ST.

MARY'S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

THE CURRENT CHALLENGES AND OPPORTUNITIES OF

E-BANKING IN ETHIOPIAN BANKING SYSTEM (THE
CASE OF WEGAGEN AND UNITED BANKS)

BY

TAMIRU DABA

(MBAAF/0441/2008A)

JUN, 2021

ADDIS ABABA, ETHIOPIA

 ST. MARY'S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

THE CURRENT CHALLENGES AND OPPORTUNITIES OF

E-BANKING IN ETHIOPIAN BANKING SYSTEM (THE
CASE OF WEGAGEN AND UNITED BANKS)

A THESIS SUBMITTED TO ST. MARY UNIVERSITY, SCHOOL OF

GRADUATE STUDIES, IN PARTIAL FULFILLMENT OF THE
REQUIRMENTS FOR THE DEGREE OF MASTERS OF BUSINESS
ADMINISTRATION IN ACCOUNTING AND FINANCE

BY

TAMIRU DABA

(MBAAF/0441/2008A)

ADVISOR: ABEBAW KASSIE (PhD)

JUN, 2021

ADDIS ABABA, ETHIOPIA

i
 ST. MARY'S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

THE CURRENT CHALLENGES AND OPPORTUNITIES OF E-

BANKING IN ETHIOPIAN BANKING SYSTEM (THE CASE OF
WEGAGEN AND UNITED BANKS)

BY

TAMIRU DABA

APPROVED BY BOARD OF DIRECTORS

____________________ ___________________
Deans, Graduate Studies Signature & Date

____________________ ___________________
Advisor Signature & Date

____________________ ___________________
External Examiner Signature & Date
_________________ ___________________

Internal Examiner Signature & Date

ii
 Declaration

I, the undersigned, declare that this thesis is my original work, prepared under the guidance of
Abebaw Kassie (PhD). All sources of materials used for the thesis have been duly
acknowledged. Furthermore, I confirm that this thesis has not been submitted either in part or in
full to any other higher learning institution for the purpose of earning any degree.
_________________________ ______________________
Name Signature
St. Mary‘s University, Addis Ababa JUN, 2021

iii
 Endorsement

This thesis has been submitted to St. Mary‘s University, School of Graduate Studies for
examination with my approval as a university advisor.
_________________________ ______________________
Advisor Signature
St. Mary‘s University, Addis Ababa JUN, 2021

iv
 Table of content

Contents page

Declaration ..................................................................................................................................... iii

Endorsement .................................................................................................................................. iv

Acknowledgments........................................................................................................................ viii

Acronyms & Abbreviations ........................................................................................................... ix

Lists of Tables ................................................................................................................................. x

Abstract .......................................................................................................................................... xi

CHAPTER ONE: INTRODUCTION ............................................................................................. 1

1.1 Background of the Study ....................................................................................................... 1

1.2 Background of the organizations........................................................................................... 2

1.3 Statements of the problem ..................................................................................................... 3

1.4. Research question................................................................................................................. 4

1.5 Objectives of the study .......................................................................................................... 5

1.5.1 General Objective ........................................................................................................... 5

1.5.2 Specific Objectives ......................................................................................................... 5

1.6. Significance of the study/importance ................................................................................... 5

1.7 Limitation and Scope of the Study ........................................................................................ 6

1.8 Organization of the Research Paper ...................................................................................... 6

CHAPTER TWO: LITERATURE REVIEW ................................................................................. 8

2.1 Theoretical review ................................................................................................................. 8

2.1.1Introduction to information technology .............................................................................. 8

2.1.2 Definition of E-banking .................................................................................................. 9

2.1.3 Kinds / Forms of E-banking ............................................................................................. 10

2.1.4 Plastic cards .................................................................................................................. 10

v
 2.1.5 Automated Teller Machines (ATM) ............................................................................. 11

2.1.6 Point-of-Sale Transfer Terminals (POS) ...................................................................... 11

2.1.7 Organizational challenges of E- banking...................................................................... 12

2.1.8 Strategic Challenges of E-banking ............................................................................... 15

2.1.9. Technological challenges ............................................................................................ 16

2.1.10 E-banking System in Ethiopian Banking Industry ..................................................... 17

2.1.11. Challenges in E-banking in general ........................................................................... 18

2.1.12 Opportunities of E-banking for the customers ........................................................... 19

2.1.13 Importance of E-banking for the Bank ....................................................................... 20

2.1.14 Measures to be taken for safer EE-banking ................................................................ 20

2.2 Empirical Reviews .............................................................................................................. 22

2.3 conceptual framework of the study ..................................................................................... 25

CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY ...................................... 27

3.1 Introduction ......................................................................................................................... 27

3.2 Research Design .................................................................................................................. 27

3.3 Research approach............................................................................................................... 27

3.4 Study Area ........................................................................................................................... 28

3.5 Population, Sample Size and Sampling Techniques ........................................................... 28

3.6 Data Source and Collection Method ................................................................................... 29

3.6.1 Questionnaires .............................................................................................................. 29

3.6.2 Interviews ..................................................................................................................... 31

3.6.3 Secondary data Sources ................................................................................................ 31

3.7 Method of Data Analysis..................................................................................................... 32

CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION .................................................... 33

4.1 Introduction ......................................................................................................................... 33

vi
 4.2. Demographics of Respondents ........................................................................................... 33

4.2.1 Sex Ratio....................................................................................................................... 33

4.2.2. Age Ratio ...................................................................................................................... 34

4.2.3. Marital status ............................................................................................................... 34

4.2.4 Current Educational qualification ................................................................................. 35

4. 3 Program for accuracy and functionality ............................................................................. 35

4.4 Training facilities provided for employees about E-banking. ............................................. 36

4.5 A trade market for E- banking in the branches. .................................................................. 36

4.6 Recent challenges of E-banking on internal user ................................................................ 37

4.7 Difference in its challenges among the branches ................................................................ 37

4.8 Challenges of Adoption and Development E-banking Technology in Ethiopia ................. 38

4.8.1 Organizational Challenges ............................................................................................ 39

4.8.2 Environmental factors................................................................................................... 41

4.8.3 Technological Challenges............................................................................................. 42

4.9 Opportunities for Adoption and Development of E-banking Technology .......................... 44

CHAPTERFIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ................... 48

5.1 Summary ................................................................................................................................. 48

5.2 Conclusion........................................................................................................................... 50

5.3 Recommendations ............................................................................................................... 51

5.4 Suggestions for Further Research ....................................................................................... 51

REFERENCES ............................................................................................................................. 53

APENDIX ..................................................................................................................................... 58

vii
 Acknowledgments
First and foremost, I would like to thank the Almighty God who gave me the courage
through His endless love and blessings that helped me in finalizing this study. Next to him, I
would like to express my gratitude to Abebaw Kassie (PhD) for his endless, inspiration and
constructive unreserved support and advise he gave to me during the whole activities related to
the present research work.

Secondly, I would like to express my genuine thankfulness to my Families, my wife for her all
rounded support and encouragement in accomplishing my study. I am also indebted to the
employees of the selected banks who share their views with me during data collection and
questioner administration.

viii
 Acronyms & Abbreviations
7X24 - 7 days and 24 hours

ATM - Automated Teller Machines

CUP - China Union Pay

CBE - Commercial Bank of Ethiopia

EFT- electronic funds transfer

NBE-National Bank of Ethiopia

PIN -personal identification number

POS- Point-of-Sale Transfer Terminals

WWW - World Wide Web

PC Personal computer
CSF Critical success challenges
TPB Theory of planned behavior
DIT Diffusion of innovations theory
AMO Ability, motivation and opportunities
ICT Information and communication technology
CUP China Union Pay
EBSD Electronic Banking Service Department
SWIFT Worldwide Interbank Financial Telecommunications

ix
Lists of Tables

Table 4. 1 Sex Ratio of the respondents .................................................................................................. 33

Table 4. 2 Age Range of the respondents ................................................................................................ 34
Table 4. 3 Marital status of the Respondents .......................................................................................... 34
Table 4 4 Educational level of the respondents ....................................................................................... 35
Table 4. 5 Program for accuracy and functionality ................................................................................. 35
Table 4. 6 Training on E-banking ........................................................................................................... 36
Table 4. 7 E-banking trade ...................................................................................................................... 36
Table 4.8 Recent challenges of E-banking on internal user..................................................................... 37
Table 4. 9 Existence of E-banking challenges among banks branches .................................................... 37
Table 4. 10 Organizational challenges of E- banking.............................................................................. 39
Table 4. 11 environmental challenges ..................................................................................................... 41
Table 4 12 Technological challenges ...................................................................................................... 42
Table 4. 13 Respondent‘s perception towards opportunities ................................................................... 44
Table 4. 14 benefits arising from E-banking ...................................................................................... 35

x
Abstract
Modern and efficient E-banking system is a pre requisite for the growth of the banking system in
the cotemporary business world. By using both primary and secondary data this paper analyzed
the current challenges and opportunities of E-banking in the case of United and Wogagen bank.
The study employed descriptive research method to investigate the challenges and opportunities
of E-banking in the selected private banks. The study used purposive sampling techniques to
address the research problem. Quantitative data were collected through structured
questionaries’ and the qualitative data were collected through the help of focused group
discussion. The study identified three major challenges for the current E-banking in of the
banking system of the selected banks. These are organizational challenges, environmental
challenges and technological challenges. The quantitative data summery revealed that E-
banking the organizational challenges are the major challenge for growth of E-banking. The
study also showed that technological challenge is the second most important challenge for the
growth of EE-banking. In addition, the environmental challenge was identified as the third E-
banking challenge that influences the growth of E-banking of the selected private banks in
Ethiopia. From the study results, this paper recommends that banks should have to invest
adequate resource on E-banking technology, needs to work with the government to solve
infrastructural challenges, and should create deep awareness to community concerning the E-
banking product. Government also in collaboration with banks should educate and inform the
community on the work ability and effectiveness of E-banking technology, need to subsidize the
high cost for ICT equipment that challenges banks in introducing EE-banking, should support
banking sector by facilitating development of sufficient ICT infrastructure for the successful
implementation and development of E-banking services.

Key words: E-banking, ICT infrastructure, banking industry

xi
 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

The financial systems of most developing countries are cash driven; meaning that monetary
transactions are basically made through the exchange of bank notes and coins for goods and
services. However, this trend is now giving way to a modern and sophisticated payment system
where the currency and notes are converted to data, which are in turn transmitted through the
telephone lines and satellite transponders. This is as a result of rapid technological progress and
development in the financial market (Ozuru, et al. 2010; Johnson, 2005).

The history of modern bank in Ethiopia traces back to the reign of Emperor Menelik II (1889-
1913) it was during his rule that The Bank of Abyssinia established 1905. After ten years the
bank started issuing bank notes (Richard, 1980).

In the past people carry huge amount of paper money to buy or conduct exchange. Such
condition affected the daily activities of the people by consuming their time. Currently, the
introduction of technological innovation brought about drastically change in the Banking
industry. Thanks to new technological innovations, carrying paper money and time wastage at
the bank is declining. E- Banking (Electronic banking) is reducing such problems. By using
technology people save their time wastage. Both private and government banks in the country
are introducing such E- banking technologies to their customers. Banking can offer quicker and
a more dependable service to the customers for which they may be relatively satisfied than that
of manual system of banking (Jannatul, 2010).

E-banking, also known as online baking or virtual banking or internet banking is a

system which enables banking transactions like transfer of funds, payment of loans and EMIs,
deposit and withdrawal of cash virtually with the help of internet. It is one among the extended
features which banking institutions provide, in addition to traditional banking. e- Banking is
the most used feature by the citizens of India after the effect of demonetization. This
feature is assumed to be one of the most flexible, adaptable and secure ways of transacting
among the users/customers to bank. However, it depends on the trust that an individual has on
the bank he/she is operating with (Sriram, 2002).

1
In many African countries the access for internet facilities is concentrated in the major cities.
When we came to Ethiopia the situation is worse. The low distribution of internet access
throughout the all parts of the country highly influences E-banking services (Jenson, 2003).

1.2 Background of the organizations

United Bank was incorporated as a Share Company on 10 September 1998 in accordance with
the Commercial Code of Ethiopia of 1960 and the Licensing and Supervision of Banking
Business Proclamation No. 84/1994. The Bank obtained a banking services license from the
National Bank of Ethiopia and is registered with the Trade, Industry and Tourism Bureau of the
Addis Ababa City Administration. Over the years united Bank built itself into a progressive and
modern banking institution, endowed with a strong financial structure and strong management,
as well as a large and ever-increasing customers and correspondent base. Today, United Bank
is a full service Bank that offers its customers a wide range of commercial banking services
with a network of 202 Branches and 19 sub-Branches, and a number of additional outlets on the
pipeline (United Bank Annual report, 2017).

According to the United Bank 2017 annual report the number of ATMs and POS live as at June
30, 2017 reached 69 and 212, respectively. During the just ended financial year, a total of Birr
851 million was transacted via such channels which was an impressive increase of 15.75%
compared with last year same period figure of 735 million transactions. Meanwhile, United
Bank acquires Visa, MasterCard and China Union Pay (CUP) international cards through its
merchant outlets. Total capital of the Bank reached Birr 2.52 billion at the end of June 2017.

Wogagen Bank SC was established on the 11th of June 1997 EC. It came to life as a result of
the entrepreneurial wit of sixteen (16) founding members who recognized the critical role that
financial institutions would play toward creating a sustained economic development and were
able to put in an initial paid-in capital of Birr thirty million Established under the banking
proclamation of Licensing and Supervision, Proclamation No. 84/1994.The Bank was
registered with the National Bank of Ethiopia on April 30, 1997. The Memorandum and
Articles of Association of the Bank were signed on April 15th, 1997 and registered with the
Addis Ababa Bureau of Trade, Industry and Tourism on April 15, 1997, Registration Number
1/34/4/89(Wogagen bank board of directors,2017).

2
1.3 Statements of the problem
In this era of globalization, with increased competition around the globe in all sectors, a strong
banking industry is important in every country and can have a significant effect in supporting
economic development through efficient financial services; as a result many banks in the world
are modifying their strategies to reach customers worldwide more easily and cheaply.
Therefore, banks are developing the technologies that will help them deliver banking products
and services by the most cost-effective channels and one of such channel is adoption of E-
banking or internet banking (Ayana, 2012).

E-banking is a way to keep existing customers and attract new ones to the bank. The
transaction costs of providing these services are lower than the traditional approach. The
rapidly growing information and communication technology is knocking the front door of
every organization in the world (Booz & Hamilton, 1997).

Even though E-banking has a lot of benefit in delivering service to both customers and
bank. In Ethiopia several challenges hindered customers and banks easy access to enjoy
electronic banking that helps to reduce cost and times with the technological advancement in
banking sector which has been entertained elsewhere in Africa and the rest of the world. This is
due to lack of awareness or competition among banking industries, poor internet access. The
modern E-banking methods like ATMs, Debit cards, Credit cards, Tele banking, Internet
banking, Mobile banking and others are new to the Ethiopian banking sectors (Ayana, 2012).

The introduction of electronic banking in to the banking sector is to bring extra opportunities to
the customers there by to enhance the banks‘ profitability. Unless this technology bring
increase customer satisfaction than the traditional brick and mortar branches customer may
perceive as the same as different branches rather than a new means of delivery channels
(Worku, etal,2016).

Electronics banking has several benefits like transferring money, collecting receivable, paying
bill, productivity gains, transaction cost reduction, customer service improvement and at the
same time establishing a means to control the overall activities on bank accounts (Abraham
2012).

3
According to the study of Megersa (2010), there are a number of challenges which commercial
banks operating in Ethiopia are facing in the provision of electronic banking services.
One of the major hindrances is lack of appropriate technological infrastructure to
support the service. The financial institutions also argue with internet challenges including its
congested connection, security and quality of service.

There is also lack of specialists with the adequate technological skills to build that
infrastructure. It might also be a challenge to convince customers, especially those who are not
familiar with using the internet, and who might find it hard to try to deal with a service that
they consider confusing and frustrating. Even though there are researches conducted related to
this topic in Ethiopia and revealed that unavailability of a backbone network connecting the
whole country; inadequacy of reliable and secure information infrastructure especially
telecommunication infrastructure; sluggish ICT penetration in banking sector; insufficient legal
and regulatory support for E-banking etc. are the major current challenges of E-banking in the
country, this study attempts to fill this gap and contributes to the literature on the challenges
and opportunities of electronic banking service in Ethiopia.

Those studies did not include the current challenges of E-banking because these studies were
conducted before eight and six years. There is different development in connection with E-
banking like increase of customer‘s interest in using this technology, improvements in the E-
banking service, and improvements in the ICT.

By point outing the past research gaps and its important this research would like to examine the
current challenges and opportunities of E-banking especially in the United and Wagagen
Banks.

1.4. Research question

Based on the stated research problem the paper has the following research questions.

 What are the challenges of E-banking in United and Wogagen banks?

 What are the possible opportunities for costumer in the use of E-banking service in
the two commercial banks under study?

4
  What are the significant factors that affect customers to use E-banking service in the
two commercial banks under study?
 How organizational and technological factors affect customer to use E-banking
service in the two commercial banks under study?

1.5 Objectives of the study

1.5.1 General Objective

The general objective of the study was to assess and identify the challenges and opportunities
of adoption and development of E-banking technology in the case of United and wogagen
banks.

1.5.2 Specific Objectives

Apart from the above general objective the study have the following specific objectives that
addressed in the study.

The specific objectives of the study were;

 To explore the current practice and extent of adoption of E-banking service in United and
Wogagen banks

 To identifies the major and significant challenges of E-banking among the consumer and
the bank side in the case of United and Wogagen banks.
 To show the current opportunities of E-banking service in the two commercial bank under
study.

1.6. Significance of the study/importance

Since E-banking system is in an infant stage in Ethiopia, by investigating the different
challenges and opportunities for the adoption of this service delivery channel and by
recommending solutions for the identified problems, this study will help first banks to benefit
from the adoption of this technology to provide efficient and effective financial service for its
customer and strengthen their business.

5
Secondly, the finding of this paper will have a great importance in filling the knowledge gap
that exists on the customers and the bank on the area of E-banking, it‘s significant and means of
adoption.

Thirdly, it helps to fill significant knowledge gaps about E-banking landscape in Ethiopia;
thereby it will give insight to researchers and students about the problem and stimulate further
investigation of the issue.

Finally for new researchers, this study will serve as a standing stone and be a base for
theoretical and empirical concept for their further study in the same title and concept

1.7 Limitation and Scope of the Study

The study focused only on the current challenges and opportunities of E-banking in the case of
United and Wgagen banks. It does not cover the challenges on the remaining 15 commercial
banks in Ethiopia. Therefore, the study was limited on the two commercial banks.

In addition the study focused on investigating the challenges and opportunities of E-banking
faced by the customers in adoption and the bank side implementation in the case of United and
Wogagen banks. Conceptually; it merely focused on the challenges faced by customer and
employee of the banks in E-banking practice it did not include issues other than the stated
concepts and other related issues which are directly related to the topic of the study.

Furthermore the quality of the output of this study depended on the genuine responses from the
respondent and the large sample size due to the available cost and time the study conducted on
the selected branch of the two commercial banks. In addition, shortage of time and lack of
sufficient fund may have its own impact on the qualities of the study output.

1.8 Organization of the Research Paper

The study is organized in to five chapters. The first chapter states the general introduction of
the study. Chapter two presents the literature review regarding the research area and
sets out the theoretical foundation for the research . The third chapter outlines the research

6
methodology. The research results and discussions are presented in chapter four. The last
chapter draws conclusions and recommendations.

7
 CHAPTER TWO: LITERATURE REVIEW
In this chapter the theoretical part and empirical parts of past literature was discussed in detail
from the introduction of E-banking to research conducted on the world and in Ethiopia related
to the challenge and opportunity of E-banking services.

2.1 Theoretical review

2.1.1Introduction to information technology

Information Technology has become a necessary tool in today‘s organizations. Banks today
operate in a highly globalized, liberalized, privatized and a competitive environment. IT has
introduced new business paradigm. It is increasingly playing a significant role in
improving the services in the banking industry. Indian banking industry has witnessed a
tremendous developments due to sweeping changes that are taking place in the
information technology. Internet Banking refers to a system allowing individual customers to
perform banking activities at off-bank sites such as home, office and other locations via internet
based secured networks. Internet or online banking through traditional banks enable
customers to perform all routine transactions, such as account transfers, balance inquiries,
bill payments and stop-payment requests, and some even offer online loan and credit card
applications (Okoye, 2013).

Internet banking is a web-based service that enables the banks authorized customers to
access their account information. It permits the customers to log on to the banks website with
the help of banks issued identification and personal identification number (PIN). The banking
system verifies the user and provides access to the requested services, the range of products and
service offered by each bank on the internet differs widely in their content. The banking
industry can kill two birds with one stone that is with help of technology. Tremendous
progress took place in the field of technology which has reduced the world to a global
village and it has brought remarkable changes in the banking industry.( Kumari,2016).

8
2.1.2 Definition of E-banking
Daniel (1999) defined Internet banking services as major information services of a bank to
serve its customers via the Internet. Internet banking permits consumers to carry out usual
banking transactions on a computer which is equipped with Internet connection.

Electronic banking is a system where banking services are provided electronically to Bank
customers and it has created a new path in doing the banking businesses-banking is a product
designed for the purposes of online banking that enables users to have easy and safe access to
his / her bank account. E-banking is a safe, fast, easy and efficient electronic service that
enables you access to bank account and to carry out online banking services, 24 hours a day,
and 7 days a week. With this service you save your time by carrying out banking transactions at
any place and at any time, from your home or office, all you need is internet access. E-banking
enables accurate statement of all means available in users bank account, Statement of current
account, credits, overdrafts and users deposits, Execution of national and international
transfers in various currencies, execution of all types of utility bill payments (electricity, water
supply, telephone bills, etc..),Carrying out customs payments, electronic confirmation for all
transactions executed by E-banking ,and management of your credit cards .Electronic banking,
popularly known as E-banking, is a service provided by the bankers, that allows customers to
carry out all their banking transactions like, financial transactions, deposits, withdrawals,
paying bills and to access the his/her/its account information, through the use of electronic
channels like Computers, Mobiles, ATMs, Television and other Electronic devices(Daniel,
1999).E-banking, is also known as internet banking or virtual banking or online banking or web
banking, provides, convenience their customers in accessing banking facilities from the
comfort of their home or office without having to physically visit their bank (Okoye, 2013).

It also known as electronic funds transfer (EFT) is simply the use of electronic means to
transfer funds directly from one account to another, rather than by check or cash. Electronic
banking can also be defined as a variety of the popular services provided by banks. E-banking
is an electronic connection between bank and customer in order to prepare, an age and
control financial transactions (Burr, 1996).

9
2.1.3 Kinds / Forms of E-banking
The tools/channels use in executing e–banking include plastic cards (debit cards, credit cards,
prepaid cards), personal computers, telephone, mobile phones, internet, ATM‘s, POS or point
of interaction machines(Morufu and Taibat, 2012).

The description of the above mentioned tools/channels are as follows: -

2.1.4 Plastic cards

2.1.4.1Debit cards: -
Debit card is a banking card enhanced with ATM and POS features so that it can be used at
merchant locations. Debit cards allow you to spend only what is in your bank account. It is a
quick transaction between the merchant and your personal bank account. A debit card is
linked toan individual‘s account, allowing funds to be withdrawn at the ATM and point of sale
without writing a check. When using a debit card to pay for goods and services, the
purchase amount is deducted from the cardholder‘s checking account. The types of debit
card include online debit card and offline debit card. With offline debit card, debit is not
made immediately. Benefits of using a debit card include making the payment process at the
checkout counter quicker and more convenient, eliminating the need to carry a Check book
and a lot of cash, using it at locations where personal checks are not accepted, and
reducing the possibility of loss or theft of cash (Okoye, 2013).

2.1.4.2 Prepaid debit cards

These are debit cards not usually linked to a customer‘s ‗account. They must be funded before
being used by cardholders. Prepaid debit cards are identified with such names like cash cards,
value cards, and Naira cards etc. prepaid cards can be used asgift cardsstudents ID cards,
Government payment card, payroll card, Bursary card, insurance cards, travel cards etc.
(Kassahun , 2016).

2.1.4.3 Credit Cards

A credit card is different from a debit card in that it does not remove money from the
user‘s account after every transaction. In the case of credit cards, the issuer lends money to
the consumer (or the user) to be paid to the merchant. A credit card allows the consumer to

10
revolve their balance at the cost of having interest charged. The parties involved in a credit
card transaction include cardholder, card issuing bank, merchant, acquiring bank,
independent sales organization, merchant account, credit card association, transaction
network, and affinity partner (Kassahun , 2016).

2.1.5 Automated Teller Machines (ATM)

This is a computerized telecommunications device that provides the customer of a
financial institution with space to financial transaction in a public space without the need for a
human clerk or bank teller. Using an ATM, customers can access their bank accounts in order
to make cash withdrawals and check their account balance. ATM‘s rely on authorization of a
financial transaction by the card issuer or other authorizing institution via the
communications network. Many banks charge ATM usage fees for transactions (Kassahun,
2016).

2.1.6 Point-of-Sale Transfer Terminals (POS)

The system allows consumers to pay for retail purchase with a check card, new name for debit
card. This card looks like a credit card but with a significant difference. The money for the
purchase is transferred immediately from account of debit card holder to the store's
account (Malak, 2007).

Internet / extranet banking-According to Booz, Allen & Hamilton (1999), ―Internet banking‖
refers to systems that enable bank customers to access accounts and general information
on bank products and services through a personal computer (PC) or other intelligent
device(Booz, Allen and Hamilton,1999).

Mobile banking:- can be defined as an occurrence when customers access a bank‘s

networks using cellular phones, pagers, personal digital assistants, or similar devices
through telecommunication wireless networks. It means performing banking activities
which primarily consists of opening and maintaining mobile/regular accounts and
accepting deposits; furthermore, it includes performing fund transfer or cash-in and cash-
out services using mobile devices (NBE Directive, FIS-01-2012).

11
Tele-banking: - Telephone Banking service is provided by phone. To access an account it is
required to dial a particular telephone number and there areseveral options of services. Options
included; Checking account balance, funds transfer between current, savings and credit card
accounts Bill payments, Stock exchange transaction receive statement via fax loan payment
information.

2.1.7 Organizational challenges of E- banking

Daghfous and Toufaily (2009) directed a study on the achievement and basic calculates
selection of E-banking by Lebanese banks. The exploration was directed on the components
that can prompt to achievement the appropriation of E-banking and alternate variables that can
constitute as boundary to its selection, it concentrate on the authoritative, auxiliary and vital
elements which can quicken or, actually, moderate the reception of this electronic mode.
Lebanese market, with an aggregate of 57 banks, 31 of them work globally and 26 are entirely
nearby were utilized to assemble information.

The consequences of their study demonstrates that the authoritative challenges (bank measure,
utilitarian divisions, specialized staff, specialized infrastructure, thought dangers, leaders'
global experience and dominance of advancement) are challenges which apply noteworthy
effect on the reception of E-banking, among the basic qualities, the outcome established that
inner mechanical environment of the bank is an essential calculate deciding the appropriation
of E-banking, additionally the outcome demonstrates that banks which are creating in the
universal scale will probably embrace E-banking developments.

The other expressive contextual investigation examination led by Humphrey (2008) on

‗Components affecting the reception of internet Banking in Oman, expected to recognize the
fundamental potential variables or hindrances that are as of now restraining the fuse or
selection of E-trade applications in the Omani Banking area. Information, utilized as a part of
their study was gathered utilizing semi organized meetings and study survey and in addition
checking on some bank archives. The consequences of their study give a

Pragmatic picture about the reception of E-Commerce applications in the center money related
part space of Oman. One of the fundamental discoveries is that security and information
secrecy issues have been a noteworthy hindrance. ThE-banking area was hesitant to utilize E-

12
trade applications as they felt that exchanges led electronically were interested in programmers
and infections, which are outside their ability to control. Absence of top administration support
is the other repressing variable in the appropriation of electronic trade applications according to
their finding.

The investigation of Mayer (2008) on critical success challenges (CSF) (CSF) in E-banking
directed in United Kingdom, expects to decide the basic issues identified with budgetary
segment associations when they build up organizations on the internet. The overview strategy
was utilized by specialists who focus on the budgetary area in the UK. The study demonstrates
that Understanding the CSFs in E-banking is vital for senior administration of banking related
associations, since it would possibly help them enhance their vital arranging process. The
investigation of the study shows two noteworthy sorts of measurable examinations were led,
expressive factual examinations and variable examination. In unmistakable examinations, the
components (or challenges) were positioned altogether of their mean score, the most elevated
score being the most vital et cetera. The main six considers request of significance were: easy
to use site, frameworks security, support from top administration, quick responsive client
benefit, advancement of electronic business inside association, and unsurpassed accessibility of
administrations and fast conveyance of administrations.

Consider investigation, which was done to aggregate together, related challenges to reveal
components (regarding element examinations), observed the accompanying elements to be
basic for the achievement in E-banking. Issues identified with hierarchical adaptability and
speed of administrations conveyance was observed to be at the highest point of the significance
list. Issues identified with authoritative adaptability and speeds of administrations conveyance
were observed to be at the highest point of the significance list. Business procedures and
frameworks joining and improved client administrations were next in the rundown of
significance.

The investigation of Kim (2010) on the appropriation of electronic banking: hidden purchaser
conduct and basic achievement variables led in Estonia was expected to think about the further
comprehension of, how customers see electronic Banking in the prime of intuitive diverts in
Estonia, as Estonia is globally eminent for being a pioneer in the acknowledgment of new
advancements. A progression of a top to bottom meetings was led with driving industry

13
specialists in Estonia. The determination basis for the respondent was essentially their
association with the advancement of Internet Banking frameworks from the beginning of its
rise. The overview directed for this examination tended to six distinct issues affecting the
selection of Internet Banking (Better costs, Recommendations, Better administration,
Marketing endeavors, Better get to and higher security). The most essential figures beginning
to utilize Internet Banking are above all else better access to the administrations
(accommodation), better costs and higher security. Better administration (i.e. leaning toward
self-benefit over office administration) was additionally of over the normal significance. Two
elements that the respondents did not consider significant to their selection choice were banks'
advertising exercises and individual proposals from companions and associates.

Likewise the overview directed six primary deterrents (PCs are troublesome, no entrance to
internet, internet Banking is costly, low security, have had zero chance to attempt and I lean
toward individual contact) in embracing Internet Banking (aftereffects of a preparatory study,
100 respondents), the most vital variables disheartening the utilization of Internet banking are
absence of Internet get to and not having an opportunity to experiment with Internet Banking in
a sheltered situation. At long last the exploration demonstrates that Banking exercises alone
may not be adequate in accomplishing development if general foundation, financial
environment and government activities are not strong.

The examination directed on recognizing the attitudinal, social and saw behavioral control
figures that may impact the reception of Internet Banking by Howcroft (2012) depended on
theory of planned behavior (TPB) and the diffusion of innovations theory (DIT) created by a
past research in Singapore. The point of the study was to gather South African information
keeping in mind the end goal to try out the theories in regards to the elements, which influence
appropriation of Internet Banking and contrast these outcomes and those gathered in different
nations. Online poll was utilized to gather exact information and the aftereffects of the study
demonstrates that aim to receive Internet Banking can be anticipated by attitudinal variables,
saw behavioral control elements to a lesser degree, and not by subjective standards. Ever y
single attitudinal component aside from banking needs is observed to be noteworthy, with
intricacy and hazard demonstrating a negative relationship.

14
2.1.8 Strategic Challenges of E-banking
Karjaluoto (2012) demonstrated that banks have the decision to offer their Banking benefits
through different electronic conveyance stations innovations, for example, Internet innovation,
video banking innovation, phonE-banking innovation, and ATM innovation. They likewise
showed that Internet innovation is the fundamental electronic dispersion divert in thE-banking
industry. As it were, E-banking as an internet based banking that includes the arrangement of
Banking administrations, for example, getting to accounts, exchanging stores amongst records,
and offering an online monetary administration. Turban (2013) claims that in the 1990s E-
banking was underutilized as business associations utilized it just to showcase their items and
administrations. Rogers (2011), analyzed client introductions and utilization of monetary
appropriation directs in the Australian money related industry, found that all the more as of late
most budgetary foundations, confronted with aggressive weight after the presentation of
deregulation in 1983, have reexamined their procedures to take full favorable position of IT.

Rafiu (2007) opines that the test to extend and keep up banking piece of the pie has impacted
many banks to put more in improving utilization of the Internet. The development of E-banking
had made many banks reevaluate their IT procedures in aggressive markets. These finding
recommends that the banks that fail to react to the development of E-banking in the market is
probably going to lose clients and that the cost of offering E-banking administrations is not
exactly the cost of keeping branch banking.

This idea was likewise affirmed in a study led by Jasimuddin (2010) analyzed the part of E-
banking in Saudi Arabia. He demonstrated that the greater part of Saudi banks had exploited
Internet innovation to build up sites yet few offered E-banking administrations. He proposed
that if the Saudi Arabian banking industry wished to be effective in the worldwide economy it
would need to coordinate Internet innovation into its Banking technique.

Ayo (2009) explored the possibilities of internet business in light of ability, motivation and
opportunities (AMO) model and watched that practically all organizations have online
nearness. The paper reported the inspiration and open doors for internet based business as low
in light of absence of e-Payment foundation and access to information and communication
technology (ICT) facilities. Additionally, in an exact appraisal of client acknowledgment of
internet business did in Germany, Buse and Tiwari (2009) watched that: the most noteworthy

15
versatile clients are best administration, trailed independent from anyone else utilized, salaried
class, understudies and others. Government workers were found not to disparage portable E-
banking; the most supported explanation behind completing versatile E-banking is universality,
next is review of ledger, trailed by promptness; and the most noteworthy dread of clients about
portable E-banking is that of frailty, next is cost, and uncomfortably. Mahdi and Mehrdad
(2010) utilized chi-square to decide the effect of E-banking in Iran and their discoveries from
the perspectives of clients is that, E-banking cause higher focal points to Iranians. At the end of
the day, Iran banks give benefits that the clients are determining fulfillment with specific
reference to the utilization of E-banking. In a comparable study, Jayawardhena and Foley
(2010) investigate E-banking as another.

2.1.9. Technological challenges

According to the study conducted by Babatunde, and Adebisi (2012) technological challenges
include technological aspects such as research and development activity, automation,
technology incentives and the rate of technological change. They can determine barriers to
entry, minimum efficient production level and influence outsourcing decisions. Furthermore,
technological shifts can affect costs, quality, and lead to innovation. Specifically, this study
investigates how technological invention, advancement in technology, availability of the state
of the art technology, nature of technological changes and diversity of technology affect
strategic decisions of manufacturing firms. A technological innovation can have a sudden and
dramatic effect on the environment of a firm. Firstly, technological developments can
significantly alter the demand for an organization‘s or industry‘s products or service (Barnat,
2005,). According to Barnat (2005) technological change can decimate existing businesses and
even entire industries, since it shifts demand from one product to another. Moreover, changes
in technology can affect a firm‘s operations as well its products and services. He further said
these changes might affect processing, methods, raw materials and service delivery. Therefore,
marketers should keep track of the advancement and invention in technology, nature of changes
in technological environment as well as the diversity in technology in their operating
environment.

16
2.1.10 E-banking System in Ethiopian Banking Industry
According to the study conducted by Gardachew, the appearance of E-banking in Ethiopia goes
back to the late 2001, when CBE introduced the service for local users with its eight ATMs
located in Addis Ababa (Gardachew, 2010)

2.1.10.1 E-banking Services in the United Bank

United Bank S.C is the first to introduce telE-banking including text messages or SMS by
the end of 2008. Currently, United Bank starts to deliver E banking services. Like ATM,
internet, mobile and agent banking. United Bank among the commercial bank in Ethiopia that
provide Card Banking Services through ATM & POS. United is pioneer in providing money
send/receive service on ATM. United has started rendering MasterCard C and VISA services
and United Bank offers its customers with Debit Cards (i.e. Hiber Card) and its customers can
use these cards for withdrawal of cash and shopping from hi/her account through any of
his/her ATM and POS placed at convenient locations. United bank is a pioneer Bank in the
country to provide SMS and Internet Banking services to its customers.

state of the art Hibir Mobile and Hibir Online Banking services are its customers 24 hours link
to their account information with view of all banking transactions that enables customers to
access details on dealings regarding current, saving and overdraft accounts, loan particulars,
Letter of Credit, Check book status, exchange rate value of foreign currencies and many other
relevant details to keep customers abreast of all customers financial demands they have with
the bank.(www.unitedbank.com.et.Annual report, 2017).

Moreover, using United Bank new upgraded Online Banking Services customers can transfer
funds from one of their account to another or to other United Bank customer‘s account, effect
local remittances, set standing instructions on certain recurrent transactions and upload bulk
payments such as salary of employees. United Bank online Banking Service will enable its
customers to access and print a bank statement free of charge (real time) without coming to any
of United Bank branches (united bank annual report,2017)).Using its Hibir Online and Hibir
Mobile services United offers the following E-banking services. Balance Enquiry, Mini
Statement, Viewing Forex rate, fund Transfer. Fund Transfer to own account (s) in United
Bank Fund transfer to other person‘s accounts in United Bank Local Remittance from account,

17
Recurrent Payments (standing instruction), Viewing loan balance, Loan Repayment Amount
and LC‘s Outstanding, Check Stop Payment request, Check Book Request, Check Status
Request, Utility Payment, PIN management and authorization, Bulk payment, Branch or ATM
location information, Account.

According to the United Bank‘s (2017) annual report the number of ATMs and POS live as at
June 30, 2017 reached 69 and 212, respectively. During the just ended financial year, a total of
Birr 851 million was transacted via such channels which was an impressive increase of 15.75%
compared with last year same period figure of 735 million transactions. Meanwhile, United
Bank acquires Visa, MasterCard and China Union Pay (CUP) international cards through its
merchant outlets. Total capital of the Bank reached Birr 2.52 billion at the end of June 2017.

2.1.11. Challenges in E-banking in general

1-Implementation of global technology: There is a necessity to have a quite level of

infrastructure and good human capacity building prior the developing countries may adopt
global technology for their local needs. In developing countries, many clients either do not trust
or do not access to the needful infrastructure that is to be able to process electronic payments
(Kaur & Rajneesh, 2014).

2- Security Issue: is one of the important issues for E-banking. In the case of any monetary
damages to the clients, the bank‘s reputation is spoiled. The security risk is the main threat
from the hackers, who can use several types of information of public peoples for reason of
criminal activity. While Sometimes hackers hike the passwords of the clients cause to theft
their money or some hidden or secret information (Kazmi & Hashim, 2015).

3- Strengthening the public support: In developing countries, in the previous year's most e-
finance initiatives have been the result of joint efforts between the non-public and public
sectors. If the public sector does not have the necessary resources to implement the projects it is
important that joint efforts between public and non-public sectors along with the multilateral
agencies like the World Bank, be developed to enable public support for e-finance related
initiatives(Kaur & Rajneesh, 2014).

18
4- Trust Issue: Trust plays a key role for E-banking, but the lack of trust is the main issue in
the growth and development of electronic banking alerts, security alerts and reminders, and
Balance and Transaction notifications (Kazmi & Hashim, 2015).

2.1.12 Opportunities of E-banking for the customers

The study that was conducted by Kassahun Girma stated the benefit of E-banking for
Customers as follows: the main benefit from the bank customers ‗point of view is significant
saving of time by the automation of banking services processing and introduction of an easy
maintenance tools for managing customer‘s money.

The main advantages of E-banking for corporate customers are as follows:-

 Reduced costs in accessing and using the banking services.

 Increased comfort and time saving — transactions can be made 7x24, without requiring
the physical interaction with the bank.
 Quick and continuous access to information: Corporations will have easier access to
information as, they can check on multiple accounts at the click of a button.
 Better cash management: E-banking facilities speed up cash cycle and increases
efficiency of business processes as large variety of cash management instruments is
available on internet sites.
 For example, it is possible to manage company‘s short term cash via internet banks
(investments in over-night, short- and long term deposits, in commercial papers, in
bonds and equities, in money market funds). Private customers seek slightly different
kind of benefits from E-banking.
 Reduced costs: This is in terms of the cost of availing and using the various
banking products and services.
 Convenience: All the banking transactions can be performed from the comfort of the
home or office or from the place a customer wants.
 Speed: The response of the medium is very fast; therefore customers can actually wait
till the last minute before concluding a fund transfer.
 Funds management: Customers can download their history of different accounts and do
a ―what-if ―analysis on their own PC before affecting any transaction on the web. This will lead

19
to better funds management. In addition, Withdrawing cash customers can alsohave mini banks
statements balance inquiry at these ATMs. Through Internet Banking customer can operate his
account while sitting in his office or home. There is no need to go to the bank in person for such
matter- Banking has also greatly helped in payment of utility bill. Now there is no need to stand
in long queues outside banks for his purpose.
All services that are usually available from the local bank can be found on a single website.
The Growth of credit card usage also owes greatly to E-banking. Now a customer can shop
worldwide without any need of carrying paper money with him and banks are available each
day in a week and they are only a mouse click away.

2.1.13 Importance of E-banking for the Bank

Electronic Banking as already stated has greatly serviced both to the public and the banking
industry. This has resulted in creation of a better enabling environment that supports
growth, productivity and prosperity. Besides many tangible benefits in the form of
reduction of cost, reduced delivery time, increased efficiency, reduced wastage, banking
electronically controlled and thoroughly monitored environment and discourage many
illegal and illegitimate practices associated with banking industry like money laundering,
frauds and embezzlements. Further E-banking has helped banks in better monitoring of their
customer base. This is a useful tool in the hand of the bank to device suitable
commercial packages that are in conformity with customer needs. As E-banking provide
opportunity to banking sector to enlarge their customer base, a consequence to increase the
volume of credit creation which results in better economic condition. Besides, E-banking
has also helped in documentation of the economic activity of the masses (Mahdi, 2004).

2.1.14 Measures to be taken for safer EE-banking

Internet banking allows us to transact in a fast and convenient way. Unlike traditional banking
to make us wait in an unending queue, internet banking functions are just a few clicks away.
However, this facility needs safety and secured way of transacting as the risk of phishing is
high. The following are some of the measures to ensure secure banking:

Password: We need to change our passwords at regular intervals in order to keep our accounts
safe. One of the best practices is to have a password as a combination of upper case and lower

20
case letters, numbers and special characters usage of public computers Logging in to bank
account from cyber cafes or libraries is not recommended by banking experts. Chances of
passwords being traced or seen by others are usually high in such places. One should make sure
to clear the cache and browsing history, and delete all the temporary files from the computer.
Also, never allow the browser to remember ID and password; this leads to hacking.

Confidentiality; No bank will ask for any confidential information via phone or email. We
have to beware of apparent phone call from the bank or an email requesting such details; do not
give out login information. Sharing login credentials with friends and family is not advisable
either.

Regular check; is must Check your account after making any transaction online. Verify
whether the right amount has been deducted from your account. If you see any discrepancies in
the amount, inform the bank immediately.

Anti-virus software: In order to protect your computer from new viruses, ensure that you
always use licensed anti-virus software. Pirated versions of anti-virus software may be
available for free, but they may fail to protect your computer from new viruses prevalent in the
online world. In addition, you will get notifications for updates in the software periodically.
Make sure that you keep your anti-virus updated, so that your confidential information is
always protected.

Disconnect the internet connection when not in use: Most broadband users do not disconnect
the internet connection on their computer when they are not using it. Malicious hackers can
access your computer via an internet connection and steal your confidential banking
information. To keep your data protected, ensure that you disconnect from the internet when
you do not require it.

Type your internet banking URL: It is a safer to type your bank URL in the address bar of
the browser than clicking on links given in an email.

There are instances of fraudsters sending emails with fraudulent websites links that are
designed exactly like the bank‘s original website.

21
Once you enter your login details on such a website, they may be used to access your account
and steal your money. While logging on, check for 'https://' in the URL and ensure that it is
your bank‘s authentic website.(Sriram, 2012).

Generally e- banking is challenged by several challenges and it also has several opportunities as
mentioned in the empirical studies of this work. The main challenges listed are lack of banking
services through the web or other electronic means such as using mobile phone, data and
network security and privacy, lack and limitation of government policies, regulations and e-
commerce laws, as well as legislation to protect workers and to make the Internet secure, .weak
telecommunications. Therefore, I have discussed the main current challenges and opportunities
of E-banking in the Ethiopian banking industry, especially in Wegagen and United banks. This
is because of the availability materials and my interest.

2.2 Empirical Reviews

A number of empirical studies examined the challenges and opportunities of E-banking service,
adoption and implementation in both developed and developing countries in general and also
studies in Ethiopia are available. A brief review of each of different studies is presented in the
following discussions.

The study conducted in Bangladesh on the challenge of E-banking adoption and

implementation by M. M. Rahman (2008). The study result point out that despite huge demand
from the business community as well as the retail customers particularly the urban customers,
electronic banking (E-banking) is still at a budding state due mainly to a number of constraints
such as unavailability of a backbone network connecting the whole country; inadequacy of
reliable and secure information infrastructure especially telecommunication infrastructure;
sluggish ICT penetration in banking sector; insufficient legal and regulatory support for
adopting E-banking and so on.

Another study conducted by Khalfan et al., (2006) on ‗Factors influencing the adoption of
internet banking in Oman. Data, used in their study were collected using semi structured
interviews and survey questionnaire as well as reviewing some bank documents. The results of
their study provide a Pragmatic picture about the adoption of E-Commerce applications in the

22
core financial sector domain of Oman. One of the main findings is that security and data
confidentiality issues have been a major challenge. The banking sector was reluctant to use E-
commerce applications as they felt that transactions conducted electronically were open to
hackers and viruses, which are beyond their control. Lack of top management support is the
other inhibiting factor in the adoption of electronic commerce applications as per their finding.

Another study conducted by Seyed (2013) on studying the effect of E-Banking on Bank
Profitability; Case Study Selected Asian Countries stated E-Banking as one of the gifts to
human beings by computer technology. The study covers four banks that have adopted online
banking in Asian selected countries between 1990 and 2010 with support of a short-run co-
integration relationship after allowing for the heterogeneous country effect. The long-run
relationship is estimated using a full-modified OLS. By using bank specific and
macroeconomic control variables, the researcher investigate the impact of internet banking on
the return on assets (ROA) and equity (ROE). Accordingly, the results show that internet
banking variable has had a positive effect on the performance of the banking system.

Another study on E-banking and profitability was done in Nigeria by Abaenewe et al (2013)
investigated the profitability performance of Nigerian banks following the full adoption of
electronic banking system using judgmental sampling method was adopted by utilizing data
collected from four Nigerian banks. The profitability performance of these banks was measured
in terms of returns on equity (ROE) and returns on assets (ROA). With the data collected, we
tested the pre- and post-adoption of E-banking performance difference between means using a
standard statistical technique for independent sample at 5 percent level of significance for
performance factors such as ROE and ROA. The study revealed that the adoption of electronic
banking has positively and significantly improved the returns on equity (ROE) of Nigerian
banks. On the other hand and on the contrary, it also revealed that e-banking has not
significantly improved the returns on assets (ROA) of Nigerian banks. The findings of this
study have motivated new recommendations for bank customers, bank management and
shareholders with regard to electronic banking adoption for banking operations.

23
In Ethiopia some studies have focused on the adoption, opportunities and challenges of
electronic banking services on some individual banks while few studies focus on ATM banking
service usage which is one of the electronic banking services categorized under card banking
system.

A study conducted by Wondwossen &Tsegai (2005) on the challenges of E-banking adoption

in selected commercial banks in Ethiopia observed that the following reasons considered being
the hindrance factors for the use of electronic payment system in Ethiopia. These hindrance
factors include, lack of appropriate infrastructure for E-payment, lack of internet facilities with
customer and learning how to interact with bank website. Moreover, factors that affect adoption
of E-banking in the country regarding the technological factor, organizational factor and
Environmental factor.

Another study conducted in Ethiopia on Challenges and Opportunities of Electronic Banking in

Ethiopian Banking Industry by Kassahun (2016) indicated that, the major challenges Ethiopian
banking industry faces in the adoption and development of E-banking technology are, high cost
of implementation of E-banking, lack of customer awareness, limitation in network
infrastructure and internet related support services, low levels of computer literacy, low level of
ICT infrastructure, lack of sufficient government support, legal and regulatory differences with
cross-country security risk and lack of trust. The study identified operational and services
benefits from adopting and developing of E-banking technology such as increase productivity,
reduces paper work, reduce transaction cost, generate foreign currency, increase reliability and
reducing errors as operational benefits and facilitate development of new products, facilitates
marketing and market access, improve customer service, reduce long queues in banking halls,
increase accessibility of the bank services, create good relation among banks and clients and
encourages price transparency as services benefits.

The study on the impact of E-Banking on financial performance in Ethiopia, for the case of
commercial banks is done by Abebaw (2020) and result of the study supports that Mobile
Banking is statistically significant for capital, Non-performing asset, and deposit performance.

24
ATM banking also has statistical significant effect on profit, capital, Nonperforming asset, and
deposit performance. Similarly, POS tanking has statistical significant on profit, capital, and
deposit performance. Card tanking is also has statistical significant for profit, Non-performing
asset, and deposit performance. The overall result indicates that IT investment, in this case E-
Banking services, has effect on Banks major financial performance. As effect of E-Banking
product differ on Banks financial performance measures to the in magnitude and direction.

The Study conducted by Dula ( 2019) on the E-Banking Service Quality of Ethiopian Banks
depicted that a significant proportion of the sample respondents e-banking services like POS
and Internet banking services potential were not adequately used by customers and the major
problem that customers experienced on mobile banking was the lengthy steps in processing
transactions.

From the above review literature this paper identified different factor are the challenges of E-
banking. Different researchers use different variable that affects E-banking in different
countries. But most of those variables are included in the three major factors those are
organizational challenge, technological and environmental challenge. This paper used these
three major factors as major factors for the challenges of E-banking in the case of United and
Wogagen banks. All the remaining major factors are parts of the three factors.

2.3 conceptual framework of the study

The conceptual farm work of the study shows that the causal relationship between the major
challenges and opportunities of E-banking and its growth. This can be shown by the following
figure.

25
Figure 2.1 conceptual framework of the study

Technologica
l challenges

Challenges of Environmen
E-banking tal
challenges

Organizational
challenges

Increase in
global
computation

Opportu developme
nities of nt of IT
E-
banking

increase in
customer
awareness
TO E-
banking

26
 CHAPTER THREE: RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction
This chapter presents the methodology part of the research, it covers the research
approach and design, methods and procedures used for data collection and analysis
concerning the current Opportunities and Challenges of E-banking services . The chapter also
discusses the targeted population, sample and sampling techniques, instrumentation and
research ethics.

3.2 Research Design

The research design is the blueprint that shows research type selection, appropriate data type to
be collected and method/s of data analysis.

Commonly, there are three types of research. One is descriptive which is mostly describing the
existing situation as it is. The second type is explanatory which is describing relationship or
cause and effect among variables. The third type of research is exploratory which is
experimental in nature. Because of the nature of the data to be collected and the research
question this study employed distributive research design.

3.3 Research approach

There are three approaches that are used in conducting a given research in terms of the type of
data used. These are quantitative, qualitative and mixed research approach. Quantitative
research approach focuses primarily on the construction of quantitative data which is a
systematic record that consists of numbers constructed by researcher utilizing the process of
measurement and imposing structure. The quantitative research approach employ measurement
that can be quantifiable while the qualitative approach cannot be measured.

In mixed research approach inquirers draw liberally from both qualitative and quantitative
assumptions. The research conducted this study using mixed research approach; the rationale
for combining both quantitative and qualitative data is to better understand the research
problem by combining both numeric values from quantitative research and the detail of

27
qualitative research and to neutralize limitations of applying any of a single approach. The
mixed research approach uses separate quantitative and qualitative methods as a means
to offset the weaknesses inherent within one method with the strengths of the other method
(Creswell, 2009).

In order to attain the objective of the study and answer the research questions, the researcher
was adopted mixed research approach. The rationale of using a mixed approach is to gather
data that could not be obtained by adopting a single method (Creswell, 2003). Hence, the basis
of such approach helps to neutralize the limitations of applying a single approach in connection
with the qualitative and quantitative nature of the research questions.

This study was focused on describing the current situation of the problem and answer the
research questions which are in the form of ‗‗what‘‘, and to highlight the most important
factors that can negatively or positively affect the adoption and development of E-banking in
the two commercial banks under study. Moreover, this research aims to explain the
phenomenon and assess the current practice of E-banking and opportunities. Therefore,
Descriptive research is being used to achieve the research objectives.

3.4 Study Area

The area chosen for this study is Addis Ababa because head office of the two commercial
banks that represents the whole branches in the country and the central bank of the country are
located there and also E-banking experts of the two commercial banks are located at head
offices which found in the capital city of the country, Addis Ababa.

3.5 Population, Sample Size and Sampling Techniques

In research methods, population is the entire aggregation of items from which samples can be
drawn (Yahiya, 2011 cited on Kassahun, 2016). The populations of the present study the two
commercial banks under study i.e. United and Wogagen banks. In order to undertake this study,
the researcher purposely sampled twenty branches of the two banks ten from united bank and
ten from wogagen bank which are adopted E-banking technological. Those branches are
located in Addis Ababa. The researcher chooses to take twenty branches as a sample, because it
is often impossible or too much expensive to collect data from all the potential units. The

28
procedure used for drawing the sample from the available lists was based on their familiarity
with E-banking technology i.e. long years services in providing E-banking products to public.
Thus, this research paper used purposive sampling method to draw the sample from the
population.

3.6 Data Source and Collection Method

The study was conducted by collecting data from both primary and secondary sources. Primary
data was collected from the staffs from twenty branches and the IT departments of the two
commercial banks under study based on a structurally designed questionnaire. It included both
closed ended and open-ended questions, which gives the respondents an opportunity for
adequate expression of their view on the questions .In addition, semi-structured interview with
the higher official of the two commercial banks E-banking manager‘s was conducted. In order
to get sufficient and reliable data that represents the whole branch of the selected commercial
banks both primary and secondary data was collected from each bank at the head office level.
Secondary data: different documents, records and reports of the industry, Regulatory organ
reports, from web site, books, annual reports and magazines, articles and journals were also
analyzed.

In order to collect sufficient data so as to answer the research questions, researcher designed
two surveys; the first was a questionnaire to get quantified results. The second survey was
interviews aimed to collect data from E-Banking managers. In addition to questionnaire and
interview secondary data source has been also used.

3.6.1 Questionnaires
According to Yin (2003), structured questioners are important method for collecting primary
data and that it further allows the researcher to be well focused on the specific research topic.
The questionnaire was used because the researcher considered it to be more convenient as
respondents could answer at their convenience (See Appendix 1). The questionnaire was
developed by the researcher based on the research questions and the literature. The researcher
used open and closed-ended type of questionnaires, which gives the respondents an opportunity
for adequate expression of their view on the questions. The questionnaire began with an

29
introductory statement, which specified the purpose of the research as purely academic.
Respondents were encouraged being objective in their responses since they were assured of
confidentiality.
To determine the probable usefulness of the questionnaire and whether further revision is
needed prior to conducting the survey, the questionnaire was pilot tested. The researcher
circulated the questionnaire to four postgraduate students and six professional staffs of sampled
private commercial directly engaged in E-banking technology. The subjects were asked if they
had any problems understanding the questionnaire or have specific comments regarding the
questionnaire. The format for responding was through both open-ended and close-ended
questions. The subjects were encouraged to be very free with their responses, make suggestions
for improvement and outline any difficulties they found. After each questionnaire was
accomplished, every question was asked what he/she meant in checking various answers.
Comments were solicited on the intelligibility of the questions and what the changes should be
done in order to make the questions simpler. These respondents also gave their comments on
understanding the instructions about the scaling and the time taken to answer the questions. The
test found no grave problems and minor modifications were made to the survey questions based
on the response obtained. In addition, the pilot study was conducted to ensure the validity,
sequence and relevance of the questionnaire to this study.

As despite in the above, twenty purposely sampled branches and the IT departments of the two
commercial banks were included in the survey. The target respondents were professional
experts who are in charge of the E-banking technology in sampled two private commercial
banks. As per the secondary data (through interview made with E-banking Mangers of the two
banks) number of professional expert directly engaged in E-banking technology are 289 (Two
hundred eighty nine). A questionnaire is floated to 140 professional staff of twenty branches
and IT departments of the two commercial banks that directly involved in the delivery of the E-
banking Services. The respondents are considered as they are deemed to be knowledgeable in
due course of implementing and running E-banking system in their line of work and could
provide important perspectives on its adoption as they are involved in implementation of the
project. The survey is to be used through distributing self-administered questionnaires. Random

30
sampling technique is employed to select respondent from employees of the twenty branches
and IT departments of the two commercial banks.

Questions present in the form of affirmative statements, relating to the concepts on E-banking
and to identify their intention on the challenge and opportunities for adoption and development
of E-banking technology, in such a way to enable measurement of the respondent‘s opinions.
The respondents were asked to indicate their level of agreement on a five point likert scale with
the following ratings. Strongly agree (SA; or 5), agree (A;or 4), neutral (N; or 3), disagree (DA;
or 2), and strongly disagree (SD; or 1). The numbers were indicated in the questionnaires to
provide a feel of ordinal scale measurement and to generate data suitable for quantitative
analysis. The questionnaire was a close ended questionnaire to elicit guided responses and for
easy analysis and to obtain additional information, the respondents were requested to provide
open-ended responses if they have opinions which they feel the researcher would find useful.

3.6.2 Interviews
In addition to questionnaires, semi-structured interviews were conducted with E-banking
managers of the two commercial banks to have sufficient information regarding the research
problem and with the relevant bodies of the National Bank of Ethiopia (Banking Supervision
directorate). The major purpose of this interview was to corroborate certain facts that the
investigator already thinks have been established (Yin, 1989; pp. 89). Therefore, Thus, semi-
structured interviews were conducted so as to substantiated and improve the results of
questionnaires.

3.6.3 Secondary data Sources

The secondary sources of data constituted data gathered from records and reports of the two
banks, World Wide Web (www) of the two commercial banks, literature on E-banking, books
and journals, and unpublished theses.

The most important use of this secondary data source will be to corroborate and augment
evidence from other sources (Yin, 1989; pp. 86). Thus, the document examination helps to

31
substantiate the patterns that evolved from the data collected via questionnaires and interview,
so that the validity of the findings could be enhanced through secondary sources.

3.7 Method of Data Analysis

In order to meet the stated research objectives, the collected data was analyzed based on the
nature of the objective. Accordingly, the data collected via questionnaires was analyzed with
descriptive statistics using Microsoft excel. Furthermore, Wolcott (1994) cited in Creswell
(2003; pp. 184), suggested that qualitative research is fundamentally interpretative i.e. the
researcher makes an interpretation of the data. Thus, the data that was collected from the
interview and reviews of documents were interpreted qualitatively. To sum, the analysis of
quantitative data and interpretation of qualitative data combines to seek convergence among the
results (Creswell, 2003).

32
 CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION

4.1 Introduction
The central focus of this study was to address the challenges and opportunities that are faced by
E-banking in the case of United and Wogagen banks. In this section, the researcher tried to sum
up findings of the study by identifying and analyzing the major factors which are the challenges
of E-banking and also possible opportunities in Ethiopian banking industry.

The Respondents were from the selected branch and IT department staffs of the two
commercial banks. Of the total 140 questionnaires prepared and administered 130 were
effectively answered and collected. Out of the total questionnaire administered 130 (92.85%)
of the respondents effectively completed and returned the questionnaires forms. On the other
hand of the total of effectively answered questionnaires 120 were found from the branch
employees of the two banks while 10 were from the IT department staffs.

In addition to the survey questionnaire, the researcher conducted an interview with key in
formant supervisors from each work units and reviews some available bank documents
regarding E- banking services to complement and crosscheck the reliability of the respondent
found from the questionnaires.

4.2. Demographics of Respondents

4.2.1 Sex Ratio

The descriptive analyses for demographic profile of respondents which indicated out of 130
respondents 80 (61.53%) were male while the rest 50 (38.46%) were female.

Table 4. 1 Sex Ratio of the respondents

Sex Frequency Percent (%)

Male 80 61.53
Female 50 38.46
Total 130 100.00
Source: own computation (survey data, 2018-2019) .

33
Sex ratio determination helps to identify which groups is mostly advantageous and challenged
in using E-banking.

4.2.2. Age Ratio

Table 4. 2 Age Range of the respondents

Age Frequency Percent (%)

20-30 33 25.38
31- 40 57 43.84
41 – 50 27 20.76
Over 51 13 10
Cumulative 130 100
Source: own computation (survey data 2018-2019) .

From the Table 4.2 it can be seen that from the total respondents, people between aged 20 to 30
years old were 33 which accounts for (25.38%) of the total respondents. Respondents aged
between 31 to 40 years old were 57 accounting for (43.84%). Respondents aged in the range
of 41 to 50 years old were 23 implying that it accounts for 20.76% of the respondents.
Likewise, of the total respondents, 13 (10%) respondents were aged above 51 years old. This
data helps to identify which age is mostly using E-banking.

4.2.3. Marital status

Table 4. 3 Marital status of the Respondents

Marital status Frequency Percent (%)

Single 49 37.69
Married 61 46.92
Divorced 20 15.38
Widowed 0 0
Total 130 100
Source: own computation (survey data 2018-2019) .

34
Regarding the marital status of the samples, 49 (37.69%), 61 (46.92), and 20 (15.38) were
single, married and divorced, respectively. The implication of this data is that participants were
from all age groups and marital status which helps researcher to have the necessary information
in analyzing the data collected from each groups.

4.2.4 Current Educational qualification

Table 4.4 Educational level of the respondents

Educational level Frequency Percent (%)

TVET - -
Diploma 30 23.07
University Degree 80 61.53
Master‘s Degree 20 15.38
Above - -
Total 130 100
Source: own computation (survey data 2018-2019)

Analysis on the educational level of respondents showed that 30 (23.07%), 80 (61.53%), 20

(15.38%) were found to be diploma holders, university degree holder and second degree
holders, respectively. The result revealed that all of the respondents of the assessment were at
least high school graduate and above. In other word there was no any respondent whose
educational level is below diploma study.

4. 3 Program for accuracy and functionality

Table 4. 5 Program for accuracy and functionality

Response Frequency Percent(%)

Are links and interactive programs cheeked for accuracy & functionality

Yes 130 100 %

No - -

Total 130 100 %

35
 Source: Compiled from questionnaires

The table above shows that 100 % of the respondents answered yes for the question is links and
interactive programs checked for accuracy and functionality. This indicates that checking for
the accuracy and functionality of their links and interactive programs helps to solve challenges
of E-banking activities.

4.4 Training facilities provided for employees about E-banking.

Table 4. 6 Training on E-banking

Technology Frequency Percent (%) Cumulative

awareness
Is electronic banking training provided to employees?
Yes 127 97.67 97.7
No 3 2.30 2.3
Total 130 100 100
Source: Compiled from questionnaires

Depending on the information gathered from the bank managers and employees 127 or 97.7 %
answered yes on the question, is electronic banking training provided to employees. While only
3(2.3%) answered no on the same question.

4.5 A trade market for E- banking in the branches.

Table 4. 7 E-banking trade

Response Frequency Percentage

Yes 129 99.23

No - -
Undecided 1 0.769
Total 130 100
Source: Compiled from questionnaires

36
The above table indicates that from the total respondents (129) 99.23% answered the banks
have a trade market for E-banking while 1(0.76%) of the respondents replied undecided on the
question.

4.6 Recent challenges of E-banking on internal user

Table 4. 8 Recent challenges of E-banking on internal user

Response Frequency Percentage (%)

is there Recent challenges of E-banking on internal user?
Yes 125 96.15

No 5 3.84

Total 130 100 %

Source: Compiled from questionnaires

Based on the above table from the total of 130 respondent, 125 (96.15%) answered the
existence of challenges in their banks for E-banking service. Among the challenges they
described on the open ended question, poor internet speed, the policy and regulation did not
allow the private sector to own and develop telecommunication materials were described as the
existing challenges.

According to the Ethiopian telecommunication law, no one is allowed to open

telecommunication center. It is only in the hand of Ethiopian government. Only five or 3.84 %
answered no to the question. Therefore majority of the response state the existence of E-
banking challenges in the banks.

4.7 Difference in its challenges among the branches

Table 4. 9 Existence of E-banking challenges among banks branches

Response Frequency Percent (%)

Yes 130 100
No - -

Total 130 100

37
Source: Compiled from questionnaires

From the collected response from the questionnaire on the question ―is there the difference in
its challenges among branches‖ all respondents answered yes. The challenges of E-banking
differ from one branches of the bank to the other.

4.8 Challenges of Adoption and Development E-banking Technology in Ethiopia

As cited in chapter two, there are so money challenges that negatively affect adoption and
growth of the E-banking technology. The factors affecting the successful adoption and growth
of new technologies, such as E-banking are common in nature. Such as cost factors, security
and trust factors and lack of adequate ICT infrastructure (particularly in developing countries
like Ethiopia). However, reasons vary widely among banks and countries and also important to
note that challenges to E-banking technology adoption and development work differently
according to organizational type and culture.

A total of fourteen questions on challenges of adopting and extending of E-banking technology

obtained from different literatures were asked to indicate the extent to which each respondent
agrees to corresponding closed ended statements rated on a five-point Liker type scales ranging
from ‗1‘ ―Strongly Disagree‖ to ‗5‘ ―Strongly Agree‖. Statistical results are presented under
each section of the factors considered using the table including the number of frequencies, the
Mean, Mode and Standard Deviation of the data points. The mean tried to tell the average
where the data points fall for each specific variable, Mode indicated most frequently answered
points for each specific variable while the standard deviation column showed the variability of
the data points for each variable under consideration.

Accordingly, the researcher tried to interpret the Mean and the Mode of the data points. The
researcher tried to triangulate and complement the result obtained from the interview and open
ended questions with the results obtained from the Likert type statements pertaining to similar
variables, when found appropriate.

For analysis purpose challenges are categorized in to organizational, environmental and

technological factors according to Tornatzky and Fleisher (1990).

38
4.8.1 Organizational Challenges
Most cited organizational factors in the different literature are; IT users‘ community;
organizational structure; firm‘s process; firm size; technological capabilities of the
organization‘s members; the technological and financial resources available; process of
selecting and implementing the IT; management backing and support for the project(Harrison,
2012).

In this study costs related to implementation and running of E-banking technology, resistance
to changes in technology, customer awareness, technical and managerial skills required to
implement E-banking technology are considered as organizational factors and the survey result
is shown on table 4.12 as follows
Table 4.10 Organizational challenges of E- banking

No I. Organizational number mean mode Std.

Challenges deviation

1 High cost of implementation of E- 130 3.89 5 0.106

banking
2 Lack of customer awareness with E- 130 3.93 5 0.116
banking products
3 Lack of technical and managerial skills 130 4.05 5 0.56
in implementation and development of
E-banking
technology
4 Resistance to changes in technology 130 3.76 5 0.96
among by Board, top Management and
staff ;
Source: Survey result, 2019
The above table shows that high cost of implementing of E-banking technology such as cost of
ICT equipment and network, software and re-organization is the major organizational challenge
for implementation and growth of E-banking technology in the two commercial banks, in

39
which the mean score and mode were found 3.89 and 5.00 respectively. This is in line with
finding OECD (2004) where high cost of ICT equipment and network, software and
reorganization is a factor that hinders adoption of E-banking technology. The respondent also
agreed that lack of social awareness regarding E-banking services provided by banks is
considered as a factor that negatively affecting the successful adoption and growth of E-
banking technology as the average result in the Likert scale is found 3.93. Similarly, an
interview script received from E-banking Managers of sampled banks indicates that
communities are not aware of the benefits of e- banking technology to the individual as well as
to the society as whole. As a result, they are not provoked enough to use E-baking products or
services. The finding is in line with Vaithianathan, S. (2010) and Angelakopoulos and Mihiotis
(2011) in which all indicted that, the non- familiarity with E-banking technology products and
services by customers is the main factor that has a negative influence on the adoption and
growth of E-banking technology.

The result further revealed that lack of technical and managerial skills in implementation and
development of E-banking technology is considered as factor that has a negative influence on
the adoption and growth of E-banking technology in Ethiopia with a mean score of 4.05.
Besides, an interview conducted with united banks E-banking manager confirmed that E-
banking and E-payment system requires high level of understanding and knowledge on ICT, E-
banking on one hand and limited knowledge of about E-banking and how they operate by the
banks worker on the other hand create a great obstacle for implementation and growth of E-
banking technology. The finding is in line with Vaithianathan, S. (2010) where lack of skilled
human in E-banking context is considered as hurdles that prevent pervasive e-commerce
adoption in developing countries. The respondent also agreed that resistance to changes in
technology by Board, Top Management and staff is considered as challenge for the adoption
and growth of E-banking technology as the average result in the Likert scale is found 3.76.

In general, the result revealed that high cost of implementation of E-banking technology,
customers unfamiliarity with the E-banking products and their benefits, lack of technical and
managerial skills in implementation and development of E-banking technology and resistance
to changes in technology by are considered as organizational factors that hinders Ethiopia
banks to adopt and develop E-banking technology.

40
4.8.2 Environmental factors
According to Tornatzky and Fleischer (1990) another factors influencing technology innovation
is environmental factors. The issues raised in this study in relation with environmental factors
are infrastructure, role of government, regulation and law, computer literacy and other are
considered as organizational factors and the survey result is shown on table below.
Table 4.11 environmental challenges

No Technological challenges number mean Mode

1. Limitation in network infrastructure and 130 3.77 5

internet related support services;
2. Limitation in ICT infrastructure; 130 3.84 5
3. Lack of adequate coordination, interaction and 130 3.78 5 and
cooperation between banks and other decision 4
making centers in E-banking context;
4. Absence of financial networks that links different banks; 130 3.73 4

5. Frequent power disruption; 130 3.89 5

6 Relative high cost of internet; 130 3.05 5
Source: compiled from the questioner
The above table highlighted that limitation in network infrastructure and internet related
support services is the basic external challenge for adoption and growth of E-banking
technology in Ethiopia, were the median and mode value are 3.77 and 5.00, respectively as per
the response of the sampled participants. Likewise, an interview conducted with all E-banking
managers of the two commercial banks indicates that limitation in network infrastructure and
internet related support services is a major obstacle to effectively deliver of E-banking services
to their customers. This result is consistent with the findings reported earlier by OECD (2004)
and Wondwossen and Tsegai (2005). The respondent also agreed that low level ICT
infrastructure development in the country having a mean score of 3.85 is one of the obstacles
for E-banking development. Since, the E-banking technology requires a generally good
infrastructure in terms of communication and information technology. Unless there is a

41
transformation in infrastructural development in Ethiopia, E-banking technology would not
serve its purpose as a successful propagator for financial inclusion.

The result further revealed that most respondents agreed that absence of financial networks that
links different banks (Mean = 3.73), lack of adequate coordination, interaction and cooperation
between banks and other decision making centers in E-banking context (Mean = 3.78), frequent
power disruption (Mean =3.89) are another external factors that hampered adoption and growth
of E-banking technology in the two banks under study. Regarding with lack of adequate
coordination, interaction and cooperation among banks, an interview conducted with each E-
banking managers of the two banks confirmed that there is no adequate coordination,
interaction and cooperation between banks and other decision making centers in E-banking
context. Nevertheless, United Bank E-banking Manger confirmed that currently six bank
named United Bank, Awash International Bank, NIB International Bank, Birhan International
Bank, Addis International Bank and Cooperative Bank of Oromia have reached an agreement
to share ATM and POS networks.

Finally, with regard to ideas that high internet cost considered as a challenge on average the
respondents were found be the mean resulted of 4.05.

4.8.3 Technological Challenges

Even though there are many benefits associated with adoption of new technology, there are
many hindrance technological factors that affect effective implementation and extending of the
technology. The issues raised herein under the technological factors were relative
disadvantages that hinder banking industries from adoption and development of E-banking
technology such as customer fear of risk, security risk, lack of trust with the technology, loss of
the audit trail and all of the respondents participated in this study were asked that such factors
are consider as challenges that the banks faced while adopting and extending of E-banking
technology and the survey result is shown below.

42
 Table 4. 12 technological challenges

No challenges number mean mode

1. Users do not trust the E-banking technology 130 3.93 4

provided by banks;;
2. Government can organize and create good plans to 130 3.95 4
support the development of civilian technology
innovation.
3. Lack of confidence with the security aspects; 130 4.05 5
4. Loss of Audit Trail. 130 3.88 5
Source: Compiled from the questionnaire

Responses captured in the above table shows that, the respondents asked whether customers do
not trust the E-banking products provided by banks and the descriptive statistics result gives
mean value of 3.93, that means the largest number of respondents (43.1%) were agreed with
the idea that lack of customers trust with E-banking technology is one technological factor that
have a negative impact for adoption and growth of E-banking technology. This result is in line
with the finding of Ziad et al., (2009) where lack of confidence in service providers is cognitive
hindrance in adoption of ecommerce. According to Delali (2010) consumer‘s confidence, trust
in the traditional payments system has made customers less likely to adopt new technologies
and new technologies will not dominate the market until customers are confident that their
privacy will be protected and adequate assurance of security is guaranteed and also new
technologies also requires the test of time in order to earn the confidence of the people, even if
it is easier to use and cheaper than older methods.

The result further revealed that the largest number of respondents were agreed with the idea
that customer fear of risk to use E-banking technology is considered as challenge for the
adoption and growth of E-banking technology in Ethiopia banking industry, were mean and
mode value found 3.95 And 4.00, respectively. Likewise, lack of confidence with the security
issue is considered as another challenge for the adoption and development of E-banking

43
technology, were mean score and mode value found 4.05 and 5.00, respectively. This result is
consistent with the findings of (Okoye, 2013), Ziad et al., (2009), Khalfan et al., (2006) were
security risk as hindrance factor for the adoption of E-banking. Thus, customer fear of risk and
lack of confidence with the security aspect are other technological factors that hamper adoption
and growth of E-banking technology in the country.

4.9 Opportunities for Adoption and Development of E-banking Technology

Table 4.13 Respondent‘s perception towards opportunities

o
N Opportunities of E-banking numb mean mo
er de

1 Late adopter 130 4 5

opportunities

2 Commitment of the government to 130 4 5

strengthen the banking industry;
3 The existence of high demand; 130 4.16 5

4 Improvement in the banking 130 4.04 5

habit of the society;
Source: compiled from questionnaire

Respondents were asked whether they `strongly agreed, Agreed, Neutral, Disagreed or Strongly
disagreed‘ based on the four questions shown in the table above to confirm the existence of the
opportunities for adoption and development of E-banking technology in Ethiopia, Accordingly,
the sampled respondents agreed with the idea that the existence of high customers demand,
improvement in the banking habit of the society, late adopter of E-banking in Ethiopia banking
industry, commitment of the government to facilitate the expansion of ICT infrastructure and to
strengthen the banking industry are existing opportunities fostering the adoption and
development of E-banking technology in Ethiopia banking industry. This is evidenced by the
data collected from the respondents with mean score of 4.00, 4.00, 4.16 and 4.04, respectively.
An interview conducted with Banking Supervision Directorate Manager at NBE agreed that the
business environment is conducive taking into account the economic growth and stability in the

44
Country. However, the interviewee admitted that there are infrastructural hurdles such as
network and accessibility problems, ICT and other which impact the expansion of technology
innovative banking products like ATM, Mobile and Internet Banking and due attention shall be
given by respective stakeholders.

4.10 Benefits Realized from the Adoption and Development of E-banking

Technology in Ethiopia Banking Industry
Perceived benefits are the gains or improvements derived from existing traditional ways of
operating business transactions using E-banking technology applications. The following section
summarizes respondents‘ views of expectations and perceived benefits for E-banking
deployment. Benefits expected to be gained from E-banking as an option is a big deciding
factor for a Bank‘s decision to adoption and growth E-banking technology. Some of these
benefits include facilitate development of new products and new business, improvement
productivity, cost saving, increased market share, speed and efficiency of doing business,
improvement in customer service and others.

A total of five questions on ―Benefits‖ of adoption and development of E-banking were asked
to indicate the extent to which each respondent agrees to corresponding closed ended
statements rated on a five-point Likert type scales ranging from ‗1‘ ―Strongly Disagree‖ to ‗5‘
―Strongly Agree‖. Statistical results on the variables under the benefits of E-banking including
the number of frequencies, the Mean and mode of the data points. The mean and mode tried to
tell the averages where the data points fall for each specific variable. Accordingly, the
researcher tried to interpret the mean of the data points. The researcher tried to triangulate and
complement the result obtained from the interview, open ended questions with the results
obtained from the Likert type statements pertaining to similar variables, when found
appropriate.

45
 Table 4.14 benefits arising from E-banking
No benefits numb mean mo
er de

1 Enhance productivity in the banking 130 4.18 4

industry

2 Reduced paper work; 130 3.78 5

3 Low transaction cost. 130 4.06 5

4 Enhance foreign currency generation; 130 4.02 5

5 Increase reliability and reducing errors; 130 4 5

Source: compiled from questionnaire

The potential operational efficiency benefits of E-banking technology as perceived by the

banks identified in this study as captured in the above table the respondents strongly agreed that
adoption and development of E-banking technology in Ethiopia banking industry will increases
productivity of the Bank, reduces paper work and transaction cost. This is evidenced by the
data collected from the respondents with mean score of 4.18, 3.78 and 4.06 respectively.
Similarly, interviews conducted with E-banking Mangers of the two banks supported that
adoption and development of E-banking technology reduce the banks cost in two fundamental
ways: it minimizes the cost of processing transactions i.e. no need to have too much clerks and
cashiers and expenditures on paper slips, forms and other bank stationery have also gone down
and reduces the number of branches required to service an equivalent number of customers, this
lead the bank profit margin to boost.

The result further revealed that large number of respondent (43% strongly agree and 33%
agree) agreed that adoption of E-banking technology generate foreign currencies. This
agreement is based on the responses of the respondents with mean score 4.01. Besides, an
interview conducted with E-banking Manager of united Bank confirmed that the bank has
generated 430 million dollar through international card transaction for the past eight years. This
implies that adoption of E-banking technology has a crucial factor not only for trade but also

46
for economy growths in the country through improving the capital inflow and solve foreign
currency shortage that the country faced. Same was supported by Cobb (2005) in which E-
payments have a significant number of economic benefits apart from their convenience and
safety and these benefits when maximized can go a long way in contributing immensely to
economic development of a nation.

Lastly, the other operational benefit of E-banking technology identified in this study is increase
reliability and reducing errors. This agreement is also based on the responses of the respondents
with mean score of 4.00

47
 CHAPTERFIVE: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS

The purpose of this chapter is to conclude and provide summary, suggestive recommendations
based on the findings by identifying major challenges and opportunities of E-banking in
Ethiopian banking industry to enhance the growth of E-banking service in the banking industry.

5.1 Summary

The objective of the study was to identify the current challenges and opportunities of E-banking
in Ethiopian banking system. Accordingly, this part of the research summarizes the findings of
the study and major challenges of E-banking. The study employed three independent variables.
These are organizational, technological and environmental challenges.

ORGANIZATIONALCHALENGES

High cost of implementation of E-banking such as cost of ICT equipment and network,
software and re-organization, lack of customer awareness with E- banking service provided,
and lack of skills and trained staff in implementation and running of E-banking system and
resistance to changes in technology among by Board, top Management and staff are described
in the study as organizational challenges for adoption and growth of E-banking in Ethiopia
banking industry.

ENVIRONMENTAL CHALENGES

lack of law mandating the banks to adopt E-banking technology, lack of adequate coordination,
interaction and cooperation between banks and other decision making centers in E-banking context,
absence of financial networks that links different banks, frequent power disruption, tight
foreign currency regulation and lack of uniform platform by banks are another environmental
challenges for adoption and growth of E-banking technology in Ethiopia.

TECHNOLOGY RELLATED CHALLENGES AND OPPORTUNITIES

In connection with technology factors, lack of customer trust with E-banking services provides
by the banks, customer fear of risk to use E-banking technology and security risks are consider

48
as technological factors negatively affect the adoption and growth of Ebanking technology in
Ethiopia. In this study, majority of challenges for adoption and development of E-banking
technology in Ethiopia are derived from the external environments and limitation in network
infrastructure and internet related support services is one of basic challenge in adoption and
development of E-banking technology in Ethiopia.

49
5.2 Conclusion
The findings of the study revealed that the current challenges and opportunities of E-banking
system in Ethiopian banking industry stretches wide across the three extremes of the
challenges and opportunities where the concerted effort by stakeholders to overcome the
challenges will bring about immense opportunities to the dominant players in the field
with the ultimate result of transforming the country towards financial inclusion.
Accordingly, a number of conclusions can be drawn from these results. Potential operational
efficiency benefits of E-banking. Moreover, the banks realized service benefits like, increased
comfort and time saving, transactions can be made 7x24, without requiring the physical
interaction with the bank, quick and continuous access to information, better cash management,
E-banking facilities speed up cash cycle and increases efficiency of business processes as large
variety of cash management instruments are available on internet sites, reduced ,conveniences,
speed ,and funds management‘s-banking activities face challenges because, Lack of banking
services through the web or other electronic means such as using mobile phone data and
network security and privacy, lack and limitation of government policies, regulations and E-
commerce laws, as well as legislation to protect workers and to make the Internet secure, weak
telecommunications, broken and slow Internet connections and lack of Internet awareness.

50
5.3 Recommendations
Based on the findings the researcher came up with the following possible
recommendations .

To the Banks

 Banks should have to invest adequate resource on E-banking technology.

 Banks needs to work with the government to solve infrastructure that challenges E-
banking

 It should create deep awareness to community concerning the E-banking products

they offer and the benefits associated with using E-banking services through advertising
their products and services on the internet, mass media as well as through organizing
public exhibition and talk shows.

 The bank should inform the e-bank users how to protect themselves from the challenges
of E-banking before the users were challenged by it.

 The banks should facilitated proper and continuous training courses for their employees

To the Policy Makers

 In collaboration with banks, Government should educate and inform the community on
the work ability and effectiveness of E-banking technology.

 Government need to subsidize the high cost for ICT equipment that challenges banks in
introducing E-banking.

 The policy needs to allow banks to establish their own telecommunication managed by
their own.

 Government should support banking sector by facilitating development of sufficient ICT

infrastructure for the successful implementation and development of E-banking services.

5.4 Suggestions for Further Research

This study described the current challenges and opportunities of E-banking system in Ethiopia
in the case of Wogagen and United Banks. Nevertheless, it did not consider the customers
perspective and other stakeholder like Ethio-Telecom.

51
Therefore, the researcher would like to recommend further research be made on the area
especially to capture the customers‘ and other above stakeholders perspectives.

52
REFERENCES
Ayo, W, (2009), Electronic -banking in Ethiopia: practices, opportunities and Challenges‟,

Journal of internet Banking and commerce, 15(2):2-9.

Abbasi Z (2001).E-security issues in Pakistan.

Abebe.2016.Opportunities and challenges in the adoption of e- banking services:

Abraham H (2012).Challenges and Opportunities of Adapting Electronic banking in

Ethiopia.

Adeoye, Abayomi Olarewaju and Elegunde, Ayobami Folarin (2012) „Impacts of External

Business Environment on Organisational Performance in the Food and Beverage

Industry in Nigeria‟, British Journal of Arts and Social Sciences Vol.6 No.2

Alam N. (2010). Challenges Faced by Sudanese Banks in Implementing Online

Banking: Bankers‘ Perception, Journal of Internet Banking and Commerce, vol. 15,
no.2, pp.2.

Anish Kumar .and ital, 2016.INTERNET BANKING -BENEFITS AND CHALLENGES,

Tamil Nadu, India.

Babatunde, B.O. and Adebisi, A.O. (2012).‖Strategic Environmental Scanning and

Organisational Performance in a Competitive Business Environment‖, in Economic

Insight -Trend and Challenges, Vol LXIV, No I.

Barnat, R. (2005) Strategic Management, New Jersey: Prentice Hall.

Basel J. A. Ali-Ph.D. Role, Challenges and Benefits of Electronic Banking service in Jordan,

2016

Booz-Allen and Hamilton (1999).Corporate internet banking: A global study of potential

Effects‘, New York, NY

Burr, W. (1996) ―Wie Information stechnik die Bank organization. verändernkönnte,‖Bankund

Markt, 11, pp. 128–31

53
Business Teacher (2012) Business Environment Retrieved
frohttp://www.businessteacher.org.uk

/business environments/global-CHALENGES- strategy. php #ixzz2K15QmYvX on

23rd April, 2012

Buse, P. (2009). Changes in thE-banking sector: the case of Internet banking in the UK.

Internet Research, 10(1), 19-31. 37

Creswell, W.J. (2003), ―Research Design: Qualitative, Quantitative and Mixed approaches‖,

2nd ed., New Delhi: Sage.

Daniel, E. (1999). Provision of electronic banking in the UK and Republic of Ireland.

International Journal of Bank Marketing

Dr. Richard Pankhurst, Early Ethiopian Banking History.

Daghfous, M (2009). `Adoption of Internet banking by Australian consumers: An empirical

Investigation and trends in South African Internet banking; Aslib Proceedings, New
Information Perspectives, 56(3), 187-196.

Gardachew, 2010, ` Electronic -banking in Ethiopia: practices, opportunities and

Challenges‟, Journal of internet Banking andcommerce,

Gaeta Sharma 2016: Study of Internet Banking Scenario in India.

How croft, D. (2012). ―Who offers Internet Banking?‖ Quarterly Journal, Office of the

Comptroller of the Currency, Vol. 19 No. 2, June, pp. 27-46.

Humphrey, K. (2008). ―Internet Banking: Developments and Prospects‖, Working Paper,

Center

for Information Policy Research, Harvard University, April. 39

Jannatul, M. N. (2010). E-banking and customer‟ satisfaction inBangladesh: an analysis.

International Review of Business ResearchPapers.

Jassimuddin, S. (2010). Towards modeling the effects of national culture on IT

54
 implementation and acceptance. Journal of Information Technology, 16(3), 145158.

Jayawardhena, F. (2010). Perceived usefulness, perceived ease of use, and user acceptance of

information technology. MIS quarterly, 13(3), 319-340. 42

Jenson ,2003``The Evolution of the Internet in Africa’’, in Beebe.

Karjaluoto, D. (2012). ―Internet Banking: Developments and Prospects‖, Economic and

Policy Analysis Working Paper No. 2000-9, Office of Comptroller of the Currency,
September.

Kassahun Girma. 2016 .Challenges and Opportunities of Electronic Banking in Ethiopian

Banking Industry. Addis Ababa, Ethiopia.

Kim, J. & Prabhakar, N. (2010). ―Internet Banking in the US, Japan and Europe‖, Multinational

Business Rev 7381.

Megersa, N. (2010). the Role and Performance of International Banking In

Financing International Trade, Addis Ababa

Mahdi Salah (2004).E-banking in Emerging Economy: Empirical Evidence of Iran

(Corresponding author) Accounting and Management Department, Zanjan University,

Iran.

Mahdi. R. (2010). A meta-analysis of the technology acceptance model. Information and

Management, 43(6), 740-755.

Malak, J 2007, Readiness of the Palestinian banking sector adopting the electronic

banking system: exploratory study, MA thesis, The Islamic University of Palestine.

Mayer, C. (2008). ―Do Internet Activities Add Value? The Italian Bank Experience‖, Working

Paper, Berkley Research Center, New York University.

Morufu, O. and Taibat, A. (2012).Bankers perceptions of electronic banking in Nigeria: A

Review of post consolidation experience.

55
Neumann, L. G. (2007), “pressures and conflicts in moving towards harmonization of

Accounting practices”: The Hungarian experience. European Accounting

Review, 4(4), pp.713-737.

Nitsure R R(2003) E-banking challenges and opportunities. Economic and Political weekly

38: 5377-5381

Okoye, Victor. 2013―E–Banking in Nigerian Banking Industry: Challenges and

Prospects‖ International Journal for Management Science and Technology (IJMST)

Ozuru, H. N; Chikwe, J. E and IdikaUduma (2010). The use of Traditional payments

and electronic payments Systems in NigA discourse. Proceedings of the 11th

Annual Conference ofInternational Academy of African Business and Development.

Pikkarainen, T., Pikkarainen, K., Karjaluoto, H., and Pahnila, S., (2004). ―Consumer

Acceptance of online banking: an extension of TAM‖. Internet Research:

Electronic Networking Applications and Policy, 14(3), pp. 224-235.

Rafiu, P. (2007). The importance of trust in electronic commerce internet research

Electronic networking application and policy 8(4) 313-21

Rogers, D. (2011). The adoption of electronic banking in Tunisia: an exploratory study.

Journal of Internet Banking and Commerce, 14(3), 1-11.

Salman Shamim and KashifSardar.(2010). ―Electronic banking and e-readiness

adaption by commercial banks in Pakistan‖, Linnaeus University, school of

Computer science, physics and Mathematics.

Sriram Devulapalli1 (2012), SaiKarthikOruganti.Challenges and Opportunities ofE-banking in

India.

Thompson, J. & Martin,F. ( 2010). Strategic Management: Awareness and Change (5 thed.) :
New York: Thomson press

56
Turban, J. (2013). Virtual classroom characteristics and student satisfaction with

internetbased MBA courses. Journal of management education, 24(1), 32-54.

United Bank Annual financial statement report,2017 Addis Ababa,Ethiopia

United Bank SC web report,(2015)[online]Available from :<http://www.unitedbank.com.et>.

[08 May 2015]

Worku and etal.2016.The Impact of Electronic Banking on Customers‘Satisfaction in

Ethiopian Banking Industry (The Case of Customers of Dashen and

Wogagen Banks in Gondar City)

Zhao, et al., 2008, ‗Perceived risk and Chinese consumers' internet banking

Service Adoption‘, International Journal of Bank Marketing,

57
 APENDIX

ST.MARY‘S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

The objective of this questionnaire is to collect relevant data on the current challenges and
opportunities of E-banking in Ethiopian banking system. Your response will be used only for
conducting research for the completion of MBA degree in Accounting and finance and thus
your response will be kept confidentially and will not be used for any other purpose.

A. Personal Information

I. Name of the organization/bank__________________________________________

II. Year of establishment: ________________________________________________

III. Job position ________________________________________________________

IV. Work experience __________years

V. Gender: Male  Female 

VI. Educational status:

A. Diploma  B. Degree C. Masters D. PhD and above

Below are lists of statements pertaining to challenges and opportunities of

E –Banking please tick your appropriate choice
1.What are the different electronic channels through which the bank is delivering the service?

A. Credit card  E. Master card 

B. Salary card  F. Debit card 

C. Visa card  G. Student card 

D. Others__________________________________________________

2.Are links and interactive programs cheeked for Accuracy & functional?

YES NO

58
3.Does electronic banking training provided to employees?

YES NO UNDECIDED

4.Does the bank have a trade market for e – banking?

YES NO UNDECIDED

5.Does your bank experience challenge / risk of e – banking recently?

YES NO

6.Is there a difference in its challenges among the branches?

YES NO

Instruction:
Below are lists of statements pertaining to challenges and opportunities of E -Banking. Please
indicate whether you agree or disagree with each statement by ticking (√) on the spaces that
specify your choice from the options that range from ―strongly agree‖ to "strongly disagree‖.
Note: SA- Strongly Agree, A- Agree, Undecided, DA- Disagree, SD- Strongly
Disagree.

II. TECHNOLOGICAL CHALENGES SA Agre U DA SD Tota

e A l%
1 Users do not trust the E-banking technology 39 60 20 5 6 130
provided by banks;;
2 Government can organize and create good plans to 45 56 15 6 8 130
support the development of civilian technology
innovation
3 Lack of confidence with the security aspects; 59 42 13 9 7 130
4 Loss of Audit Trail. 52 47 9 8 14 130

59
 No I. Organizational Challenges SA Agree U DA SDA Total

1 High cost of implementation of E-banking 53 44 10 12 11 130

2 Lack of customer awareness with E-banking 45 56 5 23 1 130
products
3 Lack of technical and managerial skills in 56 43 12 15 4 130
implementation and development of E-
banking
technology
4 Resistance to changes in technology among 45 48 8 20 9 130
by Board, top Management and staff

Below is a list of question on the technological challenges

NO. Environmental challenges SA Agree Natura Disagre Strongly Tot

l e Disagree a
1 Limitation in network 50 37 15 19 9 130
infrastructure and internet
related support services;
2 Limitation in ICT 52 39 12 20 7 130
infrastructure;
3 Lack of adequate coordination, 45 45 13 21 6 130
interaction and cooperation
between banks and other
decision making centers in E-
banking context;
4 Absence of financial networks 42 52 7 17 12 130
that links different banks
5 Frequent power disruption; 49 46 16 10 9 130

6 Relative high cost of internet; 60 39 13 13 5 130

60
 ST.MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

Interview

Thank you very much for volunteering to participate in this one-on-one personal interview. The
main objective of this interview is to assess the CHALLENGES AND OPOPORTUNITIES OF
E-BANKING. Your responses will be treated with utmost confidentiality and will not be used
for any purpose other than the objective of the research. Moreover, the results of the research
will be reported in manner that could not identify you or your organization. The outcome of the
study are anticipated to assist the understanding of the basic opportunities and challenges of
adopting E- banking innovation in delivering quality service to customers of <YOUR BANK>.

Thank you in advance for your participation.

A. Please tell us your working Unit: EBSD IT Area Bank

B. Qualification, Position, and year of service in current

position_____________________________

PART ONE CURRENT CHALLENGES OF E-BANKING

1. What type of Electronic banking service do you provide?

A.ATM B. Internet banking

C. mobile and Agent banking or others?

Please specify.
____________________________________________________________________________
____________________________________________________________________________
________

2. What do you think are the basic challenges of E-banking currently your bank is facing ?

3. Are the following CHALENGES considered in your institution as challenges E-banking

currently ?

a. Security risk

61
b. Customers dissatisfactions

c. Lack of social awareness

d. Cost incurred in the purchase of technological instruments

e. Lack of competition

f. Inadequate ICT infrastructure

g. Lack of skilled manpower .

4. Do you see any social, Economic and legal challenges in introducing of ATM, internet
banking mobile and agent banking in your institution?

PART TWO OPPORTUNITIES OF E-BANKING.

1. What are the opportunities gained by your institution from providing E-banking ?

2. In your opinion what are the key CHALENGES that push your institution to introduce E-
banking ?

3. Any other suggestion or recommendation you would like to add?

Thank you!!

62
Respondents perception towards the measures to be taken to solve challenges of e –
banking

Strongly Agree Und DA Strongly Total %

Agree ecid Disagree
ed
1 Strong password helps
to ensure secure e – 30% 63% 1% 6% 0% 100
banking
2 Regular check of an
account after making 53.7% 43.2% 3.1 0% 0% 100
any transaction online
insure secure e –
banking
3 Using licensed anti-
virus software reduces 67.5 % 22.5% 0% 10% 0 100
challengers of e –
banking
4 Disconnected the
internet when not in use 51.6% 48.4% 0% 0% 0% 100
ensure secure e –
banking
5 Typing your internet
banking URL helps to 45 % 38% 1% 3% 3% 100
ensure secure e –
banking

63
Respondents answer regarding the personal behavior
PERSONAL BEHAVIOR SA Agree U DA SDA Total
%
1 I have the resource to use electronic 30 45 5 12 8 100
banking services
2 I have the knowledge to use electronic 26 36 1 21 16 100
banking service s
3 I have the ability to use electronic banking 20 36 6 21 17 100
services
4 It would take me lots of time to learn how to 34 20 1 31 14 100
use electronic banking services

GROUP INFLUNCE SA Agree U DA SDA Total

%
5 I worried to use electronic banking 15 12 3 42 28 100
services because other people may be able
to access my account
6 People who are important to make think 34 25 6 18 17 100
that should use electronic banking
7 People whose opinion I think should use 78 18 4 - - 100
electronic banking services.
8 People who influence my decision think 82 11 7 - - 100
that I should use electronic banking
services

64