Mobile Banking And Profitability Of Tier 1 Commercial Banks In Kenya

ABSTRACT

Mobile banking is an administration given by commercial organizations in participation with cell phone administrators. Mobile banking is evolving as the new front on which banks can differentiate their service delivery as a form of financial innovations. Hence financial innovations have been largely adopted by local banks to enhance profitability. More and more banks are strategically launching newer and newer mobile banking platforms. At the same time, improved financial performance in comparison to previous periods has been the trend by these commercial banks, yet limited studies focusing on the effect of mobile banking on profitability of commercial banks in Kenya. The study sought to determine the effect of mobile banking on the profitability of tier 1 commercial banks in Kenya. It also sought to achieve the following specific objectives; to establish the impact of transactions, electronic funds transfer services, and customization on the profitability of tier1 commercial banks in Kenya. The primary data source was the primary tool for data collection using questionnaires distributed to the bank's staff from each bank. Questionnaires administered included open-ended questionnaires, closed-ended questionnaires, and Likert-type scale questionnaires. They were administered using the drop-off and pick up latter method. The study also made use of secondary data from audited financial statements of banks and financial performance data from CBK annual banking survey reports. The data collected was cleaned, coded and systematically organized in a manner that facilitates analysis using the Statistical Package for social sciences (SPSS) version. Data was analyzed using Descriptive Analysis, correlation analysis, Trend analysis and Multiple Regression analysis. Data presentation was done in the form of tables and figures. The study found that transactions have a positive and significant relationship with profitability of tier 1 commercial banks whereas Electronic funds transfers had a weak but insignificant relationship with profitability taking into account a significance level of 0.05. Hence, we support the null hypothesis that EFTs does not have a significant effect on profitability of tier 1 commercial banks. Finally, customization had a weak and insignificant relationship with profitability hence supporting the respective null hypothesis. Nevertheless banks continue to receive a significant amount of revenue from mobile banking as their customers continue to carry out more and more transactions on the mobile platform. Hence, commercial banks are strategically launching newer and newer mobile banking platforms for their customers as well as leveraging their own operating costs so as to achieve the ultimate goal of making profits. The study thus concludes that commercial banks should fully endorse mobile banking to offer their customers quality services and as a result will continue recording a tremendous positive effect on profitability.