Paperless Banking And Financial Performance Of Commercial Banks In Kenya

ABSTRACT

The banking industry has been undergoing a significant process of transformation. Novelty in

information technology has been the force behind this transformation. Paperless banking

which is a wide concept in banking is the automatic distribution of new and outdated banking

merchandises and amenities straight to clients through paperless supportive networks. These

channels include, and not limited to; internet investment, mobile financial transactions, and

real time gross settlements. It’s from this contextual that the study sought to investigate the

outcome of paperless banking on the financial performance of commercial banks in Kenya.

The research specifically sought to investigate if there is a correlation between the reliant

mutable financial performance as measured by return on assets (ROA) and return on

equity(ROE), with the independent variables; internet investment, mobile investment and real

time gross settlement which were measured by percentage of adoption of service and

percentage of transactions. The following hypotheses were developed for empirical testing;

internet banking, mobile banking and real time gross settlement lacks significant result on

monetary performance of commercial bank in Kenya. A census research was done on all

Banks in Kenya as regulated by CBK. The study used secondary data from 43 commercial

banks operational in Kenya. The research used both inferential and descriptive statistics.

Diagnostic tests were carried out to test for Normality and Heteroscedasticity tests. Data was

coded and sorted using SPSS to produce descriptive statistics which was presented in form of

tables. The study found out that mobile banking positively affect ROA but at 0.084

significance, RTGS come strong on affecting ROA at 0.022 significance and internet was the

least contributor at 0.295, 1% increase in RTGS volumes increase ROA by

0.7985%.Therefore Internet and Mobile Banking has a positive outcome on financial

performance of commercial banks though not at 5% significant. Further the results indicated

that there was no strong correlation between the variables given that there was no matrix id

greater than 0.7 for both models. This indicates lack of significant correlation between

paperless banking and fiscal performance of Commercial banks in Kenya. Based on this

conclusion, the study recommends that Commercial banks use RTGS to achieve on

profitability and at the same time revamp mobile and internet banking platforms for customer

service and loyalty.