Title:
Strategic Uptake of Digital Process Innovation on Financial Performance of Commercial Banks in Kenya

Authors:
Kimathi, Doris Kagendo, PhD, Dr. Ntongai David, PhD, Karuti, Franco Mutua, Kenya

Abstract:

Uptake of digital process innovation has become a critical determinant of financial performance in the banking sector, particularly in emerging economies characterized by rapid technological change and strict regulatory oversight. In Kenya, commercial banks are increasingly adopting digital solutions, yet limited empirical evidence exists on how specific dimensions of digital process innovation influence financial performance within the context of government policy constraints. This study examined the effect of strategic uptake of digital process innovations on the financial performance of commercial banks in Kenya, while assessing the moderating role of government policies. Digital process innovation was operationalized through ideation, process automation, and creativity. Guided by Rogers’ Diffusion of Innovation Theory, the study adopted a positivist philosophy and descriptive research design. Primary data were collected using structured questionnaires administered to licensed commercial banks employees in different cadre and thus acted as respondents, complemented by secondary data from audited financial reports obtained from the Central Bank of Kenya. Multiple regression analysis revealed a statistically significant positive relationship between digital process innovation and financial performance. Ideation enhanced innovation-driven revenue streams, process automation improved operational efficiency and cost management, and creativity supported the development of differentiated digital banking solutions. Government policies significantly moderated this relationship, either strengthening or constraining the financial benefits derived from digital initiatives. The study concludes that digital process innovation represents a strategic capability that enhances financial performance when effectively integrated into organizational processes and aligned with regulatory frameworks, offering valuable insights for both bank managers and policymakers in Kenya’s banking sector.

DOI: https://doi.org/10.51505/IJEBMR.2026.1203