Effect Of Electronic Banking On The Financial Performance Of Commercial Banks

Electronic banking utilizes electronic and telecommunications networks to provide a broad array of value-added products and services to bank customers. E-business is transforming business practices across industries, including commercial banks. The introduction of electronic banking services has been a pivotal innovation in the Kenyan banking sector. Against this backdrop, this study investigates the correlation between e-banking and the performance of commercial banks in Kenya. Specifically, it examines whether there is a relationship between the dependent variable, such as profit after tax, and independent variables including the number of ATMs, issued debit and credit cards, point-of-sale terminals, and the usage levels of mobile banking, internet banking, and electronic funds transfer, all components of e-banking.

The study utilized secondary data gathered from commercial banks’ annual reports and the Central Bank of Kenya. Both descriptive and inferential statistics were employed to analyze the data.

The findings indicate that e-banking significantly impacts the profitability of commercial banks in Kenya, establishing a positive relationship between e-banking and bank performance. The significance tests reveal that the influence of bank innovations on profitability is statistically significant, suggesting that the cumulative effect of these innovations plays a crucial role in explaining the profits of commercial banks in Kenya.

The study recommends that bank management should prioritize the adoption of innovations to enhance profitability, especially as early adopters tend to be more profitable. Additionally, it suggests that government policymakers should review policies aimed at promoting innovation adoption and technology transfer, as these measures can bolster organizational profitability and subsequently contribute to increased tax revenues