ABSTRACT
This study sought to assess the effect of digital banking on the financial intermediation in licensed commercial banks in Kenya. Specifically, the study sought to determine the effect of mobile banking, agency banking and internet banking on financial intermediation in licensed Kenyan commercial banks. The study employed correlational descriptive research design. Secondary sources of data were employed. Correlation analysis and multiple linear regression analysis were used so as to establish the effect of digital banking on financial intermediation. The study findings revealed that agency banking had increased tremendously over the eight years of study. However, this had a negative and insignificant effect on growth of financial intermediation as measured through loans-to-deposits ratio. The value of transaction through mobile and internet banking increased significantly from year 2012 to 2019 as more banks implemented digital banking. However, both mobile banking and internet banking was not significant in enhancing financial intermediation and the study found a negative correlation. Thus, the study concluded that digital banking through agency, mobile and internet banking cannot be utilized to significantly predict financial intermediation. Policy recommendations are made to the National Treasury and Central Bank of Kenya, and to the commercial bank practitioners, and by extension, other financial institutions practitioners, and consultants not to focus entirely on digital banking in order to enhance financial deepening but should focus on other factors instead.
Key words: Digital banking; Financial Intermediation; Mobile banking; Agency banking.