Addis Ababa University

College of Business and Economics

Department of Accounting and Finance

Challenges and Prospect of E-Banking in Ethiopia

By

Mattewos Kinfe

A Research Project Submitted to Partial Fulfillment of the Requirement for the

Award of Masters of Science Degree in Accounting & Finance

Advisor: Asmare Emire (Dr.)

January, 2016

Addis Ababa, Ethiopia

 DECLARATION
I, Mattewos Kinfe, declare that this study entitled as “Challenge and prospect of E-banking
service in Ethiopia”, is my own work. I have carried out the research work independently with
the guidance and support of the research advisor. This study had not been submitted to any
degree/diploma in this or any other institution. It is done in partial fulfillment of MSc Degree in
Accounting and Finance.

Name of student: Mattewos Kinfe Signature: ________________

Place: Addis Ababa, Ethiopia Date: Jan.22, 2016

 CERTIFICATE
This is to certify that Mattewos Kinfe has carried out his research work on the topic entitled
“Challenges and prospect of E-banking service in Ethiopia”. This work is original in nature
and is suitable for submission to the award of MSc. in Accounting and Finance.

Name of advisor: Asmare Emire (Dr.) Signature:

Place: Addis Ababa, Ethiopia Date: _________

 ABSTRACT
Despite the growth of e-banking adoption worldwide, Ethiopian banks continue to conduct most
of their banking transactions using traditional methods. The general objective of the study was
assessment of the current extent and practices, benefits realized by banks, driving forces,
opportunities and challenges for the adoption of e-banking service in Ethiopia. From this general
objective, five specific issues were explored. 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 the E-banking Department of each bank at the head office level and bank web
sites respectively. The collected data was analyzed by using descriptive analysis such as tables
and percentages.

From the analysis of the collected data, the findings revealed that: balance inquiry, cash
withdrawal, funds transfer within same bank, statement printings a r e some the major
practice of e-banking in those banks that are providing the service to their customer. The
different e-banking channels by which banks are using to provide these services to their
customers are ATM, debit card, Internet banking and Mobile banking. In addition to this some
banks start to provide different type of card services. On the View point of the bank Cost
reduction, coverage of wide geographical area, customer satisfactions are some of the benefits of
using E banking. The driving forces that initiate banks to adopt e-banking services are : existence
of high competition in the banking industry, desire to improve organizational performance,
desire to reduce transaction cost, desire to cover wide geographical area, and desire to build
organizational reputation are among others. Chances of risk, Lack of suitable legal and
regulatory framework, absence of financial networks that links different banks, Low level of
internet penetration and poorly developed telecommunication infrastructure, high cost of
internet, security concerns are among the major challenges of e-banking service in the country.
However, late adopter opportunities, improvement in the banking habit of the society,
commitment of the government to facilitate the expansion of ICT infrastructure and willingness
among banks to cooperate in building infrastructure are the major opportunities for the adoption
of the system in the banking industry.
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TABLE OF CONTENT
Abstract---------------------------------------------------------------------------------------------------iii

Acknowledgement-------------------------------------------------------------------------------- vii

Acronyms------------------------------------------------------------------------------------------viii

List of Tables-------------------------------------------------------------------------------------- ix

Chapter One

Introduction
1.1 Background of the study……………………………………………………….……….1
1.2 Problem of The statement..…………………………………………………….……….2
1.3 General Objective...…………………………………………………………….……….3
1.4 Spesific Objectives .…………………………………………………………….………3
1.5 Research Questions ……………………………………………………….…………….3
1.6 Jestfication of the study...……………………………………………………………….4
1.7 Scope of Wo……………………………………………………………………………..5
1.8 Organization of The study .……………………………………………………………...5
Chapter Two
Litrature Review
2.1 Defination of Electronic Banking …………..……………………………………….…..6

2.2 Importance of E- banking ……………………………………………………………….7

2.3 Benefit of E-banking from the Banks point of View ………..…………………….…….8

2.4 Benefit from customers point of View ………...………………………………..……….8

2.5 Economic benefit ………………………………………………………………..……….9

2.6 Type of E-banking …………………………………………………………..…………....9

2.6.1 Internate Banking …....…………………………………………..………………….9

2.6.1.1 Advantages of Internate Banking ..…………..………………………………..10

 2.6.2 Telephone Banking ..…………………………………………………….……...…..11

2.7 Delivery Chanales of E-Banking……………………….………………………….…….11

2.7.1 Automated Teller Machines ATMs)…………………….……………………...…12

2.7.2 Personal Computer service ………………………………………………………..12

2.7.3 Electronic Fund Transfer at Point of sales (EFTPos) …………………….….……13

2.7.4 Credit ard……………………………………………………………..…………....14

2.7.5 Debit Card……………..……………………………………………………..…….14

2.8 Characterstics of E-Banking...…………………………………………………….…..….15

2.9 Challenge of E-anking……………………………………………………….………...…15

2.9.1 E-Banking fraud...…………………………………………………..…….….…..16

2.9.1.1 Security Measure to avoid E-Banking Fraud …….…………….….……….16

2.10 Banking in Ethiopia …………………………….……………………………..…….…17

2.10.1 Banking History in Ethiopia ………………………………………..……….....17

2.10.2 Review of Commercial Banking Practice in Ethiopia ……………….………..18

2.10.3 Technology Used in the banking Sector ………………………………………19

2.10.4 Challenge and Prospect of E-Banking …………………………………….…..21

2.10.4.1 Challengs ………………………………………………………….…….21

2.10.4.2 Prospects ……………………………………………………….……….23

Chapter Three

Methodology
3.1 Study area…………………………….………………………………………….….…..24

3.2 Study Designe ..…………………………………………………………………………24

3.3 Traget Population..………………………………………………………………………24

3.4 Sampling and Sampling Technic……………………………………………….………..25

3.5 Sources of Data………………………………………………………………………….25

3.6 Data collection Instrument………………………………………………………………25

3.7 Data Collection Procedure.………………………………………………………..…….26

3.8 Data analysis....………………………………………………………………………..…26

3.9 Limitations ……………………………………………………………………………...26

Chapter Four

Result and Discussion

4.1 Introduction ……………………………………………………………………….……28

4.2 Analysis and discussion Related to objective 1 …………………………………….…..28

4.3 Analysis and discussion related to objective 2 …………………………………...…….35

4.4 Analysis and discussion related to objective 3 …………………………………..…..….36

4.5 Analysis and discussion related to objective 4 …………………..……………………...38

4.6 Analysis and discussion related to objective 5 ……………………………............…….40

Chapter Five

Conculusion and Recommendation

5.1 Introduction …………………………………………………………………….….……43

5.2 Conclusion …………………………………………………………………………..…..43

5.3 Recommendation..……………………………………………………………………....45

Refrences...……………………………………………………………………………….…47

Annex 1………….…………………………………………………………………………..50

Annex 2……………….…………………………………………………………………..…59

Annex 3……………………………………………………………………………………..60
 ACKNOWLEDGMENTS

First and foremost, I would like to thank the Almighty God to give me the courage through his
endless love and blessings that helped me to finalizing the study. And I would like to thank his
mother Saint Mary. She pray, bless, protect and intercede for us.

Secondly, it gives me a great pleasure to extend my sincere gratitude for the help I received to
complete this paper. I would like to acknowledge Dr. Asmare Eemire for his unreserved and
valuable advice on each step of the research paper. Special thanks go to the employees of the
selected banks who provide all the necessary information about e -banking.

I would like also to express my gratitude to my friends, for their unlimited advisory as well as
moral support starting from the beginning up to the end. Finally, I would like to thank all people
involved directly or indirectly for the accomplishment of this paper.

Mattewos Kinfe
 ACRONYMS

ATM Automated teller machine

AIB Awash international bank
CBE Commercial bank of Ethiopia
DB Dashen bank
DR Disaster Recovery
E-banking Electronic banking
EFTPos Electronic fund transfer at point of sales
ETC Ethiopia Telecommunication Corporation
ICT Information communication technology
L/C Letter of credit
MCB Multi-channel banking
NBE National Bank of Ethiopia
NIB Nib international bank
NGN Next generation network
NNOC National network Operation center
SSL Secure sokate layer
SWIFT Society for Worldwide Inter-bank Financial
Telecommunication
PC Personal computes
PDA Personal Digital assistant
POS Point of sale
UB United bank
WB Wegagen bank
ZB Zemen bank
 LIST OF TABLES
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Table 1: Demographic characteristics of respondents------------------------------------------------27

Table 2: Classification of banks according to their adoption of e-banking------------------------28

Table 3: Current practice of E banking --------------------------------------------------------------29

Table 4: Operational issue related to E banking ---------------------------------------------------31

Table 5: Up sealing of banking service using E banking-------------------------------------------33

Table 6: Benefit of e-banking service------------------------------------------------------------------34

Table 7: Driving forces that initiate banks to adopt e-banking service----------------------------35

Table 8: Challenges of e-banking service in Ethiopia-----------------------------------------------37

Table 9: Prospect of e-banking service in the country-----------------------------------------------39
 CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The increasingly competitive environment in the financial service market has resulted
in pressure to develop and utilise alternative delivery channels. The most recently
delivery channel introduced is online or electronic banking also known as e-banking
(Daniel & Storey, 1997). Online or electronic banking systems give everybody the
opportunity for easy access to their banking activities. These banking activities may
Include but not limited to: retrieving an account balance, money transfers between a
users accounts, from a users account to someone elses account, retrieving an account
history. Some banks also allow services such as stock market transactions, and the
submission of standardized accounting payment files for bank transfers to third
parties (Claessens etal. 2002). It had been projected that more than 32 million
households globally were banking online by 2003 (Simpson, 2002). Banks and other
financial institutions have moved to e-banking in their efforts to cut costs while
maintaining reliable customer service (Kolodinsky and Hogarth, 2001).

It is evident that banks and other financial institutions in developed and developing
countries are embracing e-banking. As technology evolves, different kinds of
electronic banking systems emerge, each bringing a new dimension to the interaction
between user and bank. They include Automated Teller Machine (ATM), mobile and
Internet (online) banking, electronic funds transfer, direct bill payments and credit
card (Gikandi and Bloor, 2010; Liaoa and Cheung, 2002). The use of these facilities is
on the increase. For example, in Kenya and Singapore a recent survey indicates that
there is steady increase in use of E-banking technologies such as Automated Teller

Machine (ATM), mobile and Internet (online) banking, electronic funds transfer,
direct bill payments and credit card (CBK 2008; Liaoa & Cheung, 2002). Among
these E-banking facilities, the Automated Teller Machine (ATM) is the first well-
known and widely adopted system that was introduced to facilitate the access of the
user to his banking activities (Nyangosi et al. 2009; Claessens et al., 2002)

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In Ethiopia, Online banking is in its infant stage. Even though, the concept of online
banking implimented in Ethiopia with a single service of SMS message during late
2008, It doesnot show that much improvement as its age. Now a day som banks are
adopting e-banking system which is the state - of- the art. In addition, many banks are
making what seem like huge investments in technology to maintain and upgrade their
infrastructure, in order not only to provide new electronic information based services,
but also to manage their risk positions and pricing. The earliest forms of electronic and
communications technologies used mainly in Ethiopian banking offices were
automation devices. However, Telephones, telex and facsimile were employed to
speed up and make more efficient the process of servicing clients.

1.2 Statement of the problem

In a relatively short period of time, the Internet has moved from an occasional tool to
one of the principal ways we communicate, entertain ourselves, and do work. And all
that time we spend online has to come at the expense of something else. One main
advancement technology has brought to us is the introduction of online banking or E-
banking. Traditional banking is characterized by physical decentralization, with
branches scattered around populated areas to give customers easy geographical access
(Ainin et al., 2005). E- Banking does away with the need for most visits to the
bank. However, according to Locket & Littler (1997), physical banks assure customers
that their banks has substantial resource and guarantee the security of their savings. A
study indicated that electronic banking has been available in the UK since the early
1980s.
It is not clear whether all customers want or are comfortable with electronic banking
(Daniel & Storey, 1997). Technology is changing at a rapid pace making it difficult
for both the customer and the bank to determine the best approach. Particular
problems arise with trying to integrate new channels with legacy channels. It is for
these reasons that academic research is needed in this newly emerging delivery
channel (Daniel & Storey, 1997).
Similarly, in Ethiopia, most banks practicing online banking are also facing challenges
such as customer preference of the online banking facility, Very poor Connection,
Trust of the people in the moder tools, convenience of clients to utilize and adopt
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online banking facilities. While numerous studies have been undertaken to examine
issues in the wider context of Economic and Financial implication online banking,
problem and prospect, comprehensive research in the area of online banking issues in
the specific context of Ethiopia has been rather limited. This study attempted to
identify prospects and influencing challenges inhibiting acceptance of online banking
in Ethiopian Commercial Banks.

1.3 General Objective

The main objective of the study is to determine the prospect and challenges of e
banking in Ethiopia.

1.4 Specific Objectives

The specific aims of the study are:
1. To explore the current practice and extent of adoption of e-banking
service in Ethiopia.
2. To find the benefits realized by banks in the adoption and practice of
e-banking to compliment their service delivery channels.
3. To determine the driving forces towards the adoption of e-banking service
in the banking industry.
4. To identify the major challenges for the adoption of e-banking service in
Ethiopia.
5. To find the existing opportunities for the adoption of e-banking service in
Ethiopia.

1.5 Research Questions

Based on the above stated objectives, the following research questions will
answered:
1. How looks like the current practices and extent of e-banking service in
Ethiopia?
2. What are the benefits of adopting e-banking service from the viewpoint
of the bank?

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 3. What are the driving forces towards the adoption of e-banking service in
the banking industry?
4. What are the major challenges for the adoption of e-banking service in Ethiopia?
5. What are the existing opportunities for the adoption of e-banking service
in Ethiopia?

1.6 Justification of the Study

Commercial banking is undergoing rapid change, as the international economy

expands and advances towards institutional and market completeness. A major force
behind these developments is technology, which is breaching geographical, industrial
and regulatory barriers, creating new products, services and market opportunities, and
developing more information and systems-oriented business and management
processes (Liaoa & Cheung, 2002). One of the products of global technological
changes is the advent of online banking (E-banking). Online banking has become
prevalent and employed by many financial institutions to reduce costs associated with
having personnel serve customers physically, shorten processing periods, increase
speed, improve flexibility of business transaction and provide better service in all
(Shih & Fang, 2004). It has been identified as the fastest growing area for business
(Aladwani, 2001) and many banks are improving on use of their online banking
facilities to move along with global trend.

Much documentation on online banking services has been carried out elsewhere
(Daniel and Storey, 1997; Liaoa & Cheung, 2002; Claessens et al., 2002). However, in
Ethiopia, there is little or no information concerning online banking usage. Even those
commercial banks to which start using online banking is connect some of its own
branches. Cross bank transaction using online banking is a monster idea for
Ethiopian Commercial banks. This paper tries to identify prospect and challenges of
online banking. This assessment would enable the banks to render better online
banking service to their customer, adopt new strategies to cope with challenges and
meet customer needs in the use of these online banking facilities.

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1.7 Scope of work

The studies were conducted at five selected commercial banks in Addis Ababa.
The Banks are Commercial Bank of Ethiopia, Dashen Bank, Awash International
Bank, Zemen Bank and Wegagen Bank. The banks are selected under the assumption
that i t h a s a better application of online banking than other commercial banks in
Ethiopia. The study is involve staff from the selected banks, staffs from national
bank of Ethiopia, staffs from Internet Network security Agency (INSA) The study
laid emphasis on Challenges and prospect of online banking in Ethiopia.

1.8 Organization of the study

The research report is organized into five chapters: Chapter one focuses on the
background of the study, problem statement, objectives and justification of the study.
In chapter two, a range of literatures review capture there to gather relevant
information concerning online banking. In chapter three, detail of methodology
follow to achieve result outline. It is including the study design, sampling,
sampling technique and data analysis. Chapter four contain results and discussion
from the study supported with findings from other research works. Chapter five
focuses on main findings, conclusions and recommendations of the study.

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 CHAPTER TWO

REVIEW OF RELATED LITRATURE

2.1 Terms and Concepts

The definition of Electronic banking (E-banking) varies amongst researchers partially
because Electronic banking refers to several types of services through which bank
customers can request information and carry out most retail banking services via
computer, television or mobile phone (Daniel, 1999; Mols; 1998; Sathye, 1999).
Different authors have defined it in different ways based on their understanding of the
application of electronic banking. According to Daniel (1999), electronic banking is
electronic connection between the bank and customer in order to prepare, manage and
control financial transactions. Sathye (1999) also asserted that electronic banking can
be defined as a variety of the following platforms: (a) Internet banking (or online
banking), (b) telephone banking, (c) television-based banking, (d) mobile phone
banking, and (e) PC banking (or offline banking). In the opinion of Daniel (1999),
E-banking is online banking (or Internet banking) which allows customers to conduct
financial transactions on a secure website operated by their retail or virtual bank,
credit union or building society. This implies that E-banking is a service that
allows an account holder to obtain account information and manage certain banking
transactions through a personal computer via the financial institution web site on the
internet.
For many consumers, electronic banking means 24-hour access to cash through an
Automated Teller Machine (ATM) or Direct Deposit of pay checks into checking or
savings accounts (FTC, 2006). But electronic banking now involves many different
types of transactions.

Electronic banking, also known as Electronic Funds Transfer (EFT), is simply the use
of electronic means to transfer funds directly from one account to another with out the
physical involvement of the bank personnel, rather than by cheque or cash. By using
Electronic fund transfer an account holder can use:
 Salary deposited directly into bank or credit union account
 Withdraw money from a cc ou nt t hrou gh an ATM machine with a
personal identification number (PIN), at any convenience, day or night

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  Settle utility bills and other regular payments
 Transfer money between accounts
 Order payment to government offices like tax and pension
 Conduct transactions at the point-of-sale, using a credit/debit card rather
than cash, credit or a personal check
 Use computer and personal finance software to coordinate t o t a l
personal financial management process, integrating data and activities
related to income, spending, saving, investing, recordkeeping, bill-paying
and taxes, along with basic financial analysis and decision making.

2.2 Importance of E-banking

Electronic banking systems provided easy access to banking services. The interaction
between user and bank has been substantially improved by deploying ATMs, Internet
banking, and more recently, mobile banking (Claessens et al. 2002). Electronic
banking (E-banking) reduces the transaction costs of banking for both Small and
Medium Enterprises (SMEs) and banks. SMEs need not visit banks for banking
transactions, providing round the clock services (Cheng, 2006). Customers prefers E-
banking for conveniences, speed, round the clock services and access to the account
from any parts of the world (Cheng, 2006). E-banking offers benefits to banks as well.
Banks can benefit from lower transaction costs as E-banking requires less paper work,
less staffs and physical branches (Cheng, 2006). E-banking leads to higher level of
customers’ satisfaction and retention (Poatoglu & Ekin, 2001).

E-banking reduces loan processing time as borrowers loan application can be viewed
by loan processing and loan approval authority simultaneously (Smith & Rupp, 2003).
Typically, loan applications received at branch level and send to head office for
approval. This documents transfer to and from branch to head office consume much
time and delay loan sanction period (Riyadh et al., 2009).

The benefits of E-banking identified from the current literature are classified in two
main categories - tangible and intangible.

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 Tangible benefits
- Increase automation process
- Transformation of traditional market chain
- Retained and expand customer base
- Reduced operational costs
- Acquisition of each market
- Increase business efficiency
Intangible benefit
- Enhance well being and education of customers
- Competitive advantage
- Convenient banking

2.3 Benefit from the Bank’s point of View

According to a survey by booz, Allen and Hamilton, an estimated cost providing the
routine business of a full service branch in USA is $1.07 per transaction, as compared
to 54 cents for telephone banking, 27 cents for ATM (Automated Teller Machine)
banking and 1.5 cents for Internet Banking(Nathan 1999; Pyun et al., 2002). In Nordea,
Finland, one online transaction costs the bank an average of just 11 cents, compared to
$1 for a transaction in a brunch (Echikson, 2001). Average payment in internet bank or
via direct debit cost 4 times less than payment in brunch. On actual cost side (cost side
in the bank point of view) direct debit payment cost 16 times less and payment in
internet bank 7 times less than payment in brunch. This indicate that E banking
contribute a significant financial benefit to banks to which implement E banking. In
addition to this E banking reduce the capital expenditure and staff coust of the bank.

2.4 Benefit from the customer point of View

The main benefit from the bank customer’s point of view is significant saving of time
by the automation of banking service processing and introduction of an easy
maintenance tools for managing customer’s money. The main advantages of E banking
for corporate customers’ are
- Reduce costs in accessing and using the banking service
- Increased comfort and time serving
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 - Transaction can be made even after banking hour without the physical interaction
of the bank 24 hours a day. This increase the productivity of both the bank and the
company
- Quicq and continuous access of information and corporation will have easier
access to information as, check multiple accounts at the click of a button, better
cash management (Bank Away! 2001; Gur_u, 2002).

2.5 Economic Benefit

The impact of the new economy on the entire economy growth has been studied in
several research projects. For example (Pohjola, 2002) shows that the contribution of
the use of information communication technology to growth of output in the Finnish
market sector has increased from 0.3 percent in early 1990’s to 0.7 percent in late
1990’s. Similarly, research conducted in Estonia (Arm and Vensel, 2001), bank
customers use bank office on average 1.235 times per month, and wait in queue in
bank office on average for 0.134 hours. Simple calculation shows that making
payments using E banking facilities rather than in the banks office create overall
economy savings in the amount of 0.93% of GDP (average distance to nearest bank
office is 4.14 km (Arma and Vensel, 2001), which takes approximately 0.21 hors to
travel.

2.6 Types of E-banking

Over the past years, two types of electronic banking services have emerged in the
banking sector; internet and telephone banking (Adriana, 2006)

2.6.1 Internet banking

Internet banking is a new age banking concept. It uses technology and brings the
bank closer to the customer. Internet banking refers to systems that enable bank
customers to get access to their accounts and general information on bank products
and services through the use of banks website, without the intervention or
inconvenience of sending letters, faxes, original signatures and telephone
confirmations (Thulani et al, 2009). For those that have access to the internet and a

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computer all you need to do is proceed to your banks website and login. From there
you have access to all of your accounts that you have at that bank. Transfer funds
between your accounts with ease. You can also use online banking to see how much
money you have in your accounts and where the money you have spent has gone.
Broadly, the levels of banking services offered through internet can be categorized in to
three types:
1. The Basic Level Service is the banks‟ websites which disseminate
information on different products and services offered to customers and
members of public in general. It may receive and reply to customers‟ queries
through e-mail.

2. In the next level are Simple Transactional Websites which allows customers to
submit their instructions, applications for different services, queries on their
account balances, etc, but do not permit any fund-based transactions on their
accounts.

3. The third level of Internet banking services are offered by Fully Transactional
Websites which allows the customers to operate on their accounts for transfer
of funds, payment of different bills, subscribing to other products of the bank
and to transact purchase and sale of securities.
The above forms of Internet banking services are offered by traditional banks as
an additional method of serving the customer. There are also banks that deliver
banking services primarily through Internet or other electronic delivery channels.
Some of these banks are known as virtual banks or Internet- only banks and may
not have any physical presence in a country despite offering different
banking services (Adriana, 2006).

2.6.1.1 Advantages of Internet Banking

1. It removes the traditional geographical barriers as it could reach out to

customers of different countries / legal jurisdiction.
2. It has added a new dimension to different kinds of risks traditionally
associated with banking, heightening some of them and throwing new risk
control challenges.

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 3. It poses a strategic risk of loss of business to those banks who do not respond
in time, to this new technology, being the efficient and cost effective delivery
mechanism of banking services.
4. A new form of competition has emerged both from the existing players and
new players of the market who are not strictly banks.
5. Another advantage of Internet banking is that it is cost-effective. Thousands of
customers can be dealt with at once. There is no need to have too many clerks
and cashiers. The administrative work gets reduced drastically with Internet

banking. Expenditures on paper slips, forms and even bank stationery have
gone down, which helps raise the profit margin of the bank by a surprisingly
large number.

2.6.2 Telephone Banking (Tele banking)

Tele banking (telephone banking) can be considered as a form of remote or virtual

banking, which is essentially the delivery of branch financial services via
telecommunication devices where the bank customers can perform retail banking
transactions by dialing a touch-tone telephone or mobile communication unit, which is
connected to an automated system of the bank by utilizing Automated Voice
Response (AVR) technology (Balachandher et al., 2001). It allows consumers to
phone their financial institutions with instructions to pay certain bills or to transfer
funds between accounts (FTC, 2006).

2.7 Delivery channels of E-banking

E- Banking services are delivered through various electronic means collectively called
electronic delivery channels. Electronic Banking is really not one technology, but an
attempt to merge several different technologies. Each of these evolved in different
ways, but in recent years different groups and industries have recognized the
importance of working together (Abor, 2004). The various delivering channels for E-
banking are discussed as follows:

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 2.7.1 Automated Teller Machines (ATMs)
ATM is also called 24-hour tellers are electronic terminals which give consumers the
opportunity to bank at almost any time (FTC, 2006). ATM banking is one of the
earliest and widely adopted retail E-banking services in Kenya (Nyangosi et al. 2009).

It is described as a combination of a computer terminal, record-keeping system and

Cash vault in one unit, permitting customers to enter the bank’s book keeping system
with a plastic card containing a Personal Identification Number (PIN) or by punching a
special code number into the computer terminal linked to the bank’s computerized
records 24 hours a day (Rose, 1999).
To withdraw cash, make deposits or transfer funds between accounts, a consumer
needs an ATM card and a personal identification number. Once the customer login,
access to transactions are displayed on the screen. It offers several retail banking
services to customers. They are mostly located outside of banks, and are also found at
airports, malls, and places far away from the home bank of customers. They were
introduced first to function as cash dispensing machines (Abor, 2004). Some ATMs
charge a usage fee for this service, with a higher fee for consumers who do not have
an account at their institution. If a fee is charged, it must be revealed on the terminal
screen or on a sign next to the screen Rose (1999).
ATM services have a lot of advantages. They include increase in productivity during
banking hours if the service is available in addition to the human tellers. They are
cost-effective way of achieving higher productivity per period of time. According to
Rose (1999), an ATM transaction is an average of about 6,400 per month compared to
4,300 for human tellers. Furthermore, it saves customers time in service delivery as
alternative to queuing in bank halls, customers can invest such time saved into other
productive activities (Abor, 2004). In addition, ATMs continue to serve customers
whiles human tellers in the banking hall have stopped work, thereby increasing
productivity for the banks.

2.7.2 Personal Computer Banking Services

PC-Banking is a service which allows the bank’s customers to access information
about their accounts via a proprietary network, usually with the help of proprietary
software installed on their personal computer. Once access is gained, the customer can
perform a lot of retail banking functions. The increasing awareness of the importance
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 of computer literacy has resulted in increasing the use of personal computers.
This certainly supports the growth of PC banking which virtually establishes a branch
in the customers’ home or office, and offers 24-hour service, seven days a week. It
also has the benefits of Telephone Banking and ATMs (Abor,2004).

It offers consumers the convenience of conducting many banking transactions

electronically using a personal computer. Consumers can view their account balances,
request transfers between accounts and pay bills electronically from home.

2.7.3 Electronic Funds Transfer at Point of Sale (EFTPoS)

An Electronic Funds Transfer at the Point of Sale is an on-line system that allows
customers to transfer funds instantaneously from their bank accounts to merchant
accounts when making purchases (at purchase points). A POS uses a debit card to
activate an Electronic Fund Transfer Process (Chorafas, 1988). Point-of-Sale Transfer
Terminals allow consumers to pay for retail purchase with a check card, a new name
for debit card. This card looks like a credit card but with a significant difference, the
money for the purchase is transferred immediately from your account to the store's
account.
Increased banking productivity results from the use of EFTPoS to service customers
shopping payment requirements instead of clerical duties in handling cheques and

cash withdrawals for shopping. Furthermore, the system continues after banking
hours, hence continual productivity for the bank even after banking hours. It also
saves customers time and energy in getting to bank branches or ATMs for cash
withdrawals which can be harnessed into other productive activities (Abor, 2004).
Some banks issued international cards (such as Visa, MasterCard etc.) to their
customers. Such cards can be used wherever accepted, and payment on the cards can
only be done through an ordinary domiciliary account of the cardholder, or any other
account that may be permitted. Some of these cards are credit or debit cards.

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2.7.4 Credit Cards

A credit card is a small plastic card issued to users as a system of payment. It allows
its holder to buy goods and services based on the holder's promise to pay for these
goods and services. The issuer of the card creates a revolving account and grants a
line of credit to the consumer (or the user) from which the user can borrow money for
payment to a merchant or as a cash advance to the user (Mavri & Ioannou, 2006). A
credit card is different from a debit card in that it does not withdraw money from the
users account after every transaction. The issuer lends money to the consumer to be
paid to the merchant. Holders of a valid credit card have the authorization to purchase
goods and services up to a predetermined amount, called a credit limit. The vendor
receives essential credit card information from the cardholder, the bank issuing the
card actually reimburses the vendor, and eventually the cardholder repays the bank
through regular monthly payments. If the entire balance is not paid in full, the credit
card issuer can legally charge interest fees on the unpaid portion.

2.7.5 Debit Cards

A debit card (also known as a bank card or cheque card) is a plastic card that provides
an alternative payment method to cash when making purchases. Functionally, it can
be called an electronic cheque, as the funds are withdrawn directly from either the
bank account or from the remaining balance on the card. In some cases, the cards are
designed exclusively for use on the internet, and so there is no physical card (Mavri &
Ioannou, 2006).

In many countries the use of debit cards has become so widespread that their volume
of use has overtaken or entirely replaced the cheque and, in some instances, cash
transactions. Like credit cards, debit cards are used widely for telephone and Internet
purchases and, unlike credit cards, the funds are transferred immediately from the
bearer's bank account instead of having the bearer pay back the money at a later date.
Debit cards may also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a check guarantee card.

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2.8 Characteristics of E-banking

E-banking includes the systems that enable bank customers to access accounts,
transact business, or obtain information on financial products and services through a
public or private network, including the Internet. Customers access E-banking
services using an intelligent electronic device, such as a Personal Computer (PC),
Personal Digital Assistant (PDA), Automated Teller Machine (ATM), telephone
(Ibrahim et al 2006).

2.9 Challenges of E-banking

Banking organizations have been delivering electronic services to consumers and

businesses remotely for years. Electronic funds transfer, including small payments
and corporate cash management systems, as well as publicly accessible automated
machines for currency withdrawal and retail account management, are global fixtures.
However, the increased world-wide acceptance of the Internet as a delivery channel
for banking products and services provides new business opportunities for banks as
well as service benefits for their customers (BCBS, 2001). Notwithstanding the
significant benefits of E-banking and its capabilities, it carries risks and challenges as
which are recognised and need to be managed by banking institutions in a prudent
manner.
The speed of change relating to technological and customer service innovation in E-
banking is unprecedented. Historically, new banking applications were implemented
over relatively long periods of time and only after in-depth testing. Today, however,
banks are experiencing competitive pressure to roll out new business applications in
very compressed time frames, often only a few months from concept to production.
This competition intensifies the management challenge to ensure that adequate
strategic assessment, risk analysis and security reviews are conducted prior to
implementing new e-banking applications (BCBS, 2001).
E-banking increases banks’ dependence on information technology, thereby
increasing the technical complexity of many operational and security issues and
furthering a trend towards more partnerships, alliances and outsourcing arrangements
with third parties, many of whom are unregulated. This development has been leading
to the creation of new business models involving banks and non bank entities, such
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 as Internet service providers, telecommunication companies and other technology
firms (BCBS, 2001).

The Internet is ubiquitous and global by nature. It is an open network accessible from
anywhere in the world by unknown parties, with routing of messages through
unknown locations and via fast evolving wireless devices. Therefore, it significantly
magnifies the importance of security controls, customer authentication techniques,
data protection, audit trail procedures, and customer privacy standards (BCBS, 2001).
Other E-banking related problems are user error, bad internet connections, access
problems and security issues. Most of these problems happen less to outweigh its
benefits.

2.9.1 E-Banking Fraud

Convenience is the key reason of why millions of people are opting out of traditional
banking for online banking. Banks also enjoy providing the option of online banking
because they can save on operating costs. Most internet banking fraud occurs in a
two-step process. Firstly, the offender must get their hands on the customer's account
information, like their username and password. Secondly, the offender will use that
information to move his victim's money to another account or withdraw it to make
fraudulent purchases. For the first step, offenders often employ one of the many
popular fraud schemes to obtain personal information. These fraud schemes include,
but are not limited to:
- “Over the shoulder looking” scheme: involves the offender observing his
potential victim making financial transactions and recording the personal
information used in the transaction.
- "Phishing" scheme: stems from the two words "password" and "fishing." It
entails sending e-mail spams and mail supposedly from the consumer's bank as a
way to obtain the consumer's personal information, social insurance number, and
in this case their online banking username and password (Kaleem & Ahmed,
2008).
-

16 | P a g e
 2.9.1.1 Security Measures to Avoid E-banking Fraud

Kaleem and Ahmad (2008) argued that in undertaken E-banking transactions,

customers are always concerned about hackers and anti-social elements. Hacking
enables the unethical hackers to penetrate the accounts of online bankers, and spend
their money. Availability of confidential information which is just secured by a user
name and password makes it vulnerable to such threats. Most of the banks try to make
their sites secured by implementing latest network security software. Learn to keep
your cards, documents and passwords safe, and monitor your accounts to safeguard
yourself from bank fraud committed through identity theft. Most importantly, find
out how to protect your personal information to avoid identity theft from happening
to you (BSP,2006).
E-bankers should install virus scanners and keep them and their systems up-to- date
especially PC banking. They should avoid practices that easily lead to security
hazards in particular they should not start up arbitrary executable attachments
received via electronic e-mail. Users should check fingerprints of certificates against
the fingerprints that are (should be) given by the bank on official paper documents
(Claessens et al., 2002; BSP, 2006).

2.10 Banking in Ethiopia

2.10.1 Banking History in Ethiopia
A reference to the Ethiopian history reveals that the first bank in the country,
Bank of Abyssinia was founded during the regime of Emperor Menelik II in February
1905. Due to a foreign domination of its management (mainly the British), the then
Bank of Abyssinia was forced to dissolve and in its place was established the
Bank of Ethiopia in 1931 whose management was still left to foreigners due to
the then lack of skilled manpower in the country. The Bank of Ethiopia was later
replaced by the State Bank of Ethiopia soon after the war with Italy. The latter was the
first bank in the country fully controlled and owned by the Ethiopian government. In
the mean time, however, a number of foreign banks had opened their branches in
the country, most of them with an interest to have control over the nation’s economy. It
was the State Bank of Ethiopia that gave rise to the present Commercial Bank of
Ethiopia (CBE) and National Bank of Ethiopia (NBE). During the Dergue reign, CBE
had remained as the only participant in the country’s commercial banking sector.
17 | P a g e
However, following the 1991 takeover by the present government and accompanying
encouragement of private investment, a number of private banks have emerged
in the country’s financial sector. Accordingly, Monetary and Banking proclamation
No.83/1994 and the Licensing and Supervision of Banking Business No.84/1994 laid
down the legal basis for investment in the banking sector. Consequently, shortly after
the proclamation the first private bank, Awash International Bank was established in
1994. (NBE, 2009).

2.10.2 Review of Commercial Banking Practices in Ethiopia

In Ethiopia, 16 private and three state owned banks are operating til the end of
Nov.2015 Despite a rapid increase in the number of financial institutions since
financial liberalization, the Ethiopian banking system is still underdeveloped
compared to the rest of the world. The use of checks is mostly limited to
government institutions, NGOs and some private businesses. The common
banking functions provided by public and private banks in Ethiopia are deposit
mobilization, credit allocation, money transfer and safe custody. Banks in Ethiopia are
unable to improve customer service, design flexible and customized products, and
differentiate themselves in a market where product features are easily cloned.
Ethiopian banking is unable to come from long way of being sleepy to a high
proactive and dynamic entity.

The Ethiopian banking industry as a whole has a net work of 2,502 branches (Birittu,
No.120), which is the lowest compared to the size of the country (1.1milion square
km) and number of population (more than 90 million) and this shows that the number
of population being served by a single branch stood at around 34,373(Birittu No. 120)
With such highly scattered branch network and disintegrated working system it is
hard to ensure efficient flow of financial resources and optimize the
contributions of the entire financial system to the development processes. All banks
in Ethiopia are too late to move with technological advancement and they should
clearly chart out the time schedule for their integration and technological advancement.
Some of the banks even today do not have information websites, which can help them
to provide at least the information on financial services offered by them (NBE ,
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2008/09). The gaint state owned commercial bank of Ethiopia had been issued only
1,806,876 debit cards, and has mobile banking user of 290,383 and internate banking
user 9,781.00 till Dec. 2014(Birittu no. 120). This is a very samll number compared to
the population size of the country and very scatterd physical branch of the banks.
According to IMF data Ethiopia lag far behind from sub- Saharan African countries in
terms of access of finance. (Birittu No.120)
Product of the Ethiopian Banking sector did not fully benefit from the current
thecnology advancement. Out of ninteen fully oprating commercial banks there are only
six of them comence mobile banking as per the directive No FIS/01/2012. This show
that how far the banking indestry in Ethiopia backwarded in comparisen with the
current world banking indestry advancement and outlate offerings.

2.10.3 Technologies Used in the Banking Sector

Nowadays, banks can use advanced technologies and internet, networks, payment cards,
Automated Teller Machine (ATMs) and so on. This is one is of the prospects that
enables banks to increase the efficiency and productivity.
The banking business has continued realizing the advantages of the cutting-edge
information and communication technology. It has become essential to effectively
implement the appropriate technology to have faster decision support and effective data
integration in the financial intermediary process and also to look for other avenues to
augment income.
Concerning the sectoral outlook, there are emerging initiatives to invest in electronic
multi-service channels and also a tendency to optimally utilize the available resources in
a consortium, which partly supports the effective implementation of the envisaged
national payment system. Additionally, the ongoing efforts of emplacing the electronic
laws focusing on the retail banking business are expected to have a positive effect on the
growth of the payment card business. These are other opportunities for banks to expand
their activities and ultimately realize a second-generation reform in the Ethiopian
financial sector (Dashen, 2009/10)

In this regard, commercial Banks are still at the early stage to implementing modern
banking technology and value-added service provision. Withstanding the prevailing long
attachment of branch-based service channel, which is perceived to lead the society to
19 | P a g e
only value human interaction, Dashen Bank are succeeding in effectively implementing
both the branch-based and impersonal banking service channels. Though the bank have
gone through various challenges in popularizing and penetrating the market through
electronic delivery channels, we are now at the level of encouraging recognition and
flexibility to adopt the new habits as alternate service channels. The bank is able to reap
better returns by way of increasing non-interest income from diversified service
offerings and total solutions to the customers. (Dashen, 2009/10)

Anticipating a further reduction in the processing time and upholding service efficiency,
Dashen bank attempting to continue introducing modern banking services and further
leverage our technologies to provide the highest level of customer services and
convenience, while keeping cost of access to the minimum. The bank resolutely pursue
taking unique initiatives to reach for all relevant modern financial services and to up-
hold the delivery of convenience banking on a 24/7 base.

Ethiopian banking system is one of the most underdeveloped compared to the rest of the
world. In Ethiopia cash is still the most dominant medium of exchange and electronic-
banking is not well known, let alone used for transacting banking business. All banks in
Ethiopia are too late to move with technological advancement and they should clearly
chart out the time schedule for their integration and technological advancement. But
unlike other E banking delivery channales all most all banks has installed ATMs at
convenient locations for their cardholders. Currently, debit service only gives for Visa
and master cards and clients of respective banks can withdraw cash and can buy goods
and services by using the debit card. (Worku, 2010).

To realize high quality service delivery standards, Dashen Bank has kept on playing a
leading role in the adoption of appropriate modern banking technologies. Accordingly,
the Bank has launched its mobile banking service ‘Modbirr’. The service will entitle
customers to conduct banking transactions using their mobile phones anytime,
anywhere. (Dashen, 2009/10). In addition to dashen bank, Commercial bank of Ethiopia,
Wegagen bank, united bank also implement Mobile banking. Commercial bank of
Ethiopa starts internate banking to its customers in 2012 with the service of veiw report,
check balalnce and print report. Till date this service does not have any improvement.

20 | P a g e
Electronic Banking has been widely used in developed countries and is rapidly
expanding in developing countries. In Ethiopia, however, cash is still the most dominant
medium of exchange, and electronic payment systems are at an embryonic stage. In the
face of rapid expansion of electronic payment systems throughout the developed and the
developing world, Ethiopia’s financial sector cannot remain an exception in expanding
the use of the system. Currently most of the commercial banks in Ethiopia start to offer
some of the futers of E banking to its customers. Even the internate banking offerd by
the commercial bank of Ethiopa serve only with in the banks branch. Still cross bank
transaction through E banking not yet starts in Ethiopia. But there is a start in relation to
ATM service which offers by five private commercial banks jointly.

2.10.4 Challenges and prospects of E-Banking

2.10.4.1 Challenges
According to M. M. Rahman (2008) in Bangladesh despite huge demand from the
business community as well as the retail customers particularly the urban customers,
electronic banking (e-banking) is still at a budding state due mainly to a number
of constraints such as unavailability of a backbone network connecting the whole
country; inadequacy of reliable and secure information infrastructure especially
telecommunication infrastructure; sluggish ICT penetration in banking sector;
insufficient legal and regulatory support for adopting e- banking and so on. The
concept of e-banking includes all types of banking activities performed through
electronic networks. It is the most recent delivery channel of banking services,
which is used for both business-to-business and business-to-customer transactions.
However, in true sense, e-banking includes activities like payment of bills and
invoices, transfer of funds between accounts, applying for a loan, payment of loan
installments, sending funds to third parties via emails or internet connections
regardless of where the client is located. Leow, Hock Bee (1999) state that the
terms PC banking, online banking, Internet banking, telephone banking or mobile
banking refers to a number of ways in which customer can access their banks
without having to be physically present at the bank branch. Therefore, e-banking
covers all these ways of banking business electronically. Since e-banking offers
some smart services benefiting both banks and customers compared with traditional
banking system, it has become imperative to make necessary room for banks to
flourish e- banking. Among others, attractiveness of e-banking includes: it lowers
21 | P a g e
transaction cost; provide 24- hour services; ensure increased security and control
over transactions; reduces fraud risk; performs higher volume of transactions with
less time; increases number and volume of value payment through banks; allows
remote transactions facilities that replace physical presence of a customer in a bank
branch and; increases transaction speed and accuracy. On the other hand, traditional
banking is time-consuming and more costly and therefore, e-banking is replacing
traditional banking all over the world.

In addition, an exploratory study that was conducted in Zimbabwe by Chitura Tofara

(2008) indicated that incompatibility with the existing system, cost of
implementation, security concerns, lack of expertise, inadequate legislation and
consumer acceptance are the major challenges of e-banking in the countries banking
industry. The same chalges may also face by Ethiopian banking indestries to
impliment the E banking facilites. But the good thing is that the benefite out weghted
the chalenges in many parametres. Specially country like Ethiopia which have a huge
potential customers for such service copled with a fast growing economy will be the
main advantages of the banking service to offer different products with the helep of
technology to their customers.
In addition, as investigated by Alhaji Ibrahim H. (2009) using exploratory study,
the following are among the critical challenges of e-banking.

- Lack of Technological Infrastructure – the implementation of e-payment

is been impeded by unavailability of ICT infrastructure. Most rural areas
where majority of small and medium scale industries are concentrated have no
access to internet facilities and ICT Equipment
- Costs – where available, the cost of ICT is a critical factor relative to per
capital income. This makes the cost of entry higher compared to developed
countries.
- Regulatory and Legal Issues – inexistence of proper legal and regulatory
framework.
- Non-readiness of banks and other stake holders (acceptability) – even
though some have shown impressive willingness, some banks are still not fully
ready to for this new payment regime.

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Resistance to changes in technology among customers and staff due to:

- Lack of awareness on the benefits of new technologies

- Fear of risk among banks
- Lack of trained personnel in key organizations and
- Tendency to be content with the existing structures
People are resistant to new payment mechanisms;
- Security – where disclosure of p r i v a t e
information, counterfeiting and i l l e g a l alteration of
payment data may be rampant.
- Frequent connectivity failure in telephone lines
- Frequent power interruption
- Wide spread Problem of internate connection

2.10.4.2 Prospects of E-Banking

According to M.s, M Rahman (2008) in Bangladesh e-banking is now a global

phenomenon. Apart from the developed countries, the developing countries are
experiencing strong growth in e-banking. The government’s emphasis on setting
up ICT park, raising allocation for developing ICT infrastructure, waiving taxes
on computer peripherals and other measures including the automation program of
banking sector and competition among the scheduled banks in improving customer
services have accelerated the prospects of e-banking.
The fact that the over all commercial banks branch in Ethiopia compared to the size of
the population and the area of the country is very minimal, it creats a good advantage
to expand E banking facilities and reach the wide spread population of the country
through vertual banking system.

23 | P a g e
 CHAPTER THREE
METHODOLOGY

This chapter discusses the processes and techniques used in carrying out the study. It
also gives a description of the respondents including information on the study
population, the number of respondents and how they were selected. It also provides an
outline of research design and the instruments for data collection. The methods
adopted in the administration of the research instrument, data collection procedure,
data analysis and measures used to ensure validity of the instrument used.

3.1 Study Area

The study was carried out in five selected commercial Banks in Adiss Ababa namely,
Commercial bank of Ethiopia, Dashen Bank, Awash bank, Wegagen bank, and
Zemen bank. These banks were chosen because various E-banking facilities or
products including ATM services, mobile Banking, Internate Banking and the likes
are available. Furthermore, they are closer to the researcher and access to information
is also easy. The banking service has different departments which rely on the
services of E-banking in a way to carry out their jobs.

3.2 Research Design

Research design is usually a plan or blue print which specifies how data relating to a
given problem should be collected and analysed. It provides the procedural outlines
for the conduct of any investigation.
In this study, the researcher adopted a qualitative study approach because it provided
in- depth information to address the objectives. In all, 22 questionnaires were
administered to the interviewees from the selected banks to solicit information
concerning the E-banking. Part of the information was also gathered from reports in
the bank concerning E-banking services.

An exploratory research design was considered the most suitable approach in view
of the nature of the problem being investigated. According to Zikmund (2000),
exploratory research is conducted to clarify and research a better understanding of

24 | P a g e
 the nature of the problem. Consequently, it is appropriate to use when there is
little prior knowledge of the problem being researched. Saunders & Thornhill
(2003) argue that exploratory research is advantageous because it is flexible
and adaptable to change.

3.3 Target Population

In research methods, population is the entire aggregation of items from which samples
can be drawn. The populations of the present study consist of Head office of the
selected banks.

3.4 Sampling and Sampling Technique

Sixteen (16) representative respondents were interviewed in each selected bank. They
are from The E bankinh department of respective banks including the director of the
department. The questionnaires were self administered to the respondents. Purposive
sampling technique was used for staff in the IT department of the banks whiles simple
random sampling technique was employed for other respondents. An informal
interview was also conducted with some officers to gather information needed
for the study.

3.5 Sources of Data

The study used data from primary sources. Primary sources of data included
questionnaire administered to selected staff of the Head Offices of all sellected banks.
The questionnaire was developed in consultation with the supervisor. The items were
subsequently edited and vigilantly selected bearing in mind the research questions.

A total of 81 respondents out of a sample of 90 employees completed and returned

their questionnaires. A copy of the questionnaire is attached as Appendix 1.

3.6 Data collection instruments

The researcher relied on primary data sources. The primary sources involved self-

25 | P a g e
 administered questionnaires. The questionnaire was used because the researcher
considered it to be more convenient as respondents could answer at their convenience
(See Appendix 1). The questionnaire was developed by the researcher based on the
research questions and the literature. Open-ended and closed – ended questions were
used. The questionnaire began with an introductory statement, which specified the
purpose of the research as purely academic. Respondents were encouraged to be
objective in their responses since they were assured of confidentiality.

3.7 Data collection procedure

The consent of all respondents was sought before they were included in the study. At
each staff category, convenient sampling was used to select respondents for the study.
Each respondent was made to answer each question and then the appropriate answer
ticked. Where the researcher is not sure of an answer, the researcher probed until
answer provided is consistent. This procedure was repeated for each junior and senior
staff respondents. To clear any doubts in the minds of respondents the purpose of
the study was made known to respondents.

3.8 Data Analysis

Data from the structured self administered questionnaire was properly organized
through data coding, cleaning and entering. Data processing was by statistical
package for social sciences (SPSS). Descriptive statistics by percentages, figures and
tables were generated from the software to establish relationship among variables.
The relevant information was obtained in a standard form using tables, frequencies
and percentages to analyze and interpret the information. The results were finally
presented in tables. These were used to ensure easy understanding of the analyses.

3.9 Limitations

Collection of data in Ethiopia is very difficult. Problems such as the swearing of an

oath of secrecy in the bank, indifference on the part of interviewees and
respondents limited the objectives of the study. The absence or inaccessibility of

26 | P a g e
 reliable records and reports on E-banking data for the past years also limited the
research investigation.

27 | P a g e
 Chapter Four

Results and Discussion

4.1 Introduction

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 below.
4.2 Analysis and discussion related to Objective I
Table 1: Demographic characteristics of selected
respondents
Bank Year of Job position experi gender Educational
establishment ence Status

Commercial Bank of 1963 Director of10+ F 2nd Degree

Ethiopia E banking
Awash international 1994 E banking 3 M First Degree
Head
Ethiopia(CBE)
Dashen bank(DB)
Bank(AIB) 1995 Head E 5+ M 2nd Degree
banking
Wegagen Bank(WB) 1997 E banking 12 M First Degree
Manager

Zemen Bank(ZB) 2008 Coordinater 2. M First Degree

5
Source:From
questionnaire

As shown in the above table almost all the banks except the single branch Zemen
bank have an age of more than 15 years. As the researcher purposely selects, all the
28 | P a g e
 respondents are from the department of E banking and at managerial position of the
respective bank. Except two of the respondants all these respondents have an
experience of more than five years. In addtion to the above listed respondants the
questioner also distributed to additional Eighty five respondantes to each bakand in
total it was 90 questioners was distributed.The non responsing rate out of the total
questioner is 10%. The sampl saize giving a full picture about the current status of E
banking status in Ethiopia. As mentioned erleayer the servey condacted in the Head
offices of sellected banks which show the over all status of the bankinging activity
through out the country.

Table 2: classification of banks according to their adoption of e-banking

Banks providing Year of
E-banking service commencement

Commercial bank of Ethiopia 2001

Wegagen Bank 2014
Dashen Bank 2006
Awash Bank Under process
Zement bank 2009

Source:From Questionnaire

As reported in the above table among banks that are currently in operation in the
country, four banks are providing banking products to their customer through electronic
channels, the remaing awash Bank is under prossess to implement E banking to its
customer in a full capacity. Even though awash bank is not providing e-banking, it gives
ATM service only to its customer.Currently there are 16 private commercial banks and
3 state owend banks including the gainet commercial bank of Ethiopia are oprating in
Ethiopa. Even though, the number of commercial banks in ethiopa is not that much
many, the capacity and implimentaion of current technology in the industry is very
insignificant compared to other banks in the worled in general and sub saharan countries

29 | P a g e
 in particular.

In addition, the table also indicated that e-banking service is in an infant stage in the
country since most banks are not yet adopted the system and even those banks that
are currently providing the services are commenced the system after 2006 and are not
fully adopted the technology because of different challenges.

Table 3: Current Practices and Extent of e-banking service in Ethiopia

Service offered CBE Dashen Zemen Wegagen Awash

Balance enquiry 1 1 1 1 1

View account history 1 1 1 1 1

Order Pin code 0 0 1 0 0

Fund transfer with in the bank 1 1 1 1 0

Settel utility bills 0 0 0 0 0

Print accoun t statement 1 1 1 1 0

Send Message 1 0 0 0 0

Applay for loan 0 0 0 0 0

Open new account 0 0 1 0 0

Applay for credit card 0 0 0 0 0

Applay for insurance 0 0 0 0 0

Fund transfer across bank 0 0 0 0 0

Cash withdrawal 1 1 1 1 1

Applay for debit card 0 0 0 0 0

Source: From Questionnaire
- 0 for no
- 1 for yes

As shown above, Only Zemen bank offered 50 % of the listed services through its e
banking chanales. Even the gainet satet owned commercial bank of Ethiopia offered only
30 | P a g e
 six services out of listed 14 services. This implied that after all this year the banking
indestry in Ethiopia still not strong enough to impliment the state of technology which
aviliable to current banking indestries. Specialay in the current status of globalization
which products are easly cloned the copitance of financial services in Ethiopia are
questionable. Even zemen bank which is considered as modern and bank of the sate of
technology offered only 7 services. As all of us know zemen bank was a single branch
bank and it was considered as a vertual branched beank. Even thoug the bank open its
second branch recently, its vision was renedered technological sepported service with its
single branch.

Awash bank the largest and poiners of private bank is provied ATM service only.
Undeniably, the largest state-owned bank, Commercial Bank of Ethiopia, is the pioneer
in introducing ATM service for local users in 2001 with its fleet of eight ATMs located in
Addis Ababa. Moreover, CBE has had Visa membership since November 14, 2005.
However, due to lack of appropriate infrastructure, it failed to reap the fruit of its
membership.

Despite, being the pioneer in introducing ATM based payment system and
acquired Visa membership, CBE lagged behind Dashen Bank, which worked
aggressively to maintain its lead in electronic payment systems. Dashen bank, a
forerunner in introducing e-banking in Ethiopia, has installed ATMs at convenient
locations for its own cardholders.

The younger single-branch Zemen Bank launched multi-channel banking (MCB)

services in Ethiopia, which includes ATMs, Internet Banking, Banking through Call
Centre and SMS banking. These services introduced October 22, 2009, makes Zemen
Bank the first in Ethiopia to introduce fully IT supported and 24/7 customers services
to local bank customers. It is currently the only bank in the country offering ATM;
call Centre, SMS and internet banking services all at the same time. Zemen’s new
services would enable customers of the bank to get the services listed in the above
table.

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 The launch of MCB is perfect for business owners, individuals and even local and
national institutions. Whether it’s monitoring business account activities while away on
a business trip, personal finance management at any time of the day, or the need to be
informed with alerts/notifications based on one’s account activities, bank users need to
have more accessible ways of communicating with their bank.

The Multi-Channel Banking services were designed for bank customers that
require easy access to the bank’s facilities while they are On-The-Go. Zemen Bank
designed and equipped each of the new services with a user friendly Amharic and
English language support. Zemen Bank customers can access their account from
their PC/Laptop, Mobile Phone, ATM, and through a direct phone call to the
dedicated and customer friendly Zemen Bank Call Centre. The Multi-Channel
Banking Services are free of charge to all Zemen Bank customers. ATM cards are also
issued immediately and free of charge to all customers who open an account with
Zemen Bank (Business in Ethiopia, 2009).

Finally, with respect to service charge, as per Dashen and Commercial bank of
Ethiopia, customers being charged minimal amount based on amount of transaction
on ATM service and point of sale terminals. However, all the services are free of
charge at Zemen Multi channel banking services.

In general, as shown in the above table the most dominant e-banking channel
among those banks, which are currently providing the service is ATM card, which is
the first generation of electronic banking channel, so from this it is possible to conclude
that even banks that are providing the service did not sufficiently adopted the latest e-
banking channel such as internet and mobile banking

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 Table 4: operational issues related to e-banking service

S.No Operational Issues Banks

CBE Dashen Awash Wegag Zeme

en n
1 Are links and interactive program’s check 1 1 1 1 1
for accuracy and functionality?

2 Are security measures in place to prevent 1 1 1 1 1

the web site information from being
altered?
4 Does the bank have procedures in place 1 1 1 1 1
for when there is an interruption in service
of e- banking for customers?

5 Is electronic banking training provided 1 1 1 1 1

to employees?

6 Are any policies and procedures in place 1 1 1 1 1

to address activities beyond the traditional
trade area?

7 Doe the bank have a target market or 1 1 1 1 1

trade area for e-banking.

Source: From Questionnaire and Interview

- 1 stand for Yes
- 0 stand for No
The above operational issues listed in the table related to e-banking service are
discussed below:

As per the data collected among banks that are currently providing the service, all banks
are checking their links and interactive programs periodically for its accuracy and
functionality since this helps banks to take corrective measures as soon as an
33 | P a g e
 operational error is happened in the system.

To prevent the web site information from being altered, security measures like firewall
and secure socket layer (SSL) are taking by all banks.Even though, it is not
satisfactory to make use of their passbook and checkbook are the procedures in
place for when there is an interruption in the service of e-banking for customers.
In wegagen bank there is a file over DR (disaster recovery) site when ever service is
interapted from the pirmary source it will swicth to the DR Site. The DR Site is a file
soureces which work ofline and update it selef whenevre the service resium.

Providing b a s i c a n d r e f r e s h m e n t training to employees help banks to provide

quick, up to date and secured services to the customer. With this regard, even if it is
not sufficient as explained by the respondents during interview, all banks are providing
e-banking training to their employees. Some of the staff do not have sufficent
knowldge about e banking.

Addressing banking activities beyond the traditional trade area is one among the
different driving forces of delivering banking products to the customer through
electronic channels. With this regard, all banks have policies and procedures in
place to address this activity. Using internet and mobile as a channel of service
delivery is the implication of this activity because these channels can able banks to
provide service for the customer at any place rather than branch based traditional
service.

Finally, with respect to target market or trade area, all banks have target market area
for their service. This can easly checked by the location to which Atm machine located
and types of card offerings by the banks to different social group based on different
status. In addition to this when each bank impliment a given E banking service, it have
a targate social group to whom expected to use a given service. For this Mobile and
agent banking is one indication.

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 Table 5.Upseling of Banking service using E banking Facility
Strongly Agree Nutral Disagree Strongly
agree Disagree
Paying utility Bills 30% 0% 5% 60% 5%
Credit card 30% 0% 5% 40% 25%
Online Account Review 60% 30% 0 5% 5%
Application for Loan 10% 5% 5% 50% 30%
Fund transfer 80% 10% 5% 5% 0%
Customer loyality 30% 5% 55% 10% 0%
Program
Sources: From Questioneri
The above table shows that the respondats that wether e banking has a rol to expand
the bank service and increase its customer. As indicated above Internate banking has
minimal impact to expand services like paying utility bill, credit card facility, Loan
aplicattion and customer loyality program whereas for online account review and Fund
transfer services expand along with the implimentaion of internate banking.
In conection to opraetional cost, E banking reduce oprational as well as branch eration
costs. On this regard all respondants agree with that e banking is cost efficent than
paper based banking.

4.3 Analysis and Discussion Related to Objective II

Table 6: Benefits realized by banks from the adoption of e-banking service

Bank
CBE Enhanced image, improvement Benefits
of organizational efficiency, and load
reduction
DB Attracting high value customers , enhanced image, improvement of
organizational efficiency, high foreign currency earning, low risk of cash
management and load reduction

35 | P a g e
 Wega Attracting high value customers , enhanced image, and
gen improvement of organizational efficiency

ZB Attracting high value customers, enhanced image, larger customer coverage,

improvement of organizational efficiency, better monitoring of their
customer base, and load reduction

Source:From Questionnaire
As reported in the above table, all of the banks (100%) believe that providing
banking products to the customer by using electronic channels have the benefit
of building good image, load reduction that enables bank employees to focus on
strategic issues instead of focusing on traditional activities and improvement of
organizational performance through cost reduction (by avoiding paper work and by
reducing the number of employees required). In addition, adopting e-banking service
as a means of service delivery have also the benefits as stated by each respective
bank in the above table. In general, according to the respondents’ response as listed
in the above table, it is possible to conclude that delivering banking products
through electronic channels made the bank benefited.

Even though, those banks that are currently providing e-banking service to their
customer can get the different benefits as listed in the above table, the
assumption of perceived relative advantage, perceived organizational
performance, perceived customer relationship and perceived ease of use are the
major perceived advantages of e-banking adoption among those banks which are
not yet adopted the technology but are planned to adopt the system in the near
future.

4.4 Analysis and Discussion Related to Objective III

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 Table 7: Driving forces that initiate banks to adopt e-banking services

Bank Driving
CBE forces
Rapidly changing customers’ needs and preferences, desire to improve
organizational performance. desire to improve the relationship with
customers, desire to reduce transaction cost, desire to cover wide
geographical area, desire to build organizational reputation and desire to
satisfy customers

DB Existence of high competition in the banking industry , desire to

improve
organizational performance, desire to improve the relationship with
customers, desire to reduce transaction cost, desire to cover wide
geographical area, desire to build organizational reputation, desire to satisfy
customers, to keep the international banking standard and rapidly changing
customers’ needs and preferences
WB Desire to improve organizational performance, desire to improve the
relationship
with customers, desire to reduce transaction cost, desire to cover wide
geographical area, desire to build organizational reputation, desire to satisfy
customers
ZB Existence of high competition in the banking industry, desire to
improve
organizational performance, desire to improve the relationship with
customers, desire to reduce transaction cost, desire to cover wide
geographical area, desire to build organizational reputation, desire to
satisfy customers and rapidly changing customers’ needs and preferences

Source: From Questionnaire

As depicted in the above table, even though there are some sort of difference regarding
37 | P a g e
 the driving forces that initiate for the adoption of e-banking service in each bank, the
existence of high competition in the banking sector, rapidly changing customers’
needs and preferences, desire to improve organizational performance, desire to
improve the relationship with customers, desire to reduce transaction cost, desire
to build organizational reputation and desire to satisfy customers are the major
common driving forces that initiate banks for the adoption of e-banking as a means of
service delivery to their customers.

Therefore, from this it is possible to conclude that it is due to the existence of some
driving forces in which banks are initiated to provide modern banking services to the
customer. In addition, the table also implied that there are common driving forces
that lead all banks to provide e-banking services.

4.5 Analysis and Discussion Related to Objective IV

Table 8: Challenges of e-banking service in Ethiopia

Bank Major
AIB Chances of risk, lack of challenges
suitable legal and regulatory framework,
lack of
government initiation or lack of government prioritization, absence of
financial networks that links different banks, low level of internet
penetration and poorly developed telecommunication infrastructure, high
cost of internet and security issues

38 | P a g e
 WB High installation cost, chances of risk , lack of suitable legal and
regulatory
framework, high rate of customer illiteracy, non-readiness of banks to
adopt the system, lack of government initiation or lack of government
prioritization, absence of financial networks that links different banks, low
level of internet penetration and poorly developed telecommunication
infrastructure, high cost of internet and security issues

CBE Chances of risk , lack of trained and efficient staff in e-banking context,
lack of
suitable legal and regulatory framework, absence of financial
networks that links different banks, low level of internet penetration
and poorly developed telecommunication infrastructure , high cost of
internet and security issues
DB Chances of risk , lack of trained and efficient staff in e-banking context,
lack of
suitable legal and regulatory framework, absence of financial
networks that links different banks, low level of internet penetration
and poorly developed telecommunication infrastructure, high cost of
internet and security issues
ZB security issues, lack of public awareness on the use of e-banking service

Source: From Questionnaire and Interview

According to the above table even though there is some sort of difference
among the challenges in each bank, chances of risk (such as operation, security
and reputation risk as stated by all banks ), Lack of suitable legal and regulatory
framework that govern and regulate e-banking transaction in the country, absence
of financial networks that links different banks, Lack of government initiation or
lack of government prioritization , high cost of internet, Low level of internet
penetration and poorly developed telecommunication infrastructure are the major
common challenges for the adoption of e-banking service in the country’s banking

39 | P a g e
 industry. Especially with respect to ICT infrastructure, even though ETC is
expanding its internet and mobile network services, The quality and sestanabilty of the
network system is still very poor. The net work access in Ethiopia is limited to majour
city. More than 80% of the country population is an agrarian population and located in
the country side rural raeas. In those areas the aviliability and effecency of network is
very very limited. This problem copled with low computer illitraecy rate has a negative
impact on the spred and development of E banking in the Ethiopain banking Indestries.
Since the Ethiopian banking system is heavily dependent on the state-owned ETC to
perform transactions and connect branches to their main office, Ethiopia
Telecommunications Corporation's (ETC) failure to offer efficient services, is
limiting banking services.
Finally, even though it may be temporary, frequent power interruption is another
challenge that affects the provision of e-banking service among those banks that are
currently providing the service. Therefore, from the above discussion it is possible
to conclude that there are challenges for the adoption of e-banking service among
those banks that are not yet adopted the system and for the sufficient adoption of the
service from the viewpoint of those banks that are currently providing the service in
the country.

4.6 Analysis and Discussion Related to Objective V

Table 9: prospect of e-banking services

Bank Opportunitie
CBE Late adopter opportunities, s commitment of the government to
facilitate the
expansion of ICT infrastructure, improvement in the banking habit of the
society , sustainable economic growth in the country, increment of tourist
inflow to Ethiopia and willingness among banks to cooperate in building
infrastructure

40 | P a g e
 DB Late adopter opportunities, commitment of the government to
strengthen the
banking industry, commitment of the government to facilitate the expansion
of ICT infrastructure, improvement in the banking habit of the society,
sustainable economic growth in the country, increment of tourist inflow to
Ethiopia and willingness among banks to cooperate in building infrastructure

ZB Late adopter opportunities, commitment of the government to

strengthen the
banking industry, commitment of the government to facilitate the expansion
of ICT infrastructure, improvement in the banking habit of the society,
sustainable economic growth in the country, increment of tourist inflow to
Ethiopia and willingness among banks to cooperate in building infrastructure

WB Late adopter opportunities, commitment of the government to

facilitate the
expansion of ICT infrastructure, improvement in the banking habit of the
society, sustainable economic growth in the country, increment of tourist
inflow to Ethiopia and willingness among banks to cooperate in building
infrastructure

AIB Late comers opportunities, commitment of the government to strengthen

the
banking industry, commitment of the government to facilitate the expansion
of ICT infrastructure, improvement in the banking habit of the society,
sustainable economic growth in the country, increment of tourist inflow to
Ethiopia and willingness among banks to cooperate in building infrastructure

Source: From Questionnaire and Interview

The above table indicated the existence of some difference among the respondent
of each bank regarding the different existing opportunities in the country for the

41 | P a g e
 adoption of e- banking. But late adopter opportunities, improvement in the
banking habit of the society, sustainable economic growth in the country,
increment of tourist inflow to Ethiopia, commitment of the government to
facilitate the expansion of ICT infrastructure and willingness among banks to
cooperate in building infrastructure are common to all banks. With respect to
cooperation among banks, the memorandum of understanding signed by three private
commercial banks to launch an Automated Teller Machine (ATM) and Point of Sale
terminal (POS) network in February 2009 is welcoming strategy to improve
electronic payment system in Ethiopia.

The agreement is the first significant cooperation between competing banks in

Ethiopia, which others should be encouraged to follow as there is no single bank in
Ethiopia that can afford to provide extensive geographical coverage and access. In
addition, the commitment of the government to strengthen the banking industry is a
good opportunity for the adoption of e-banking service in the country because
currently the national bank of the country is developing a project in cooperation
with the World Bank in order to modernize the payment system of the country (Abiy
D., 2008).

ETC has been exerting utmost efforts toward expansion of Next Generation Network
(NGN) Information and Communication Technology (ICT) in the country.
Expansion of the NGN Information and Communication Technology will
enable the Corporation provide efficient and modern telecom services to the society
and accelerate the development of school-net, woreda-net, agri-net, distance education,
e-banking, e-medicine, dependable TV broadcasting, and other related services in
Ethiopia. In addition, in order to cope with the fast growth in the complexity of
networks, services and their customer base, ETC has realized the need of a
centralized National Network Operation Center (NNOC) that can improve the
network performance and lower the time needed to locate and maintain faults.
Furthermore, it is able to ensure customers experience service quality and perceive the
value of delivered service, and it also improves operational readiness for short time-to-

42 | P a g e
 market of new innovative services (Ma Zhiyong, Tewodros Hailemeskel, Li Xiaojin,
2008).

Therefore, from the above discussion it is possible to conclude that there are
good opportunities for the adoption of e-banking service in Ethiopia.

43 | P a g e
 Chapter Five

Conclusion and Recommendation

5.1 Introduction

Information technology is considered as the key driver for the changes taking place
around the world. Due to a pervasive and steadily growth of information and
communication technology, the world banking industry is entering into new phenomena
of unprecedented form of competition supported by modern information and
communication infrastructure. The rate at which e-banking technology is adopted
by banks constitutes an important part of technological change. With this regard
currently, our banks are in an infant stage

This chapter as a whole presents the concluding remarks for the main findings in
chapter four and important recommendations as per the main problems investigated in
this research study respectively.

5.2 Conclusions

Based on the analysis made in chapter four the following conclusions are made
on the assessment of the opportunities and challenges for the adoption of e-
banking service in Ethiopia.

ATM, Credit Card and debit card services, internet banking, mobile banking and
other electronic payment systems are at infant stage. The most dominant e-banking
channel among those banks, which are currently providing the service is ATM
card, which is the first generation of electronic banking channel, so from this it is
possible to conclude that even banks that are providing the service did not
sufficiently adopted the latest e-banking channel such as internet and mobile banking.
44 | P a g e
 In view of the extent of e-banking adoption, majorities of the banks have not adopted
this technology and are using traditional services to reach and serve their clients. In
general, banks in Ethiopia are trailing behind in acquiring the required quality of
banking services to effectively compete in the global market.

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 24*7 and funds transfers
among others.

Adoption of e-banking service have the benefit of attracting high value customers,
enhanced image, larger customer coverage, improvement of organizational
efficiency, and load reduction etc from the view point of the bank.

Important perceived benefits of using e-banking among those banks that are not
currently providing the service but are planned to adopt the system were
relative advantage, organizational performance, customer relationship and perceived
ease of use.

As per the findings, the major driving forces that initiate banks to deliver banking
services to the customer using electronic channels are existence of high
competition in the banking industry, rapidly changing customers’ needs and
preferences , desire to improve organizational performance, desire to improve
the relationship with customers, desire to reduce transaction cost, desire to cover
wide geographical area, desire to build organizational reputation, desire to satisfy
customers and to keep the international banking standard among others.

Chances of risk, lack of trained and efficient staff in e-banking context, lack of
suitable legal and regulatory framework, absence of financial networks that links
different banks, low level of internet penetration and poorly developed
telecommunication infrastructure, high cost of internet and security issues are the main

45 | P a g e
 challenges for adoption of e-banking in Ethiopia. In addition, lack of customer
awareness regarding the service is another challenge in order to provide the service.
Therefore, from this, it is possible to conclude that there are challenges for the
adoption of e-banking service among those banks that are not yet adopted the system
and for the sufficient adoption of the service from the viewpoint of those banks
that are currently providing the service in the country.

Finally, Late adopter opportunities, commitment of the government to facilitate the

expansion of ICT infrastructure, improvement in the banking habit of the society,
sustainable economic growth in the country, increment of tourist inflow to Ethiopia and
willingness among banks to cooperate in building infrastructure are among the major
opportunities for the adoption of e- banking in the country. Therefore, from this, it is
possible to conclude that there are good opportunities for the adoption of e-banking
service in Ethiopia.

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 viable e-banking
service in Ethiopia. .

Ongoing efforts by the Ethiopia telecommunication corporation to

expand ICT infrastructure should be encouraged by the government and
gradually the corporation should try to reduce the service charge.

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 recognized 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.

46 | P a g e
 The only Directive which deal with E bankining is a directive which is issued by
the National bank of Ethiopa which is “Agent and Mobile banking service
Directive # FIS/01/2012” There fore the national bank of Ethiopia should come up
with a better and advanced regulations and directives to facilitate the advancement
of banking technology in the country.

The National Bank of the country should prepare various capacity building
activities for banks regarding e-banking operation and provide incentives for
banks to invest rigorously on ICT and use of e-banking.. .

Security risk is the major challenge for the adoption of e-banking service in the
banking industry. Therefore, the national bank of the country in collaboration
with all banks in the country should prepare typical security technologies
applicable to control system networks such as firewall, intrusion detection and
prevention etc.

Banks that are currently providing the service should promote the system in
order to raise public awareness on the use of e-banking service.

47 | P a g e
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 Annex 1
QUESTIONNAIRE
Addis Ababa University, Collage of Business and Economics
Department of Accounting and Finance
MSc in Accounting and Finance Final Thesis Questionnaire.
The researcher is a student of the Addis Ababa Univercity, pursuing a master’s degree

programme in Finance. I am undertaking a dissertation on the topic: E banking In Ethiopia

Chalenge and prospect.

Important Note: Information supplied by you will be treated as strictly confidential. Identity
of position will not be revealed. Information will be used for only academic work. . I
greatly appreciate your co-operation.
Student Name: Mattewos Kinfe
Thesis Title: Challenges and prospect of E Banking in Ethiopia

Bank Name: _______________________

Position: _________________________

Year of Estabilishment: _______________

Work Expriance: __________________ years

Educational status

College Diploma □ First digree □ Second degree (Masters) □ PHD □

1. Does your bank offer Internet or online banking facilities to customers?

Yes □ No □

51 | P a g e
 2. What year did your bank commenced the use of Internet banking?

______________________________________________________

______________________________________________________

3. What banking activities does your bank offer via online banking?
Yes No

1. Check Balance □ □

2. Veiw account historical records □ □

3. Order Pin code, □ □

4. Transfer Fund with in the same bank □ □

5. Transfer Fund across banks, □ □

6. pay bills, □ □

7. Order/print account statement, □ □

8. Send message, □ □

9. Applay for loan, □ □

10. Open account, □ □

11. Applay for credit/debit cards, □ □

12. Applay for Insurance □ □

52 | P a g e
4. Was huge investment involved in providing Internet banking services to your
customers?

- One Time Investment _________________________________

- Running cost (Estimated yearly average) __________________________________

5. Will you say Internet banking has made it possible for your bank to expand its
services to other areas of operations the bank was not initially offering?
Stgly agree agree nutral disagree St. disagree
- Paying utility Bills □ □ □ □ □
- Credit Card □ □ □ □ □
- Online account review □ □ □ □ □
- Application for Loan □ □ □ □ □
- Fund transfer □ □ □ □ □
- Customer loyality program □ □ □ □ □

6. In terms of operations and transaction costs, would you say Internet banking has
increased or decreased costs?

7 What do you think are the factors influencing adoption of E-banking in

Ethiopia?
Stgly agree agree nutral disagree St.

53 | P a g e
 disagree
- IT infrasrtractures □ □ □ □ □
- Attitude of the socity towards E banking □ □ □ □ □
- The legal frame work of the country □ □ □ □ □
- Economical development of the country □ □ □ □ □
- Capacity of financial institiutions □ □ □ □ □
- Computer litrecy rate □ □ □ □ □

Tick Yes or No

8. Has the data made available to the bank by Internet banking helps the bank?
Yes No

a. To tailor services to customers’ needs? □ □

b. To easy and facilitates loan processing procedure to customers? □ □
c. Help to increase loan provision to customers? □ □
d. Reduce cost for adverts since services offered
are always available on the WWW page? □ □

9. If your organization started offering electronic banking services (or if you say yes
for the above question):
A. Are links and interactive programs checked for accuracy and functionality?

A. Yes B. No if no, why?

B. Is security measures in place to prevent the web site information from being
altered?
A. yes B. no if yes, what are they?

54 | P a g e
C. does the bank have procedures in place for when there is an interruption in service
of e- banking (internet banking) for the customer?
A. yes B. no if yes, describe the procedures

D. Is electronic banking training provided to employees?

A. yes B. no
E. does the bank has a target market or trade area for e-banking?

A. yes B. no if yes what is it?

F. is any policies and procedures in place to address activities beyond the traditional
trade area?

A. yes B. no if yes what are they?

G. what are the different benefits does the bank is realized by using e-banking
channels?
Stgly agree agree nutral disagree St.
disagree
I. Attracting high value customers □ □ □ □
□
II. Enhanced image □ □ □ □
□
III. Increased revenue □ □ □ □
□
IV.Larger customer coverage □ □ □ □
□
V. Cost reduction □ □ □ □
□

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 VI. Improvement of organizational efficiency □ □ □ □
□
VII. Better monitoring of their customer base □ □ □ □
□
Others (explain)

H. If there is a difference in the implimentation of e-banking service among the

branches, what is the reason behind?

I. What are the different electronic channels through which the bank is delivering the

service to its customers? You can choose more than once!

Yes No

A. Internet □ □
B. banking
ATM □ □ □
C. Tele banking □ □
D. Mobile or SMS □ □
E. Others _________________________________________________

J. What are the different ATM and other cards available? You can choose more than

once. Banking

Yes No
A. Credit Card □ □
B. Salary Card □ □
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 C. Visa Card □ □
D. Student card □ □
E. Master card □ □
F. Debit card □ □
G. Other _______________________________________________________

K What options are available to the customer once they have accessed e-banking? You
can choose more than once!
Yes No
A. Fund transfer □ □
B. New account set-up □ □
C. Insurance premium payment □ □
D. Credit application □ □
E. Balance inquiry □ □
F. Bill presentment and payment □ □
G. Cash withdrawal □ □
H. Purchase of goods and services □ □
I. Utility payment □ □
J. Others/ mention it

L. Do you think that the bank has sufficiently implimented the system?
A. Yes B. No
M Rate the risks which i nvol ved b e c a u s e o f adopting / using e l e c t r o n i c
c h a n n e l s for delivering banking services ?

Very Low Low Average High Very

High
A. Transaction/oprational Risk □ □ □ □ □
B. Security Risk □ □ □ □ □
C. Compliance/legal risk □ □ □ □ □
D. Reputation Risk □ □ □ □ □
E. Strategic Risk □ □ □ □ □
F. Others ___________________________________________________________

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N. What measures you are taking to minimize this risk?

____________________________________________________________________________

___________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

____________________________________________________________________________

Thank you!

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Annex 2

Interview Questioneri for National Bank oF Ethiopia

1. Is there any guiding ruel to commercial banks to adopt E-banking?

2. What is the Pre set goal to adopt E-banking?
3. How to control transaction made in E-banking specialy in connection of
Money Laundery?
4. What is the main advantage to which expected to get by adoption of e-
banking?
5. How the legal frame works in financial sector facilitate the adoption of E-
banking?
6. Why the service of E-banking not developed as its age in Ethiopia?
7. Is there any faverable ground to adopt E-banking in ethiopia?
8. Do you Belive that the exsiting IT infrastracture is enough to provide E-
banking without interaption?
9. Is there any major reported security breach in connection with E-banking?

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Annex 3

Interview Questioneri for Selected commercial Banks

1. Do you offer E-banking service to your customer?

2. Why? Why not?
3. What benefite the bank can maximize by offering E-banking service
4. How do you evaluate the legal ground towards E- banking service?
5. Do you belive E-banking is safer than paper based banking?
6. Which E-banking outlet you offer to your customer?
7. Does E banking bring the benefit that you aspire from it?
8. What is the majour chaleng to E-banking?
9. What possible opportunities are there to E banking?
10. Do you think there is enough infrastracture to offer E banking service in
Ethiopia?

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