The Relationship between Mobile Banking Deepening and Financial Performance of Commercial Banks in Kenya

Abstract

The objective of this study was to investigate the relationship between mobile banking deepening and financial performance of commercial bank in Kenya. The banking sector in Kenya has experienced turbulent times following the collapse of many banks in the 1990s. In order to minimize their operational costs, commercial banks have adopted internet banking including ATMs, mobile banking and internet banking where customer can access their accounts on their personal computers. Mobile banking offers millions of people a potential solution in emerging markets that have access to a cell phone, yet remain excluded from the format financial mainstream. The study applied descriptive research design. The target population included six mobile phone service providers who provide mobile phone services and 43 commercial banks operating in Kenya as at June 2014. The total amounts transferred via the mobile for the past five years were collected and the number of mobile banking users was regressed against bank performance as measured by the return on assets. The study used secondary data from the Central bank of Kenya, Mobile phone Companies and Kenya National Bureau of Statistics. During the study period, the amount of money transacted through the mobile money transfers increased steadily from 27.07 billion in 2009 to 207.08 billion by the last month of the analysis. The growth was motivated by the convenience offered by the service. The study however found that there exist a weak positive relationship between mobile banking and the financial performance of commercial banks in Kenya. The study recommends that the policy makers take mobile banking awareness creation into consideration when drafting policies on the operations of banks in Kenya. This was because of the weak relationship of mobile banking and financial performance especially as the industry moves into a technologically competitive environment. The study also recommends that policy makers keep a keen eye on the developments of mobile banking as it is a new platform for competition among commercial banks as the world moves into a digital age to ensure it does not lose its regulatory role.

Keywords: Mobile Banking Deepening, Financial Performance, Commercial Banks