Financial Technology Adoption and Technical Efficiency of Commercial Banks in Kenya

The adoption of financial technology (FinTech) has transformed the banking sector by enhancing operational efficiency and service delivery. This study examines the relationship between FinTech adoption and the technical efficiency of commercial banks in Kenya. Using Pearson correlation analysis, the study establishes strong positive relationships between FinTech adoption and technical efficiency (r = 0.68), as well as mobile banking (r = 0.66) and digital lending (r = 0.62) with technical efficiency. A multiple regression model was employed to assess the predictive influence of FinTech adoption, mobile banking, and digital lending on technical efficiency. The results indicate that all three variables significantly impact technical efficiency, with FinTech adoption (β = 0.42, p < 0.01), mobile banking (β = 0.35, p < 0.01), and digital lending (β = 0.29, p < 0.01) playing a crucial role in optimizing banking operations. The study concludes that FinTech adoption is a key driver of technical efficiency, as it streamlines banking operations, reduces transaction costs, and enhances customer experience. Despite progress in FinTech integration, commercial banks still face challenges related to system reliability and scalability, highlighting the need for continuous investment in digital infrastructure. The study recommends that commercial banks in Kenya prioritize investment in advanced FinTech solutions, particularly by expanding mobile banking functionalities and optimizing digital lending platforms through data-driven risk assessment. Additionally, financial regulators should create policies that foster an enabling environment for FinTech innovation while ensuring data privacy and cybersecurity. Capacity-building initiatives and strategic partnerships between banks, FinTech firms, and academic institutions are also crucial in enhancing FinTech adoption and sustaining long-term efficiency gains. These findings contribute to the understanding of FinTech’s role in improving banking performance and provide insights for policymakers and industry stakeholders aiming to enhance financial sector efficiency.