CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Tanzania as other countries in developing and developed countries has moved from the era of
local technology to the era of modern technology with full of competition and development of
technology. Electronic payment system as a mode of payments has been developing from day to
day and has become most powerful mode of payments and easy accessible way of payments.
Tanzania as other developing and developed countries is among countries which experiencing
the growth of science and technology, also is among countries which experiencing the
competition in different industrial sectors and institutions sectors.
Like other social entities financial institution are being shaken by technological innovations and
inventions (Shyamapada et al, 2011).
Electronic money transfer age has been described one of the most valuable and easy payment
method, the first payment being payment by cash (notes and coin) and the second being paper
based payment (for example, cheques). The electronic payment system is considered as the
backbone of e-commerce and one of its most crucial aspects. It can be defined as a payment
service that utilizes the information and communication technologies including integrated circuit
(IC) card, cryptography, and telecommunication networks' (Raja et. al.2008). Electronic payment
systems refers to the automated processes of exchanging monetary value among parties in
business transaction and transmitting this value over the Information and Communication
Technology (ICT) networks. The common E-banking channels include the payment cards
(Debits and Credit), online web portals, point of sales (POS) terminals, Automated Teller
Machines (ATM), mobile phones and direct debit/deposit system (Nnaka,,.2009).

E-banking system has many advantages and interesting which results into them to acquire many
number of customers, services with higher quality and lower price, preservation and
enhancement of share in the market, concentration in new distribution, making competition
between brands, concentration of on expenses and improvements of revenue, providing extensive
services, improvement in management system, decreasing of expenses of contractions, close

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Intra banking connection, controlling ecological pollution and others, (Farshad Havasil et al,
2013).

E-banking in Tanzania is a system which relate to the lifetimes of an individual and interaction
and development need social identity, a reliable legal system, good communication network and
highest government support.

Most banks in developed and some in developing countries in the World are now offering
Electronic banking services with different levels of satisfaction to its customers. Given the
almost adoption of Electronic banking in Tanzania and other developing countries, the reason for
slow adoption of E-banking technology in developing countries like Tanzania is an important
research that will be to addressed by this study.

The purpose of the research will be to assess the current practice and extent of E-banking
service, benefits realized by banks as well as users of bank servicers, driving forces,
opportunities and challenges for the adoption of E-baking service in Tanzania.

1.2 Statement of the Research Problem

E-banking has been widely used in developed countries and is rapidly expanding in developing
countries. Nevertheless, in Tanzania cash is still the most dominant medium of exchange, and
electronic payment systems are observed late to move with rapid expansion of electronic
payment systems throughout the developed and the developing world, Tanzania’s financial
sector remain behind in expanding the use of the technology. Tanzania as other countries still
engage in marketing competition, international trade and Word market competition and all of this
move directly with Electronic banking and this study will have to base on Challenges and
Opportunities of Electronic Banking in Tanzania. Lots of researches on E-banking system have
been done in different countries in the world. Different factors in the adoption of E-banking have
been taken as the main factors of the adoption of new technology by different researchers such as
environmental factors (like lack of suitable legal and regulatory framework for e-commerce,
poor ICT infrastructure, lack of competitive pressure in the industry), organizational factors

(Lack of skilled man power, resistance to changes in technology among staff) and technological
factors (security risk and functionality) . However, despite the importance of these adoptions and

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development of E-banking, very limited number of research has been done on the challenges and
opportunities of E-banking in developing countries like Tanzania. Therefore, more studies are
still required to assess challenges and prospects of E-banking in the country to identify areas in
which the country lags behind that inhibit their E-Banking adoption and diffusion (Zhao et al.,
2008). Therefore, the purpose of this paper will be to identify the challenges and opportunities
for adoption and development of E-banking technology in Tanzania’s banking industry.

1.3 Objective of the Study

1.3.1 General objective

General objective of this study will be to assess the Challenges and Opportunities of Electronic
Banking in Tanzanian Banking Industry.

1.3.2 Specific Objective

i. To explore the challenges encountered in the adoption and development of E banking in
Tanzanian banking industry.
ii. To explore the opportunities available in the expansion of E-banking to customer.
iii. To find benefits realized by the banks in the adoption of E-banking technology to
compliment their service delivery channels
iv. Assess the perceived benefit/drivers that can be obtained from the use of E-banking
system in Tanzania.

1.4 Research Questions

i. What are the challenges and opportunities of Electronic banking in Tanzania?
ii. What are the benefits of Electronic banking realized by Tanzanians?
iii. What benefits realized by the Tanzanian banks in the adoption of E-banking technology?
iv. What are the contributions of Government in improving Electronic banking?

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1.5 Significance of the Study
The recommendation of this study will act as a stimulant for further researches to be conducted
in the same field. The findings of the study will specifically help in assessing the benefits which
will be realized by banks, driving forces, challenges and opportunities for adoption and
development of Electronic banking technology in Tanzania. It will also help policy maker to
formulate various ways on how to improve the electronic banking services, the results which will
arise from this study will be useful because it will provide them with useful information that will
guide them to come up with ways of making Electronic banking system better The study will
enables government organizations and trade associations to develop banks E-banking assistance
programs that are designed to address the factors identified by this research. This study will have
to assist all stakeholders in the banking industry identify and formulate strategies that will
promote E banking. The study will enables government organizations and trade associations to
develop banks E-banking assistance programs that are designed to address the factors that will be
identified by this research. It will also act as the basis for further research to other researchers in
the field.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Definition of key terms.

2.1.1 Electronic banking

Definitions of electronic banking (E-banking) vary amongst different researchers since every one
can define on its own view and perception. Electronic banking can be defined as all banking
systems which are made through electronic system.  E-banking is defined as the automated
delivery of new and traditional banking products and services directly to customers through
electronic, interactive communication channels. E-banking includes the systems that enable
financial institution customers, individuals or businesses, to access accounts, transact business,
or obtain information on financial products and services through a public or private network,
including the Internet.(< https://ithandbook.ffiec.gov/it-booklets/e-banking/introduction/definition-of-
e-banking.aspx>, viewed on 12 January 2021, 3:58 PM). Kassahun Girma on his research (challenges
and opportunities of electronic banking in Ethiopian Banking Industry, February 2016) defined
Electronic banking as several types of services through which a bank’s customers can request
information and carry out most retail banking services via computer, television or mobile phone.
(Daniel, 1999; Mols1998; Sathye 1999). Michael Mekonnen on his research ( Challenges and
Opportunities of E-banking in Ethiopia,) defined Electronic banking as a form of banking service
where funds are transferred through an exchange of electronic signal between financial
institutions, rather than exchange of cash, checks, or other negotiable instruments (Kamrul
2009).

Different authors have defined it according to their view and understanding on Electronic
banking. The following are some of them.

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E-Banking includes all banking
services based on the
implementation
of an electronic system. (Azad
et al, 2013a).
E-banking includes all banking services based on the implementation of electronic system. (Azad
et al, 2013).

According to Polouček et al. (2013), electronic banking can be defined as the provision of banking
products and services to clients by means of electronic ways.