Hana Getye Final Thesis

LUNAR INTERNATIONAL COLLEGE
SCHOOL OF BUSINESS AND ECONOMICS
OPPORTUNITIES AND CHALLENGES OF ELECTRONIC

BANKING SYSTEM: THE CASE OF BANK OF ABYSSINIA S.C
BY:
HANA GETYE
AUG, 2022
ADDIS ABABA, ETHIOPIA
Lunar International College
School of Business and Economics
Opportunities and Challenges of Electronic Banking System: The

Case of Bank of Abyssinia S.C
By:
Hana Getye
Advisor: Getachew Wagaw. (PhD)
A thesis submitted to the School of Business and Economics in Partial

fulminant for the requirements for the award of Masters of Science
Degree in Business Administration of Lunar International College
Aug, 2022
Addis Ababa, Ethiopia
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DECLARATION
I am Hana Getye registration number I.D. No. GSR 0119/12, do here by declare that this
Thesis is my original work and that it has not been submitted partially; or in full, by any
other person for an award of degree in any other College University/institution. The support
and help I received during this investigation have been duly acknowledged.
Name: Hana Getye
Signature----------------------- Date-----------------------------
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APPROVAL OF THESIS FOR DEFENSE
I hereby certify that I have supervised, read, and evaluated this thesis titled ―opportunities
and challenges of electronic banking system in the case of bank of Abyssinia by Hana
Getye prepared under my guidance. I recommend the thesis be submitted for an oral
defense.
________________ ________________ ________________

Advisor name Signature Date
________________ ________________ ________________
Department Head Signature Date
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APPROVAL OF THESIS FOR DEFENSE RESULT
As member of the board of examiners, we examined this entitled ―Opportunities and
challenges of electronic banking system in the case of bank of Abyssinia. We here by
certify that the thesis is accepted for fulfilling the requirement for the award of the degree
of MA in Business Administration.
Board of Examiners
_____________________ ________________ _____________

External examiner name Signature Date
_____________________ ________________ ________________

Internal examiner name Signature Date
_____________________ ________________ ________________

Chairperson name Signature Date
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ACKNOWLEDGMENT
Firstly, I thank God for making it possible for me to attain this academic achievement. I
also wish to express my gratitude goes to my advisor Getachew Wagaw. (PhD) without his
encouragement, guidance, and professional expertise the completion of this thesis would
not have been possible. I appreciate his critical evaluations and immediate response starting
from proposal development and thesis draft to the completion of this work. I do not have
the words to express him; he is always in my heart whether here or everywhere.
Finally, I would like to express my gratitude to Lunar international college school of

business and economics, the department of business administration, to all of my instructors
who have been supporting and helping me with all the required facilities to complete the
courses work and for providing technical support important for the completion of the
research. I extend my acknowledgment to Bank of Abyssinia managers and employees,
and enumerators; my appreciation goes to participants in the study who helped me during
data collection.
Table of content
DECLARATION ........................................................................................................................... iii
APPROVAL OF THESIS FOR DEFENSE................................................................................... iv
APPROVAL OF THESIS FOR DEFENSE RESULT ................................................................... v
ACKNOWLEDGMENT .................................................................................................................. I
LIST OF TABLES .......................................................................................................................... v
LIST OF FIGURE .......................................................................................................................... vi
LIST OF ABBREVIATION ......................................................................................................... vii
ABSTRACT ................................................................................................................................. viii
CHAPTER ONE ............................................................................................................................. 1
1. Introduction ............................................................................................................................. 1
1.1. Background of the study ............................................................................................. 1
1.2. Statement of the problem ............................................................................................ 2
1.3. Research Questions ..................................................................................................... 4
1.4. Objective of the study ................................................................................................. 5
1.4.1. General objective................................................................................................... 5
1.4.2. Specific objective .................................................................................................. 5
1.5. Scope of the study ....................................................................................................... 5
1.6. Significance of the study............................................................................................. 6
1.7. Organization of the study ............................................................................................ 6
CHAPTER TWO ............................................................................................................................ 7
2. Review of Related Literature .............................................................................................. 7
2.1. Introduction ................................................................................................................. 7
2.2. Theoretical review ...................................................................................................... 7
2.2.1. Introduction of E-banking ..................................................................................... 7

II
2.2.1.1. Definition of E-banking................................................................................... 7
2.2.1.2. Evolution of E-banking ................................................................................... 8
2.2.1.3. E-banking channels ......................................................................................... 9
2.2.1.3.1. Internet banking ........................................................................................ 9
2.2.1.3.2. Automated teller machines (ATM) .......................................................... 9
2.2.1.3.3. Point-of-sale transfer terminals (POS) ..................................................... 9
2.2.1.3.4. Mobile banking....................................................................................... 10
2.2.1.4. Organizational challenges of E-banking ....................................................... 10
2.2.1.5. Electronic banking challenges in Ethiopia .................................................... 10
2.2.1.6. Strategic challenges of E-banking ................................................................. 13
2.2.1.7. Technological challenges .............................................................................. 14
2.2.1.8. Opportunities of E-banking system ............................................................... 14
2.2.1.9. Opportunities of E-banking for banks ........................................................... 14
2.2.1.10. Opportunities of E-banking for customer .................................................... 15
2.3. Empirical review ....................................................................................................... 15
2.4. Conceptual frame work of the study ......................................................................... 18
CHAPTER THREE....................................................................................................................... 19
3. Research Methodology ..................................................................................................... 19
3.1. Research design ........................................................................................................ 19
3.2. Research approach .................................................................................................... 19
3.3. Types and source of data........................................................................................... 20
3.4. Study population and sampling method and sample size ......................................... 20
3.4.1. Target population ................................................................................................ 20
3.4.2. Sample size.......................................................................................................... 20
3.5. Method of data collection ......................................................................................... 21

III
3.6. Method of data analysis ............................................................................................ 21
CHAPTER FOUR ......................................................................................................................... 23
4. Results and Discussion ..................................................................................................... 23
4.1. Introduction ............................................................................................................... 23
4.2. Demographic Information of the Respondent........................................................... 23
4.3. Opportunities e-banking services .............................................................................. 25
4.3.1. Perceived Usefulness........................................................................................... 26
4.3.2. Perceived Ease of use .......................................................................................... 27
4.4. Challenges of E-banking services ............................................................................. 29
4.4.1. Organizational factor ........................................................................................... 29
4.4.2. Technological challenges .................................................................................... 30
4.4.3. Environmental challenges ................................................................................... 31
CHAPTER FIVE........................................................................................................................... 34
5. Summary of Finding, Conclusions and Recommendations .............................................. 34
5.1. Summary of finding .................................................................................................. 34
5.2. Conclusions ............................................................................................................... 35
5.3. Recommendation ...................................................................................................... 37
Reference ...................................................................................................................................... 39
APPENDIX –A Questioner and Interview guide line .................................................................. 42
Questioner ................................................................................................................................. 42
Interview ................................................................................................................................... 47
IV
LIST OF TABLES
Pages
Table 4.1. Demographic information of respondents - - - - - - - - - - - - - - - - - - 23
Table 4.2 Opportunity of electronic banking service - - - - - - - - - - - - - - - - - - 25
Table 4.3 Perceived usefulness - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 26
Table 4.4 Perceived ease of use - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 28
Table 4.5 Organizational factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29
Table 4.6 Technological factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 31
Table 4.7 Environmental factor - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 32
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LIST OF FIGURE
Pages
Figure 2.4 conceptual frame work of the study - - - - - - - - - - - - - - - - -- - - - 18
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LIST OF ABBREVIATION
BOA Bank of Abyssinia
ATM Automated teller machine
AVR Automated voice response
E-banking Electronic banking
E-commerce Electronic commerce
EFT Electronic fund transfer
E-payment Electronic payment
ICT Information communication technology
IT Information technology
PC Personal computer
PDA Personal digital assistance
POS Point of sale
PIN Personal identification number
SPSS Statistical package for social science
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ABSTRACT
The objective of this thesis is to identify the opportunity and challenge of electronic banking system
in the Bank of Abyssinia found in Addis Ababa town. From this general objective, three specific
issues were explored those are identifying the current challenge of the Bank of Abyssinia SC,
identifying of the current opportunity of e-banking service .and identify factor affecting customer
to use e-banking service in the case of the Bank of Abyssinia SC. The study identified
organizational, technological and environmental challenges as factors that affect customers to use
e-banking service in the case of the Bank of Abyssinia S.C. An exploratory research design was
employed to conduct this study. Both primary and secondary qualitative data were collected for
the purpose of this study from Employee of Bank of Abyssinia. The collected data was analyzed by
using descriptive statics using mean, mode, median and their standard deviation. Following
analysis of the data, it was discovered that there are several opportunities to start using e-banking
services. enhancing customer service, making it easier for work to be completed quickly and with
the fewest possible errors, Streamlining the actions taken by bank staff to provide services to
consumers, increasing revenues for the bank, cutting costs, increasing efficiency, reducing lines
in the banking hall, and strengthening relationships with clients. And also, this study looked into
the main obstacles that the Bank of Abyssinia's electronic banking services face, which include a
lack of infrastructure, restrictions imposed by law and society, and issues with illiteracy. The
analysis indicates or recommends a number of actions that the government and the Bank of
Abyssinia could take to solve the various issues raised in the study.
KEY WORDS: Bank of Abyssinia, Challenge and Opportunity, E- Banking
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CHAPTER ONE
1. Introduction
1.1. Background of the study
Information technology is widely regarded as a major driving force behind the global
transformation. The world banking business is experiencing a recent phenomenon of
unprecedented rivalry supported by modern information and communication infrastructure, thanks
to the pervasive and steady rise of information and communication. With greater awareness about
the benefits of computers and the internet, E-commerce has become a buzzword for businesses in
recent years. (R.K and Rimpi 2007)
E-banking is defined as the automated providing of new and conventional banking services directly
to customers through electronic, interactive communication channels. The systems that allow
customers of financial institutions, whether they are individuals or businesses, to access accounts,
conduct business, or obtain information on financial services through public or private networks
are referred to as "e-banking services." Examples of these systems include internet ATMs, debit
cards, credit cards, internet banking, mobile banking, etc. E-banking, also referred to as online
banking or virtual banking, is a system that makes it possible to conduct financial operations like
money transfers, loan payments, cash deposits, and withdrawals electronically using the internet.
(Sritam, 2002).
Every country benefit from a healthy banking industry, which may help support economic progress
by providing efficient financial services. To stay up with the globalization movement in Ethiopia.
The banking industry’s role must after, both procedurally and in terms of information. This
transformation will include the switch from traditional distribution channel banking to electronic
distribution channel banking. Existing banks and financial organizations. Because of a real-time
settlement, it enables business process re-engineering in a borderless market to achieve zero
latency, resulting in improved customer service levels and risk management. It has had exceptional
growth since its inception in the 1990s. The growth rate is higher in developed countries, and
comparatively lower in last developed countries (Chang, 2003 & Gallup, 2008)
Bank of Abyssinia was established on February 1996 (90 years to the day after the first but defunct
private bank was established in 1906 during emperor Menelik II). Bank of Abyssinia started its
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operation with an authorized and paid-up capital of birr 50 million, and birr17.8 million
respectively, and with only 131 shareholders and 32staff. The two decades since its establishment
Bank of Abyssinia has registered significant growth in paid-up capital and total asset. Additionally,
it drew a sizable clientele from all walks of life, important shareholders, and numerous seasoned
employees. The bank's success demonstrates the public's trust in its dependability and satisfaction
with its services. Bank of Abyssinia offers a user-friendly e-commerce platform, payment services
that can act as a payment gateway for clients, and five virtual machines that let clients open
accounts, make cash deposits and withdrawals, and send money locally. Dubbed interactive teller
machine (ITM) aka “branch in a box” the terminals use touch screens and video technology to
offer virtual banking service (Bank of Abyssinia annual report 2021).
1.2. Statement of the problem
Ethiopia's banking sector is underdeveloped, hence there is an urgent need to start setting up
capacity building plans and modernizing the financial system by implementing the most cutting-
edge technologies available worldwide. With a growing number of import-export businesses, and
increased international trades and international relations, the current banking system is short of
providing efficient and dependable service and therefor all banks operating in Ethiopia should
recognize the need for introducing electronic banking system to satisfy their customers and meet
there requirements of rapidly expanding domestic and international trades, and increasing
international banking services. Considering the law extent of development of ICT infrastructure in
developing countries, when compared with the developing countries E-banking has not been able
to diffuse into society given the low rate of internet access (Banjir & Catherine 2004).
Electronic banking is described as a remote banking service offered by approved banks or their
representatives through equipment operated under the direct control or administration of the bank
or under an outsourcing agreement in this area of globalization. In other words, electronic banking
refers to the process by which a customer can conduct banking transactions electronically without
having to visit a branch, as well as the systems that allow bank customers, individuals, or
businesses to access accounts, conduct business, or obtain financial information via a public or
private network, such as the internet. (Ayana, 2012)
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In E-banking system, information is electronically transmitted over wireless communication
channels and the internet. These processes raise issues of how users are authenticated, how
integrity of data is maintained and importantly the confidentiality of this data. One of the issues
raised with adoption of new technology is perceived risk or uncertainty about the outcome of the
use of the innovation (Gerrard and Cunningham 2003) or uncertainty that the use of the innovation
is secure. Uncertainty arises from a predictive validity of the attributes that is how well users of
new technology will predict future performance (Cox 1967). Risk is a subjective determined
expectation of loss; the greater the expected probability of loss, the higher the risk perceived (Mitchell,
1999), and thus the lower the motivation to adopt an innovation.
Electronic banking have a lot of benefits of delivering services to customers in Ethiopia customers
were missed to enjoy with the technological advancement in banking sector. The modern electronic
banking methods such as ATMs, internet banking, mobile banking, debit card, credit card and
others are new to our country. Few people in Ethiopia are familiar with electronic banking systems,
which use current technology to give users access to financial services such as cash withdrawal,
fund transfers, bill payment, and others. (Ayana, 2012)
All Ethiopian banks are behind the times when it comes to technical innovation. (Meaza, 2013)
Every bank customer in Ethiopia is disappointed with the country’s poor financial development
(Ayana, 2012).Even the time spent searching for bank branches and the long waits were wasted. It
takes a long time to get into your account. This is due to the lack of integration in particular.
(Ayana, 2012)
There are also a scarcity of experts with the necessary technological abilities to construct that
infrastructure. It may also be different to persuade customers, particularly those who are unfamiliar
with the internet and who may find it difficult to deal with a service that is not yet available.
(Meaza, 2013)
According to the study of Megersa(2010), there are s 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 institution also argue with internet challenges including its congested connection, security
and quality of service.
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Wondwossen and Tsegai (2005:44) discovered that the lack of customer faith in the initiatives, the
absence of payment regulations and controlling systems specifically for E-payments, and the lack of
competent people are the key barriers to the development of E payments. There is also a scarcity
experts with the necessary technological abilities to construct that infrastructure. It may also be
difficult to persuade customers, particularly those who are unfamiliar with internet and who may
find it difficult to deal with a service that is complex and annoying. Despite the fact that research
on this topic has been conducted in Ethiopia, it has revealed that is a lack of a backbone network
connecting the entire country; inadequacy of reliable and secure information infrastructure,
particularly telecommunication infrastructure ; slow ICT penetration in the banking sector; and
sufficient legal and regulatory support for E-banking service. It is the major challenges of E-
banking in the country, this study attempts to fill this gap.
Those studies did not include the current challenges of E-banking because these studies were
conducted before five and three years. There have been several developments in E-banking system
such as a rise in client interest in this technology, improvements in the E-banking service and
advancements in ICT.
The main obstacles and barriers that oppose E-banking service are the concerns of security, privacy of
information and technology investment cost. Also the literature indicates that according to the
customers there are different factors that influencing the adoption of E-banking such as, perceived
advantages and other factors related to the services itself & how to be accepted and used by the
customers, which differ from country to country, reflecting the economic and technological
development in each country .
Therefore this study is beneficial for it will identify the problems related to delivering of E-banking
service, and assessing the challenges and opportunity of E-banking in Bank of Abyssinia SC based
on the research problems and identified gaps.
1.3. Research Questions
Based on the problem stated in the study, researcher develops the following research questions.
1. What are the current opportunities of the electronic banking system in the Bank of
Abyssinia SC?
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2. What are the current challenge of the electronic banking system in the Bank of Abyssinia
SC?
3. What are the significance factors affecting customers to use the electronic banking system
at the Bank of Abyssinia SC?
1.4. Objective of the study
1.4.1. General objective
The general objective of the study is to identify the opportunity and challenge of electronic banking
system in the case of the Bank of Abyssinia SC.
1.4.2. Specific objective
1. To identify the current opportunity of e-banking service in the case of the Bank of
Abyssinia SC.
2. To identify the current challenge of the Bank of Abyssinia SC.
3. To identify significance factor affecting customer to use e-banking service in the case of
the Bank of Abyssinia SC.
1.5. Scope of the study
The study was conceptually, methodologically and geographically delimited in bank of Abyssinia.
In terms of concept, the dependent variable (development of IT, increase customer awareness,
increase in global competition, organizational, technological and environmental challenges) and
the predictor factor in opportunities and challenges of electronic banking system. The study was
descriptive research design and both qualitative quantitative research approach in terms of
methodology. In Ethiopia banking system consists 1 state owned development bank, 1 government
owned commercial bank, and 26 private banks, the study focused only on the bank of Abyssinia it
doesn’t cover the opportunities and challenges of E-banking system of remaining 25 commercial
banks in Ethiopia.
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1.6. Significance of the study
This study have potential value to financial institutions particularly banks to understand the
challenge and opportunity related with new technology and its advantages in providing service to
customer. In addition it helps to fill significant knowledge gaps about electronic banking system.
Finally based on the factors found to be influencing banks decision on electronic banking system
the study may provide recommendations for banks about changes needed to accelerate the system
to deliver service to customers through technological innovation.
1.7. Organization of the study
The research was divided into five sections. The first chapter covers the study’s background of the
study, statement of problem, research question, objective of the study, scope of the study and
significance of the study, as well as the study’s organization. The second part of the research
focused on explaining associated definitions of key terms and concepts, theoretical literature
review on the opportunities and challenges of E-banking, empirical literature of the study,
conceptual framework. The third chapter deals with mainly the methods of tile study including
research design and approach, data type and sources, study population and sampling method of
data collection, method of data analysis. The fourth chapter deals with the data analysis,
interpretation and discussion of the study on the opportunities and challenges of E-banking system.
Finally, the fifth chapter of thesis mainly deals with summary of major result, conclusion and
recommendation.
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CHAPTER TWO
2. Review of Related Literature

2.1. Introduction
In this chapter the theoretical part and empirical parts of past literature was discussed in detail from
the introduction of E-banking definition of E-banking, evolution of E-banking, challenges and
opportunities of E-banking respectively. And also include empirical review of the study from
different researches.
2.2. Theoretical review
2.2.1. Introduction of E-banking
According to Mohammed shamsuddoha (2008) through a number of developments, electronic

banking is changing the financial services sector Because of technology, the volume of
international trade and other financial operations is growing geometrically. It provides the ability
to create more effective systems of controls in individual institutions and in the market themselves.
Electronic banking refers to a system allowing individual customer to perform banking activity at
off-banks sites such as home, office and other locations via internet based secured networks.
Customers of traditional banks can execute all common operations including account transfers,
balance enquiries, and bill payments via internet or mobile banking. (Okoye, 2013)
Electronic banking enables banks to offer new services, improve their competitive position in the
market for already-existing payment services, and expand their markets for traditional deposit
taking and credit extension activities. Bank operational expenses might be cut by using electronic
banking. The ongoing advancement of electronic banking and electronic money may help boost
the effectiveness of the banking and payment system and lower retail transaction costs both
domestically and abroad.
2.2.1.1. Definition of E-banking

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 business banking is a product
designed for the purposes of online banking that enables users to have easy and safe access to bank
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account. Electronic banking is a safe, fast, easy and efficient electronic service. Electronic banking
enables accurate statement of all means available in user’s bank account, statement of current
account, credits, overdrafts and user’s deposits, execution of all types of utility bill payments like
electricity, water supply, traffic penalty, telephone bills etc. 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 its account information through the use of
electronic channels like computer, mobile, ATMs and other electronic device(Daniel, 1999).
Electronic 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).
Electronic banking, commonly referred to as electronic fund transfer (EFT), is simply using
electronic means, as opposed to checks or cash, to transfer money directly from one account to
another. Your paycheck can be electronically transferred into your checking account at a bank or
credit union, and you can use an ATM to withdraw cash whenever it's convenient, day or night,
using your personal identification number (pin). Incorporate data and actions related to your
income, spending, saving, investing, recordkeeping, bill-paying, basic financial analysis, and
decision-making into your overall personal financial management process by using computers and
software.
2.2.1.2. Evolution of E-banking

The banking sector is constantly responding to changes in customer preferences and needs;
increasing competition from non-banks, changes in demographic and social trends, information
technology advances, channel strategies and government deregulations of the financial service
sector (Byrs and ledere, 2001)
Electronic innovation in banking industry can be traced back to 1970, when the computerization
of financial institutions gained momentum (Malak 2007), however a visible presence of this was
evident to the customers since 1980, with the introduction of ATM. Since then, the technical sector
has helped to build the innovation banking industry. The development of automated voice response
(VAR) technology took place in the first decade of the 1990s. By using VAR technology banks
could offer telephone banking facilities for financial services. E-banking has the potential to lower
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maintenance costs because it leverages the internet for data transfer and software download as well
as a web browser as the user interface. For users E-banking provides current information, 24 hours
a day access to banking service.
2.2.1.3. E-banking channels

2.2.1.3.1. Internet banking
According to Booz, Allen & Hamilton (1999), internet banking refers to systems that enable bank
customers to access accounts and general information on bank service through web technology in
which bank customers are able to conduct their business transactions with the bank through
personal computer.
Internet banking system where a personal computer is connected by a network service provider
directly to a host computer system of a bank so that customer service requests can be performed
automatically without the need for customer service agents to intervene. The system is able to
distinguish between customer service requests that can be processed automatically and those that
need to be handled by customer service representatives.
2.2.1.3.2. Automated teller machines (ATM)

It is an electronic terminal which gives consumers the opportunity to get banking service at almost
any time to withdraw cash make deposit or transfer funds between accounts, a consumer needs an
ATM card and personal identification number(PIN).
A financial institution's customers can use an ATM, an electronic computerized

telecommunications equipment, to access their bank accounts, order or make cash withdrawals,
and check their account balances without having to go to a physical bank teller.
2.2.1.3.3. Point-of-sale transfer terminals (POS)

An electronic device used at retail locations to process card payments is called a POS terminal.
The POS device is a piece of hardware that accepts and handles credit card payments. The
terminals' responsibilities include reading a customer's credit or debit card's data, sending funds
from the customer's account to the traders, and documenting transaction details.
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2.2.1.3.4. Mobile banking
With the help of short text messages (SMS) and mobile applications, customers can execute some
banking tasks, such as checking their accounts and transferring money. Mobile banking is typically
carried out using SMS or mobile internet, but it is also possible to use specialized applications
called clients that are downloaded to the mobile device. (Rahman, 2006).
Mobile banking can be defined as when consumers use cellular phones, pagers, personal digital
assistants, or other similar devices to access a banks networks over telecommunication wireless
networks. It refers to the process of operating and maintaining mobile accounts as well as accepting
deposits.
2.2.1.4. Organizational challenges of E-banking

Organizations are different in their preference to technological innovation (Lacovou 1995 and
Grover 1993) influenced by a number of factors, like firm size, top management support and
financial and human resources. Financial resources are an important factor in facilitating
innovation for any organization and they are often correlated with the firm size therefore, it is
expected that the availability of financial resources within the firms is important for E-banking
system. These resources give financial organizations access to human resources, including the
knowledge and experience needed to create and support the delivery of E-banking services.
2.2.1.5. Electronic banking challenges in Ethiopia

Banking in Ethiopia faces numerous challenges of E-banking applications and seize the
opportunities presented by ICT applications in general key challenges for E-banking applications
are:
Low level of internet penetration and poorly developed telecommunication infrastructure lack of
infrastructure for telecommunications, internet and online payments impede smooth development
and improvements in E-commerce in Ethiopia. Most rural areas of the country, where the majority
of small and medium businesses are concentrated, have no internet facilities and thus are unable
to engage in e-commerce activities.
Lack of suitable legal and regulatory framework for e-commerce and e-payment: Ethiopian current
laws do not accommodate electronic contracts and signatures. Financial institutions now have
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access to human resources, including those with the skills and knowledge required to develop and
support the implementation of E-banking services.
High rates of illiteracy: low literacy rate is a serious impediment for the adoption of e-banking in
Ethiopia as it hinders the accessibility of banking services. Citizens must not only be literate in
reading and writing but also have a foundational understanding of ICT in order to fully benefit
from electronic banking.
Absence of financial networks that links different banks (banks are not yet automated): most of the
banking transactions currently taking place use credit and debit cards supplied by visa and master
card. For conducting e-banking the use of credit and debit cards is mandatory thus requiring the
need for specialized systems which are not currently available.
Electronic banking despite its numerous benefits, there are challenges in the implementation of e-
banking applications. Some of the identified challenges as revealed by previous research works
include security, infrastructure, regulatory and legal issues and
Socio-Cultural challenges.
Security
One of the biggest challenges and the basic requirements of e-banking is ensuring its security. E-
banking process security comprises verifying client and banker data and shielding sent information
from interception. This authentication can be done using user ID and passwords. In addition a
means must be provided that prevent repudiation both by the merchant and customer once the
payment process has taken place (Barnes and Hunt, 2001). 23
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According to Worku (2010), e-banking systems must also take into account the need of multilateral
security keys i.e. security needs of all participating parties in the e-banking system. An e-payment
system that is not secured may not get trust from its users. Trust is one of the crucial factors to
ensure the acceptance of e-banking system by users.
Martina (2005) also indicated that e-banking applications represent a security challenge as they
highly depend on critical ICT systems that create vulnerabilities in financial institutions,
businesses and potentially harm customers. It is imperative for banks to understand and address
security concerns in order to leverage the potential of ICTs in delivering e-banking applications.
Software failures can also be considered as security challenges as it destroy entire portions of a
network and bring huge losses. According to Tadesse and Kidan (2005), some of the major security
challenges include the following. Disclosure of private information, Counterfeiting, Illegal
alteration of payment data
Infrastructure
The other challenge for e-payment is proper infrastructure. For the effective deployment of e-
banking, it is necessary to have a reliable and cost effective infrastructure that can be accessible to
the majority of the population.
12
The most common communication infrastructure for e-banking is computer network such as
Internet. Most e-banking systems use internet to communicate with their customers. The other
communication infrastructure available for e-banking users is the mobile network used for mobile
phone. Automating the banking activities is another prerequisite for e banking system. Closed
financial network that links banks and other financial institutions is necessary. This network is
usually used between banks or other financial institution for clearing and payment confirmation
Alhaji Ibrahim H. (2009).
Regulatory and Legal Issues
National, regional or international set of laws, rules, and other regulations are important
prerequisites for successful implementation of e-banking services. Rules on money laundering,
monitoring of commercial banks and e-money institutions by supervisory agencies, central bank
management of the payment systems, consumer and data protection, cooperation, and competitive
issues are a few of the key components. (European Central Bank, 2002).
Socio-Cultural Challenges
Cultural and historical differences in attitudes and the use of different forms of money (e.g. use of
credit card in North America and use of debit cards in Europe) complicate the task of developing
an electronic payment system that is applicable at international level. Difference in the degree of
the required security and efficiency among peoples of different cultures and level of development
aggravates the problem (Tadesse and Kidan, 2005).
According to Kumaga (2010) consumer’s confidence and trust in the traditional payment system
has made customers less likely to adopt new technologies. New technologies will not dominate the
market until customers are confident that their privacy will be protected and adequate assurance
of security is guaranteed. New technology 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.
2.2.1.6. Strategic challenges of E-banking

E-banking was underutilized as business associations utilized it just to showcase their items and
administrations. Rogers (2011) analyzed client introduction 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.
13
Ayo (2009) explored the possibilities of internet business in light of ability, motivation and
opportunities 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 facilities.
2.2.1.7. Technological challenges

Technology competence converting existing technology infrastructure and skills to utilize the
technology. (Elias 2009 and Chang 2007) consider some relevant characteristics of technology and
organizational context. A technological innovation can have a sudden and dramatic effect on the
environment of a firm. Technological developments can significantly alter the demand for an
organizations service.
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 firms operations as well its 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.
2.2.1.8. Opportunities of E-banking system

Business organizations are trying to uncover the new technologies coming from the E-commerce
applications which has a lower transaction cost resulted to eliminate association in distributing
channels (Salman and Kashif 2010). The cost can be reduced to zero in some services like
information and manufactured goods information. Transaction of low cost and easiness provides
to adopt the new trend of technology to trade information among different groups and business
parties. Information and communication technology transformed business to go from local and
global. However it has been said that E-banking is vital in the banking sector of developing
countries. (Polatoglu and Ekin 2001).
2.2.1.9. Opportunities of E-banking for banks

According to Robinson (2000), relevant costs for conducting a banking transaction via online are
much lower than via a brick and mortar branch. Moreover, Sheshunoff (2000) contends that one
of the most significant elements influencing banks' use of electronic banking is the requirement to
14
erect formidable customer-existing obstacles. According to the author, it is rare that customers will
switch to another financial institution after they become accustomed to using full service E-
banking.
E-banking as already stated has greatly serviced both to the public and the banking industry. As a
result, a better enabling environment that promotes growth, productivity, and prosperity has been
created. Along with many other real advantages like decreased costs, faster delivery, higher
productivity, and less waste, banking electronically regulated and closely watched environments
also deter numerous unethical and illegal activities related to the banking industry including fraud
and embezzlement. E-banking has helped banks to device suitable commercial packages that are
in conformity with customer base, a consequence to increase the volume of credit creation which
results in better economic condition.
2.2.1.10. Opportunities of E-banking for customer

The benefit of E-banking is not limited to banks but also to their customers. Thanks to the
emergence of the internet, banking transactions are no longer limited too time and geography. It is
very easy for consumers throughout the word to access to their bank accounts 24 hours per day
and seven days a week. Customers can enjoy a variety of services, especially services which are
not provided by traditional bank branches (Pham 2010). It is argued that one of the greatest benefits
that E-banking brings about is that it is not expensive or even free for customers to utilize E -
banking services. Convenience and accessibility are two benefits of e-banking that will boost client
happiness and loyalty. Customers can absolutely control their financial activities whenever they
choose and benefit from increased privacy when dealing with the bank.
In addition withdrawing cash customers can also have mini banks statements balance inquiry at
these ATM. Customers who use internet banking can manage their accounts whether seated at their
desk or home. There is no need to visit the bank in person to handle this situation, and banking
also made paying a utility bill much easier.
2.3. Empirical review
Some related studies are conducted by different researchers in different parts of the world.
Gardachew (2010) performed analysis of the advantages and disadvantages of Ethiopian e-
15
banking. His study's primary focus was on examining the state of electronic banking in Ethiopia
and looking into the main prospects and problems of putting an E-banking system in place.
The author conducted research on how banks are currently run and identified some issues with
using the E-banking system, including the lack of appropriate legal and regulatory frameworks for
E-commerce and E-payments, political unrest in neighboring nations, high literacy rates, and the
absence of financial networks that connect various banks. According to Gardachew
(2010), the advantages provided by ICT through e-learning programs and the governments'
commitment to building out ICT infrastructure are seen as motivators for the use of e-commerce
and e-payment systems.
M.M. Rahman’s paper on the challenges of E-banking adoption and implementation in Bangladesh
(2008). The findings of the study show that, despite high demand from the corporate sector and
retail customers, particularly in urban areas, due to a variety of obstacles, electronic banking
(Ebanking) is still in its infancy. Such as the lack of a backbone network that connects the entire
county the insufficiency of information infrastructure, particularity telecommunication
infrastructure, must be reliable and secure.
The study conducted by Wondwossen and 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 factor
include, lack of appropriate infrastructure for E-payment, lack of internet facilities with customer
and learning how to interact with banks website. Moreover, factor organizational factor and
environmental factor.
Another study conducted in Ethiopia on challenges and opportunities of electronic banking system
in Ethiopia banking industry bay Kassahun (2016) indicate that, the major challenges Ethiopian
banking industry faces in the adoption and development of electronic 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
16
errors as operational benefits and facilitate development of new product, 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 conducted by Ram and Sheth (1989) argue that consumer resistance to the innovation is
caused by financial barrier and psychological barriers. Functional barriers can be divided into
three: the usage barrier, the value barrier and the risk barrier, whereas psychological barriers can
be divided into tradition barrier and image barrier. According to Ram and Sheth (1989) functional
barriers arise when consumers perceive changes would take place when adopting innovation and
the psychological barriers are caused by consumer’s beliefs. On the other hand Khanfar et al (2006)
conducted study on the consumer satisfaction with internet banking website The study identified
some factors which can determine customers satisfaction in the use of internet banking service.
Such as customer supports, security, ease of use, digital service, transaction and payment,
information content, and innovation. Researchers employ a survey questionnaire to gather data and
their results showed that there is a narrow based satisfaction with internet banking in all factors
through a multi regression; the researchers found out that all actors have an impact on the customer
satisfaction, and they have found that the relation was positive.
In general, review of empirical studies shows that understanding the 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 challenges those
are organizational challenge, technological challenge and environmental challenge. The main
obstacles and barriers that oppose E-banking challenges and opportunities are the concerns of
security, privacy of information and technology investment cost. This study will generally tried to
assess the benefits of E-banking for the bank, customer and general economy. Problems related
with implementation of E-banking and also used these three major factors for the challenges of E-
banking in the case of bank of Abyssinia S.C.
17
2.4. Conceptual frame work of the study
The conceptual frame work of the study shows that the causal relationship between the major
opportunities and challenges of E-banking and its growth. This can be shown by the following
figure.
Figure 2.4. Conceptual frame work of the study
Dependent variable independent variable
Development of IT
Opportunities of E-
banking Increase customer
awareness
Increase in global
computation
Technological
challenge
Challenges of E-
banking
Environmental
challenge
Organizational
challenge
Source: prepared by the researcher 2022
18
CHAPTER THREE
3. Research Methodology
3.1. Research design
Research design is a frame work or blueprint or plan specifically created to answer the research
question is the central purpose of all research. Control of variance means the researcher must
consider factors that might systematically contribute to the research result or confound the
interpretation of the result.
This study used a predominantly descriptive method of research design, as evidenced by the
research goal and research question. Descriptive research design is a scientific method that entails
watching and describing a subject’s activity without altering it in any manner. Its goal is to gather,
organize and summarize information on the subject under investigation. (Punch, 2006).
3.2. Research approach
There are three basic research approaches, the first one is qualitative research approach inquirers
generate or inductivity develop a theory or pattern of meaning rather than starting with a theory as
is post positivism. Qualitative research approach tend to use open ended questions so that
participants can express their views an meanings are constructed by human beings as they engage
with the world they are interpreting. The second research approach is Quantitative research
approach is based on the philosophy of post positivism world view. It is also reductions in that the
intent is to reduce the ideas into a small, discrete set of ideas to test such as the variables that
constitute hypotheses and research question. Another one is mixed research approach it is inquirers
draw liberally from both qualitative and quantitative assumptions. (Creswell, 2003)
The quantitative research approach was applied in order to attain the study’s goal. The information
was gathered via self-administered questionnaires. In order to acquire the information needed, a
questionnaire was created and pretested. The quantifying of relationships between variables is at
the heart of quantitative data collection methodologies. The quantitative techniques is
advantageous since it aids the researcher in avoiding bias when collecting and presenting research
findings.
19
3.3. Types and source of data
This research uses both qualitative and quantitative data type. This type of data are expected to be
collected both the primary and secondary data source. The primary data source instruments are
questionnaires. The secondary data source are from the Bank of Abyssinia SC procedures, annual
reports, website and other related literature.
3.4. Study population and sampling method and sample size
3.4.1. Target population
The population of the present studies the Bank of Abyssinia SC in order to undertake this study
the researcher purposely sampled selected branches to the Bank of Abyssinia SC which are
challenges and opportunity of electronic banking system. Those branches located in Addis Ababa.
The researcher choose some of selected branches as a sample because of it is often impossible of
too much expensive through money and time to collect data.
3.4.2. Sample size
Sampling is the process of choosing, from a much large population, a group about which wish to
make generalized statements so that the selected part represent the total group (leedy, 1989).
The sample size is governed by the researcher’s time and funding. Purposive sampling was
employed to choose a sample from the population for this study. Due to time and money
constraints, the samples were purposefully limited to the branches of the Bank of Abyssinia SC in
Addis Ababa.
(Sekaran 2003) provides a simplified formula to calculate sample size of infinite population, which
is used to determine the sample size for this particular study. Given a population of 100 clerical
staff found in selected Area Banks, a sample of 80 clerical staff were chosen for the study at a 95%
confidence interval is assumed for this formula to determine the sample size at e=0.05.
20
3.5. Method of data collection
The study is collecting data from both the primary source and the secondary source of data. The
primary data is collected from the staffs or the IT departments of the five selected branches under
study based on a structurally designed questionnaire. It included both closed ended and open ended
questions. In addition semi-structured interview with the higher official of the banks E-banking
managers was conducted.
Questionnaires used as the primary method for data gathering. A questionnaire is a set of questions
that translates the researcher’s information demands into set of precise questions that respondents
are willing and able to answer. Closed-ended questionaries’ used to collect data for the study.
Employee views regarding the performance appraisal system taken into account when creating
closed –ended surveys.
In order to collect sufficient data that can answer the research questions, research designed two
survey; the first was a questionnaire to get quantified results. The second survey was interviews
aimed to collect data from E-payment/It mangers. In addition to questionnaires data collected from
different published and unpublished materials has been also used.
3.6. 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 questionaries’ was analyzed with descriptive
statics. The analysis of qualitative data and interpretation of qualitative data combines to seek
convergence among the results (crewel, 2003).
Data analysis consists of examining, categorizing, tabulating or otherwise recombining the

information to address the study’s basic thesis is what data analysis is all about (yib, 1989). The
data acquired through a survey of a statistical population regarding the use of an E-banking system
was studied by the researcher.
The researcher used descriptive analysis method According to Amin & Wallenberg (2005)
descriptive statistics provides us with the techniques of numerically and graphically presenting
information that gives an overall picture of the data collected. Descriptive statistics is the process
of transforming raw data into a format that is easy to understand and analyze. It gives numerical
21
and graphic procedures to summarize a collection of data clearly and understandably. As a result,
it was used to describe the various properties of the study variables/factors using frequency,
percentage, tables, and mean values. The data was edited, coded, organized, and entered into SPSS
Version 26.
Note that in data analysis for the case of descriptive statics: N-Number of responses, 1-strongly
agree, 2-Agree, 3- Neutral, 4-Disagree and 5-Strongly disagree.
22
CHAPTER FOUR
4. Results and Discussion
4.1. Introduction
In this chapter, data gathered through questionnaire and interviews are presented, analyzed and
interpreted, using percentages and frequencies with the help of Statistical Package for Social
Science (SPSS). To collect relevant data, 80 questionnaires were distributed to employees of the
Bank of Abyssinia, Addis Ababa city branches. Among the questionnaires distributed to
employees (80 questionnaires), the researcher collected 67 properly filled questionnaires in which
the response rate is 93.2 percent. (13) Questionnaires missed because in one hand some of them
were incomplete on the other hand respondents failed to return back their filled questionnaire to
the researcher. According to the organized questionnaires, the researcher produced the following
analyses. To find the major out puts of the study and to give important recommendations, the
collected data should be analyzed and discussed, accordingly the analysis and important findings
from the collected data are discussed.
4.2. Demographic Information of the Respondent
First part of the questionnaire consists of the demographic data of the respondents. The variables
include age, gender, educational level, occupation and experience with the bank. Accordingly,
these variables of the respondents are summarized and described in the table below
Table.4.1 Demographic information of the respondent
No Item Variable Percentage

Frequency
1 Gender Male 35 52.238
Female 32 47.76
Total 67 100
2 Age 20 – 30 years 32 47.76
23
31 – 40 years 20 29.85%
41 – 50 years 15 22.3888%
51 and above 0 0%
Total 67 100
3 Educational Diploma 0 0
level
Degree 51 76.1194%
Master degree 16 23.88%
Total 67 100
4 Experience < 2 years 12 17.91%

with the bank
3 – 5 years 32 47.7611%
6–10 years 15 22.388%
>10 8 11.94%
Total 67 100
Source: From Questionnaire and Interview (2022)
As it is shown on the above table.1, the highest percentage of participants in this study was males
who represent 50.7% of respondents and the remaining 49.3% was females. This shows the gender
distribution for male employees are very large than the female employees. In the case of
classification of respondents by age 47.8% of the respondents are young (20-30 years old),
29.85%% of the respondents under (31-40 years old) and the remaining 22.4% of between (41-50
years old). This indicates that majority of employee’s age is lies between 20 – 30 years. Regarding
the educational level of the study 76.1% of the respondents are BA degree holders and the
remaining 23.9% of the respondent are master degree holders.
In relation to work experience of employees, the table shows that 17.91% respondents are below
2 years’ experience; 47.7611% of respondents the employees have an experience of between 3-
24
5years; 22.388% respondents of the employees have an experience between 6-10 years, and the
remaining respondents, representing 11.94% of the employees has an experience of above 10
years.
4.3. Opportunities e-banking services
An advantage that is expected to be gained from the adoption of E-banking covers both direct and
indirect benefits for the banking industries. Direct benefits include savings on operational cost,
improved organizational functionality, productivity gain, improved efficiency, saving of time and
increased profitability. Indirect benefits include the opportunity or intangible benefits such as
improved customer’s satisfaction through improved services, improved banking experience and
fulfillment of their changing needs and lifestyle (Lu 2005; Kuan 2001 & Iacouou 1995). The result
from questionnaire were shown in table 4.3.2 as follows.
Table.4.2 Opportunities of electronic banking service
Statistics
Government Government The need for The existence

commitment commitment electronic of high
to developing to assisting in banking demand
the banking the expansion services is
industry of ICT significant
infrastructure
N Valid 67 67 67 67
Missing 0 0 0 0
Mean 1.9701 1.9701 1.9701 1.9701
Std. Deviation .17146 .17146 .17146 .17146
Sum 132.00 132.00 132.00 132.00
Source: From Questionnaire and Interview (2022).
25
As we have seen in the table 4.3.1 above, the descriptive statistics result gives mean of 1.9701,
standard deviation 0.17146 that means the largest number of respondent were agreed on the issue
The need for electronic banking services is significant opportunity of e banking services it
Improves Government commitment to developing the banking industry in addition to that enhance
the Government commitment to assisting in the expansion of ICT infrastructure, desire the
existence of high demand. From this it is possible to conclude that almost all respondents strongly
agree and agree with that of the above listed opportunity of e – banking service. As a result, all are
considered as the benefit of the bank resulted from provision of e-banking services in bank of
Abyssinia.
4.3.1. Perceived Usefulness
According to an interview result, one of the basic benefits considered in the adoption of E-banking
system, is that it saves time to accomplish banking activities both for banks as well to customers.
Using the system to get banking service is fast and 70 available 24 hours a day and 7 days a week.
This were in line with the study of Karjaluoto et al. (2002), which identifies time saving as a major
benefit of adopting online banking system. The result were shown in table 4.3.2 as follows.
Table.4.3 Perceived Usefulness
Statistics
Create E-banking is E-banking Efficie Using Reduce

better more user- services such ncy technical number
relationsh friendly than as Internet and tools such as of
ip among going to a banking, speed ATMs helps customers
banks and bank mobile to reduce come to
clients banking, transaction the
ATMs, and costs banking
POS are time- hall
saving.
N Valid 67 67 67 67 67 67
Messing 0 0 0 0 0 0
26
Mean 1.9254 1.9552 1.8358 1.9851 1.9552 1.8955
Std. Deviation .26477 .20837 .37323 .12217 .20837 .30819
As we have seen in the table 4.3.1 above, the descriptive statistics result gives approximately 1.9
of mean. Which means the largest number of respondent were agreed on the issue. 0.26477 of
standard deviation for e - banking services Create better relationship among banks and clients,
.20837 is standard deviation for enables the client more user-friendly than going to a bank. 0.37323
is Standard deviation for E-banking services such as Internet banking, mobile banking, ATMs, and
POS are time-saving. 0.12217 is standard deviation for Efficiency and speed that means expand
its service provision easy, improvement of organizational performance through cost reduction (by
avoiding paper work) and E - banking service as a means of service customers’ needs and
preferences, desire to improve organizational performance, desire to reduce transaction cost its
standard deviation is 0.20837, desire to build organizational reputation and desire to satisfy
customers and reduce queues in the banking indicated by it standard deviation of 0.30819.
Therefore, the descriptive statistics from this it is possible to conclude that almost all respondents
strongly agree and agree with that of the above listed under Perceived Usefulness. As a result, all
are considered as the benefit of the bank resulted from provision of e-banking services in Bank of
Abyssinia.
4.3.2. Perceived Ease of use
One of the basic benefits related with the use of E-banking system is the perceived ease of use.
Giglio (2002) suggests that adopting online banking services reduce the workload over the banking
staff and it’s easy to have more satisfied customers. On the other hand Robinson (2000) indicated
that online banking provides convenience not only to bank and also to customers. The data
obtained from the survey in this study also confirms the finding of Giglio (2002) and Robinson
(2000) and the result were shown in table 4.3.3 as follows.
Table 4.4 Perceived Ease of use
Statistics
27
Using E- E- In the case customers' E- banking
banking banking of mobile service bank system helps to
system (like makes it banking, of Abyssinia perform
ATMs, mobile easier for our provides banking task in
banking, me to do customers instructions a simple way
internet banking can simply on how to
banking) activities use their utilize the
simplify the phone to electronic
activity of access banking
workers to financial system
deliver 24- services
hour
accessibility of
bank service
N Valid 67 67 67 67 67
Missing 66 66 66 66 66
Mean 1.8358 1.9851 1.9403 2.0000 1.9254
Std. Deviation .37323 .12217 .23872 .00000 .26477
Respondents were asked whether they `strongly agreed, Agreed, Disagreed and strongly
disagreed‟ based on shown in the above table 4. The descriptive statistics result gives
approximately 2 for mean. That means the largest number of respondent were agreed that enables
24-hour accessibility to the bank service and enable users to complete banking activities more
easily. Which means that respondents of the sampled is not only agreed with the idea that perceived
24-hour accessibility to the bank service and ease of use in terms of, simplifying banking activity,
is a good factor for the ability to have E-banking system. With the help of e-banking, the easy
access to the banks will be another advantage to the customers. Moreover, payment cards can make
life easy for people who want to travel abroad as it minimizes the volume of cash one needs to
28
carry and the associated risk of theft. More over an interview result were also support the result of
questionnaire that it indicated, it is an option less to implement E-banking to simplify the banking
activity that is easily understand e banking service application and improve enables 24-hour
accessibility to the bank service. As a result, all are considered as the benefit of the bank resulted
from provision of e-banking services in Bank of Abyssinia.
4.4. Challenges of E-banking services
4.4.1. Organizational factor
One of the basic issue related with organizational factor is, the availability of financial as well
skilled human resource to implement the system. In this study costs related with the use of E-
banking instrument and technical or managerial skills required to implement E-banking system
were considered as organizational factors.as shown on the table 4.4.1 below.
Table 4.5. Organizational challenge
Statistics
lack of Customers' Customers find Using

technological desire to use that using a internet
and managerial technological mobile phone to banking
skills in innovation will obtain banking increases
implementation be influenced by services is cost to do
and a lack of relatively banking
development of government expensive task
E-banking assistance
technology
N Valid 67 67 52 67
Missing 0 0 15 0
Mean 2.3731 2.3731 2.1923 2.6418
Std. Deviation .79460 .79460 .39796 .48309

29
As we have seen in the table .5 above the descriptive statistics result gives approximately 2 of
mean. that means majority of respondents are agree and strongly agree with the above listed
illiteracy related challenges those are of lack of technological and managerial skills in
implementation and development of E-banking technology , Customers' desire to use technological
innovation will be influenced by a lack of government assistance, Customers find that using a
mobile phone to obtain banking services is relatively expensive, but there is a little bit lack of
technological and managerial skills in implementation and development of E-banking technology
context and also in case of Using internet banking increases cost to do banking task most of the
respondent are neutral as shown in the table above its mean is 2.6418.
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 factor that hiders Ethiopian banks to adopt and
develop E-banking technology.
4.4.2. Technological challenges
One of the basic barrier a firm faces, while adopting technological innovation is the perceived
risks. For example the study of Sohail and Shanmugham (2003) suggests that one of the barriers
in the adoption of electronic banking is fear of security risks. Moreover, all of the bank manager’s
participated in this study were asked whether security issue is raised with the use of technological
facility in the banking industries, and all of them stated that security is the main concern that
hinders our bank to use technological facilities. These were also supported by the survey result
shown on table 4.4.2, as follows.
Table 4.6. Technological challenges
Statistics
In the case of Government Lack of Absence of

using mobile can organize available financial
banking, and create networks that
30
ATM and good plans to ICT links different
others, support the infrastructure banks
security risk development
affect users of civilian
decision to technology
use the innovation
system
N Valid 67 67 67 67
Missing 2 2 2 2
Mean 2.4627 2.0000 2.0000 3.7463
Std. Deviation .72464 .00000 .00000 .43843
Results reported on table 6. The descriptive statistics result gives mean is approximately 2 except
in case of Absence of financial networks that links different banks its mean is different from the
rest of challenges its mean is 3.7463. That means majority of respondents are agree and strongly
agree with the above listed illiteracy related challenges. In the case of using mobile banking, ATM
and others, security risk affect users decision to use the system and Absence of financial networks
that links different banks with the related challenges and one of the major obstacle factor identified
in this study is lack of ICT infrastructure to use E-banking service, such as internet banking, mobile
banking, ATM and others its standard deviation is 0.000,. As a result all are considered as the
challenge of the bank resulted from provision of e-banking services in BOA.
4.4.3. Environmental challenges
Another factor which can affect the adoption of technological innovation in banking industry is an
external environment: in this study four basic environmental factors are considered, poorly
developed telecommunication infrastructure, Lack of government support and adequate
coordination between banks. The result obtained from survey, interview and literature regarding
those issues were presented as shown on table 4.4.2, as follows.
31
Table.4.7. Environmental challenges
Statistics
Lack of Customers Using Low level of Relatively Lack of

adequate may not internet internet high cost of sufficient
coordinat willing to banking penetration internet government
ion, accept E- is and poorly service support will
interactio banking difficult developed affect
n and service due to telecommuni customers
cooperati low cation willingness to
on internet infrastructure use
between access in technological
banks and the innovation
other Ethiopia
decision
making
centers in
electronic
banking
system
N Valid 67 67 67 67 67 67
Missing 1 1 1 1 1 1
Mean 2.4328 2.0000 2.0000 2.0000 2.3284 2.2090
Std. Deviation .49921 .00000 .00000 .00000 .47316 .40963
As shown on the table 6. The descriptive statistics result gives its mean is approximately 2. that
means majority of respondents are agree and strongly agree with the above listed illiteracy related
challenges, Using internet banking increases cost to do banking task is the major illiteracy related
32
challenges that hinders e-banking services in bank of Abyssinia. 0.49921, 0.47316 and 0.40963
are standard deviation for Lack of adequate coordination, interaction and cooperation between
banks and other decision making centers in electronic banking system , Relatively high cost of
internet service and Lack of sufficient government support will affect customers willingness to
use technological innovation. Standard deviation for the rest of listed illiteracy related challenges
0.000.
This show that the presence of Low level of internet penetration and poorly developed
infrastructure. This implies that ICT infrastructure in Ethiopia for internet access is not sufficient
to use E-banking service. Similarly, the interview script received from the respondents indicates
that the poor quality of telecommunication network service is a major obstacle for all banks in
Ethiopia to effectively deliver E-banking service. As a result all are considered as the challenge of
the bank resulted from provision of e-banking services in BOA.
33
CHAPTER FIVE
5. Summary of Finding, Conclusions and Recommendations
5.1. Summary of finding
This study identify the problems related to delivering of E-banking service, and assessing the
challenges and opportunity of E-banking in Bank of Abyssinia SC based on the research problems
and identified gaps. Technical and managerial skills to use and implement the system are
considered as barrier for the delivering of E-banking service. Most challenges to E-banking service
identified in this study were come from external Environments; specifically those are lack of legal
framework regarding E-banking, lack of ICT infrastructure, and Absence of competition between
local and foreign banks. Interestingly, lack of Government support was not taken as barriers for
the adoption of E-banking system in Ethiopia.
The study also identified basic Opportunity a firm could get from the E-banking system. The
benefits were classified based on technology acceptance model (TAM) as perceived ease of use
and perceived use fullness. Perceived ease of use is taken as a major benefit of using E-banking
system. At the same time this finding supports the study of Giglio (2002) and Robinson (2000).The
other benefit found in the study were based on its usefulness in terms of time and cost saving. In
general the finding of the study, other E-banking service offer, such as enhancing customer
satisfaction, reduce the number of customers come to banking hall, increase the productivity of
banks, increase reliability and accessibility of banking service, creating good relationship between
clients .
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 as
technological factor negatively affect the adoption and growth of E-banking technology in
Ethiopia. In this study majority of challenges for adoption and development of E-banking
technology in bank of Abyssinia are derived from the external environments and limitation in
network infrastructure and internet related support services is one of basic factors in E-banking
system.
34
5.2. Conclusions
Based on the main findings above, the following conclusions are drawn.
 E-banking system, such as ATM, mobile banking, internet banking and others are not well
practiced by Ethiopian banking industry. This is due to low level of ICT infrastructure and
lack of legal frame works a, Absence of skilled man power. In addition to the above two
basic factors affecting of E-banking in bank of Abyssinia, result of the study also shows
that security risk and lack of trust on the use of technological adoption are other major
barriers for the system. The main practice of e-banking among those banks that are
providing the service have been for, balance inquiry, cash withdrawal, statement printing,
PIN change, purchase goods or services, accessing his/her accounts and funds transfers
among others.
 It is approved that Basic benefits of E-banking for the customers are convenience,
accessibility, ease of use, low cost of using banking activity, providing real time
information and getting quality service. It also identified that the basic benefits of E-
banking for banks are simplifying works of employee, reduce costs per transaction,
improve customer satisfaction, attract new segment of customers, additional revenue
stream, and provide good image for the bank.
 On the other hand, the study approves that; increasing speed and efficiency, productivity,
reliability and accessibility of financial service and also acts as information control tool for
governments are the benefits of E-banking for the Economy.
 After the introduction of E-banking, banks get different challenges to practice E-banking
effectively because of High rates of illiteracy, low level of internet penetration and poorly
developed ICT infrastructure, lack of suitable legal and regulatory framework for E-
banking, frequent power interruption, fear of risk and unavailability of competent and
skilled employee.
 In general, the findings of this study offer additional insights into the current E-banking
situation and its implications for E-banking growth in Bank of Abyssinia different Addis
Ababa cities branches specially in marginal area after the introduction of E-banking, banks
get different challenges to practice E-banking effectively because of High rates of
illiteracy, low level of internet penetration and poorly developed ICT infrastructure, lack
35
of suitable legal and regulatory framework for E-banking, frequent power interruption, fear
of risk and cultural related challenges of adoption e-banking.
36
5.3. Recommendation
As per the findings from the analysis of the collected data; the following recommendations are
forwarded in order to promote and develop adoption of e-banking service in bank of Abyssinia in
Addis Ababa cities branch especially in low level of internet or network penetration area.
 For the successful implementation of E-banking system ICT infrastructure, is a major

prerequisite, so government and private sector cooperatively, should improve supporting
of banking sector by investing on ICT infrastructure development. To exploit the benefit
of E-banking system, banking industry operated in Ethiopia needs to familiarize their
customers with the processes and benefits of the system and Branches should pay special
attention to deliver service to customers by using E- banking system, which can easily be
accessible.
 Creating continuous social awareness about E-banking services by emphasizing its
advantage like time saving, low cost and convinces through different forms of media
advertising such as brochures, web pages etc and should build always to guarantee
reliability or dependability of online transactions in order to build customer confidence &
to improve the trust worthiness reputation of banks.
 The Bank should also create deep awareness to community concerning the E-banking
products they offer and the benefits associated with using E-banking services through
advertisement on the internet, mass media as well as through organizing public exhibition
and talk shows. Besides, the bank should attract the community to use the technology by
diverse incentive campaigns. This way, customers’ interest would be aroused on
telecommunication infrastructure development.
 The lack of legal and regulatory framework for e-banking services has discouraged banks
from introducing these innovative payment instruments or where they have introduced, has
put them at legal risk. Electronic payments are not clearly stated in Ethiopia legal system.
Thus, government should issue laws that govern electronic payment. This helps financial
service providers introduce innovative products currently in use around the world which
are cost effective, efficient and safe.
 In general recommended to overcome those challenges e-banking services in Bank of
Abyssinia in Addis Ababa cities specially in low network penetration area branches; the
37
government should support the electronic banking sector by investing a comprehensive
regulatory and legal framework for e-commerce and e-payment, by providing incentives
for financial institutions to invest rigorously on ICT and use of ecommerce.
38
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Kaleem, A & Ahmad, S. (2008). Bankers‟ Perceptions of Electronic Banking in Pakistan.Journal

of Internet Banking and Commerce, Vol. 13, No.1.
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Mayer, C. (2008). ―Do Internet Activities Add Value? The Italian Bank Experience‖, Working
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Mitchell, W 1999, “Consumer perceived risk: conceptualizations and models”, European Journal
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41
APPENDIX –A Questioner and Interview guide line
Questioner
Dear Sir/Madam to identify the opportunity and challenge of electronic banking system in the case
of the Bank of Abyssinia SC. The information you provide in response to the items in the
questionnaire will be used as part of the data needed for a study of challenges and Opportunities
of E-banking service in Bank of Abyssinia. The results of the study are anticipated to supply to the
understanding of the basic challenges and benefits of providing new technology in delivering of
service. I would like to assure you that the information you provide will be used only for the
purpose of achieving academic award. Your involvement is regarded as a great input to the quality
of the research results. Hence, I believe that you will enlarge your assistance by participating in
the study. Your honest and thoughtful response is invaluable. Thank you for your participation.
Section I: Demographic profile of respondents please indicate the following by ticking (√) on the
spaces in front of response options:
section 1. Demographic detail

i. Gender: Male Female
ii. Age: 18-29 30-39 40-49 50-59 above
iii. Educational status: first degree master’s degree Ph.D. and above
iv. Work experience: ____________years
v. Monthly income level:
4000-5999 6000-9999 10000 and above
section 2. Related to those banks providing challenges and opportunities of E-banking
service please tick your appropriate choice
1) Do your organization started offering E-banking services to the customer by using
electronic channels?
Yes No
42
2) What are the different electronic channels through which the banks delivering the
service?
A. Mobile banking
B. Internet banking
C. ATM
D. Other
3) What are the different ATMs through which the bank is delivering the services?
A. Credit card D. visa card
B. Debit card E. others ____________________
C. Master card
4) What options are available to the customer once they have accessed E-banking
service?
A. Cash withdrawal C. bill payment
B. Balance inquiry D. Fund transfer
5) Is there any risk involved because of using electronic channels for delivering banking
service to customers? Yes No
if the answer is yes, what are they?
A. Security risk E. strategic risk
B. Operational risk F. cross-border risk
C. Repopulation risk G. others ______________________
D. Money laundering risk
6) What are the difference benefits does the bank is realized by using E-banking
services?
A. Enables digital payments D. large customer coverage
B. Lowest transaction cost E. enhanced image
C. Increase revenue F. others ________________
Instruction:
Below are lists of statements pertaining to the 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”.
43
Note: SA-strongly agree, A-agree, N-neutral, DA-disagree, SD-strongly disagree
1) Organizational challenges SA A N DA SD
I. lack of technological and managerial skills in implementation
and development of E-banking technology
II. Customers' desire to use technological innovation will be
influenced by a lack of government assistance
III. Customers find that using a mobile phone to obtain banking
services is relatively expensive
IV. Using internet banking increases cost to do banking task
2) Technological challenge SA A N DS SD
V. In the case of using mobile banking, ATM and others, security
risk affect users decision to use the system
VI. Government can organize and create good plans to support the
development of civilian technology innovation
VII. Lack of available ICT infrastructure
VIII. Absence of financial networks that links different banks
3) Environmental challenges SA A N DS SD
IX. Lack of adequate coordination, interaction and cooperation
between banks and other decision making centers in electronic
banking system
X. Customers may not willing to accept E-banking service
XI. Using internet banking is difficult due to low internet access
in the Ethiopia
XII. Relatively high cost of internet service
XIII. Lack of sufficient government support will affect customers
willingness to use technological innovation
44
Challenges of electronic banking service
Challenges SA A N DS SD
1. Low level of internet penetration and poorly developed
telecommunication infrastructure
2. High cost of installation
3. lack of government initiation or lack of government
prioritization
4. The absence of an appropriate legal and regulatory framework
5. In the framework of e-banking, there is a lack of coordination
and cooperation with other banks.
6. Lack of demand from the customers side
Any other challenges? Please specify
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Opportunities of electronic banking service
Opportunities SA A N DS SD
1. Government commitment to developing the banking industry
2. Government commitment to assisting in the expansion of ICT
infrastructure
3. The need for electronic banking services is significant
4. The existence of high demand
Any other opportunities? Please specify
45
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
The following are some of the perceived benefits the bank of Abyssinia derived from the
opportunities and challenges of E-banking system, please indicate your choice.
Perceived Ease of use SA A N DS SD
1. Using E-banking system (like ATMs, mobile banking, internet
banking) simplify the activity of workers to deliver
2. E- banking makes it easier for me to do banking activities
3. In the case of mobile banking, our customers can simply use

their phone to access financial services.
4. customers' service bank of Abyssinia provides instructions on

how to utilize the electronic banking system.
5. When the bank introduces new services, the management

provides training sessions for its employees.
6. E-banking system helps to perform banking task in a simple

way
Perceived Usefulness SA A N DS SD
1. E-banking services such as Internet banking, mobile banking,
ATMs, and POS are time-saving.
2. E-banking is more user-friendly than going to a bank.
3. Using technical tools such as ATMs helps to reduce
transaction costs.
4. Reduce number of customers come to the banking hall
5. Create better relationship among banks and clients
46
6. Efficiency and speed
Any other benefits? Please specify
----------------------------------------------------------------------------------------------
---------------------------------
Interview
Thank you very much for volunteering to participate in this one-on-one persona; interview. The
main objective of this interview is to assess the challenges and opportunities of electronic banking
service. Your responses will be treated with almost 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 electronic
banking service in delivering quality service to customers of bank of Abyssinia S.C.
47
Thank you in advance for your participation.
1. What do you think are the basic challenges of electronic banking currently bank of
Abyssinia is facing?
2. What are the challenges of electronic banking service in bank of Abyssinia?
3. Do you see any social, economic and legal challenges in introducing ATM, internet
banking, mobile banking in bank of Abyssinia?
4. What is the basic benefit of e-banking service?
5. Do you think the government policy have impact on the practice of electronic banking
system?
6. Do you see any social, economic, or legal challenges to bank of Abyssinia use of ATMs,
internet banking, and mobile banking?
48

Hana Getye Final Thesis

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LUNAR INTERNATIONAL COLLEGE

SCHOOL OF BUSINESS AND ECONOMICS

OPPORTUNITIES AND CHALLENGES OF ELECTRONIC

Opportunities and Challenges of Electronic Banking System: The

Advisor: Getachew Wagaw. (PhD)

A thesis submitted to the School of Business and Economics in Partial

Name: Hana Getye

________________ ________________ ________________

_____________________ ________________ _____________

_____________________ ________________ ________________

_____________________ ________________ ________________

Finally, I would like to express my gratitude to Lunar international college school of

APPROVAL OF THESIS FOR DEFENSE................................................................................... iv

APPROVAL OF THESIS FOR DEFENSE RESULT ................................................................... v

LIST OF TABLES .......................................................................................................................... v

LIST OF FIGURE .......................................................................................................................... vi

LIST OF ABBREVIATION ......................................................................................................... vii

ABSTRACT ................................................................................................................................. viii

CHAPTER ONE ............................................................................................................................. 1

1.1. Background of the study ............................................................................................. 1

1.2. Statement of the problem ............................................................................................ 2

1.3. Research Questions ..................................................................................................... 4

1.4. Objective of the study ................................................................................................. 5

1.4.1. General objective................................................................................................... 5

1.4.2. Specific objective .................................................................................................. 5

1.5. Scope of the study ....................................................................................................... 5

1.6. Significance of the study............................................................................................. 6

1.7. Organization of the study ............................................................................................ 6

CHAPTER TWO ............................................................................................................................ 7

2. Review of Related Literature .............................................................................................. 7

2.1. Introduction ................................................................................................................. 7

2.2. Theoretical review ...................................................................................................... 7

2.2.1. Introduction of E-banking ..................................................................................... 7

2.2.1.2. Evolution of E-banking ................................................................................... 8

2.2.1.3. E-banking channels ......................................................................................... 9

2.2.1.3.1. Internet banking ........................................................................................ 9

2.2.1.3.2. Automated teller machines (ATM) .......................................................... 9

2.2.1.3.3. Point-of-sale transfer terminals (POS) ..................................................... 9

2.2.1.3.4. Mobile banking....................................................................................... 10

2.2.1.4. Organizational challenges of E-banking ....................................................... 10

2.2.1.5. Electronic banking challenges in Ethiopia .................................................... 10

2.2.1.6. Strategic challenges of E-banking ................................................................. 13

2.2.1.7. Technological challenges .............................................................................. 14

2.2.1.8. Opportunities of E-banking system ............................................................... 14

2.2.1.9. Opportunities of E-banking for banks ........................................................... 14

2.2.1.10. Opportunities of E-banking for customer .................................................... 15

2.3. Empirical review ....................................................................................................... 15

2.4. Conceptual frame work of the study ......................................................................... 18

3. Research Methodology ..................................................................................................... 19

3.1. Research design ........................................................................................................ 19

3.2. Research approach .................................................................................................... 19

3.3. Types and source of data........................................................................................... 20

3.4.1. Target population ................................................................................................ 20

3.4.2. Sample size.......................................................................................................... 20

3.5. Method of data collection ......................................................................................... 21

CHAPTER FOUR ......................................................................................................................... 23

4. Results and Discussion ..................................................................................................... 23

4.1. Introduction ............................................................................................................... 23

4.2. Demographic Information of the Respondent........................................................... 23

_________ _

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