Adoption of Technological Innovations on Organizational Performance: Case of Commercial Banks in Kenya

Abstract

Internet banking (IB) allows functional banking activities online. Adoption of IB varies significantly across commercial banks. Banks with large size tend to adopt IB earlier. In 2006, 96 percent of banks with assets over Kshs 24 billion had a website, compared to only 51 percent with assets under Kshs 8 billion. These observations raise important questions: what explains these variations of diffusion rates across banking groups?  This study reports the results of a descriptive survey on factors causing variations in adoption of IB.  A structured questionnaire was administered to all financial managers in all 46 commercial banks with a response rate of 70%. The SPSS was used to run simultaneous-equation regressions on data collected. Factors driving adoption of IB include increase average bank assets, non adopters imitating early adopters and loan specialisation in consumer lending. Factors hindering IB adoption include competition among banks and average age of a bank.  The study recommends that to enhance IB adoption, banks should; strive to increase their average assets size, non adaptors to carefully study early adaptors, specialize in consumer lending, feed off competition by forming strategic alliances finally new banks have the advantage of installing IB technology in a package with other computer facilities compared to old banks. The study is important because banks have been blamed for not initiating programmes that adequately satisfying demand for financial services. The research contributes to the debate on how to enhance access to financial services in Kenya.

Key word: Adoption of Technological Innovation, Organizational performance