INFLUENCE OF FINANCIAL TECHNOLOGY ON FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

Purpose: The purpose of the study was to establish of financial technology (Fintech) on financial performance of commercial bank in Kenya listed in the Nairobi Securities Exchange.

Methodology: The independent variable for this quantitative study were digital loans, transactions and accounts, ATMs and bank agents while bank’s financial performance was the dependent variable. Secondary quarterly data was collected for a period of five years. Regression analysis was used to establish the relationship between the variables under study.

Findings: The study findings pointed to a statistically significant influence of Fintech on financial performance of commercial banks. At 95% confidence level, the number of digital loans processed, digital transactions, digital accounts acquired, ATMs and bank agents were found to have 22.7%, 37.91%, 22.41%, 2.6% and 69.9% respectively influence on financial performance of the listed commercial bank in Kenya from 2014 to 2018.

Implications:  The overall conclusion was that financial technology positively influences the financial performance of commercial banks in Kenya. Specifically, Fintech banking applications have changed the business model of commercial with banks adopting digital banking. The emerging technologies have also influenced alternative business channels (ABC) further shifting the customer traffic away from the branches thereby cutting down on operational costs.

Value: The study findings inform the regulatory framework needed to ensure the sector benefits the economy with minimal adverse disruptions. They inform banks how they can optimally employ Fintechs to enhance their financial performance. The findings add to the scholarly knowledge of Fintechs and their disruption on banking, and act as a reference for future studies.

Keywords: Financial Technology (Fintech), Financial Performance, Financial Disruptions, Incumbents, Financial Sector.