FACTORS INFLUENCING USAGE OF

MOBILE BANKING IN ADDIS ABABA, ETHIOPIA

A Thesis Submitted in partial fulfillment of the requirement

for the degree in MSc. Program in Accounting and Finance

By: - Kalkidan Gezahegn

Addis Ababa University

College of Business and Economics

Department of Accounting and Finance

May, 2016
Addis Ababa
 Declaration
I, Kalkidan Gezahegn, hereby declare that the thesis entitled Factors Influencing Usage of

Mobile Banking in Addis Ababa, Ethiopia is the outcome of my own effort and study and that

all sources of materials used for the study have been duly acknowledged. This study has not been

submitted for any degree in this University or any other University. It is offered for the partial

fulfillment of the requirement for the degree in MSc. Program in Accounting and Finance.

Name: Kalkidan Gezahegn Advisor’s Name: Laximkantham P. (PhD).

Signature: _______________ Signature: _______________

 Certification
Addis Ababa University
School of graduate studies

This is to certify that the thesis prepared by Kalkidan Gezahegn entitled: Factors Influencing

Usage of Mobile Banking in Addis Ababa, Ethiopia and submitted in partial fulfillment of the

requirements for the degree of masters of Science in accounting and finance compiles with the

regulations of the university and meets the accepted standards with respect to originality and

quality.

Approved by:

Internal Examiner ___________________ Signature ________ Date_________

External Examiner ________________Signature _________ Date_________

Advisor Laximkantham P. (PhD) Signature _________ Date__________

Chair of Department or Graduate Program Coordinator

 Acknowledgements

I would like to take this opportunity to show my sincere gratitude and appreciation to all people
that helped in this thesis work.
First and foremost, I would like to thank my advisor Laximkantham P. (PhD) for all his advice
towards better improvement of this thesis. Second, this thesis would never been accomplished
without the cooperation of CBE and United Bank staffs and customers in order to collect the
appropriate data. Therefore, I am deeply grateful to all of them. Finally, I would like to express
my heartfelt gratitude to all that helped in any way I really do appreciate what you have done.
Kalkidan Gezahegn

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 ABSTRACT

The purpose of this study is to investigate factors influencing the usage of mobile banking in

Ethiopia. The study tries to build on two widely used models for technology adoption, the

Technology Acceptance Model (TAM) and Innovation Diffusion Theory and to identify factors

influencing customer's usage of mobile banking. A research model uses the TAM model and IDT

model by integrating perceived risk, trust and awareness into the established models. This study

was conducted based on the data gathered from customers of Commercial Bank of Ethiopia and

United Bank in Addis Ababa, Ethiopia. Survey was conducted using questionnaire. Out of 400

questionnaires that have been distributed, 383 were usable. The analysis of the data was done

with the help of the SPSS and EViews. The research results found relative advantage,

compatibility, perceived trust, perceived usefulness, and perceived risk as major influencing

factors for mobile banking adoption whereas perceived ease of use and awareness were found

to have insignificant effect on mobile banking usage for bank customers located in Addis

Ababa, Ethiopia. The study recommended banks to consider investing in campaigns and

arranging information sessions to demonstrate the features of mobile banking services, and its

benefits over traditional channels.

Keywords: Mobile banking Usage, TAM, IDT, Perceived Trust, Perceived risk, Awareness

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 Table of Contents

Acknowledgements ............................................................................................................................. i

ABSTRACT ........................................................................................................................................ ii

Lists of Tables .................................................................................................................................. vii

Lists of Figures ................................................................................................................................ vii

Acronyms ........................................................................................................................................ viii

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

INTRODUCTION ..............................................................................................................................1

1.1 Overview ....................................................................................................................................1

1.2 Statement of the Problem.........................................................................................................2

1.3 Research Question ....................................................................................................................3

1.4 Objectives ..................................................................................................................................4

1.4.1 General Objective ..............................................................................................................4

1.4.2 Specific Objectives .............................................................................................................4

1.5 Research hypothesis .................................................................................................................4

1.6 Research Importance ...............................................................................................................4

1.7 Scope and Limitation of the Study ..........................................................................................5

1.8 Organization of the Study ........................................................................................................6

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

LITRATURE REVIEW ....................................................................................................................7

2.1 Definition of Mobile Banking ..................................................................................................7

2.2 Background of Mobile Banking Technology .........................................................................8

2.3 Mobile Banking In Ethiopian Banking Industry ...................................................................9

2.4 Benefits of Mobile Banking....................................................................................................10

2.4.1 Benefits of Mobile Banking to Banks .............................................................................10

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 2.4.2 Benefits of Mobile Banking for Customers ...................................................................11

2.5 Services Available On Mobile Banking ................................................................................11

2.5.1 Mobile Accounting ...........................................................................................................11

2.5.2 Mobile Financial Information .........................................................................................13

2.6 Technologies Employed to Provide Mobile Banking Services ...........................................15

2.6.1 SMS (Short Message Service) .........................................................................................15

2.6.2 Browser-Based..................................................................................................................16

2.6.3 Client-Based (Downloadable Applications) ...................................................................17

2.7 Factors Influencing Usage of Mobile Banking .....................................................................17

2.7.1 Technology Acceptance Model (TAM) ..........................................................................17

2.7.2 Innovation Diffusion Theory (IDT) ................................................................................20

2.8 Empirical Literature ..............................................................................................................26

2.9 Research Gap ..........................................................................................................................29

2.10 Justification of model used...................................................................................................30

2.11 Conceptual Framework .......................................................................................................31

CHAPTER THREE .........................................................................................................................32

RESEARCH METHODOLOGY ...................................................................................................32

3.1 Research Design ......................................................................................................................32

3.2 Population and Sampling .......................................................................................................33

3.2.1 Target Population ............................................................................................................33

3.2.2 Sample Design and Size.......................................................................................................33

3.3 Model Specification ................................................................................................................33

3.4 Data Collection Method .........................................................................................................35

3.4.1 Primary Data Collection..................................................................................................35

3.4.2 Secondary Information....................................................................................................36

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 3.5 Data Analysis ..........................................................................................................................36

CHAPTER FOUR ............................................................................................................................37

DATA ANALYSIS AND INTERPRETATION ............................................................................37

4.1 Introduction ............................................................................................................................37

4.2 Reliability Study .....................................................................................................................37

4.3 Demographic Characteristics of Respondents .....................................................................38

4.4 Access to Mobile Phone and Bank Account and Use of Mobile Banking..........................39

4.5 Information about mobile banking and Current use of mobile banking services ............40

4.6 Factors Influencing Usage of Mobile Banking System in Addis Ababa, Ethiopia ...........40

4.6.1 Relative Advantage ..........................................................................................................40

4.6.2 Perceived Usefulness ........................................................................................................41

4.6.3 Perceived Ease of Use ......................................................................................................42

4.6.4 Perceived Trust ................................................................................................................43

4.6.5 Perceived Risk ..................................................................................................................43

4.6.6 Compatibility ....................................................................................................................44

4.6.7 Awareness .........................................................................................................................45

4.7 Test results for the Classical Linear Regression Model assumptions ................................46

4.7.1 Model Specification..........................................................................................................46

4.7.2 Autocorrelation ................................................................................................................47

4.7.3 Multicollinearity ...............................................................................................................48

4.7.4 Heteroskedasticity ............................................................................................................49

4.7.5 Normality ..........................................................................................................................50

4.8 Hypothesis Testing Using Multiple Regressions ..................................................................52

4.8.1 Compatibility ....................................................................................................................52

4.8.2 Awareness .........................................................................................................................53

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 4.8.2 Perceived Ease of Use ......................................................................................................53

4.8.3 Perceived Risk ..................................................................................................................53

4.8.4 Perceived Trust ................................................................................................................54

4.8.5 Perceived Usefulness ........................................................................................................54

4.8.6 Relative Advantage ..........................................................................................................55

CHAPTER FIVE ..............................................................................................................................56

CONCLUSION AND RECOMMENDATION .............................................................................56

5.1 Conclusion ...............................................................................................................................56

5.2 Recommendation ....................................................................................................................57

5.3 Future study ................................................................................................................................58

Reference ...........................................................................................................................................59

Appendix I......................................................................................................................................... ix

Appendix II ..................................................................................................................................... xiii

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 Lists of Tables

Table 2 List of Banks and Number of Customers adopting mobile banking............................xiii

Table 3.1 List of banks in Ethiopia............................................................................................xiii

Table 3.3 Measurement of variables............................................................................................33
Table 4.2 Reliability Test (Cronbach's Alpha).............................................................................36
Table 4.3 Demographic characteristics of respondents................................................................37
Table 4.4 Access to Mobile Phone and Bank Account................................................................40
Table 4.6.1 Summary of Survey Findings for Usage Factors......................................................41
Table 4.6.2 Summary of Survey Findings for Usage Factors......................................................42
Table 4.6 Summary of Survey Findings for Usage Factors.........................................................42
Table 4.6.4 Summary of Survey Findings for Usage Factors......................................................43
Table 4.6.5 Summary of Survey Findings for Usage Factors…..................................................44
Table 4.6.6 Summary of Survey Findings for Usage Factors......................................................45
Table 4.6.7 Summary of Survey Findings for Usage Factors......................................................45
Table 4.6.8 Mobile Banking Usage Factors.................................................................................46
Table 4.7.1 Model Specification..................................................................................................47
Table 4.7.2 Autocorrelation..........................................................................................................48
Table 4.7.3 Multicolinearity.........................................................................................................49
Table 4.7.4 Heteroskedasticity Test.............................................................................................50
Table 4.8 Multiple regression results...........................................................................................51

Lists of Figures
Figure 1 Proposed research model.............................................................................................31
Figure 4.7.5 Normality Test.........................................................................................................51

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 Acronyms

Automated Cashier Machine (ATM)

Bottom of the Pyramid (BOP)
Commercial Bank of Ethiopia (CBE)
Econometric Views (EViews)
Fourth Generation (4G)
Innovation Diffusion Theory (IDT)
Information and Communication Technology (ICT)
Mobile Banking Personal Identification Number (MPIN)
National Bank of Ethiopia (NBE)
Ordinary Least Square (OLS)
Perceived Ease of Use (PEOU)
Perceived Risk (PR)
Personal Digital Assistant (PDA)
Perceived Usefulness (PU)
Short Message Service (SMS)
Technology Acceptance Model (TAM)
Theory Reasoned Action (TRA)
Third Generation (3G)
Wireless Application Protocol (WAP)

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 CHAPTER ONE

INTRODUCTION

1.1 Overview

The spread of mobile technology across the globe is one of the most remarkable achievements in
the last decades. Mobile phones have increasingly become tools that consumers use for banking,
payments, budgeting, and shopping. Advances in mobile technology have revolutionized almost
every facet of society, from information to education, granting enhanced access to an ever-
growing number of people.
Banking services and operations have undergone a paradigm shift especially in the past decade.
The changes have been catalysed by technology advancements, global commerce,
competitiveness and customer demands can be stated as the important factors. As a result,
banking services have quickly developed to adopt new delivery means which adapt to the
changing commercial landscape. In order to meet customer expectations banks vie with each
other to have new and innovative services to ensure a competitive edge (Shi & Lee 2008). The
evolutionary changes have significantly impacted on the corresponding strategies that the banks
have adopted as a consequence.
With rapid advance of Internet technologies and diffusion of mobile phones, mobile banking has
gained attention as a viable option in delivering financial services. Recent innovations in
telecommunications have enabled the launch of mobile banking as a new access method for
banking services; whereby a customer interacts with a bank via mobile phone (Barnes & Corbitt
2003).
Mobile banking is a term used for performing balance checks, account transactions, payments
etc. via a mobile device such as a mobile phone. Mobile banking today is most often performed
via SMS or the mobile internet but can also use special programs that clients download to their
mobile device. It can also be understood as availing banking and financial services with the help
of mobile telecommunications devices. The services offered by mobile banking included getting
account information, transferring funds, sending checkbook request, managing deposits,
checking transactions and so on. Commercial banks are exploring this avenue to make their

1
services more convenient for their customers. The growing number of mobile subscribers in the
country forms the most valuable support base for the growth and success of mobile banking.
Developments in the banking sector as indicated in increased competition on account of
technological developments coupled with the process of globalization have produced new
challenges for banks.
Some of the significant reasons that compel financial firms to provide mobile banking services
are; appealing to trendy customers, reducing costs per transactions, gaining revenue from service
fees, enabling new service channels, and supporting future customers (Huili and Chunfang
2011). Mobile banking services provide time independence, convenience and promptness to
customers, along with cost savings. Mobile banking presents an opportunity for banks to expand
market penetration through mobile services (Lee, Lee & Kim 2007).
Despite these advantages and the conveniences, the use of mobile banking services is much
lower than expected in both the developed and developing economies (Agwu 2012). He also
stated that mobile phones and its applications are still highly under-utilized. Akturan and Tezcan
(2012) stressed that the market of mobile banking still remains very small when compared to
other electronic banking counterparts such as ATM; internet banking, etc. Furthermore, it is
noted that the widespread adoption and large usage of mobile telephones did not reflect on the
adoption and usage of mobile banking.
Puschel, et al. (2010) indicated that adoption and usage of mobile banking will largely depend
upon customer’s perception of its ease of use and usefulness. However, the understanding of the
underlining problems of the reasons for the low rate of mobile banking usage could assist
financial managers to find ways to adjust their marketing techniques and come up with the right
solution to improve their mobile banking service as well as to increase the rate of mobile banking
customer’s usage. Therefore, this study examines factors which are influencing customer’s usage
of mobile banking.

1.2 Statement of the Problem

When compared with the banking industry operated in developed country, without doubt the
banking industry in Ethiopia is underdeveloped and therefore, there is an all immediate need to
embark on capacity building arrangements and modernize the banking system by employing the
technologies being used elsewhere in the world.

2
Over the years traditional branch based retail banking remained the most widespread method for
conducting banking transactions in Ethiopia. Currently commercial banks in Ethiopia have
started adoption of mobile phone based electronic banking systems to improve their operations
and to reduce costs. Out of the eighteen operating commercial banks in Ethiopia, there are,
currently, seven banks that have started providing mobile banking services as per NBE data
2015.1 And out of these seven banks three banks have been providing mobile banking service to
consumers for the past three years.

Even though the penetration of mobile phones among the population continues to grow in
significant numbers year after year still the customer’s adoption of mobile banking service
within these banks still remains low as per NBE Data 2015 (Appendix II).

Despite the fact that numerous mobile banking adoption studies have been investigated by
various scholars, most of them were conducted in countries such as Korea (Chung and Kwon
2009), Singapore (Riquelme and Rios 2010), Brazil (Laukkanen et al 2010), Taiwan (Luarn and
Lin 2005), and China (Wang et al. 2010) with relatively little attention paid to developing
countries like Ethiopia. All of these studies showed varying results and this study therefore
intended to fill this gap in a local context. While research has been carried out on the benefits
and challenges of introducing electronic banking in Ethiopia (Ayana 2012), (Garedachew 2010),
as per the researcher knowledge there is no study conducted with regards to factors influencing
usage of mobile banking in Ethiopia. Therefore, this study aims at filling that gap by assessing
the issues that influence customer’s usage of mobile banking services.

1.3 Research Question

Based on the above statement of the problem the research question is stated as follows:

• What are the factors influencing customer’s usage of mobile banking in Addis Ababa,
Ethiopia?

1
See Appendix II for further reference

3
1.4 Objectives

1.4.1 General Objective

• The general objective of the study is to assess the factors affecting usage of mobile
banking in Addis Ababa, Ethiopia particularly, with the following specific objectives.

1.4.2 Specific Objectives

• To examine the effect of perceived ease of use on usage of mobile banking.

• To determine the effect of perceived usefulness on usage of mobile banking.
• To assess the relationship perceived risk has with usage of mobile banking.
• To examine the association of compatibility with usage of mobile banking.
• To find out how relative advantage influence customer’s usage of mobile banking.
• To assess the effect of perceived trust on usage of mobile banking.
• To determine the influence of awareness on usage of mobile banking.

1.5 Research hypothesis

The study was done based on the following research hypothesis which were derived from the
specific objectives and tested in this study.
H1: Relative advantage has a positive effect on usage of mobile banking.
H2: Compatibility has a positive effect on usage of mobile banking.
H3: Perceived Usefulness has a positive effect on usage of mobile banking.
H4: Perceived ease of use has a positive effect on usage of mobile banking.
H5: Perceived risk has a negative effect on usage of mobile banking.
H6: Customer’s trust on the overall mobile banking service has a positive effect on usage of
mobile banking.
H7: Awareness about mobile banking services has positive effect on usage of mobile banking.

1.6 Research Importance

Introduction of new technologies allowed banking institutions to offer new channels of service
outlets like ATM facility, Internet Banking, Telephone Banking, SMS banking and Mobile
Banking. Ethiopian consumers are also having access to many new channels to interact with their

4
bank. Banks are racing against each other to bring the latest technology like mobile banking for
the benefit of their customers and themselves.

Among the existing literatures it was discovered that not many studies have been conducted to
evaluate if mobile banking channel is utilized by the customers in Ethiopia and factors affecting
customer’s usage of mobile banking channel.

Therefore, this study has tried to determine the factors that influence customer’s usage of mobile
banking in Addis Ababa, Ethiopia.

The results of this study, is believed to provide knowledge for improving the service. It may be
meaningful for researchers and banks' management to understand the factors influencing
customer’s to either adopt or not adopt mobile banking services. Identifying such variables may
help improve the likelihood of increasing the usage rate of these services, by deepening the
knowledge about the variables which facilitate or hinder the usage of this technology. Therefore,
the finding of the study is believed to assist bank managements by providing them with
information on how to increase usage of mobile phone banking to increase profitability that will
be obtained from delivering this service. The study may pave the way for further and detail
investigation for future researchers on banking and information technology.

1.7 Scope and Limitation of the Study

Even though there are eighteen commercial banks in Ethiopia there are only seven commercial
banks that have adopted mobile banking as per NBE data (Appendix II). And out of those
commercial banks that are currently providing the service those banks that comparatively are
found to have the large portion of mobile banking customers as per NBE Data are selected.
Therefore, Commercial Bank of Ethiopia and United Bank that have adopted mobile banking
technology and that constitute 65.19% and 31.16% respectively of the total mobile banking users
in 2015 are selected (NBE Data 2015, Appendix II).

The limitation of the study was the lack of previous studies in Ethiopia around the mobile
banking usage factors. And also it was not possible to include all factors that affect usage of
mobile banking in one study only selected factors were considered for the study.

5
1.8 Organization of the Study

The paper consists five chapters. The first chapter deals with the introduction part that consists of
background of the study, statements of the problem, objectives of the study, significances of the
study, scope of the study. Chapter 2 contains a review of the related literature. The research
design and methodology is presented in chapter 3. In chapter four, the results and findings of the
study is discussed. Finally, the last chapter deals with the conclusions and recommendations that
are forwarded based on the result obtained.

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 CHAPTER TWO

LITRATURE REVIEW
Chapter two is structured along several themes. First of all, this chapter explains the basic
terminology of mobile banking and background of mobile banking technology. Second, it
provides insight into mobile banking in Ethiopian banking industry as well as on the benefits for
using mobile banking for both banks and customers. Available services on mobile banking and
technologies employed to provide mobile banking services are described. The views of other
authors and previous researches on mobile banking adoption are discussed. Technology
Acceptance framework for mobile banking adoption and Innovation Diffusion Theory and their
constructs which includes perceived usefulness, perceived ease of use, relative advantage,
compatibility along with other specific factors that are identified as influential factors of mobile
banking such as perceived risk, perceived trust and awareness are discussed to develop a research
model to help investigate factors influencing usage of mobile banking in Addis Ababa, Ethiopia.

2.1 Definition of Mobile Banking

Mobile banking is an application of mobile commerce which enables customers to access bank
accounts through mobile devices to conduct and complete bank-related transactions such as
balancing cheques, checking account statuses, transferring money and selling stocks (Kim et al.
2009; Tiwari & Stephan 2007). Luo, Li, Zhang and Shim (2010), defined mobile banking as an
innovative method for accessing banking services via a channel whereby the customer interacts
with a bank using a mobile phone.
Mobile banking also means performing banking activities which primarily consist of opening
and maintaining mobile/regular accounts and accepting deposits; furthermore, it includes
performing fund transfer or cash-in and cash-out services using mobile devices (NBE Directive,
FIS-01-2012). In the broader sense mobile banking enables the execution of financial services in
the course of which - within an electronic procedure - the customer uses mobile communication
techniques in conjunction with mobile devices (Pousttchi and Schurig 2004 as cited in Singh
2011).
Mobile Banking can perform various functions like mini statement, checking of account history,
SMS alerts, access to card statement, balance check, mobile recharge etc. via mobile phones

7
(Vinayagamoorthy and Sankar 2012). Banks are constantly updating their technology and want
to increase their customer base by reaching to each and every customer. There are many
advantages of using mobile banking, such as people in the rural or remote areas can also get an
easy access to mobile banking whenever required.
Mobile banking is a developing mobile technique that has combined information technology and
commerce applications together. Since mobile banking was introduced, consumers have been
able to use it to obtain special services 24 hours a day without having to visit the traditional bank
branch for personal transactions.

2.2 Background of Mobile Banking Technology

Currently, the advancement of mobile technologies has provided an opportunity for financial
providers in introducing new financial innovations. One of the emerging financial innovations
introduced by financial providers in an effort to increase customer satisfaction and efficiency is
mobile banking.
More recent developments in Information Communication Technology (ICT) have provided the
opportunity for customers to access banking services without necessarily going to the bank
branches. This technological development has intensified in recent years and has led to the
reduction of financial institutions’ costs (Mari 2003; Saleem and Rashid 2011).
Customers will be able to obtain immediate and interactive banking services anytime and
anywhere which, in turn, initiate great value for them (Mallat et al. 2004). Mobile banking
service can also increase the amount of data processing and improve operational performance.
Moreover, adoption of mobile banking has significant impact on reducing costs and facilitating
change in retail banking (Laukkanen and Lauronen 2005). Cruz et al. (2010) and Dasgupta et al.
(2011) stated that mobile banking has great potential to provide reliable services to people living
in remote areas where internet facility is limited.
Mobile banking “helps banks to increase speed, shorten processing periods, improve the
flexibility of business transactions and reduce costs associated with having personnel serve
customers physically” (Ayo, Adewoye and Oni 2010).
The use of mobile phones has facilitated the expansion of markets, social business, and public
services in both developing and developed countries (Spence and Smith 2010). Lin (2011) claims
that rapid advances in mobile technologies have made mobile banking increasingly important in

8
financial services. The use of mobile banking offers a way of lowering the cost of moving money
from place to place (Donner and Tellez 2008; Anyasi and Otubu 2009).
Porteous (2006) classified mobile banking into two; firstly, transformational mobile banking,
which is the provision of banking services using a mobile phone to reach the unbanked
population. Secondly, additive mobile banking, in which the mobile phone is simply an
additional channel that is used to provide banking services to those already banked.
This opens a whole new world of opportunities for businesses and retailers to market their goods
and services for customer. Customers today are ‘on-the-go’ they appreciate things that are
readily available to them and banking is one example. Gone are the days when customers would
line up in banks to do their banking needs. Today by a touch of a button using electronic banking
they can transfer funds to and from their accounts. However, even though mobile technology is
widely available amongst customers, there are proportionately few adopters for mobile banking
(Deloitte 2010).

2.3 Mobile Banking In Ethiopian Banking Industry

The electronic banking service was ushered into the Ethiopian market in 2001 when the largest
state owned, Commercial Bank of Ethiopia (CBE) introduced ATM to deliver service to the local
users (Gardachew 2010).
After this the electronic banking service scope was further expanded to mobile banking when
Dashen Bank signed an agreement with iVery, a South African E-payment technology company,
for the introduction of mobile commerce in April 21, 2009. According to the agreement, iVery
Payment Technologies has licensed its Gateway and MiCard E-payment processing solution to
Dashen Bank. Dashen’s Modbirr users can transfer 500 birr to other Modbirr users in 24 hours a
day. This would make Dashen Bank the first private bank in Ethiopia to acquire E-commerce
and mobile merchant transactions (Amanyehun 2011).
However, mobile banking came into full practice after several years of trials and errors as well as
wait-and-see attitude by customers. Since then, mobile banking has shown a gradual growth
across many various parts of Ethiopia.
Despite the very high mobile penetration rate, the use and adoption of mobile banking services
remains low. With the advent of new mobile technologies, such as Blackberry, iphone, Androids,
etc, which serves as a catalyst, mobile banking is on the edge to draw millions of new users

9
within the world teeming population (Agwu 2012). Many customers who are tired of the old
banking systems are looking for time saving alternatives. The review of the existing literature
showed that mobile banking has been widely researched in the developed and emerging
economies; however, there is no research for the developing Ethiopian economy. This research is
therefore believed to fill this gap.

2.4 Benefits of Mobile Banking

Mobile banking allows anytime, anywhere (within the network coverage) banking with all the
inherent advantages (Pousttchi & Schurig 2007). The high penetration of mobile phones across
the strata of society makes it a natural tool for taking electronic banking to its next level. It is
more than likely that Internet banking and mobile banking would exist as allies rather than
competitors for each other.
Convenience is one of the benefits of mobile banking as banking transactions and other related
activities can be performed in the comfort of customer’s home or offices.
The usefulness of conducting banking transactions at home or from the office eliminates the
difficulties that are associated with driving to the bank, the cost of petrol, and parking. Mobile
banking also allows customers to perform banking transactions 24 hours a day, 7 days a week,
and 365 days a year (Eckhardt, et al 2009).

2.4.1 Benefits of Mobile Banking to Banks

Banks can utilize the time saved by the channel migration of customers to mobile banking for
expansion of business through better marketing and sales activities. Mobile banking enables
banks to reduce cost of courier, communication, paper works, etc and also it reduces costs in
setting up a branch and the resources to process transactions (Sunil and Durga 2013). Also banks
providing mobile banking services can have competitive advantage over those banks, which are
not providing this service. It has also been found to increases customer loyalty that is using
mobile banking customers need not to go in banks braches for fund transfer or for information,
which creates a good relationship between banks and customers which helps in increasing
loyalty towards the banks. Goswami and Raghavendran (2009) point out, mobile banking
services will enable banks to not only increase fee-based income but also enable significant cost
savings, improve service quality and provide cross-selling opportunities.

10
2.4.2 Benefits of Mobile Banking for Customers

Customers don’t need to stand at the bank counter for various enquiries about their account.
Customers can save their valuable time and travelling cost in reaching the bank for their financial
transactions (Sunil and Durga 2013). Customers can pay their utility bills on time and save
themselves from paying penalties, since alerts are received from the bank.
Ubiquitous access, convenience and mobility are the main benefits that mobile banking confers
to customer (Laforet and Li 2005). Delport (2010) points out that with mobile banking customers
no longer need to use scarce time and resources to travel to bank branches. Nevertheless, despite
the widespread proliferation of mobile phones and the numerous advantages that mobile banking
offers, mobile banking is still not widely adopted (Riquelme and Rios 2010).

2.5 Services Available On Mobile Banking

Mobile Banking, as defined above, includes a wide range of services. According to (Tiwari &
Stephan 2007) these services may be categorized as follows:

2.5.1 Mobile Accounting

Tiwari & Stephan (2007) defined mobile accounting as transaction-based banking services that
revolve around a standard bank account and are conducted and/or availed by mobile devices.
Not all mobile accounting services are however necessarily transaction based. Mobile
accounting services may be divided into two categories to differentiate between services that are
essential to operate an account and services that are essential to administer an account (Renju
2014). Moreover, additional services are required that inform a customer about his/her
transactions and other activities involving their account. It is for this reason that Mobile
Accounting is offered almost regularly in combination with services from the field of Mobile
Financial Information.

2.5.1.1 Account Operation

The term Account Operation, as used in this study, refers to an activity that involves monetary
transactions. Such transactions may involve an external account and/or internal account. Mobile
services that are used to operate an account are (Tiwari & Stephan 2007).

11

Money remittances: - Mobile devices may be used to instruct the bank to remit money
in order to conduct one-time transactions, such as paying bills or transferring funds. This service
can also include the facility to cancel an ordered remittance.

Issue standing orders: - The house bank may be entrusted with standing orders for
payment of regularly recurring payments such as payment of standing payments, monthly rent or
telephone bill.

Transfer funds to and from sub-accounts: - Funds from one sub-account may be
transferred to another as and when needed, for instance from a savings account to checking or
other types of account and vice versa (Sunil and Durga 2013).

Subscribing insurance policies: - Standardized, low-cost insurance policies like travel

insurance policy may be purchased via mobile devices. This service could be particularly
attractive in time-critical situations, for instance, if a bank customer has to set out on an urgent,
unplanned journey, he may still be able to subscribe to a travel insurance policy offered by his
house bank.

2.5.1.2 Account Administration

The term Account Administration refers to tactical situations, for instance, if a bank customer
has to set out on an urgent, unplanned journey, he may still be able to subscribe to a travel
insurance policy offered by his house bank. This may involve activities like access
administration and cheque book request. Mobile Accounting services that are used to administer
the account are (Tiwari & Stephan 2007), (Sunil and Durga 2013):

Access administration: - Mobile devices may be used to administer the access to an
account, for example to change the individual PIN or to request new transaction numbers.

Change operative accounts: - Through this service a customer can change his default
operative account and do transactions using a different account. This option is attractive for
customers holding several sub accounts. Funds of sub-accounts may be hereby utilized in a
targeted manner without first transferring the amount to the default account.

12

Blocking lost cards: - Mobile non-voice telecommunication systems such as Wireless
Application Protocol, Short Message Service (WAP, SMS) can be used round the clock to
speedily block lost credit and debit cards irrespective of the current geographic location.

Cheque book request: - Instead of going personally to the bank, the customer can
request for a cheque book to be mailed to his or her address as per the records of the bank. This
saves his/ her valuable time (Sunil and Durga 2013).

Bill Payment: - for those companies which register with the bank for this service, the
payment is made on request on mobile phone banking.

Change of Primary Account: - the customer has the option to change the primary
account to another new account number for carrying out transactions (Sunil and Durga 2013).

2.5.2 Mobile Financial Information

Mobile Financial information refers to non-transaction based banking- and financial services of
informational nature (Tiwari & Stephan 2007). This sub-application may be divided into two
categories: Account information and Market information (Cruz et al. 2010).

2.5.2.1 Account Information

The term Account Information refers to information that is specific to a customer and his bank,
even though it does not necessarily involve a monetary transaction. Mobile services that belong
to this category are:

Balance inquiries: - mobile devices may be employed to check the current financial
status of own bank or securities accounts (Sunil and Durga 2013).

List of latest transactions: - mobile devices may be used to request a list of the latest
transactions performed on an account. This service works with a standard, pre-specified number
of latest transactions that are reported, as and when demanded. Most of the banks provide a list
of transactions.

Statement request: - unlike the request for a list of latest transactions, it generates a list of all
transactions in a given period, for instance in a week or in a month. Statements may be requested

13
either manually, as and when needed electronically. With Mobile Banking the account
statements can be requested via and/or delivered on mobile devices (Cruz et al. 2010).
Transaction and balances: - the bank may be instructed to automatically alert the customer via
SMS whenever transactions (credits as well as debits) exceeding a certain amount are performed
on the account. In addition, a similar threshold alert may be activated for the balance status of
the account. The customer may be informed via SMS whenever the balance falls below a certain
predefined level. This service may be useful to help the customer avoid unpleasant situations by
not being able to honor his commitments (Cruz et al. 2010).

Threshold alerts for stock prices: - the bank may be instructed to send an alert on
mobile devices, via SMS, when prices of some particular stocks fall or jump to a predefined
threshold value and ask for further instructions ( Suoranta and Matila 2004).

Returned cheques or cheque status: - the customer may be informed without time
delay if one of her or his deposited cheques has not been honored and corrective steps are
required.

Credit card information: - the customer may check anytime and anywhere the current
status of his credit cards and the amount that he may utilize at that given point of time.

Branch and ATM locations: - mobile devices may help finding the nearest branch or
ATM affiliated with a bank. The current location of the customer may be determined by
positioning the mobile device. This service may be particularly useful while travelling (Crosman
2011).

Helpline and emergency contact: - mobile devices may be provided with content that is
required in emergency situations, for instance to block a lost credit card and cheque book. The
information may be either embedded in the telephone menu, for example in cooperation with a
network carrier or the information may be provided on a WAP page analogue to a web page.

Information on the completion statutes of an order: - the bank may use “push”
services to inform the customer via his mobile device regarding whether or not his orders could
be carried out. This ensures that urgent information can be provided to the customer while on the
move.

14

Product information and offers: - the bank can provide information about its products
and new offers to a customer on the move. A customer can “pull” the information that he wishes
to access. On the other hand the bank can “push” the information or offers that the customer has
identified as interesting and is willing to receive.

2.5.2.2 Market Information

The term Market Information as opposed to Account Information refers to information with a
macro scope. This information is not directly related to the customer account. It is generated
either externally like exchange rates or central bank’s interest rates, or internally by the
individual bank (Tiwari & Stephan 2007), for example bank-specific interest rates. The
individual bank customer does not play a direct role in this process. The information may be
later sorted out to cater the individual needs and preferences of a particular customer, if so
desired by him, and subsequently delivered to a mobile device of his choice, or a PDA.
Information in this category generally concerns: Foreign exchange rates, interest rates, Stock
market news and reports and Commodity prices (For example: - Gold and raw materials)

2.6 Technologies Employed to Provide Mobile Banking Services

Customers can use mobile banking technologies for various banking services ranging from
planning to pay their bills via their cell phones. Mobile technologies used in the mobile banking
include the browser-based applications, messaging-based applications and client-based
applications (Kim et al. 2009; Tiwari & Buse 2007).

2.6.1 SMS (Short Message Service)

On the messaging-based applications, the communication between the bank and the customer is
carried out via text messages. For example, by using a registered mobile number, the customer
sends a predefined command to the bank, and then uses text messages to conduct transactions
with the bank. An example of messaging-based applications is the Unstructured Supplementary
Service Data (USSD), which has compatibility with most mobile phones. Existing mobile
banking applications based on USSD includes WIZZIT in South Africa (WIZZIT 2005), M-
PESA in Tanzania (Camner & Sjöblom 2009), M-PESA in South Africa (Nedbank 2010b) and
FNB mobile banking (FNB 2010).

15
The term “SMS Banking” refers to the provision of banking and financial services via means of
text messaging service, known as SMS. SMS allows the financial institutions to communicate
with their customers. Almost all mobile phones have the ability to use SMS; SMS is so suitable
for sending messages from banks for a number of banking operations. In order to create a query,
the customer sends an SMS containing the service request to a special number which is
considered for this purpose.
The customer sends a customized SMS (a command based instructed with Arabic number) to the
bank with the predefined commands for each offered service. The server of the bank receives the
SMS, interprets the commands and executes commands and instructions, if the request is found
to be authorized. The authentication is carried out with the help of a special Mobile Banking,
Personal Identification Number (MPIN). Furthermore, the requests are only accepted from a
mobile phone number that has been registered as the authorized number of operating that
particular bank account. With the integration made with the mobile banking server one can get
all the financial and non-financial information. After completion of the whole process, the
information will be gathered in the oracle database for future reference. For example:-

Dialing to 889 Inserting the command and the PIN Navigation of the
financial or non-financial information Logging off

2.6.2 Browser-Based

The browser-based application is essentially a Wireless Access Protocol (WAP)-based internet

access (Kim et al. 2009). This requires a compatible mobile phone which is WAP-enabled. The
mobile phone is used to access banking portals through the Internet.
Brower-based customer needs to be connected to the internet to use this service. The interface is
generated from the server which is transported to mobile device, and this allows the content to be
displayed through the browser. This method is extremely fast depending on the server that the
customer is connected to but one its disadvantages is that, it requires the subscriber (customer) to
stay online all through the transaction process and could lead to higher cost for the customers.

16
2.6.3 Client-Based (Downloadable Applications)

This method requires the customers to use software installation, and this will serve as a user
interface that can allow customers to use the mobile device while offline to access some basic
transactions before going online.

Typing details before connecting to the internet could reduce cost. This client based application
is particularly useful because it allows customers to stay offline and while preparing transaction
such as entry of account details and afterwards the transmission is made by sending out the data,
this banking process conducted offline reduces online connection time and cost (Pendharkar
2004).
These are mobile banking applications that the users should download on their phone. Using the
properties of these applications, transactions can be encrypted completely in both source and
destination. Since this software has been designed for special purposes, mobile banking
application designers can optimize the applied interface for the financial transactions.
The independence of application is one of the advantages of these applications for financial
institutions (Ming 2007). Once customers have downloaded the software on their phone, they
can use the Mobile Banking application. In other words, the application should be compatible
with the various needs and functions for a large number of mobile phones and this is expensive.
The phone should also support one of the environments such as the Microsoft Windows Mobile.
Another problem of mobile banking applications is that the customers should download the
software, install it on their devices, and update its new versions, and maybe this is a new
problem for some of the customers.

2.7 Factors Influencing Usage of Mobile Banking

Several theories are offered in order to identify factors that cause people accept new technologies and
information systems and use them (Rao and Troshani 2007). The next section presents some of these
theories and based on that conceptual frame work for this particular study is formulated.

2.7.1 Technology Acceptance Model (TAM)

TAM was first introduced by Fred Davis in 1989 to predict user acceptance of new
technologies. According to (Davis 1989), TAM suggests that perceived usefulness (PU) and
perceived ease of use (PEOU) are the two most important factors in explaining individual users’

17
adoption intentions and actual usage. Davis (1989) defines perceived usefulness as the degree to
which a person believes that using a particular system will enhance his or her job performance.
Perceived Ease of Use refers to the degree to which the person believes that using the system
will be free of effort.
TAM has been extensively tested and validated and is a widely accepted model, which can be
modified or extended using other theories or constructs according to author in (Masinge 2010)
and its usage has captured the attention of IS community attested by the authors in (Mathieson
et al 2001).
Masinge (2010) conducted a study on the factors influencing the adoption of mobile banking
services at the bottom of the pyramid (BOP) in South Africa, and added perceived cost, trust
and perceived risk constructs to TAM. The results of the study revealed that perceived
usefulness (PU), perceived ease of use (PEOU), perceived cost, and customer’s trust had a
significant effect on the adoption of mobile banking at the BOP while perceived risk (PR) was
found to have no significant effect.
As a result of this many other models of extension have been suggested by the authors in (Luarn
and Lin 2005).The perceived credibility, perceived financial cost and perceived self-efficacy
has been adopted based on the literature, as an extension of Technological Acceptance Model
(TAM) to investigate and understand the behavioral intention of users of mobile bankers (Luarn
and Lin 2005).

Perceived Usefulness
Perceived usefulness is defined as the extent to which an individual believes that he or she
would benefit from using mobile banking. (Bhatti 2007; Kim, Chan and Gupta 2007) argued
that an individual often evaluates the consequences of their behavior and makes a choice based
on the desirability of perceived usefulness. Therefore, perceived usefulness will influence their
intention to accept and adopt a system. In the context of mobile banking, one of the reasons
people use mobile banking is that they find the systems useful to their transactions and saves
their time as well. Benefits are also observed by banks in the form of declining the number of
branches which reduces the cost per transaction.
Perceived usefulness is found to be the most significant factor influencing the intention to use
mobile banking. This finding suggest that if mobile banking is to be accepted by users, they

18
should perceive it as a useful and quicker way of doing banking transactions compared with the
traditional banking system.
(Luarn and Lin 2005) found that perceived usefulness is a vital factor determining the mobile
customer usage. (Wang et.al 2003) also agree that most customers choosing mobile services
because they see their benefits. On another side, (Suoranta 2003) support that lack of awareness
of its usefulness and benefits realization are important factors which hinder mobile banking
acceptance.

Perceived Ease of Use
Perceived ease of use is defined as the degree to which a person believes that using a particular
system would be free of effort. Prior studies show that perceived ease of use has a significant
effect on usage intention, either directly or indirectly through its effect on perceived usefulness
(Davis 1989; Venkatesh 2000; Venkatesh and Davis 1996). A system perceived to be easier to
use will facilitate more system use and is more likely to be accepted by users (Venkatesh and
Morris 2003).
TAM points that perceived ease of use influence the innovation acceptance. It decrease the
effort paid in learning and applying new technologies. Many researches give support to TAM
that perceived ease of use has positive impact on perceived usefulness and mobile services
adoption (Porteous 2011, Ezeoha 2005). (Bong-Keun & Tom 2013) stated on their empirical
investigation that perceived ease of use has a major significance on the adoption of mobile
banking. This finding suggests that customers seek a simple, easier, faster process and
environment for banking transactions. It was also showed that perceived ease of use is a major
determining factor explaining the attitude difference between adopter and non-adopters toward
mobile banking.
In the context of mobile banking, customers may find mobile banking services uneasy when the
system is not easy to learn and easy to use. Information such as details of products or services,
their benefits, and usage guidelines needs to be provided as it will make it easier for customers to
adopt mobile banking. Furthermore, perceived ease of use helps in building trust with banks as it
may send a signal that banks have really put in thought about their end users (Wang, Lin and
Tang 2003). Many previous empirical studies further show that perceived ease of use has a
positive influence in the adoption of mobile commerce (Khalifa and Shen 2008, Kim et al 2009;
Wei et al.2009).

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2.7.2 Innovation Diffusion Theory (IDT)

Rogers (2003) identifies three characteristics of innovations: relative advantage, compatibility,

and complexity. Adopters have invariably been found to have different perceptions about these
characteristics in comparison with non-adopters. According to (Kotler 2000), the characteristics
of an innovation affect its rate of adoption. Some products catch on immediately, whereas others
take a long time to gain acceptance.
If the innovation is perceived to be better than the existing system (a measure of its relative
advantage), is consistent with the needs of the potential adopter (a measure of its compatibility),
and is easy to understand and use (a measure of its complexity), it is more likely that a favorable
attitude towards the innovation will be formed (Ching and Ellis 2004).
Lee et al. (2005) found that the perceived relative advantage, compatibility and complexity of the
innovation played a key role in the adoption of mobile banking.
Therefore this study identifies how these characteristics of innovation influence the adoption of
mobile banking in Ethiopia. The remaining parts of this section identify these characteristics of
innovations as established in prior studies.
Chaipoopirutana, Combs, Chatchawanwan, and Vij (2009) and Lin (2011), claimed that the
adoption of mobile banking is ‘complex’ as it has the negative relation with intention to adopt
mobile banking. In this paper they have discussed the (Rogers 2003) innovation diffusion
model’s attributes: complexity, compatibility, relative advantage and triability and found that
Relative advantage, compatibility, ease of use (opposite of complexity) has a significant effect
on attitude to adopt mobile banking services. They have also suggested that compatibility has a
positive relation with the adoption of mobile banking. Customers have a favorable attitude
towards adopting mobile banking services, if they have positive belief about the relative
advantage of mobile banking.
On the other hand (Lee et al. 2005) performed eight interviews to collect transcripts from
participants and concluded that relative advantages and compatibility were positive factors
affecting the adoption of mobile banking.

Relative Advantage

Relative advantage describes the degree to which an innovation is perceived as being better than
its precursor (Rogers 2003). Gerrard and Cunningham (2003) identify a perceived relative

20
advantage as being a significant factor driving the adoption of mobile banking.
According to (Kotler 2000) when individuals pass through the innovation-decision process, they
are motivated to seek information in order to decrease uncertainty about the relative advantage of
an innovation. Potential adopters want to know the degree to which a new idea is better than an
existing practice. Hence relative advantage is often the content of network messages with regard
to an innovation.
Relative advantage, in one sense, indicates the strength of the reward or punishment resulting
from the adoption of an innovation. There are a number of sub-dimensions of relative advantage
such as the degree of economic profitability; decrease in discomfort; time saving; and effort
(Rogers 2003).
Relative advantage also refers to the comparative benefits that a user of mobile banking may
avail which he/she could not get from other traditional banking services as mentioned by
(Pikkarainen et. al 2004) that users are more likely to adopt mobile banking if they believe
using mobile banking will gain more relative advantages as compared to other traditional
banking channels such as ATM or non-mobile internet banking. It includes perceived cost and
time.
a) Perceived Cost Savings refer to the transaction cost of conducting mobile banking
transactions, including the airtime and bank charges. Perceived cost is defined as the extent to
which a person believes that using mobile banking will cost money (Luarn & Lin 2005). The
cost may include the transactional cost in the form of bank charges, mobile network charges for
sending communication traffic (including SMS or data) and mobile device cost.
b) Perceived Time Saving refer to the time required to complete a transaction. Lee (2009) found
in his study that time plays an important role in adopting mobile banking service by the users.
It has been observed by researchers that when user perceives relative advantage or relative
usefulness of a new technology over an old one, they tend to adopt it (McCloskey 2006; Rogers
2003).
Therefore mobile banking adoption is affected by the benefits available such as immediacy,
convenience and affordability to customers (Lin 2011).

Compatibility
Compatibility refers to the degree to which a service is perceived as consistent with users’
existing values, beliefs, habits and present and previous experiences (Chen et al. 2004).

21
Compatibility is defined as the degree to which an innovation is perceived as being consistent
with the existing values, past experiences and the needs of potential adopters. An innovation can
be compatible or incompatible with socio-cultural values and beliefs; with previously introduced
ideas; or with client needs for innovations (Rogers 2003).The compatibility of an innovation, as
perceived by members of a social system, is positively related to its rate of adoption.

Compatibility is a vital feature of innovation as conformance with user’s lifestyle can propel a
rapid rate of adoption (Rogers 2003). Study on compatibility is a significant antecedent in
determining customers’ attitude towards electronic banking adoption in Malaysia (Ndubisi and
Sinti 2006). Compatibility has further been found influential in the adoption of virtual store,
mobile payment and mobile banking (Koenig-Lewis 2010; Lin 2011). Al-Gahtani (2003) found
that compatibility had significant correlation with computer adoption and use.

Complexity
Complexity is defined as the degree to which an innovation is perceived to easy to understand
and use. Adoption will be less likely if the innovation is perceived as being complex or difficult
to use (Rogers 2003). Complexity can be considered as the exact opposite of ease of use in the
Technology Acceptance model, which has been found to directly impact the adoption of the
Internet (Leaderer, et al. 1999).
Customers will reject an innovation if it is very complex and not user friendly. In this context,
Cooper and Zmud (1997) report ease of use of innovative products or services as one of the three
important characteristics for adoption from the customer's perspective. For example, the user-
friendliness of domain names, navigation tools and the graphical user interface are important
determinants of the user-friendliness of a web page design.
Research by Davis (1989) has found that perceived complexity is associated with the adoption of
electronic technologies.
Since mobile banking adoption is at the early stages of adoption in Ethiopian banking industry
the complexity factor will be included in perceived to ease of use factor.

Observability
Rogers (1995) argues that observability is the “degree to which the results of an innovation are
visible and tangible to others”. Liu and Li (2009) assert that the more it is easy to describe and
observe an innovation the more positive impact it will have on people which will eventually

22
encourage usage of the innovation. Cruz et al. (2010) affirm that probability of adopting an
innovation increases when the benefits and usage of innovation can be easily observed.

Triability
Triability is defined as the “degree to which an innovation can be tried on a limited basis (Rogers
1995). As per Rogers, there is faster adoption of new ideas when these can be tried before their
full implementation whilst adoption tend be slower where prior trial is not possible (Puscel et al.
2010). Tan and Teo (2000) assert that if given the opportunity to evaluate innovation, customer
minimize the particular concerns of the unknown, which led to acceptance. Therefore, repeating
the evaluation and assistance in the use of mobile banking during the trial period can reduce the
uncertainty about mobile banking, eventually creating positive customer attitudes to using
mobile banking. Triability can also be viewed as the degree to which an innovation may be
experimented with on a limited basis (Huisman and Iivari 2006)
This research used an extended TAM containing the following constructs - perceived
usefulness, perceived ease-of-use, perceived trust and awareness and also three IDT constructs-
relative advantage, perceived risk and compatibility to explore the adoption of mobile banking.
Therefore; the research integrated the TAM and IDT along with trust and awareness to
investigate the main factors influencing mobile banking adoption.
The additional TAM constructs perceived risk, awareness and trust as indicated in different
literatures are stated as follows.

Perceived Risk
Perceived risk is the “uncertainty about the outcome of the use of the innovation”
(Gerrard and Cunningham 2003).Perceived risk as defined by (Pavlou 2001), “It is the user’s
subjective expectation of suffering a loss in pursuit of a desired outcome”. The quality of
electronic services offered with the possible risk of illegal activities and fraud has always been a
concern for both customer and service providers (Ba and Pavlou 2002).
On a study conducted by (Masinge 2010) on the factors influencing the adoption of mobile
banking services at the bottom of the pyramid (BOP) in South Africa, perceived risk, perceived
cost, trust were added to constructs of TAM. In the study, the risk factor as perceived by bank
customers in electronic transactions may comprise of five facets of security/privacy risk,
performance risk, time/convenience risk, financial risk and social risk.

23
According to (Lee 2009), performance risk refers to the loss incurred by malfunctioning of
mobile banking servers. Security/privacy risk refers to a potential loss due to fraud or a hacker
compromising the security of a mobile banking user. Time risk refers to the loss of time and any
inconvenience incurred due to the delays of receiving payments or the difficulty of navigation.
Social risk refers to the possibility that using mobile banking may result in disapproval by one’s
friends, family, or work group. Financial risk refers to the potential for monetary loss due to
transaction errors or bank account misuse.
According to (Dineshwar and Steven 2013), perceived risk and reliability were found to be the
main obstacles to mobile banking usage in the African country of Mauritius. Risk in mobile
banking is perceived to be higher than conventional banking because information exchange on
wireless infrastructure, which produced inherent doubts among customers as hacking and other
malicious attacks, might cause financial and personal data loss. Further an empirical analysis
conducted by (Cheah, et al. 2011) on factors affecting Malaysian mobile banking adoption
perceived risks was found to be negatively associated with mobile banking adoption.

Perceived Trust
According to (Gefen 2003), trust is defined as “a psychological state comprising the intention to
accept vulnerability based upon positive expectations of the intentions or behavior of another”.
Trust is important because it helps customers overcome perceptions of uncertainty and risk and
helps build appropriate favorable expectations of performance and other desired benefits.
In any business or commerce deal trust is an important element. When dealing with
technological and information technology enabled system for commerce activities like
electronic commerce and mobile commerce then it is important to comprehend about the
security and privacy concerns (Howcroft Hamilton & Hewer 2002; Hosein 2011). Trust can be
developed through spreading the right information and giving customers or users of mobile
banking furnished details about the mobile commerce system to ensure the easily manageable
use of mobile banking system (Pavlov 2003).
A study by (Bhattacherjee 2002) provided a definition and measurement of the customer’s trust
of an e-commerce service provider, based on the three dimensions or typology of trust: ability,
integrity and benevolence. (Bhattacherjee 2002) defined these as follows:
a) Ability refers to the perception of the customer about the competency and salient knowledge
of the mobile banking service provider to deliver the expected service;

24
b) Integrity refers to users’ perceptions that the service provider will be fair, honest and adhere
to reasonable conditions of transactions;
c) Benevolence refers to the extent to which a service provider will demonstrate receptivity and
empathy towards the user. The service provider will make a good faith effort to resolve users’
concerns and intends to do good to the users beyond profit motives.
Customers’ confidence about privacy and security of a system may significantly influence
adoption and usage of mobile banking. In this study, trust is defined as the extent to which an
individual believes that using mobile banking is secure and has no privacy threats. Perceived
Trust therefore is an important construct which affects customer behavior and determines the
success of mobile banking adoption (Wei et al. 2009). (Sadi and Noordin 2011), in an
exploratory analysis of the factors influencing adoption of M-commerce in Malaysia reveals that
trust identified as a key factor influencing the adoption of M-commerce. A similar study carried
out by (Mashagba et al 2013) revealed that trust, risk and security had an effect on mobile
banking adoption

Security and privacy are found to be the major obstacle in adoption of electronic based banking
activities. Customers tend to use those facilities which they believe to be the secured one and
which are from some credible source. People generally first think about the trustworthiness of
communication network and then about the service provider (Yeh & Li 2009).
Many researchers have found privacy and security that concerns which encompasses the trust
factor, is found to be the most important and significant factor impeding the adoption of mobile
banking activities (Horton et al. 2002;Gunsaekaran&Ngai 2003;Nasri 2011).
The trusting intention represents users' willingness to engage in subsequent transactions with
the service provider (Bhattacherjee 2002). The higher levels of trust in a service provider will
therefore lead to a greater intention on the part of user to engage in mobile banking transactions
(Gu, Lee & Suh 2009; Lee et al. 2007).

Awareness
The level of information customers have on mobile banking is one of the major factors impacting
the adoption and usage of online banking according to the author in (Sathye 1999). The research
further states that the adoption rate of an innovation could be determined by level of awareness
of the customers. The use of mobile banking services is new to many customers and the banks
need to create enough awareness to capture the attention of the customers.

25
Adoption is the acceptance and continued use of a product, service or idea. According to (Sathye
1999), customers go through “a process of knowledge, persuasion, decision and confirmation”
before they are ready to adopt a product or service. The adoption or rejection of an innovation
begins when “the customers becomes aware of the product”. Hence for adoption of mobile
banking, it is necessary that the banks offering this service make the customers aware about the
availability of such a product and explain how it adds value relative to other products of its own
or that of the competitors.
Customers must become aware of the new brand or technology. An important characteristic for
any adoption of innovation service or product is creating awareness among the customers about
the service or product (Sathye 1999).
Awareness creation speeds the sales of products and evidences from different participants, lay
credence to this. The level of awareness (Palvia 2009) is an important factor in encouragement of
consumers to adopt related self service facilities.
The amount of information customer’s have about online banking has been identified the major
factor impacting the adoption. According to (Sathye 1999) while the use of online banking
service is fairly new experience to many people, low awareness of online banking is major factor
in causing people not to adopt online banking. In an empirical study of Australian customers
found that customers were unaware about the possibilities, advantages or disadvantages involved
in online banking.

2.8 Empirical Literature

There is a growing body of academic research examining the determinants of mobile banking
acceptance and its utilization (Crabbe, Standing, Standing and Karjaluoto, 2009; Donner and
Tellez, 2008; Gu, Lee and Suh, 2009; Luarn and Lin, 2005; Mattila, 2003; Riquelme and Rios,
2010).
Studies have been conducted in various countries to better understand customer’s attitudes
toward this emerging mobile technology. For example, Mattila (2003) focused on the drivers and
inhibitors of mobile banking services. The author found that complexity, compatibility, relative
advantage, observability, and triability are the significant factors influencing customer decision
making in mobile banking adoption. Also, security and confidentiality of information are
fundamental pre-requisites for any mobile banking services to be successful.

26
Laforet and Li (2005) carried out a research to examine the online/mobile banking in China.
Purposive sampling technique was adapted to a sample of five hundred (500) customers who
transact their banking business online. Analysis was done quantitatively through a regression
model. Based on this research it was established that lack of understanding and awareness of
mobile banking benefits are the main factors hindering the adoption of mobile banking usage in
China though perceived risk, culture and technological skills are also barriers to online banking
in China.
Luarn and Lin (2005) conducted a survey in Taiwan in order to understand user’s behavioral
intention to use mobile banking service based on the extension of technology acceptance model
(TAM). It was observed that the financial cost, perceived usefulness, self-efficacy, credibility
and perceived ease of use were the factors influencing the behavioral intention to use mobile
banking. In this finding, it was also observed that credibility was a major issue, which has a
stronger influence on user’s behavioral intention than the technology acceptance model (TAM)
of perceived ease of use and perceived usefulness.
Cruz et al. (2010) studied the factors inhibiting the adoption of mobile banking among internet
users in Brazil. Based on their finding they concluded that most users never use mobile banking
services. They identified risk, cost, complexity, and lack of understanding about the relative
advantages of these services as the main barriers of using mobile banking services.
Laukkanen and Kiviniemi (2010) tested the factors affecting the adoption of mobile banking in
their study. They intended to find barriers of adoption of mobile banking. These factors included
use, value, risk, tradition, and image. The findings of this study indicated that providing
information and guidance on the part of the bank have significant effect on reducing the barriers
of use, image, value, and risk in mobile banking, but do not reduce the barriers of tradition.
Wessels and Drennan (2010) conducted a study to identify and test the key factors stimulating
and hindering the adoption of mobile banking, as well as the effect of user’s attitude on the
intention of use. They found out that perceived usefulness, perceived risk, cost, and compatibility
have significant effect on the adoption of mobile banking. In this study, attitude toward mobile
banking was considered as a moderating variable.
Koenig-Lewis et al. (2010) conducted a study on predicting the continuation of the use of mobile
banking services by young users in England, aiming at investigation of barriers of mobile
banking adoption. Their findings revealed that compatibility, perceived usefulness, and risk are

27
significant factors affecting the adoption of mobile banking. Compatibility not only has a strong
positive effect on the adoption of mobile banking, it is also identified as one of the most
important independent variables affecting perceived ease of use, perceived usefulness, and
credibility. The variables of trust and credibility were identified as having significant effect on
reducing the total perceived risk.
A study by (Sripalawat et al. 2011) examined positive and negative factors affecting mobile
banking acceptance in Thailand. Subjective norms, perceived usefulness, perceived ease of use,
were considered as the positive factors, and device barrier, perceived risk, lack of information,
and perceived financial cost as the negative factors. They found that the positive factors have
more influence than negative factors towards the acceptance of mobile banking.
Dineshwar and Steven (2013), the researchers investigated the complex factors that prevent
customers from adopting and using mobile banking services in Mauritius. The researchers used a
quantitative approach, they also combined the TAM and IDT together with perceived risk and
cost construct to investigate perception of mobile banking in Mauritius. The study revealed that
age, gender and salary had no influence on adoption but rather, Convenience, compatibility and
banking needs influenced banking adoption. On the other hand, Perceived security risk and
reliability were found to be the only obstacles to mobile banking usage but also that mobile
banking usage is not associated with age, gender and salary.
Mohammad Rokibul Kabir (2013) the researchers investigated on the factors that influence the
use of mobile banking in Bangladesh. The approach for this study was quantitative. During the
course of the research a self-administrated questionnaire was given to the clients of two full-
fledged mobile banking service providers of Bangladesh called Brac Bank Limited and Dutch
Bangla Bank Limited. 100 questionnaires were distributed but only 64 useable questionnaires
were returned giving a response rate of 64 percent. The data was analyzed using multiple
regressions and the outcome of the research was that, Variables such as ability, integrity,
benevolence, perceived usefulness, perceived ease of use relative cost and time advantages were
found to influence the adoption of mobile banking.
Kazi and Muhammad (2013) Pakistan inspected those factors that affect Pakistan customers
from adopting mobile banking services. Data collection was done by surveying 372 respondents
from the two largest cities (Karachi and Hyderabad) of the province Sindh by use of judgment
sampling method. The researcher used a correlation research design and the analysis was done

28
using multiple regressions in order to come up with the findings. TAM model played a big role
in this research, variables such as social influence, perceived risk, perceived usefulness, and
perceived ease of use to study whether they affected the adoption of mobile banking in Pakistan.
Kazemi, S.A., et al (2013) this research investigated those factors that affect Isfahanian Mobile
Banking Adoption in Iran, Based on the Decomposed Theory of Planned Behavior. The result of
this study suggested that there were only two important factors which are Attitude and perceived
behavioral control under which factors such as perceived usefulness, perceived ease of use,
compatibility and trust have an influence on behavioral attitude to adopt mobile banking.
Koenig et al (2010) they investigated on the barriers towards Mobile Banking System adoption
among young people in Germany. This study was based on the Technology acceptance model
(TAM) model. They received 155 responses from all the questionnaires that were sent, they also
used a structure equation modeling (SEM) approach to tests the hypothesis. The results of the
study indicated that compatibility, perceived usefulness, and risk are significant indicators for the
adoption of Mobile banking systems in Germany.
Chitungo, S. K., & Munongo, S. (2013) Zimbabwe, the study was about an analysis of the
factors that influence mobile banking adoption in the rural Zimbabwe through extending the
technology acceptance model. The researcher adopted use of stratified random sampling and the
results of the study suggested that factors such as perceived usefulness, PEOU, relative
advantage, personal innovativeness and social norms influenced the intention to accept and use
mobile banking.
Cheah et al (2011), this was an empirical study that was conducted with the aim of investigation
on the factors that affect the Malaysian customers from adopting mobile banking services. From
the study, variables such as perceived ease of use, Perceived usefulness and relative advantage
were found to be positively and significantly related to the intention to adopt mobile banking
services while a constructs such as perceived risk was found to be negatively correlated with the
adoption of mobile banking.

2.9 Research Gap

There have been a number of valuable studies in the area of mobile banking over the years back
in North America, Europe, Asia and some from African countries such as Kenya, Ghana, Nigeria
and Zimbabwe. Researcher’s such as (Gerrard 2003), (La foret 2005), (Masinge 2010), (Teo et

29
al. 2011), (Al-Jabri 2012) ,( Dineshwar 2013) and others presented evidence for a number of
variables that influenced customer behavior intention to use mobile banking, however the study
of mobile banking has been given little attention in literatures in Ethiopia.
The existing research in Ethiopia included mobile banking in electronic banking challenges and
barriers (Ayana 2012), (Garedachew 2010). As per the researcher knowledge there is no study
conducted with regards to factors influencing usage of mobile banking in Ethiopia. This study
therefore aims at filling that gap by shedding light on issues that influence customer’s usage of
mobile banking services in order to create an understanding of this new technology in the
banking sector.

2.10 Justification of model used

Many researches on the acceptance of electronic-banking services have used Davis’s (1989)
technology acceptance model (TAM). It is argued that using TAM solely is insufficient to
explain the adoption or non-adoption of technologies (Chong et al. 2010).
Several researches on mobile banking adoption have combined the Diffusion of Innovation
Theory and Technology Acceptance Model (Riquelme & Rios 2010). Puschel et al. (2010)
affirm that taken individually the models have limited predictive power but integrating the two
into a single framework results into more predictability. In their investigation on mobile banking,
Puschel et al. (2010) have integrated elements of the Technology acceptance model (TAM) of
Davis with Roger’s innovation diffusion theory. Chong et al. (2010) affirm that it is better to use
TAM as a base model and extend it by including additional variables based on the study that is
being carried out.
Akturan and Tezcan (2012) have integrated TAM, perceived benefits and perceived risks to
investigate mobile banking adoption. Wessels and Drennan (2010) extended TAM by adding
compatibility and perceived risk as constructs for their investigation on customer’s acceptance of
mobile banking. The study therefore combines TAM and IDT along with perceived risk and
perceived trust and awareness constructs to investigate factors influencing mobile banking usage
in Addis Ababa, Ethiopia. As a result for this study the factors influencing mobile banking usage
are perceived ease of use, perceived usefulness, relative advantage, compatibility, perceived risk,
perceived trust and awareness.

30
2.11 Conceptual Framework

Based on the existing theories and ideas in the literature, the research formulated an inclusive
research framework (Figure 1).
This framework illustrates the interaction between the independent variables and the dependent
variable.
Figure 1 Proposed research model or the conceptual framework

Relative Advantage (RA)

Perceived Usefulness (PU)

Perceived Ease Of Use (PEOU)

Compatibility (COM) Customer’s

Mobile Banking

Perceived Trust (PT) Usage

Awareness (AW)

Perceived Risk (PR)

Source: Compiled by researcher

Independent Variables Dependent Variable

31
 CHAPTER THREE

RESEARCH 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 Research Design

The general objective of this study is to examine the factors that influence usage of mobile
banking adoption in Addis Ababa, Ethiopia. This study adopted a quantitative research approach
by using a primary data source. Quantitative approach uses statistical methods in describing
patterns of behavior and generalizing findings from samples to population of interest, and
employs strategies of inquiry such as experiments and surveys (Creswell 2003).

In order to answer the statement of the problem and meet the research objectives, the design of
the study is both descriptive and explanatory type. Descriptive research studies are those studies
which are concerned with describing the characteristics of a particular individual, or of a group.
The main characteristic of this method is that the researcher has no control over the variables;
he/she can only report what has happened or what is happening (Kothari, 2004).
Explanatory designs try to establish cause-and-effect relationships. The primary purpose of
explanatory research design is to determine how events occur and which ones may influence
particular outcomes (Dawson & Bob 2006). Explanatory studies are characterized by research
hypotheses that specify the nature and direction of the relationships between or among variables
being studied. Therefore, this study used both descriptive and explanatory method in order to
explain the factors influencing mobile banking adopting in Addis Ababa, Ethiopia.
The study used structured questionnaire as the primary data collection instrument to gather
information.

32
3.2 Population and Sampling

3.2.1 Target Population

In research methods, population is the entire aggregation of items from which samples can be
drawn. In this study, the target population is comprised of customers of commercial banks in
Addis Ababa, Ethiopia.

3.2.2 Sample Design and Size

Particularly, the researcher set criteria to selecting the banks where the survey will be conducted.
Since the study is conducted about mobile banking usage those banks that have implemented this
technology have been considered as the target population. And out of these banks Commercial
Bank of Ethiopia and United Bank were found to have the large percentage of mobile banking
user share and these banks also have been adopting mobile banking for the past three years and
more.
Therefore, in order to conduct the survey out of the two banks located in Addis Ababa city
convenience sampling was used to conduct the survey.
Because the total number of customers within each bank was unknown at the time of the research
with 95% confidence level a minimum of 385 respondents were needed as a sample size and so
the research took 400 samples that were randomly selected from the various branches of the
banks.

3.3 Model Specification

Hair et.al (2005) argued that for analyzing the relationship between one dependent variable and
several independent variables multiple regressions analysis can be applied. Hence, multiple
regression analysis is an appropriate way to check the relationships between independent
variables and dependent variable in this study.

The literature reviewed in the previous chapter identified the main factors influencing usage of
mobile banking and a model that would help to investigate the relationship of the main factors
and usage of mobile banking is designed.

33
The linear multiple regression line based on previous model designed by (Rokibul 2013) is
modified using the variables from the above conceptual framework and is stated as follows:

UMB =
0 +
1 RADVANTAGE +
2 PU +
3 PEOU +
4 PR +
5 PT+
6 COM+
7 AW + 

Where,

UMB = Usage of Mobile Banking

0 = Usage of Mobile Banking in absence of Relative Advantage, Perceived Usefulness,

Perceived Ease of Use, Perceived Risk , Perceived Trust ,Compatibility and Awareness
variables.

1 = The partial change in the usage of Mobile Banking due to one unit change in Relative
Advantage while other things remain constant.

2 = The partial change in the usage of Mobile Banking due to one unit change in Perceived
Usefulness variable while other things remain constant.

3 = The partial change in the usage of Mobile Banking due to one unit change in Perceived Ease
of Use variable while other things remain constant.

4 = The partial change in the usage of Mobile Banking due to one unit change in Perceived Risk
variable while other things remain constant.

5 = The partial change in the usage of Mobile Banking due to one unit change in Perceived
Trust variable while other things remain constant.

6 = The partial change in the usage of Mobile Banking due to one unit change in Compatibility
variable while other things remain constant.

7 = The partial change in the usage of Mobile Banking due to one unit change in Awareness
variable while other things remain constant.

34
Table 3.3 Measurement of variables

Notation Variables Measure Sources

Dependent UMB Usage of Mobile Question No.

Banking 21-27
Variable
RADVANTAGE Relative Advantage Question No. 1- Luarn & Lin
2 (2005)

PU Perceived Question No. 3- Gu et. al (2009),

Usefulness 5 Lin (2011)
PEOU Perceived Ease of Question No. 6- Gu et. al (2009),
Use
8 Lin (2011)
PR Perceived Risk Question No. 9- Lee (2009),
13 Rokibul (2013)
Independent
PT Perceived Trust Question No. Bhattacherjee
Variables
14-15 (2002), Rokibul
(2013)

COM Compatibility Question No. Ramdhony and

16-17 Munien (2013),
Koenig-Lewis et.
al (2010)
AW Awareness Question No. Laforet and Li
19-20 [2005]
Source: Developed by the Author

3.4 Data Collection Method

3.4.1 Primary Data Collection

A questionnaire was designed for sampled customers of Commercial Bank of Ethiopia and
United Bank in the Addis Ababa metropolis. The questionnaire was developed based on previous
empirical literature and its consistency is tested using Cronbach Alpha. Closed ended

35
questionnaires were used for the study. To ensure the content validity of the questionnaire used
to assess each constructs depicted in Appendix I, all items regarding the measurement of
constructs were adapted from previous studies and carefully reworded to fit the mobile banking
adoption context in Ethiopia.

The close-ended questions were developed on a five point Likert scales ranging from 5 (strongly
agree) to 1 (strongly disagree). 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.

3.4.2 Secondary Information

The study used secondary data that is obtained from National Bank of Ethiopia.

3.5 Data Analysis

Descriptive statistics such as frequency distribution was used to assess the demographic profile
of the respondents to make the analysis more meaningful, clear and easily interpretable.
Descriptive statistics allow the researchers to present the data acquired in a structured, accurate
and summarized manner. The analysis of data was done with the help of the statistical software
of Statistical Package for Social Sciences (Version 20).

The data collected from the field was sorted for completeness, checked for any errors and
omissions, and was summarized in tables. Also the data obtained from the study was entered into
the computer and was statistically analyzed using the Statistical Package for Social Sciences
(SPSS) the descriptive spastics as well as the validity test were conducted as for the regression
part OLS(ordinary least square) method were used using Eviews 9 along with diagnostics tests.
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.

36
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1 Introduction

This chapter covers the presentation, analysis and interpretation of data collected from primary
sources. A total of 400 questionnaires were distributed to customers of Commercial Bank of
Ethiopia and United Bank S.C. located in Addis Ababa city, in order to collect data about the
factors influencing usage of mobile banking. Out of the questionnaires distributed 383 usable
responses were obtained.
This chapter presents the descriptive analysis on variables of the study and results of regression
analysis that constitute the main findings of this study. All the data were coded and entered in to
SPSS version 20 as well as EViews 9 and inferences were made based on the statistical results.

4.2 Reliability Study

To ensure internal consistency among the items included in each of the scales, Cronbach’s
coefficient alpha is estimated. Higher Alpha coefficients indicate higher scale reliability.
Specifically, (George & Mallery 2003) suggested that scales with 0.60 Alpha coefficients and
above are considered acceptable.
As shown in table 4.2 for the reliability test Cronbach’s Alpha coefficients for usage of mobile
banking factors range from 0.620 to 0.775. And the overall Cronbach’s Alpha coefficient for
expected-scale items is 0.772. Based on the examination of the research scales and constructs, it
can be concluded that each variable represents a reliable and valid construct.

37
Table 4.2 Reliability Test (Cronbach's Alpha)

Dimensions Alpha coefficients for dimensions

Relative Advantage 0.643
Perceived Usefulness 0.624
Perceived Ease of Use 0.681
Perceived Risk 0.775
Perceived Trust 0.688
Compatibility 0.638
Awareness 0.620
Reliability of total scale 0.706
Source: Analysis of Survey data 2016, using SPSS 20

4.3 Demographic Characteristics of Respondents

As is shown in table 4.3 below, 222 of the respondents were male which represent 58% of the
total respondents, while the 161 were females which are 42% of the total respondents.
Considering the age groups of the respondents, the higher number of respondents was in the rage
of 35-45 years, which represent 38.9%, followed by age groups of 25-35years, less than 25,46-55
and 56 or above years, which represent 26.9%, 22.5%, 8.6% and 3.1% respectively. According to
table 4.3, the higher number of the respondents were employed representing majority of the
respondents with 75.2% of the total response and 14.4% of the respondents were students while
9.1% of the respondents were self-employed and the remaining 1.3% were unemployed.

38
Table 4.3 Demographic characteristics of respondents

Variables Category Frequency Percent

Gender Male 222 58%

Female 161 42%
Age <25 86 22.5%
25-35 103 26.9%
35-45 149 38.9%
46-55 33 8.6%
>55 12 3.1%
Occupation Student 55 14.4%
Employed 285 75.2%
Unemployed 5 1.3%
Self-employed 35 9.1%
Source: Analysis of Survey data 2016, using SPSS 20

4.4 Access to Mobile Phone and Bank Account and Use of Mobile Banking

To determine whether the respondents were in possession of a mobile phone and bank account,
the respondents were requested to indicate whether they currently possess a mobile phone and
bank account. On the mobile phone question, 100% of the respondents had a mobile phone and
regarding bank accounts, 87.5% of the respondents had a bank account at CBE, and the
remaining 12.5% maintained bank account at United Bank.

39
Table 4.4 Access to Mobile Phone and Bank Account

Response Frequency Percent

Do you have mobile phone
Valid "Yes" 383 100.0
Bank account
"CBE" 335 87.5
Valid "United_Bank" 48 12.5
Total 383 100.0
Do you use mobile banking
"Yes" 171 44.6
Valid "No" 212 55.4
Total 383 100.0
Source: Analysis of Survey data 2016, using SPSS 20

4.5 Information about mobile banking and Current use of mobile banking services

To determine whether the respondents knew about mobile banking and whether they were
currently using a mobile banking service, the respondents were asked to indicate whether they
have heard about mobile banking and currently use mobile banking. The response was that
79.2% of the respondents have heard about mobile banking and 20.8% did not hear about mobile
banking. Also from the total respondents only 40.6% of them use mobile banking and 59.4% do
not use mobile banking.

4.6 Factors Influencing Usage of Mobile Banking System in Addis Ababa, Ethiopia

The different factors that can affect usage of mobile banking in the country including relative
advantage, perceived usefulness, perceived ease of use, perceived risk, perceived trust,
compatibility and awareness have been stated in the literature review and were analyzed as
presented here below. And the following descriptive result was obtained as presented in the table
below.

4.6.1 Relative Advantage

Out of the total respondents 61.4% strongly agreed that mobile banking is faster than visiting a
bank or using phone banking and 58.5% responded by strongly agreeing to the inquiry if they

40
find mobile banking more accessible than other banking (For example:- visiting a bank or using
phone banking). This indicated that majority of the customers found mobile banking to have a
relative advantage over other banking options. This showed that mobile banking has relative
advantages compared to other traditional banking services which may attract customers towards
using it. This concurs with results of a research done by (Puschel et al 2010) who found out that
relative advantages in mobile banking service positively affected its usage.
Table 4.6.1 Summary of Survey Findings for Usage Factors
Statement to evaluate Rating point
1 2 3 4 5 Remark
Relative Advantage
Mobile banking is faster than visiting a 2.9% - 12.0% 23.8% 61.4% Strongly
Agree
bank or using phone banking
RA
Mobile banking is more accessible than - 2.3% 17.8% 21.4% 58.5% Strongly
Agree
other banking (e.g.: visiting a bank or
using phone banking)
RA
Source: Analysis of Survey data 2016, using SPSS 20

4.6.2 Perceived Usefulness

As it is shown on table below 37.9% of the respondents strongly agreed that using mobile
banking would enable them to complete banking activities more quickly and easily and when
asked if they found mobile banking useful for their banking needs 29.8% of the respondents
strongly agreed. Respondents were also asked whether there is no time limit to access their bank
account and information and 45.4% strongly agreed. These result implies, that using mobile
banking system helps to perform banking activities within a short period of time and also
customers can access their account any time with no time limit. In line with this finding (Luarn
and Lin 2005) found that perceived usefulness is a vital factor determining the mobile banking
usage.

41
Table 4.6.2 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark
Perceived Usefulness
I think that using mobile banking would Strongly
Agree
enable me to complete banking
1.8% 4.7% 35.2% 20.4% 37.9%
activities more quickly and easily
PU
I find Mobile banking useful for my Strongly
8.1% 15.7% 29.0% 17.5% 29.8% Agree
banking needs.
PU
There is no time limit to access my bank Strongly
6.0% 3.9% 9.9% 34.7% 45.4% Agree
account and information
PU
Source: Analysis of Survey data 2016, using SPSS 20

4.6.3 Perceived Ease of Use

When asked if they agree that learning to use mobile banking would be easy 35.0% of the
respondents strongly agreed and when asked if mobile banking would make it easier for them to
carry out their tasks 33.2% were neutral. In addition when they were further asked if they think
it will take them lots of time to learn how to use mobile banking services 50.4% of the
respondents strongly disagreed. Therefore; from the above responses it can be seen that
customers perceive mobile banking to have ease of use and to be. This is also in line with
(Hoppe et al. 2001) which suggest that the more complex a new technology is perceived to be,
the less likely it will be used and the more ease of use the more likely to be used by customers.

Table 4.6.3 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark
Perceived Usefulness
I think that learning to use mobile Strongly
PEOU 24.0% 25.3% 3.9% 11.7% 35.0% Agree
banking would be easy.
I think that it is easy to use mobile
PEOU 4.2% 8.1% 33.2% 32.9% 21.7% Neutral
banking to accomplish my banking tasks.
It would take me lots of time to learn
PEOU 50.4% 21.7% 10.7% 15.7% 1.6% Strongly
how to use mobile banking services.
Disagree
Source: Analysis of Survey data 2016, using SPSS 20

42
4.6.4 Perceived Trust

The respondents were asked if they believe mobile network service providers and banks are
trustworthy 36.4% disagree and also 35.2% disagreed when asked if they trust the use of
mobile banking and This indicates that customers are yet to embrace and fully trust the mobile
banking services and the network providers. Therefore, as long as customers trust the overall
mobile banking technology their adoption rate will remain at low level. This finding confirms
with previous research findings of (Gu, Lee & Suh 2009; Lee et al. 2007) that stated that the
higher levels of trust in a service provider will lead to a greater intention on the part of user to
engage in mobile banking transactions.

Table 4.6.4 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark
Perceived Trust
I believe mobile network service
PT 19.6% 36.4% 5.5% 13.9% 24.6% Disagree
providers and banks are trustworthy.
PT I trust the use of mobile banking
18.5% 35.2% 12.0% 15.8% 18.5% Disagree
Source: Analysis of Survey data 2016, using SPSS 20

4.6.5 Perceived Risk

The study sought to determine if customers, perceived risk towards mobile banking affect their
adoption of the service. According to (Kabir 2013), perceived risk may be seen from various
perspectives such as privacy risk, financial risk, system risk and physical security risk.
The respondents were asked mobile banking services may not perform well and may process
payments incorrectly because of network problems which is system risk 25.8% agreed and
37.6% disagreed when asked if they believe that they can get compensation from banks when
and if transaction errors occur. As for the privacy concerns of the respondents when asked if they
are concerned about other people accessing their account when using mobile banking 24.3% of
them strongly agreed.
And 48.0% customers agreed that if they decided to use mobile banking and something went
wrong with the transactions, my friends, family and colleagues would think less of me which

43
indicates their fear over the social risk. Finally respondents were neutral when asked if they think
that it take them lots of time to learn how to use mobile banking services. The results obtained
could imply that the perception of the risks regarding mobile banking is expected to influence its
adoption and further growth. The finding also concurs with (Chitungo and Munongo 2013) who
discovered that presence of any perceived risk negatively affects adoption of mobile banking
service.
Table 4.6.5 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark
Perceived Risk
Mobile banking services may not
perform well and may process payments
- 16.7% 20.6% 36.8% 25.8% Agree
PR incorrectly because of network problems.
When and if transaction errors occur, I
PR 37.6% 3.7% 23.2% 19.6% 15.9% Strongly
will get compensation from banks.
Disagree
I’m worried about using mobile banking
because other people may be able to
15.1% 24.3% 18.0% 21.9% 20.6% Disagree
PR access my account.
I’m sure that if I decided to use mobile
banking and something went wrong with
the transactions, my friends, family and 18.8% 13.6% 17.8% 48.0% 1.8% Agree
PR colleagues would think less of me.
It would take me lots of time to learn
PR 16.4% 30.5% 32.1% 12.8% 8.1% Neutral
how to use mobile banking services.

Source: Analysis of Survey data 2016, using SPSS 20

4.6.6 Compatibility

As it is shown in the table below regarding the compatibility of mobile banking with the way
customers like to control and manage their banking transactions 47.3% agreed and 42.6%
strongly agreed to the statement I use the current banking service (For Example:- phone banking,
and internet banking) now because these are already a part of my daily life. This implies that
when customers feel mobile banking being consistent with their existing life style and trend then
its adoption will eventually increase. This is indicated by (Koenig-Lewis 2010; Lin 2011) that

44
stated compatibility to be influential in the adoption of virtual store, mobile payment and mobile
banking.
Table 4.6.6 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark
Compatibility
Using mobile banking fits well with the

COM way I like to control and manage my

3.7% - 22.7% 47.3% 26.4% Agree
banking transactions.
I use the current banking service (e.g;
phone banking, and internet banking)
COM 6.8% 5.2% 23.0% 42.6% 22.5% Agree
now because these are already a part of
my daily life.

Source: Analysis of Survey data 2016, using SPSS 20

4.6.7 Awareness

To determine the level of awareness of the respondents about mobile banking three statements
were stated and respondents were asked to state their level of agreement and 55.9% agreed to the
statements I am aware that my bank offers mobile banking services and 38.1% of the
respondents agreed that they are aware of all the various available services on mobile banking.
This result indicates that customers are aware about availability of mobile banking and its
advantage and disadvantage. As stated on (Sathye 1999) an important characteristic for any
adoption of innovation service or product is creating awareness among the customers about the
service or product.
Table 4.6.7 Summary of Survey Findings for Usage Factors

Statement to evaluate Rating point

1 2 3 4 5 Remark

Awareness
I am aware that my bank offers mobile
6.5% 3.2% 9.6% 55.9% 24.8% Agree
banking services
AW
I am aware of all the various available
11.5% 12.9% 31.1% 38.1% 6.5% Agree
services on mobile banking
AW
Source: Analysis of Survey data 2016, using SPSS 20

45
Finally the respondents were asked to rank which of the factors will highly influence their usage
of mobile banking and as it can be seen from the below table that relative advantage, perceived
usefulness, perceived ease of use, perceived risk, perceived trust and awareness were stated to
have strong influence on their mobile banking usage. As for compatibility factor 40.5% of the
respondents disagreed that it influences their adoption which can mean that mobile banking
technology is not viewed by many as being consistent with existing values of the users.
Table 4.6.8 Mobile Banking Usage Factors
Mobile Banking Strongly Disagree Neutral Agree Strongly Remark
Usage Factor disagree agree
Relative Advantage 5.2% 5.2% 4.4% 35.0% 50.1% Strongly agree
Perceived
6.3% 3.9% 0.3% 34.5% 55.1% Strongly agree
Usefulness
Perceived Ease Of
5.5% 8.9% 5.0% 41.8% 38.9% Agree
Use
Perceived Risk - 8.6% 1.6% 27.2% 62.7% Strongly agree
Perceived Trust 0.3% 0.3% 0.8% 28.5% 70.2% Strongly agree
Compatibility 9.7% 40.5% 3.9% 28.7% 17.2% Disagree
Awareness 5.0% 4.7% 4.7% 43.9% 46.5% Strongly agree
Source: Analysis of Survey data 2016, using SPSS 20

4.7 Test results for the Classical Linear Regression Model assumptions

The following sections discuss results of the diagnostic tests (i.e. model specification test,
autocorrelation, multicollinearity, hetroskedasticity and normality) that ensure whether the data
fits the basic assumptions of classical linear regression model or not.

4.7.1 Model Specification

According to Brooks (2008), model specification error occurs when omitting a relevant
independent variable, including unnecessary variable or choosing the wrong functional form.
When the omitted variable is correlated with the variable which is included, the estimators will
be biased and inconsistent and model specification error will tend to occur. If the omitted

46
variable is not correlated with the included variable, the estimators are unbiased and consistent
and model specification error will not occur. Therefore, in order to select a correct estimated
model, Ramsey-RESET Test is used to check on the model specification. The hypothesis for the
model specification test was formulated as follows;

H0: The model specification is correct.

H1: The model specification is incorrect.

α = 0.05

Decision Rule: Reject H0 if P value is less than significant level 0.05. Otherwise, do not reject
H0.

Table 4.7.1 Model Specification

Ramsey RESET Test

Equation: UNTITLED
Specification: AD AW COM PR PT PU RADVANTAGE C
Omitted Variables: Squares of fitted values

Value df Probability
t-statistic 0.657060 372 0.5115
F-statistic 0.431727 (1, 372) 0.5115
Likelihood ratio 0.443076 1 0.5056

Source: EViews output

From table 4.7.1, it can be concluded that this research do not reject null hypothesis (H0), since
the p value is greater than significance level of 0.05. Thus, it can be concluded that there is no
evidence to suggest the linear model is inadequate. Overall reliability and validity of the model
was enhanced further by the Prob (F-statistic) value of 0.000000.

4.7.2 Autocorrelation

It is assumed that the distribution errors are uncorrelated with one another and that the errors are
linearly independent of one another. Autocorrelation error occurs when the error term for any
observation is related to the error term of other observation according to (Brooks 2008), in this
study, BreuschGodfrey Serial Correlation LM Test is used to carry out the autocorrelation test.
The p-value is obtained to examine whether the autocorrelation problem occurs in the model. If

47
the p-value is more than 5% significant level, it implies that there is no autocorrelation problem
in the model. The hypothesis for the autocorrelation test was formulated as follow;

H0: There is no autocorrelation problem.

H1: There is autocorrelation problem. α = 0.05

Decision Rule: Reject H0 if P value is less than significant level 0.05. Otherwise, do not reject
H0.

Table 4.7.2 Autocorrelation

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 0.416106 Prob. F(2,372) 0.6599

Obs*R-squared 0.852676 Prob. Chi-Square(2) 0.6529

Source: EViews output

From Table 4.7.2, it can be concluded that this research do not reject null hypothesis (H0), since
the p value is of 0.6599 and 0.6529 for F-statistic and Chi-Square respectively were in excess of
0.05. Thus, it can be concluded that these model does not consists of autocorrelation problem.

4.7.3 Multicollinearity

According to Brooks (2008), multicollinearity will occur if some or all of the independent
variables are highly correlated with one another. It shows the regression model has difficulty in
explaining which independent variables are affecting the dependent variable. If multicollinearity
problem is too serious in a model, either additional important variable should be added or
unimportant independent variable should be dropped. This study uses high pair-wise correlation
coefficients method to detect the existence of multicollinearity high pair-wise correlation
coefficients method see the correlation of independent variables between each other. According
(Joseph and Rosemary 2003) to if the correlation coefficient is higher than 0.8, it is considered as
the model consists of serious multicollinearity problem.

48
Table 4.7.3 Multicolinearity

COM AW PEOU PR PT PU RADVANTAGE

COM 1.000000 0.438925 0.109052 0.382544 0.375168 0.375168 0.365382
AW 0.438925 1.000000 0.383863 -0.062163 0.338705 0.450649 0.510630
PEOU 0.109052 0.383863 1.000000 -0.253956 0.229596 0.587394 0.280745
PR 0.336240 -0.062163 -0.253956 1.000000 -0.278029 -0.017442 0.036731
PT 0.382544 0.338705 0.229596 -0.278029 1.000000 0.295936 0.311165
PU 0.375168 0.450649 0.587394 -0.017442 0.295936 1.000000 0.352796
RADVANTAGE 0.365382 0.510630 0.280745 0.036731 0.311165 0.352796 1.000000

Source: EViews output

Table 4.7.3 showed that there is no strong pair-wise correlation between the explanatory
variables (Financial incentives and non financial incentives). As a rule of thumb, inter-
correlation among the independent variables above 0.80 signals a possible multicollinearity
problem. In this study the maximum value of the correlation coefficient is 0.587394. Thus, it can
be concluded that all the variables in the study have low correlation power as a result there is no
multicollinearity problem in the explanatory variables selected to access factors influencing
mobile banking adoption in Addis Ababa, Ethiopia.

4.7.4 Heteroskedasticity

When the distribute of the errors is different, varying depending on the value of one or more of
the independent variables, the error terms are heteroskedastic (Brooks 2008). Heteroskedasticity
test is very important because if the model consists of heteroskedasticity problem, the OLS
(Ordinary Least Square) estimators are no longer BEST and error variances are incorrect,
therefore the hypothesis testing, standard error and confident level will be invalid. A white’ test
has been made, to ensure that this assumption is no longer violated. The hypothesis for the
heteroskedasticity test was formulated as follow;

H0: There is no heteroskedasticity problem in the model

H1: There is heteroskedasticity problem in the model

Decision Rule: Reject H0 if P value is less than significant level 0.05. Otherwise, do not reject
H0.

49
Table 4.7.4 Heteroskedasticity Test

Heteroskedasticity Test: White

F-statistic 1.397704 Prob. F(35,346) 0.0719

Obs*R-squared 47.31927 Prob. Chi-Square(35) 0.0799
Scaled explained SS 45.63000 Prob. Chi-Square(35) 0.1077

Source: EViews output

As shown in table 4.7.4, all versions of the white test statistic (F-statistic Chi-Square and Scaled
explained SS) gave the same conclusion that there was no evidence for the presence of
heteroscedasticity in this particular study. Since the p-values of 0.0719, 0.0799 and 0.1077 for F-
statistic, Chi-Square and Scaled explained SS respectively were in excess of 0.05, the null
hypothesis should not be rejected.

4.7.5 Normality

Normality test is used to determine whether the error term is normally distributed. Brooks (2008)
noted that the Jarque-Bera statistic would not be significant for disturbance to be normally
distributed around the mean. The purpose of the Jarque-Bera test is to make sure that the data set
is well-modeled by a normal distribution. The hypothesis for the normality test was formulated
as follow:

H0: Error term is normally distributed

H1: Error term is not normally distributed

α = 0.05

Decision Rule: Reject H0 if P value of JB less than significant level 0.05. Otherwise, do not
reject H0.

50
Figure 4.7.5 Normality Test

10
Series: Residuals
Sample 1 383
8 Observations 383

Mean 6.99e-16
6 Median 0.039602
Maximum 1.108704
Minimum -1.116644
Std. Dev. 0.513447
4
Skewness -0.030503
Kurtosis 2.302765
2
Jarque-Bera 1.367521
Probability 0.504715
0
-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2
Source: EViews output
Figure 4.7.5 indicated that distribution of the panel observation is symmetric about its mean.
The Jarque-Bera statistic has a P-value of 0.504715 implies that the p-value for the Jarque-Bera
test is greater than 0.05 which indicates that there was no evidence for the presence of
abnormality in the data. Thus, we do not reject H0.
Table 4.8. Multiple regression results
Dependent Variable: UMB
Method: Least Squares
Sample: 1 383
Included observations: 383
No d.f. adjustment for standard errors & covariance

Variable Coefficient Std. Error t-Statistic Prob.

C 3.132388 0.188587 16.60976 0.0000

COM 0.082220 0.039578 2.077427 0.0384
AW 0.016435 0.029738 0.552653 0.5808
PEOU -0.058128 0.035459 -1.639330 0.1020
PR -0.128218 0.035405 -3.621412 0.0003
PT -0.184110 0.034843 -5.283945 0.0000
PU 0.125348 0.032954 3.803772 0.0002
RADVANTAGE 0.321247 0.031064 10.34156 0.0000

R-squared 0.688648 Mean dependent var 4.121305

Adjusted R-squared 0.681988 S.D. dependent var 0.614266
S.E. of regression 0.416886 Akaike info criterion 1.836040
Sum squared resid 64.99901 Schwarz criterion 1.928995
Log likelihood -203.7970 Hannan-Quinn criter. 1.872917
F-statistic 103.4016 Durbin-Watson stat 1.950344
Prob(F-statistic) 0.000000

Source: EViews output

51
4.8 Hypothesis Testing Using Multiple Regressions

Since correlation analysis do not provide enough information to make a proper decision
regarding the relationships between the variables, multiple regression has been used to test the
hypothesis for the independent and dependant variables. This section discusses in detail the
analysis of the results for each independent variable and their significance in influencing mobile
banking usage. Furthermore, the discussion analyzes the statistical findings of the study in
relation to the previous empirical evidences. The result for each set of factors is discussed as
follows.
In the above table 4.8 the regression model presents how much of the variance in mobile banking
usage is explained by the underlying factors. The model or the predictor variables have
accounted for 68.1% of the variability. This means more than 68.1% of variations in usage of
mobile banking in Addis Ababa, Ethiopia were explained by independent variables included in
the model. However, the remaining 31.9% changes in mobile banking usage in Addis Ababa city
are caused by other factors that are not included in the model.

The overall significance or acceptability of the model from a statistical perspective can be
measured using the significance value of F statistic (.0000), which is less than p<0.05, the model
is significant. This indicates that the variation explained by the model is not due to probability
and is valid.

4.8.1 Compatibility

The results in table 4.8 show that compatibility has a coefficient of 0.082220 and p-value of
0.0384. Holding other explanatory variables constant compatibility was found to have a
statistically significant positive association with usage of mobile banking. Therefore, the
researcher failed to reject the null hypothesis that stated compatibility to have a positive effect on
mobile banking usage. This result also confirms with previous researches by (Koenig-Lewis
2010; Lin 2011) that found compatibility to be influential in the adoption of mobile payment and
mobile banking.
This finding could imply that when customers perceive mobile banking as consistent with their
existing beliefs, values, lifestyle and past experience, they are more likely to use these services.

52
4.8.2 Awareness

As it is shown in table 4.8 above coefficient of awareness is 0.016435 with its p-value 0.5808. It
can be seen that maintaining other explanatory variables constant awareness was found to have a
positive but statistically insignificant impact on usage of mobile banking as its value of
significance is greater than 0.05. Therefore the researcher failed to reject the null hypothesis that
stated awareness about mobile banking to have positive effect on mobile banking usage.
This implies that there is no significant relationship between awareness and mobile banking
adoption which contradicts with the prior research of (Laforet and Li 2005) that indicated
awareness to significantly influence customer’s usage of online and mobile banking. This result
can be explained by the fact that majority of bank customers feel that they have the relevant
information needed for usage of mobile banking. This suggests that this variable is not an
essential factor in influencing mobile banking usage in Addis Ababa, Ethiopia case.

4.8.2 Perceived Ease of Use

As it can be seen in the above table 4.8, the coefficient of perceived ease of use is -0.058128 and
its P-value is 0.1020. Holding other explanatory variables constant perceived ease of use has
emerged in this study as having a negative and statistically insignificant influence on customers
usage of mobile banking as its value of significance is greater than 0.05. Therefore this leads to
the rejection of the null hypothesis that stated perceived usefulness has a positive effect on
mobile banking usage. This finding is inconsistent with the results by (Khalifa and Shen 2008,
Kim et al 2009; Wei et al. 2009) that stated in previous empirical studies that perceived ease of
use has a positive influence in the usage of mobile banking. A plausible explanation for this
finding could be due to respondents’ familiarity with mobile phones that may increase their
expectancies of service usefulness rather than influencing their attitudes toward the easiness of
the service.

4.8.3 Perceived Risk

Based on table 4.8 regression analysis result the coefficient of perceived risk is -0.128218
and its P-value is 0.0003. Holding other explanatory variables constant, perceived risk was
found to have a negative and statistically significant influence on usage of mobile
banking. Therefore, the researcher failed to reject the null hypothesis that stated perceived

53
risk to have a negative effect on usage of mobile banking. Significantly, this finding is
found to be consistent with Luo et al. (2010); Mitchell (1999), Safeena, et al., (2011);
Laforet and Li, (2005); Luarn and Lin, (2005); Mallat, (2007) and Gu, et al., (2009) who
all perceive risk is one of the critical factors to be focused while designing and developing
a mobile banking service.
The significant negative result could imply that bank customers are not confident in mobile
banking services. Customers are safety seekers, and they want to keep away from risks. This is
because electronic banking services are in inherently risky environment due to the absence of
personal contact, physical product evaluation, warranties, or contracts and the customers usually
have difficulties in asking for compensation when transaction error occurs. Thus, this may
explain why many customers are hesitant to use mobile banking services.

4.8.4 Perceived Trust

As it can be seen on table 4.8 the coefficient of perceived trust is -0.184110 and P-value is
0.0000. Holding other explanatory variables constant, perceived trust was found to have a
negative and statistically significant influence on usage of mobile banking. Therefore, the
researcher rejects the null hypothesis that customer’s trust on the overall mobile banking service
has a positive effect on usage of mobile banking. This means, there is no sufficient evidence to
support the positive relationship between perceived trust and usage of mobile banking.
This result is inconsistent with findings of (Gu, Lee & Suh, 2009; Lee et al., 2007) that indicated
the higher levels of trust in a service provider will lead to a greater intention on the part of user to
engage in mobile banking transactions.
This negative association between perceived trust and mobile banking was also indicated in table
4.6.4 where customer responded to not trusting the mobile service providers as well as mobile
banking system it was again reflected on the regression result. The possible reason for the
adverse effect of trust on mobile banking usage could be attributed to the fact that, customers
lack of trust on mobile network service providers and mobile banking technology.

4.8.5 Perceived Usefulness

Table 4.8 above depicted that, the coefficient of perceived usefulness 0.125348 and its P-value is
0.0002. Holding other explanatory variables constant perceived usefulness was found to have a
positive and statistically significant influence on usage of mobile banking usage. Therefore, the
54
researcher failed to reject the null hypothesis that indicates perceived usefulness has a positive
effect on mobile banking. This result is found to be in line with (Luarn and Lin, 2005) finding
that states perceived usefulness having a positive influence in mobile banking usage.
The possible reason for the significant positive relationship could be most customers choose to
adopt mobile services because they see the benefits they could obtain and also the convenience
and any time anywhere accessibility.

4.8.6 Relative Advantage

Table 4.8 also presented that, the coefficient of relative advantage is 0.321247 and its P-value is
0.0000. Holding other explanatory variables constant relative advantage was found to have a
positive and statistically significant effect on usage of mobile banking. This was also confirmed
in pervious literatures (McCloskey, 2006; Rogers 2003 and Lin 2011) that when user perceives
relative advantage of a new technology over an old one, they tend to adopt. This suggests that if
bank customers perceive that mobile banking has a relative advantage over branch banking in
accessing accounts from any location and at any time, and provides greater control and flexibility
in managing their accounts, they may adopt it and use it.

55
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1 Conclusion

In this section based on the regression analysis findings outlined in chapter four the conclusion is
presented followed by some recommendations to provide insight in to factors influencing the
usage of mobile banking in Addis Ababa, Ethiopia.
Perceived usefulness was found to have a significant and positive influence on mobile banking
adoption. This result suggests that for mobile banking technology to be accepted by users, they
should perceive it as a useful and quicker way of doing banking transactions compared with the
traditional banking system. Therefore; it can be concluded that people will adopt mobile banking
services when the value and benefit of mobile banking is evident.
Compatibility is also found to have a significant positive association with mobile banking usage.
The implication of this result is that if customers perceive mobile banking as consistent with
their existing beliefs, values, lifestyle and past experience, they are more likely to use these
services. Therefore, it can be concluded that when mobile banking is found to be compatible by
matching with the existing values, past experiences, and needs of potential users then mobile
banking usage will increase.
Relative advantage was also found to have a significant and positive effect on customer’s usage
of mobile banking this suggests that if bank customers perceive that mobile banking has a
relative advantage over branch banking in accessing accounts from any location and at any time,
and provides greater control and flexibility in managing their accounts, they will use it.
Practically, users are more likely to adopt mobile banking if they believe using mobile banking
will gain more relative advantages as compared to other traditional banking channels such as
ATM or non-mobile internet banking. Therefore, the more relative advantage perceived by users,
the higher possibility customer will be attracted to use mobile banking services.
Perceived risk was found to have a significant and negative influence on mobile banking usage.
This implies that if individuals perceived higher risks and uncertainty such as issues of loss and
theft of financial information due to system hacking, this would discourage adoption of mobile
banking by the consumers as they are risk averse. This can be concluded that risk involved in

56
using mobile banking make people reluctant to use such tool for banking. Therefore, it is
important for banks and service providers to project higher security when providing mobile
banking services in order to yield higher consumer’s acceptance.
On the other hand perceived trust was found to have a significant and negative influence on
mobile banking usage. This could imply that when customers do not trust mobile banking service
and the service provider it will in turn lead to a less willingness to adopt mobile banking.
Therefore trust will have a positive impact on mobile banking usage when the mobile banking
service providers (both the banks and mobile network provider) are perceived to be trustworthy.
Perceived ease of use has emerged in this study as having an insignificant negative influence on
mobile banking usage it contradicts the idea that a system perceived to be easier to use will
facilitate more system use and is more likely to be accepted by users. This could imply that since
customers are more familiar with mobile phones they are now more concerned with usefulness of
the service not whether it is easy or not.
Awareness was found to have an insignificant and positive impact on mobile banking usage.
Having more or less awareness about mobile banking has no significant impact usage of mobile
banking adoption for customers in Addis Ababa, Ethiopia.

5.2 Recommendation

Based on the above findings, the following suggestions to improve customer’s usage of mobile
banking are put forward for local banks either offering or planning to launch mobile banking
services in Addis Ababa, Ethiopia:-
• Banking institutions could consider taking advantage of value-adding characteristics of
mobile banking in promoting perceived usefulness. In addition, they should continue to
innovate and invest in mobile banking services which allow users to have more
alternatives and get more values from mobile banking services.
• Banks should emphasize on the benefits that customers will obtain in the aspects of cost
savings, convenience, flexibility, and mobility when using mobile banking services.
Eventually, banks might try to educate users the benefits of using mobile banking
services through promotional mix such as personal selling, advertisements, sales
promotions, and public relations.

57
 • When designing their mobile banking products might need to emphasize that their service
fits with customers' lifestyle, culture and language.
• Banks could invest in campaigns and arrange information sessions to demonstrate the
features of mobile banking services, and its benefits over traditional channels.
• With regards to perceived risk it is important for banks and service providers to project
higher security when providing mobile banking services in order to yield higher
customers’ acceptance. In fact, banks and service providers should continuously innovate
and offer better security and reliable applications to enhance users’ confidence towards
mobile banking services.
• To change the customer’s perception with regards to risk and trust issues banks could use
a well structured advertisement and staff interaction in order to make them realize that the
service is safe to use. This will help the customers to know the advantages and
disadvantages associated with the service and as a result of this, they could weigh the
costs and the benefits of using the self-service which in turn will reduce unnecessary
worries and anxiety.

5.3 Future study

The following are areas that could be considered for future research:
The contribution of demographic factors such as age and gender toward the adoption of mobile
banking services was not given much emphasis in this study; future researchers may investigate
the influence of demographic factors in customer adoption of mobile banking services.
Furthermore, this research was conducted in Addis Ababa, Ethiopia. Further studies may also
consider selecting respondents from other areas, as well as incorporating additional factors in
understanding the intention to adopt mobile banking services.

58
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 Appendix I

Questionnaire

Dear Respondent,

The aim of this questionnaire is to identify the Factors Influencing the Usage of Mobile Banking

in Addis Ababa, Ethiopia. The results of the study are expected to supply to the understanding on

the influencing factors of mobile banking usage in commercial banks found in Addis Ababa,

Ethiopia. I would like to assure you that the information you provide will be used only for the

purpose of achieving academic award.

Thank you for your participation

Best Regards,

Section A: Demographic Factors:

1. Age Group

□ < 25 □ 26-35 □ 36-45 □ 46-55 □ > 55

2. Gender

□ Male □ Female

3. Occupational status

□ Student □ Employed □ Unemployed □ Other

4. Do you have mobile phone?

□ Yes □ No

Specific Questions:

5. In which bank do you have an account?

□ Commercial Bank of Ethiopia □ United Bank □ Other ………………..

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6. Have you heard of mobile banking before?

□ Yes □ No

7. Do you use the mobile banking services provided by your bank?

□ Yes □ No

Section B
Factors for Usage of Mobile Banking
Please indicate the extent of your level of agreement and disagreement with the following

statement. Please tick () your appropriate answer based on the following rating.

1= strongly disagree 2= disagree 3= neutral 4= agree 5= strongly agree

Statement to evaluate Rating point

1 2 3 4 5
Relative Advantage
Mobile banking is faster than visiting a bank or using phone
banking
1.
Mobile banking is more accessible than other banking (e.g.:
visiting a bank or using phone banking)
2.
Perceived Usefulness
I think that using mobile banking would enable me to
complete banking activities more quickly and easily
3.
I find Mobile banking useful for my banking needs.
4.
There is no time limit to access my bank account and
information
5.
Perceived Ease Of Use
6. I think that learning to use mobile banking would be easy.

I think that it is easy to use mobile banking to accomplish my

7. banking tasks.
8. It would take me lots of time to learn how to use mobile banking

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 services.
Perceived Risk
Mobile banking services may not perform well and may
9. process payments incorrectly because of network problems.
When and if transaction errors occur, I will get compensation
10. from banks.
I’m worried about using mobile banking because other people
11. may be able to access my account.
I’m sure that if I decided to use mobile banking and something
went wrong with the transactions, my friends, family and
12. colleagues would think less of me.
It would take me lots of time to learn how to use mobile
13. banking services.
Perceived Trust
14. I believe mobile network providers and banks are trustworthy.

15. I trust the use of mobile banking

Compatibility
Using mobile banking fits well with the way I like to control and
manage my banking transactions.
16.
I use the current banking service (e.g; phone banking, and internet
banking) now because these are already a part of my daily life.
17.

Awareness
I am aware that my bank offers mobile banking services
19.
I am aware of all the various available services on mobile banking
20.

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Section C
Ranking of Factors Mobile Banking Usage

This factor most influences the usage of mobile banking? Please tick () your appropriate

answer based on the following rating according to your concerns and needs when using mobile

banking.

1= strongly disagree 2= disagree 3= neutral 4= agree 5= strongly agree

Q.No Adoption Factors Rating point

1 2 3 4 5
21. Relative Advantage : is the extent to which the innovation is
perceived as better than the technology it replaces, including
technical performance, cost, risk, or other attributes
22. Perceived Usefulness: This was defined as a degree to which
a person believes that using a particular system will
enhance his or her job performance.
23. Perceived Ease of Use: defined as a degree to which a person
believes that using a particular system would be free from
effort.
24. Perceived Risk: The perceived sense of risk concerning
disclosure of personal and financial information.
25. Perceived Trust: the level to which a person perceives that
privacy and security concerns are addressed.
26. Compatibility
The degree to which an innovation is viewed as being consistent
with existing values of users.

27. Awareness
The knowledge consumer have about a certain product/service

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 Appendix II

Table 2 List of Banks and Number of Customers adopting mobile banking

Number of Mobile Banking Users in Year

Name of Bank
2015 2014 2013 2012 2011 2010
Commercial Bank 458,909 110,676 9236 - - -
of Ethiopia
Percentage (%) 65.19% 42.38% 33.74%
United Bank 219,388 145,078 12,779 - - -
Percentage (%) 31.16% 55.55% 46.69%
Dashen Bank 10,100 5,414 5,356 1,472 648 520
Percentage (%) 1.43% 2.07% 19.57% 100% 100% 100%
Bank of Abyssinia 9,000
Percentage (%) 1.28%
Wegagen Bank 5,536
Percentage (%) 0.79%
Zemen Bank 674
Percentage (%) 0.10%
Nib Bank 400
Percentage (%) 0.06%
Total Number of
users 704,007 261,168 27,371 1,472 648 520
Source: NBE, 2016

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Table 3.1 List of banks in Ethiopia
No Name of Banks Year of Establishment
1 Development Bank of Ethiopia 1901 E.C.
2 Commercial Bank of Ethiopia 1963 E.C.
3 Construction and Business Bank 1975 E.C.
4 Awash International Bank 1994 E.C
5 Dashen Bank 1995 E.C.
6 Bank of Abyssinia 1996 E.C.
7 Wegagen Bank 1997 E.C.
8 United Bank 1998 E.C
9 Nib International bank 1999 E.C.
10 Cooperative Bank of Oromia 2004 G.C.
11 Lion International Bank 2006 G.C.
12 Zemen Bank 2008 G.C
13 Oromia International Bank 2008 G.C.
14 Buna International Bank 2009 G.C.
15 Berhan International Bank 2009 G.C
16 Abay Bank S.C 2010 G.C
17 Addis International Bank S.C 2011 G.C
18 Debub Global Bank S.C 2012 G.C
19 Enat bank 2012 G.C
Source: NBE, 2016

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