FINTECH PAYMENT SOLUTIONS AND MARKET VALUE OF LISTED COMMERCIAL BANKS IN KENYA

Abstract

The market value of Kenya’s listed commercial banks has fluctuated significantly over the past decade, raising questions about the role of financial technology innovations in shaping valuation dynamics. This study examined the impact of FinTech payment solutions—specifically digital wallets and online payments—on the market value (Tobin’s Q) of ten commercial banks listed on the Nairobi Securities Exchange between 2013 and 2023, while assessing the moderating role of bank size. Grounded in the Network Effect Theory and guided by a positivist research philosophy, the study adopted a longitudinal panel design and utilizes quarterly data from the Nairobi Securities Exchange and Central Bank of Kenya. System Generalized Method of Moments (System GMM) addressed endogeneity, while Granger causality and Difference-in-Differences (DiD) models explored temporal dynamics and the effects of the 2016 Banking Act amendment. The results indicated that digital wallets significantly enhanced market value post-2016 (β = 0.0499557, p = 0.013), reflecting the power of network effects. In contrast, online payments exerted a negative influence (β = -0.0288222, p = 0.001), likely due to cybersecurity risks and competitive pressures. Bank size did not exhibit a moderating effect (β = 0.008, p = 0.846), suggesting uniform FinTech diffusion across institutions. Granger causality tests reveal that market value predicts digital wallet adoption (F = 10.1525, p = 7.E-09), while DiD results confirmed a significant post-2016 valuation uplift (β = 0.14, p < 0.01), linked to regulatory reform. The study highlighted the central role of digital wallets in Kenya’s mobile financial landscape and recommends scaling mobile infrastructure, enhancing cybersecurity, and promoting inclusive FinTech adoption in alignment with Vision 2030, SDG 9, the EAC Vision 2050, and the African Union Agenda 2063.