishing long-lasting business relationships and partnerships with web and mobile phone service providers. The analysis suggests that commercial banks should hire additional representatives who provide banking services in light of the investigation's outcomes. As a result, there would be more transactions, resulting in higher earnings on capital.