Impact of mobile banking on the bank profitability of Kenyan commercial banks

Submitted in partial fulfillment of the requirements for the Degree of Bachelor of Business Science in Finance at Strathmore UniversityThis study sought to determine the impact of mobile banking on the financial performance of commercial banks in Kenya during a period of seven years. The need for convenient and out-of-bank banking seems to be the force behind mobile banking. This is the reason for the heavy investment in technological adaptation. This is because, mobile banking offers millions of people with access to a cellphone the ability to carry out banking transactions without having to physically be in the bank. This was a causal study. It analyzes a sample of 7 out of the 43 commercial Banks in Kenya for a period of six years between 2010 through 2016. This was because most banks introduced the mobile banking service by around 2012. The secondary data was drawn from the annual reports of the Central bank of Kenya, the financial statements of the commercial banks and the investor annual reports. Data analysis involved multiple regressions of variables under study. That is, the financial performance represented by return on assets, the number of registered mobile banking customers by the banks, the number of mobile banking transactions by the banks and the loan amounts disbursed through mobile banking. From the regression model of 6years, the study found evidence of a positive relationship between mobile banking and bank performance. It can be concluded that mobile banking does lead to increased revenues based on the summary of findings. The mobile banking transactions as well as total mobile banking loans disbursed measured by the banks have a positive relation to the return on asset (ROA). This means that, a unit increase in each or all would result in an increase in the profitability performance indicator ROA. The results show that mobile banking has a moderate influence on profitability. The study recommends that policy makers, such as the monetary policy committee (MPC), take mobile banking adoption into consideration when drafting policies on the operations of banks in Kenya. This is because of the direct relationship between mobile banking and financial performance as the banking sector moves into a technologically competitive environment. Policy makers should keep a keen eye on the developments of mobile banking as it is a new platform for competition among commercial banks so as to not lose its regulatory rol