Ecosystem Banking and Financial Performance of Listed Commercial Banks in Kenya: Empirical Evidence from Sustainable Financial Innovations

Abstract

Purpose: The purpose of this study was to examine the influence of ecosystem banking on the financial performance of commercial banks listed on the Nairobi Securities Exchange (NSE). It aims to determine how ecosystem integration through partnerships with FinTech firms and digital platforms affects banks’ profitability and sustainability.  

Methodology: Adopting a positivist research philosophy and explanatory design, the study utilized secondary data from annual financial reports and sustainability disclosures of 11 listed commercial banks covering the period 2021–2023. Descriptive statistics, correlation, and multiple regression analyses were employed to assess the relationship between ecosystem banking and financial performance, measured by Return on Equity (ROE).

Findings: The regression results revealed a negative but statistically significant relationship (β = -0.895, p = 0.016), indicating that ecosystem banking initially constrains profitability due to high technological and integration costs. Nonetheless, long-term benefits such as improved efficiency, innovation, and customer reach outweigh these short-term effects.

Unique Contribution to Theory, Practice and Policy: The study recommends that commercial banks adopt phased digital transformation strategies and strengthen governance frameworks to enhance oversight of ecosystem partnerships. Regulators should formulate comprehensive digital finance policies that foster innovation while safeguarding consumer protection and systemic stability.