PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF

DASHEN BANK HALABA BRANCH).

A RESEARCH PAPER SUBMITTED TO DEPARTMENT OF

BUSINESS ADMINISTRATION
MA PROGRAM (MBA)

PREPARED BY:-

ADVISOR: ANDINET ASMELASH (Asst.prof)

NEW GLOBAL VISION COLLEGE SHASHEMENE BRANCH

JUNE, 2021

SHASHEMENE, ETHIOPIA

i
ABSTRACT
Despite the growth of e-banking adoption worldwide, Ethiopian banks continue to conduct most
of their banking transaction using traditional methods. The research entitles “prospect and
challenges of e-banking” conducted on dashen bank. The general objectives of the study were, to
assess the prospect and challenges of e-banking in dashen bank of Halaba branch. From these
general objective four specific issues are described. Descriptive research designs were employed
to conduct this study. Primary data were collected for the purpose of this study from employees
and customers of dashen bank. To collect the necessary primary data questionnaires and
interview were used. The collected data was analyzed by using descriptive analysis such as
tables and percentages. Finally conclusions and recommendations were given based on the
result obtained from the study.

ii
ACKNOWLEDGMENT

Above all, Thanks to the Almighty Allah who has helped me to go through all the period and
accomplish my academic successfully.

Next my deepest gratitude goes to my advisor Mr. ANDINET ASMELASH (Asst.prof). for his
helpful and critical advice and appreciation in the preparation of this paper.

Finally, I would not forget the valuable moral and financial support made by my family and to
my friends for their appreciation.

iii
ACRONOYMS

ATM –Automated teller machine

NBE-National bank of Ethiopia

EFT-Electronic funds transfer

SWIFT-Society for worldwide inter-bank financial telecommunication

POS –point of sale

ETC-Ethiopia telecommunication

E-banking-Electronic banking

ICT-information communication technology

E-payment-electronic payment

CBE- commercial bank of Ethiopia

iv
Contents
Abstract........................................................................................................Error! Bookmark not defined.
Acknowledgment..........................................................................................Error! Bookmark not defined.
Acronoyms
------------------------------------------------------------------------------------------------------------------------iError!
Bookmark not defined.

Contents-----------------------------------------------------------------------------------------------------------------vi

LIST OF TABLES.................................................................................................................................viii
Chapter one...................................................................................................Error! Bookmark not defined.
1. Introduction..........................................................................................Error! Bookmark not defined.
1.1. Back ground of the study...............................................................Error! Bookmark not defined.
1.2. Statement of the problem...............................................................Error! Bookmark not defined.
1.3. Objective of the study....................................................................Error! Bookmark not defined.
1.3.1 General objective...........................................................................Error! Bookmark not defined.
1.3.2 Specific objective...........................................................................Error! Bookmark not defined.
1.4. Significance of the study................................................................Error! Bookmark not defined.
1.5. Scope and limitation of the study...................................................Error! Bookmark not defined.
1.6. Organization of the study...............................................................Error! Bookmark not defined.
CHAPTER TWO.......................................................................................................................................5
2.LITERETURE REVIEW......................................................................................................................5
2.1. Introduction.......................................................................................................................................5
2.2. E-banking:An overview....................................................................................................................5
2.3. E-Banking Types..............................................................................................................................6
2.4. E-Banking:importance........................................................................Error! Bookmark not defined.
2.5. E-Banking:challenges.......................................................................................................................9
2.6. E-Banking:In Ethiopia....................................................................Error! Bookmark not defined.
2.7. Challenges of E-banking in Ethiopia ----------------------------------------------------------------------------------14

2.8. Emperical Evidence........................................................................................................................16

2.8.1. Challenges and prospects of E-banking Adoption....................................................................16
2.8.2. percieve advantages that intiate bankes to adopt E-banking....................................................18
2.8.3. Drivers and bariers of E-banking Adoption.............................................................................19
2.8.4. Constraints and drive ferces for the Adoption of E-banking Adoption in Africa....................19
Chapter three...........................................................................................................................................21
3. Research methodology.....................................................................................................................21

v
 3.1 Research design...............................................................................................................................21
3.2. Target population.......................................................................................................................21
3.3. Sample size................................................................................................................................21
3.4. Types of data.............................................................................................................................21
3.5. Method of data collection..........................................................................................................21
3.6. Method of data analysis.............................................................................................................21
Chapter four............................................................................................................................................22
4. Data analysis and presentation.......................................................................................................22
4.4. Analysis of the finding of the study...........................................................................................24
4.4.1. Analyisi on visa card for 40 respondent.....................................................................................24
CHAPTER FIVE.....................................................................................................................................35
5. Summary, conclusion and recommendation..................................................................................35
5.1. Summary of findings...................................................................................................................35
5.2. Conclusions...............................................................................................................................36
5.3. Recommendations..........................................................................Error! Bookmark not defined.
REFERENCE (BIBLOGRAPHY).........................................................................................................38
Appendix..................................................................................................................................................40

vi
 LIST OF TABLES
Table 4. 1 characterstics of respondant..........................................Error! Bookmark not defined.
Table 4. 2 served by dashen bank..................................................Error! Bookmark not defined.
Table 4. 3 occopation.....................................................................Error! Bookmark not defined.
Table 4. 4.1 dashen bank visa card................................................................................................24
Table 4. 4.2 using dashen visa card...............................................Error! Bookmark not defined.
Table 4. 4.3 making cash withdraw...............................................................................................26
Table 4. 4.4 getting pos terminal...................................................Error! Bookmark not defined.
Table 4. 4.5 satisfaction on visa card.............................................Error! Bookmark not defined.
Table 4. 4.6 challenges and causes for the adequet infrastracture.................................................28
Table 4. 4.7 contribution of E-banking..........................................................................................28
Table 4. 4.8 attitudes of customer..................................................................................................29
Table 4. 4.9 capacity and growth of E-banking.............................................................................29
Table 4. 5 evaluate the level of effectivness..................................................................................30
Table 4. 5.1 benefits of E-banking-------------------------------------------------------------------------------------------31

vii
 CHAPTER ONE

1. INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The increasingly competitive environment in the financial service market has resulted in the
pressure to develop and utilize alternative delivery channels. The most recently delivery channel
is introduction of online or electronic banking also known as e-banking (Daniel and Storey., n.d)

online or electronic banking systems gives everybody the opportunity for easy access to their
banking activities .these banking activities may include retrieving an account balance ,money
transfers between a user’s account, from users account to someone lees account retrieving an
account history.

Some banks allow services such as stock market transaction and the submission of standardize
accounting payment files for bank transfers to third parties (classes etal.,2002)it had been
projected that more than 32 million households globally were banking online by 2003.

Simpson (2002) banks and other financial institutions have moved to e-banking in their efforts to
cut costs while maintaining reliable customer service (kolodinsky and Hogarth., 2001).It is
evident that banks and other financial institutions in developed and developing countries are
embracing e-banking .as technology evolves different kinds of electronic banking system
emerge, each bring new dimension to the interaction between user and bank .they include
Automated teller machine (ATM), mobile and internet (online) banking, electronic funds
transfer, direct bill payments and credit card ( Gikandi and bloor., 2010)

Among these e-banking facilities the Automated teller machine (ATM) is the first well known
and widely adopted system that was introduce to facilitate the access of the user to his banking
activities (Nyangosietal., 2009).

They operate both the traditional form of banking alongside with e-banking Dashen bank is the
first bank next to commercial bank of Ethiopia to introduce the following product to the country
The implementation of the electronic payment system offer the greater service to the customer in
the form of convenience, time saving, and cost wise in processing and easy access of their own
account. the bank also benefited from the system by attracting customers in providing adequate
service and in reducing processing time and decreases customers inconvenience. Even though
1
electronic banking is a web based service that enables a banks customer access their account
easily, where as in our country it is not fully operational due to lack of adequate power supply
and in capability of telecommunication to provide 4G&3G Network facilities for interest.

There are also problems like huge cost of establishment, lack of skilled man power, shortage of
proper laws and regulation and socio cultural aspects. Beyond this entire problem the Ethiopian
telecommunication, the banks and the national banks of Ethiopia (NBE) are doing the best to
combat the problem and let prospect users to be the beneficiaries of this part of the service. This
study hope to address the general idea that the e-payment and ATM systems will be the means to
provide competitive advantage to the banks in today’s hypercompetitive world .It will be across
cutting measures to improve on effectiveness and efficiency to build up customer loyalty and
satisfaction and hence profitability of the bank in the long run.

1.2 Statement of the Problem

In this era of globalization, with increased competition around the globe in all sectors, a strong
banking industry is important in every country and can have a significant effect in supporting
economic development through efficient financial services; as a result many banks in the world
are modifying their strategies to reach customers worldwide more easily and cheaply. Therefore,
banks are developing the technologies that will help them deliver banking products and services
by the most cost-effective channels and one of such channel is adoption of e-banking or internet
banking (Booz and Hamilton., 1997).

According to banking specialists commercial banking service in Ethiopia is still conservative

which showing only moderate change when it comes to use new form of banking especially
those that utilize technology like electronic banking system through local banks are equipping
themselves with the necessary equipment fully networked their branches the lack of legislation to
enable e-banking services. E-banking is the process by which customer may make payment and
banking transaction electronically without the necessity of cash. The transaction costs of
providing these services are lower than the traditional approach. The rapidly growing
information and communication technology is knocking the front door of every organization in
the world (Booz and Hamilton., 1997).
Due to the improvement e-banking service in Ethiopia, It is the right time for the government to
consider the formation of cyber laws and allow the ever increasing need to be exercised on the
country. And lack of concern or lack of giving priority on the side of government and national
2
bank of the country are the main cause for the low development of e-banking service in the
banking sector (Mohammed M ., 2008)
Previous research has found out that demographic characteristic such as education, age, gender,
ethnic differences and incomes are significantly associated with the usage rates of technological
innovations (Dickerson and gentry, 1983; Zeithanl and gilly., 1987)
The problem is not limited to the required legal and demographic aspect only problems
concerning infrastructure like telecommunication, power supply, high establishment cost, lack of
proper trained and skilled man power in the field and customer literacy and awareness of the
society are also major challenges for the adoption of e-banking services in the banking industry.
More over the majority of the countries business transaction is not knowledge based on the
above highlight the following research questions arise and this study will be conducted to
evaluate the prospect and challenges of local electronic payment in counters specifically in case
of Dashen Bank Halaba Branch.

At the end of the study the researcher was addressed the following basic research questions:

1. What is the extent of the attitude of the society in using e-banking?

2. How far do the current condition of infrastructure and skilled man power facilitate the
e-banking system?
3. What are the competitive advantages of the bank by providing e-banking services?
4. How do you evaluate the contribution of e-banking increasing customer satisfaction?

1.3 Objectives of the Study

1.3.1 General Objective

The main objective of the study was to assess the prospect and challenges of E-banking by taking
Dashen bank Halaba branch.

1.3.2 Specific Objectives

The study was addressed the following specific objective

1. To determine the customer attitude towards the e-banking system

2. To identify the current condition of infrastructure and skilled manpower

3
 3. To show potential prospect and competitive advantage on e-banking systems in
the bank
4. To assess the contribution of e-banking system to increase customer satisfaction
1.4 Significance of the Study
The study will have great significance in determining the existing legal means of protection for
e-banking users and it will also differentiate the comparative advantage for the banks that has e-
banking system. This in turn will makes those banks more efficient in the service delivery in line
with increasing customer satisfaction. In addition to these; the paper will also tries to determine
the society’s perception for the service and the existing facilities which will enable the banks to
give the service.
The result of the study will be creating awareness about e-banking on the concerned parties were
they lie currently as compared to where shall been and hence was contribute in their decision
making .This study will also help for further investigation on the subject or the related one in the
future as reference.
1.5. Scope and limitation of the Study
The scope of the study is limited on Dashen bank Halaba branch which is found in Halaba Town
at 246km distance from our capital city, Addis Abeba. The study is limited to one branch in
Halaba due to constraints of both financial, transportation cost and time availability.

1.6. Organization of the study

This research have five chapters: the introductory chapter includes background of the study,
statement of the problem, research questions, and objective of the study, significant, scope &
limitation of the study. The second chapter deals with the literature review to discuss the subject
matter. The third chapter focuses on methodology .the fourth chapter focuses on data analysis
and representation. Finally the fifth chapter finalizes the paper with summery, conclusion and
recommendation.

CHAPTER TWO
4
 2. LITERATURE REVIEW

2.1 INTRODUCTION
One main innovation technology has brought is the introduction of e-banking. Traditional
banking was characterized by physical decentralization with branches scattered around populated
areas to gives customer access. Physical bank assure customer that their banks has substantial
resource and guarantee the security of their saving. However technology is fast growing making
it difficult for the traditional banking system to compete favorably with the advent of e-banking
the physical decentralization of the bank branches has been done away with customers not
necessarily need to be physically present in the banking hall but can bank virtually or by other
electronic means (Pupiel F., 2014)
DEFINITION OF E-BANKING
E-banking is electronic connection between the bank and customer in order to prepare, manage,
and control financial transaction. And also
E-banking is online banking (internet banking) which gives customer the opportunity to conduct
financial transaction on secure website operated by their retail or virtual bank, credit union or
building society.
This implies that e-banking is services that allow an account holder to obtain account
information and manage certain banking transaction through personal computer via the financial
institution website on the internet. (Pupiel F., 2014)
2.2. E-banking: An Overview.
The development of inexpensive computers and the spread of the internet make the market
accessible and enable the customers to pay bills electronically. Most of developed countries
bankers provide a web-site in which with one just log on and making a few clicks clients
transmit payments electronically. Thus, for customers not only saving time, but withdrawing and
paying bills become a pleasure, requiring little effort. Electronic payment systems are being
provided even on marketing points and recurring bills can be automatically deducted from one’s
own bank account regularly right at transaction time. (www.e-payment.com )
Electronic payment technology can not only substitute for checks but can substitute for cash, as
well as, in the form of electronic money (or e-money),money that exists only in electronic form
like the so called debit card. A more advanced form of e-money is the stored-value card like
smart card which contains a computer chip that allows it to be loaded with digital cash from the

5
owner’s bank account when ever needed. There is another form of electronic payment
technology which is referred to as e-cash or on-line banking, which is used on the Internet to
purchase goods or services. (www.IBID.com)
2.3. E-banking: Types
Electronic banking (e-banking) is a range of banking services that utilizes electronic equipment
and e-payment services around the world take different forms well which includes the following:
 Automated Teller Machine (ATM);
 Keycard, namely debit card, online credit card payment system and Smart card based e-
Payment system;
 Electronic Payment/Funds Transfer(EFT) ;
 Telephone Banking;
 Internet banking;
 Automated Teller Machine (ATM):
It is a device that allows customers who have an ATM Card to perform routine banking
transactions without interacting with the human teller. The ATM card holder can do most of the
banking transactions like withdrawals, deposits of cash, balance enquiry, etc. Even Railway and
Airway tickets can be blocked with the use of ATMs. Now a day, ATMs are offering a wide
range of bank services with the technology of web-enabled ATMs.
With the use of ATMs, banks are providing ‘Any Where and Any Time Banking’ to their
customers. That is the customer can have access to ATMs at anywhere within the country or
throughout the world at any time. It also reduces the transactions time. The banks can use these
ATMs as media for publicity by displaying products on the screen. And the cost of setting up
ATMs is much lesser than the branch. (Stephen G., .2006)
 Credit Card:
It can be called as an equivalent of a loan sanctioned by the bank to its customers. Credit card
facilitates and makes it possible to “Use First and Pay Later” the specified amount of credit as
per the agreed terms of sanction. Before issuing the card, the bank would like to know and be
sure the identification, age, level and source of income and repaying capacity. This card
facilitates the cardholder to purchase goods and services from the merchant establishments and
shops through the collaborating credit card companies like VISA, MasterCard, Maestro, and
Cirrus. Interest will be charged by the bank on monthly basis for the credit provided through the

6
card. And service charges also will be collected from the cardholder for the transaction and
processing. (M.M. Rahman., 2006)
 Debit Card:
It provides for online electronic payment like Credit Card but from savings or current accounts
of the cardholder for purchases. This card is a deposit access product where cardholder uses his
own money in his bank account through the debit card on the principle of “Pay First and Use
Later”. Debit card can be used to make purchase at retail shops and merchant establishments in
the same way as the credit card is used. But in order to use the debit card, the cardholder must
have sufficient balance in his/her account. Debit cards are keys to modern retail banking.
Without them, no bank can give the level of service that customers expect, cost-effectively, 24
hours a day, every day
Debit cards improve profitability by automating bank processes, thereby reducing the cost of
cash and cheque processing. They strengthen customer relationships by giving cardholders
access to their money whenever and wherever it’s needed. They make banking faster, easier and
more convenient and offer safety and security. Debit cards also provide issuers with new revenue
streams Retail banking is becoming more challenging as new technologies and new competitors
put increasing pressure on costs and revenues. Debit card contains the symbol or hologram of
collaborating company such as VISA, MasterCard, Maestro and Cirrus etc. (Stephen G,.2006)
 Smart Card:
It is an amazing piece of technology. It is the size of a regular ATM card but is capable of storing
over a 1000 times more data. The data can be encrypted and hence the card is completely
temper-proof. The card can also be personalized to the holder by printing personal and other
details on the card face. Smart card is issued to the formers to provide adequate and timely credit
support for their cultivation needs including all purchases. The formers can use this card
wherever they needs. The loan amount sanctioned to the former will be recorded in the card. The
merchants can sell the goods to the former based on the card and they can collect the amount
from the local branch of the issued bank or any other bank.(Mohammed Sh., 2006)

 Electronic Fund Transfer:

EFT system permits transfer of funds from any account at any branch of any member bank in
any city to any other account at any branch of any member bank in any other city. This system
7
utilizes the Service Branches of the member banks. It facilitates the transfer of funds from one
place to another place within the country quickly and safely. Banks collect service charges from
customers. Most of the time banks use Bank net system as a communication backbone
connecting various centers of a country to facilitate the transfer of inter-bank or inter-branch
messages. Most of the centers of a country are being brought on the network. The main objective
of the Bank is to speed up the process of transfer of funds from one bank to another bank and one
branch to another branch. (Stephen G., 2006)
Telephone banking
Tele banking (telephone banking) can be consider as a form of remote or virtual banking, which
is essentially the delivery of branch of branch financial services telecommunication devices
where the bank. Customer can perform retail banking transaction by dialing a touch-tone
telephone or mobile communication unit, which is contacted to an automated system of the bank
by utilize automated voice response (AVR) technology. It allows transferring funds between
accounts. (Pupiel F., 2014)
 Internet Banking
Internet banking refers to systems that enable bank customer to get access to their accounts and
general information on bank products and services through the use of banks website, without the
intervention or inconvenience of sending letters, faxes original signatures and telephone
confirmation. According to them for those that have access to the internet and a computer all that
one needs to do is to processed to the banks website and login .This gives easy access to the
persons accounts and this enables the person to clearly see transactions that have occurred with
in his/her accounts; (Pupiel F., 2014)
2.4. E-Banking: Importance.
The most significant benefit of e-banking is the ready accessibility of bank accounts at all times.
The inconvenience of visiting and waiting at the banks is also eliminated. E-payment greatly
increases payment efficiency by reducing transaction costs and will enhance the customer
satisfaction and increase the customer base. From bankers’ point of view, e-banking considerably
reduces transaction costs for the banks.
E-payment offers substantial advantages to the customers in the form of convenience, timesaving
and easy access to the banking services. The customers can transact in their account at anytime
and anywhere throughout the country or outside the country. There is no time and place
restriction. The customers need not visit the branch for each and every transaction and no need to
8
wait in the big queue. By this they can save the time. The customers can avail accesses to the
banking services at anywhere. With the help of e-banking, the easy access to the banks will be
another advantage to the customers. Thus the e-banking provides sophisticated services to the
customers.
From seller point of view, it may help them by increasing the sales as they would be preferred by
most of international community. It can also minimize the cash handling costs as it reduces the
daily rush to deposit and enable to have quick cash just after the sale. Minimizing the risk
associated with forged cash notes and cheque can also be achieved by using the e-payment
system available for us. To put all above mentioned importance of e-payment in net-shell, we
can list out the significant use of the system as below list
 Increase payment efficiency;
 Reduce transaction costs;
 Enable trade in goods and services of very low value;
 Increase convenience of making payments;
 Payment can be made swiftly and remotely using various devices;
 Can be used for E-commerce/e-Trade;
 Can be used for other purposes like paying bills, taxes, etc.
2.5. E-Banking: Challenges.
E-banking with many types and great advantages cannot take the place of cash in trading
activity. Cash is still the preferred mode of payment for the sake of security anonymity, for tax
purposes or for keeping secret what one’s money is being spent on. Banking is still done in the
conventional way “explicit consent” (i.e., a signature) is required before a transaction is
considered valid and transaction security (e-transactions and e-payment) Privacy and safety are
yet to be in place. Also e-banking cannot ensure equal accesses to all consumers are non-existent
because of lots of challenges it faces. Let us see the common challenges of E-banking in general
aspect.
 Infrastructure problem
 Heavy investment costs
 Socio-cultural challenges
 Legislative and regulative issues
 Infrastructure Problem:

9
The first challenge for e-banking and e-payment in most of developing country is short of well-
developed infrastructure. For effective deployment of e-payment services, it is necessary to have
a reliable and cost effective infrastructure that can be accessible to the majority of the population.
The base communication infrastructure for e-payment is computer network, user access devices
with internet facility. Most of the transactions use internet to communicate with the customers.
Automating the banking services is another prerequisite for e-payment. Close financial links
between banks and other financial institutions is necessary. This link is used for clearing and
payment systems among the institutions.
 Heavy Investment Costs:
In order to offer electronic services in all aspect, banks have to invest huge amount of money.
They have to incur heavy maintenance costs also. This may not be the problem for well-
established banks. But in case of new and small banks, they have to face financial problems at
the initial stage. Banks in developed countries have already deployed huge amount of
investments for e-banking services. For banks in developing and underdeveloped countries, this
may create financial crisis.
 Socio-Cultural Challenges:
Normally customer’s confidence and trust in traditional banking system will make customers less
likely to adopt new technologies. New technologies will not be successful until customers are
satisfied with privacy and security aspects. It also requires some time to earn confidence among
the customers even it is easier and cheaper than the traditional methods.
 Security Challenges:
It is first and foremost requirement of E-payment as the internet is inherently unsecured.
Securing the process in e-payment involves authenticating both customer and banker and
protecting the information to be transmitted from interception. This authentication can be done
using user ID and passwords. Every transaction is authorized against a customer’s account
balance; banks can safely offer cards to anyone of legal age, regardless of their banking history
or credit status. Customers who demonstrate their ability to manage electronic debit card
accounts can be offered other banking services, such as loans, mortgages and credit cards.
Banks should take effective steps for the interests of customers from data tampering and hacking.
Software failures can also destroy entire portions of a network and bring huge losses. In e-
banking system there are many ways in which private information may be accesses by attackers.

10
And this information could be used to make fraudulent transactions that could lead to a loss of
money. Some of the fears possessed by customers are:
 Disclosure of private information
 Counterfeiting
 Illegal alteration of payment data
Legislative and Regulatory Issues:
Proper legal and regulatory frameworks are vital for the success of e-payment. National, regional
and international laws, rules and regulations are important prerequisites for successful
implementation of e-payment. Legal or Legislative support is essential for protecting the
interests of customers and banks in various areas relating to e-banking and payment systems.
Some of the main issues like liability for loss in case of fraud, allocation of loss in case of
insolvency, cheque truncation, evidence and burden of proof, preservation of records, prevention
of fraud, etc. are to be cleared in the legislation. This can be done by adopting model laws at
global level such as UNCITRAL Model Law on E-commerce and UNCITRAL Model Law on E-
signature.
2.6. E-banking: In Ethiopia
 Traditional Banking System:
The commercial banks in Ethiopia started their traditional way of banking in the year 1906 with
the establishment of first bank called “Bank of Abyssinia” as a private bank. In 1931, the Bank
of Abyssinia became “Bank of Ethiopia” a fully government-owned bank providing central and
commercial banking services. In 1964, National Bank of Ethiopia and Commercial Bank of
Ethiopia started their operations. Private Banks came into existence after the changes in the
Economic Policy in the year 1994. Basically the Ethiopian banks are following the American
way of banking system. Accepting deposits from the public, lending money to the borrowers and
transferring funds from one place to another, etc. are the basic banking activities of commercial
banks in Ethiopia.
NBE has authorized Ethiopian Birr to be used as a legal tender throughout the country. Birr is
representing the values and used as major instrument of payment. The second major instrument
of payment is cheque. The customers who have checking account can use cheques to make
payments and for other uses. Cheques are typically used for large transactions. Drafts are also
used to send money or to make payments to another place. Mail Transfers and Telegraphic

11
Transfers are used to transfer money from one account to another account. (The History of
Banking and other Financial Institutions in Ethiopia, NBE: Official Website).
 E-Banking System in Ethiopia:
The banks in Ethiopia currently are using the following E-banking services:-
 SWIFT:
SWIFT [Society for Worldwide Inter-bank Financial Telecommunication] provides a messaging
service that enables to settle majority of high value payments internationally. Banks in Ethiopia
currently settle their foreign transaction payment through SWIFT. They are using SWIFT as a
primary payment system for international payment system. Connection to SWIFT network is
done only through a dial up connection which makes the usage of SWIFT as expensive. Banks
must make a dial up call to the server found in Brussels.
 Western Union Money Transfer:
Western union is the world’s largest money transfer network with more than 212,000 agents in
over 195 countries. In Ethiopia, Commercial Bank of Ethiopia, Construction and Business Bank,
United Bank, Dashen Bank S.C. and others are agent companies for Western Union. The money
transfers are paid out in Ethiopian Birr with the maximum ceiling of Br. 60,000. It includes a
test question to be answered by the receiver. Unlike SWIFT, which is used to transfer money
from Ethiopia to abroad and vice versa, Western Union is used to transfer money only from
abroad to Ethiopia.
 Plastic Cards:
Currently, there is no issue of local and international credit cards in Ethiopia. But there are some
business firms (Hotels, Supermarkets, etc.) that accept international credit cards. Dashen Bank
currently gives encashment services to VISA and Master Card users. This card is mostly used by
foreigners and Ethiopians residing abroad. Dashen Bank only acts as a merchant accepting credit
card issued by banks outside Ethiopia. But the bank is finalizing its preparation to start issuing
credit cards with Debit-Credit cards. Presently, Dashen Bank is issuing a VISA branded debit
card, which works locally in Ethiopia only. The card uses as an ATM card and used to effect
payment at merchant outlets. With the Dashen Bank card, one can:
 Operate multiple accounts with a single card.
 Withdraw up to 3,000 Birr per day per card subject to the balance in your account.

12
  Purchase goods or services up to Birr 5,000.00 per day per card at any of the Dashen
Bank merchants.
 Check the balances of all accounts linked to the card.
 Obtain mini-statement that lists the last ten transactions in any of your accounts linked to
your card.
There are two main software’s that enables Dashen Bank to implement payment card system.
The first one is the core banking software called Flex Cube which enables the bank to run its day
to day operation .The second one is software called Base 24 which enables the bank to both the
local and international debit and credit cards. The software should be integrated in order to effect
payment with the help of cards.
Dashen Bank uses ETC’s (Ethiopia Telecommunication Corporation) internet broad band
system for its banking networking. If any connection problem (telecommunication failure)
happens, the whole networking system will be off line, this means every customer’s account will
not be updated automatically till the system becomes on line.
During such period the Base 24 doesn’t stop working and hence all ATMs (automatic teller
machine) and POSs (Point of sale) works by taking the last available balance on flex cube before
the off-line (telecommunication network failure). Consequently, the customer’s account balance
may be affected at the area bank where the account is maintained and Base 24 is not aware of it
due to the communication gap between the two. Therefore the person using a card may not have
the actual balance in his account when he/she tries to make transactions.
Other types of plastic cards are like Total Fuel Card / Abyssinia Card (By TOTAL Eth. PLC.)
Smart card used for fuel purchase has two options for payment: post-invoiced and pre-paid it has
limited usage, but promising trend.
 Automated Teller Machine (ATM):
In Ethiopia, before the Dashen ATM service, the Commercial Bank of Ethiopia is introducing
ATM services to its customers with eight ATMs located only in AddisAbaba. Currently , Dashen
Bank installs 20 ATMs since two years back at different parts of the country including the major
up-country cities. These ATMs enable the customers to withdraw limited amount of money from
their account and to check their account balances. But depositing money through ATM is not
possible. In order to use ATM, the customers need ATM cards and secrete PIN codes which are
given by the bank for the purpose of security.
 Electronic Fund Transfer (EFT):
13
EFT system permits transfer of funds from any account at any branch of any member bank in
any city to any other account at any branch of any member bank in any other city. In our country
there is no bank to bank connection. The only transfer mode we have in Ethiopia is branch to
branch within the same bank at different places at the same time. This system utilizes the Service
Branches of the member banks. It facilitates the transfer of funds from one place to another place
within the country quickly and safely. It has replaced the old money transfer method which was
telegram. Banks collect service charges from customers. The system reduces telephone expenses
to the cost of internet charges and stationeries. Most customers of Dashen Bank and United Bank
are the beneficiaries of this new money transfer system in Ethiopian case.
Locally, in Ethiopia, electronic fund transfer, plastic card, and Tele banking are the ones in use
and on the verge of growing. The two banks being the first to introduce those service, are
promoting the payment system to their customers since the service provides highly efficient in
time saving, cost minimizing and ease of accessing for the banks.
2.7. Challenges of E-banking in Ethiopia.
E-payment system in Ethiopia is having the following challenges which are not different what
we have seen above but with more severity:
 Infrastructure:
Information and Communication Technology (ICT) infrastructure is prior most to offer and to
implement e-banking services. Communication infrastructure such as Internet, WAN, Telephone
lines must be adequate for e-banking. In Ethiopia, due to poor telecommunication infrastructure,
ICT is facing lot of problems or challenges. Ethiopian Telecommunication Corporation is unable
to provide reliable and fast telecommunication services. Failures in telephone line and other
network lines are happening frequently. This will create problems to offer e-banking services.
Especially, Internet is the major problem because of Low bandwidth and low speed.
Another major problem is frequent Electric Power disruption. This will create lot of problems in
e-payment activities that are basically depending on power supply. It will force the banks to
depend on generators results in high operational cost. These problems are considered as obstacles
for the expansion of e-banking services in the country. Problems related to infrastructure
capacity for e-payment service in Ethiopia can be summarized as below list:

 Frequent connectivity failure in telephone lines,

 Low bandwidth, particularly for Internet
14
  High cost of Internet
 Availability of Internet especially at peak hour is low
 Lack of dedicated data service networks and closed financial networks
 Frequent power interruption
 Establishment Expenses:
Initially, banks have to invest huge amount of money in order to provide e-banking services.
They have to buy and install the required systems and facilities which lead increased
establishment expense. For well-established banks in developed countries, the establishment cost
may not be a problem. But for banks in 3 rd world like Ethiopia and for new banks, it is very
difficult to invest such huge amount. According to the information gotten from both banks, it
takes above a million dollar each to commissioning their current ITC package, not to mention the
indirect costs like maintenance charge.
 Lack of Skilled Manpower:
In order to offer and maintain e-banking services without any fault, banks need skilled
manpower. But in Ethiopia, the banks are suffering due to inadequate skilled manpower. They
have to hire manpower from foreign countries to overcome this problem. Otherwise, they have to
provide proper training to the existing manpower. It will result in increased operating expenses.
 Legal Framework:
Legal framework is playing a crucial role in facilitating e-payment system and in its growth.
Instead of strict regulation, the country should make some amendments in order to coincide with
the current up-dated practices. Ethiopia has not yet set a comprehensive legal framework for e-
commerce and e-payment. The reason for nonexistence of comprehensive legal framework in
Ethiopia may be inexistence of large pool of e-commerce user group. Another reason may be the
existence of Ethiopian Civil Code of 1960, which is open by many standards to incorporate
technical and institutional improvements. The Ethiopian Civil Code addresses some of the most
important legal issues pertaining to electronic transactions like freedom of form of contracts. The
code, however, doesn't allow signatures to be in electronic form. Clearly stipulated privacy and
data protection laws are absent in Ethiopia. But mostly in developed countries, they have
developed a comprehensive legal framework for e-commerce which includes e-banking.
The National Bank of Ethiopia does not clearly mention its role in regulating the e-banking
system in its governing legislation. It has some short comes such as e-signature, lack of

15
significant penalties for frauds and other abuses and lack of adequate provision for e-banking,
especially e-payment. Another reason for nonexistence of legal framework may be the banks,
which provide some of the e-banking services, might have not faced any major problem
regarding the regulatory aspects.
 Socio-Cultural Aspects:
The banks in Ethiopia, especially Dashen Bank and Commercial Bank of Ethiopia have faced
some problems related to social and cultural attitude. There is a resistance to changes among
customers and some staff members. This is mainly because of lack of awareness on new
technologies and its benefits. The fear of risk is also another reason for their resistance. In case
of staff members, the lack of training and sticking with existing structure are the problems. In
general, peoples are resistant to new payment mechanisms.
2.8 Empirical Evidence
2.8.1. Challenges and prospects of E-Banking Adoption
Challenges of e-banking
According to M. M. Rahman (2008) in Bangladesh despite huge demand from the business
community as well as the retail customers particularly the urban customers, electronic banking
(e-banking) is still at a budding state due mainly to a number of constraints such as inadequacy
of reliable and secure information infrastructure; sluggish ICT penetration in banking sector;
insufficient legal and regulatory support for adopting e-banking and so on. The concept of e-
banking includes all types of banking activities performed through electronic networks. It is the
most recent delivery channel of banking services, which is used for both business-to-business
and business-to-customer transactions. Transfer of funds between accounts, applying for a loan,
payment of loan installments, sending funds to third parties via emails or internet connections
regardless of where the client is located. Leow, Hock Bee(1999) state that the terms PC banking,
online banking, Internet banking, telephone banking or mobile banking refers to a number of
ways in which customer
Can access their banks without having to be physically present at the bank branch. Therefore, e-
banking covers all these ways of banking business electronically. Since e-banking offers some
smart services benefiting both banks and customers compared with traditional banking system, it
has become imperative to make necessary room for banks to flourish e- banking. Among others,
attractiveness of e-banking includes: it lowers transaction cost; provide 24-hour services; ensure
increased security and control over transactions; reduces fraud risk; performs higher volume of
16
transactions with less time; increases number and volume of value payment through banks;
allows remote transactions facilities that replace physical presence of a customer in a bank
branch and; increases transaction speed and accuracy. On the other hand, traditional banking is
time-consuming and more costly and therefore, e-banking is replacing traditional banking all
over the world.
In addition, an exploratory study that was conducted in Zimbabwe by Chitura Tofara (2008)
indicated that incompatibility with the existing system, inadequate legislation and consumer
acceptance are the major challenges for the adoption of e-banking in the country’s banking
industry.
Prospects of e-Banking
Of Technological Infrastructure the implementation of e-payment is been impeded by
unavailability of ICT infrastructure. Most rural areas where majority of According to M., M
Rahman (2008) in Bangladesh e-banking is now a global phenomenon. Apart from the developed
countries, the developing countries are experiencing strong growth in e-banking. The
government’s emphasis on setting up ICT park, raising allocation for developing ICT
infrastructure, waiving taxes on computer peripherals and other measures including the
automation program of banking sector and competition among the scheduled banks in improving
customer services have accelerated the prospects of e-banking.
In addition, as investigated by Alhaji Ibrahim H. (2009) using exploratory study, the following
are among the critical challenges for the adoption of e-banking in Nigeria:
Lack small and medium scale industries are concentrated have no access to internet facilities
ICT Equipment Costs – where available, the cost of ICT is a critical factor relative to per capital
income. This makes the cost of entry higher compared to developed countries.
Regulatory and Legal Issues – inexistence of proper legal and regulatory framework. Non-
readiness of banks and other stake holders (acceptability) – even though some have shown
impressive willingness, some banks are still not fully ready to for this new payment regime.
Resistance to changes in technology among customers and staff due to:-

 Fear of risk among banks

 Tendency to be content with the existing structures

People are resistant to new payment mechanisms:-

Security – where disclosure of private information, counterfeiting and illegal alteration of
payment data may be rampant.
17
2.8.2. Perceived advantages that Initiate Banks to Adopt E-Banking
The study that was conducted in Omani banks by Al-Sabbagh, I., & Molla, A. (2004) using
exploratory research found that bank manager’ perceptions of four concepts: perceived relative
advantage, Perceived organizational performance, perceived customer/organizational
relationship and perceived ease of use provided a broader understanding of e-banking adoption
in the banking industry.
The first construct: Perceived relative advantage construct relates to the degree to which bank
managers think that Internet technology might help their bank gain advantages in the industry.
From the literature, three major issues emerged relating to the perception of relative advantage:
convenience of services; innovative use of IT; and management of banking services.
The Second construct: Perceived organizational performance is associated with how much a
bank manager thinks Internet technology could improve their organizational performance. Three
issues: profitability; market environment and employee productivity were utilized to explore this
construct in depth. From the broad question related to
The third construct: profitability, two impediments are indicated: high technology investment
cost and the need for economies of scale for Internet technology use are inhibiting the rate of E-
banking adoption.
Productivity of employees was another issue of interest. Most respondents expected that their
business efficiency could be improved on the Internet.
Perceived Customer/Organizational Relationship relates to how a bank manager perceives
Internet technology adoption in terms of improving the relationship with their customers. In the
literature, three major issues emerge related to the perception of customer/organizational
relationship: customer trust, customer commitment, and customer satisfaction.

The final construct: Perceived Ease of Use measures how easy a bank manager believes that
Internet technology is to use. The literature suggests that if technology is perceived to be easy to
use then the rate of adoption will increase. The research threw up three major issues related to
perceived ease of use: easy to navigate, easy to learn and easy to manage. The last issue related
to management of financial transactions on the Internet.
2.8.3. Drivers and Barriers of E-Banking Adoption
An exploratory research conducted by Mahdi Salehi (2004) in Iran indicate that the adoption
status of e-banking is the transition of pre-development to development phase and the main

18
drivers for adopting e-banking are downsizing, gaining competitive advantage, increasing market
share and improving bank’s image. The analysis further reveals that political challenges and
traditional organizational culture are barriers for adoption of e-banking.

In addition to the above factors, the case study that was conducted in china by Sherah Kurnia,
Fei Peng, Yi Ruo Liu (2005) suggests that the government support is also a strong driver for e-
banking adoption. The government support is manifested in two ways. Firstly, the Government is
establishing an electronic commerce (EC)-friendly environment in the country. The government
in recent years to revamp the national ICT and logistic infrastructures has committed heavy
investments. New EC laws and regulations have also been passed and adjusted to provide legal
protections for EC activities in general. Secondly, the government also directly offers financial
incentives to promote e-banking adoption.

2.8.4 Constraints and Drive Forces for the Adoption of E-Banking in Africa
The study that was conducted by Isaac Awuondo (2005) indicated that the Constraints and drive
forces for the adoption of e-banking in Africa respectively are presented below:-
Constraints:
Security: Majority of the shy away from e-Banking services due to security concerns.
Human face: According to some analysts, customers still value personalized and
responsive services from their bankers. Lack of technological infrastructure especially
in the rural area s. Lack of proper legislation governing e-banking transactions.
Preference to paper money, as opposed to “virtual” cash in transactions etc.

Drive forces towards e-Banking adoption in Africa

 Rapidly changing customers’ needs and preferences
 Competitive forces and product differentiation strategies
 Pressure to reduce transactional and operation costs

19
 CHAPTER THREE

3. Research Methodology
3.1 Research Design
The researcher used descriptive type of study which has the purpose to describe the existing
situation about the E-banking system user and employees of the bank
3.2 Target population
The target population that was considered in this study includes Dashen bank staffs and
customers of Dashen bank specifically in Dashen bank Halaba branch.
3.3 Sample size
20
Among the total population 1050, 50 sample respondents was selected by using convenient
sampling technique because convenient sampling technique is non-probability sampling
technique used to draw representative data by selecting sample based on convenient accessibility
and proximately to the researcher.
3.4 Types of data
So as to conduct this study only primary type of data was used i.e. secondary type of data was
not used hence the system is secured and it can’t be exposed to the external parties other than the
institution employees.
3.5 Method of data collection
The research used primary type of data to get accurate and sufficient information. The primary
data collected from E-banking system users and employees of the bank through questionnaires
and interviews.
To collect data both questionnaires and interview data collection techniques was used. For this
purpose both close ended and open ended questionnaires was prepared and distributed to
respondents. More over interview was conducted with junior officer of Dashen bank Halaba
branch.
3.6Method of Data Analysis
The analysis is based on the data collected from questionnaires and interviews. The data gathered
from questionnaires presented through table, number, and percentage. Information obtained from
interview presented in theoretical description given by junior officer of the bank.

CHAPTER FOUR
4. DATA ANALYSIS AND INTERPRETATION
This chapter discusses the data gathered from the sampled customers of dashen bank, and
employees of the Dash Bank in Halaba. All the data was obtained through questionnaires
containing close and open ended questions and interview.
Out of the customers of dashen Halaba Bank and employees of the bank in Halaba, a total of
1000 customers and 50 employees of the bank were selected,40 of customer and 10 employees
were selected as sample respondent using convenient sampling techniques. Questionnaires
prepared for both employees of the bank and user of ATM and the interview which was made
with junior officer has been summarize using descriptive statistical percentage

21
4.1. Table Background characteristics of respondents
Dashen customers Employees of Dashen bank
No. General characteristics
No. % No. %
Sex
Female 10 25% 4 40%
1
Male 30 75% 6 60%
Total 40 100% 10 100%
Item[Generalcharacteristics Dashen customers Employees of Dashen bank
No.
] No. % No. %
Age
18-25 15 37.5% 1 10%
26-30 15 37.5% 2 20%
2 31-35 6 15% 5 50%
36-40 4 10% 2 20%
41-45 0 0% 0 0%
46 and above 0 0% 0 0%
Total 40 100% 10 100%
Educational Back Ground
12 complete and below 10 25% 0 0%
Certificate 0 0 0 0%
3
Diploma 5 12.5% 0 0%
First Degree 20 50% 10 100%
2nd Degree and above 5 12.5% 0 0%
Total 40 100% 10 100%
Source: Data collected through Questionnaire, On May, 2021
According to item 1 of Table 4.1, the male and female respondent customers of dashen bank
account for 30(75%) and 10(25%) respectively and for Dashen bank employees 6(60%)
and4(40%) respectively. From this result the researcher understood that the majority of the
sample respondents were male. This implies that female’s involvement on such e-banking
activity is low so the bank has to encourage female’s participation on such activities.
From the total number of customers, 15(37.5%) were in the age group of 18-25, 15(37.5%) were
in the age group of 26-30, 6(15%) were in the age group of 31-35 and 4(10%) were in the age
group of 36-40 respectively.
And from the total number of employees of the bank, 1(10%) were in the age group of 18-25,
2(20%) were in the age group of 26-30, 5(50%) were in the age group of 31-35and 2(20%) were
in the group of 36-40 respectively. This implies that customers of the bank and employees of the
bank are more of the preference of adults than any other groups.
Considering education level of respondents in item 3 of table 4.1, from the total number of
customers, 10 (25%) were 12 grade complete and below, 5(12.5%) were diploma holders and
22
20(50%) were first degree holders, 5(12.5%) are 2 nd Degree holder (MSC).And from employees
of the bank, 10(100%) were first degree holders. Therefore, the majority 20(50%) of customers
of the bank and 10(100%) employees of the bank are first degree holders. This indicates most of
the users of e-banking systems are educated persons so the bank has to promote other classes to
use such system.
4. Table 4.2: For how long you have been served by dashen bank?
Respondents
Types of response o
N. %
0-2 15 37.5%
3-5 25 62.5%
6-10 0 0%
10> 0 0%
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
As it shown on the item of table 4.2 respondents were asked for how long you have been served
by dashen bank. As it depleted in the table presented, 15(37.5%) of respondents have been
served from 0-2 years and 25(62.5%) of respondents have been served from 3-5 years. From this
the researcher understood that the majority of respondents have served from a period of 3-5
years. This implies that most of the users of the e-banking system were senior customers so the
bank has to encourage others to use such products.

5. Table4.3: What is your occupation?

Respondents
Types of response
No. %
Student 8 20%
Merchant 22 55%
Employee 10 25%
Other 0 0%
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
As it shown on the item of table 4.3 respondents were asked what your occupation is .as it
depleted in the table is presented, 8(20%) were students, 22(55%) were merchants and 10(25%)
were employees. This indicates that the majority of customers of the bank are merchants and
employees than other classes.

4.4. Analysis of the Findings of the Study

The researcher has tried to investigate the service delivery of local electronic payments system
(visa card) utilization from point of the service holders of the bank. To this end, various

23
questions were posed to sample respondents mainly related to service delivery. Thus in this
section responses from the customers are summarized in the form of number and percentage and
presented as follows.
4.4.1. Analysis on Visa Card for 40 Respondents.
Table 4.4.1: Have you heard about Dashen visa card?
Respondents
Types of respondents
No. %
Yes 35 87.5%

NO 5 12.5%
Total 40 100%

Types of response

I don’t know anything about visa 3 7.5%

I don’t know that I can withdraw

money outside the bank 2 5%

Other reasons 0 0%
Total 5 12.5%
Source: Data collected through Questionnaire, On May, 2021
As it is shown the item of table 4.4.1 respondents were asked for have you heard about Dashen
bank visa card. As it is depleted in the table presented, 35(87.5%) respondents hear information
about Dashen visa card and 5(12.5) do not heard. This indicates that majority of the respondents
were heard about Dashen visa card. Therefore the researcher understood that the Bank’s provides
reliable information for customers about visa card as well people are aware of bank development
information.
Tables 4.4.1 of the same table respondents were asked if they are not heard about ATM why. As
depleted on the table presented, 3(7.5%) of respondents said they don’t know anything about visa
and 2(5%)of respondents said they don’t know how can withdraw money outside a bank. This
indicates that the bank has provided reliable information to its customer but it has to do more to
achieve the desired objective.
Table 4.4.2: Do you use Dashen visa card?

24
 Respondents
Types of response o
N. %
Source: Data
Yes 30 75%
NO 10 25% collected through
Total 40 100% Questionnaire, On
May, 2021
On item 3 of Table 4.4.2 respondents were asked for using Dashen visa card and 30(75%) out of
40 respondent’s uses, and 10(25%) aren’t using. The researcher notice from the above data
majority of the respondents said they were users of visa card. This means more of customers
knowing the importance of Dashen visa card. But still the customers have to encourage through
different marketing techniques. Therefore, the company is expected to provide reliable
information about visa card payment to increase customers.

Table 4.4.3: What is your chance of getting ATM at your convenience for making cash
withdrawal?
Respondents
Types of response
No. %
Very high 0 0%
No. High 0 0%
Moderate 30 75%
Low 10 25%
Very Low 0 0%
Total 40 100%
Types of response
Very greatly 0 0%
Greatly 15 37.5%
Moderate 20 50%
Slightly 5 12.5%
Very slightly 0 0%
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
One of the most important factors in service delivery is placement of ATM service where it is
required. However, as it was clearly shown in the above Table 4.4.3, 30 (75%) respondents said
moderate and 10(25%) respondents said low. ATM distribution and customer demand is still not
satisfied enough and ATM shortage has put enormous pressure on their commercial or other
activities related to cash outlay. Therefore it is essential to do more on provision of ATM at
convenience places.

25
Table 4.4.3 of the same table it is indicated that respondents, 15(37.5%) were affected greatly, 20
(50%) of the respondents were affected moderately and 5 (12.5%) were affected slightly
respectively. Since the usage rate of the cards and customers number are increased by the
confidence built on regular users of the card, it is possible to protect this draw back and decrease
the degree of disappointment of customers by providing the service on their areas.
Table 4.4.4: What is the chance of getting pos terminal at your convenience or your preferred
shopping area?
Respondents
Item
No. %
Very high 0 0%
High 0 0%
Moderately 5 12.5%
Low 30 75%
Very low 5 12.5%
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
The chance of getting pos terminal for the customer convenience is rated as low by, 30(75%)
respondents. From this the researcher understood that Dashen Bank has some problem by placing
pos terminals at customer’s convenience.
With this, it is stated the bank achieved the objective set at the beginning and there is also a
problem that even if the bank had some advertisement to initiate use of pos by merchants they
are resistant to accept and participate in the propagation of pos use to customers. There by the
pos is limited in distribution around market area of business centers. And also the chance of
getting pos terminals was low because of high cost of the machine to place everywhere near to
every market area.
Table 4.4.5: How do you express your satisfaction on visa card?
Respondents
Types of response
No. %
Very satisfied 6 15%
satisfied 14 35%
Less satisfied 20 50%
Not satisfied 0 0%
Neutral 0 0%
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
As it shown on the item of the table 4.4.5 respondents were asked about their satisfaction on visa
card, 6(15%) of respondents were very satisfied, 14(35%) of were satisfied and 20(50%) were

26
less satisfied respectively. This indicates that the majority of customers are less satisfied on the
visa card of the bank, due to this reason the bank has to improve its visa card implementation.
Regarding improvement and development on visa card service the respondent said that the bank
should make:-
 Need of fast maintenance during the system fail working
 It is better to install VPN(virtual private network)
 The delay on the card production must be solved
 The bank should increase its ATM service all over the country
 The bank increase visa card terminal
 Try to improve the quality of service & accessibility
Source: data collected through open ended questionnaire, On May, 2021
Table 4.4.6: Are there any challenges and causes for the adequate infrastructure?
Respondents
Item
No. %
Yes 40 100
No 0 0
Total 40 100%
Source: Data collected through Questionnaire, On May, 2021
From the above table the entire respondent said that there are many challenges and causes for the
adequate infrastructure these are:

 Power interruption make great challenges to the services

 There is no expansion of network capacity and telecom infrastructure in a small town

 Network interruption

Source: Data collected through open ended questionnaire, On May, 2016

Questions to the employees of the bank has been analyzed as follows

Table 4.4.7: How do you evaluate the contribution of e-banking in increasing customer
satisfaction?

Respondents
Item
No. %
Very extremely helpful 3 30%
Very helpful 6 60%

27
Helpful 1 10%
Less helpful 0 0%
Not helpful 0 0%
Total 10 100%
Source: Data collected through Questionnaire, On May, 2021
As table 4.4.7 show that, 3(30%) of the respondents responded that contribution of e-banking to
wards for customer satisfaction was very extremely helpful, 6(60%) of the respondent responded
that contribution of e-banking to ward customer satisfaction very helpful and 1(10%) of the
respondent responded that helpful. Contribution of e-banking system to ward for customer
satisfaction is very important because system of e-banking encourage the customer to use and
save time and resource wisely. From this the researcher concludes that e-banking system is great
contribution towards for customer satisfaction.
Table 4.4.8: What extent is the attitude of customer towards e-banking system?

Respondents
No. Item
No. %
Extremely high 0 0%
Very high 0 0%
High 2 20%
Medium 6 60%
low 2 20%
Total 10 100%
Source: Data collected through Questionnaire, On May, 2021
As shown in the above table 4.4.8: 2 (20%) of the respondent responded that high, 6(60%) of the
respondent responded that medium and 2 (20%) of the respondent responded that low
respectively .From this the researcher conclude that awareness or attitudes of customer towards
e-banking system was moderate. Attitude of customer towards e-banking system is important
aspect because of that when customer has awareness about e-banking system; they use it to save
their time and relating thing. So the bank has to promote its product to customers to increase
their attitude towards e-banking system.
Table 4.4.9: In what extent the capacity and growth of e-banking?

Item Respondents
No. %
Extremely high 1 10%
Very high 2 20%
High 6 60%
Medium 1 10%
Low 0 0%
28
 Total 10 100%
Source: Data collected through Questionnaire, On May, 2021
The table show that, 1(10%) of respondent suggest that the capacity and growth of e-banking
system were extremely high, 2(20%) of the respondent were suggest that very high, 6(60%) of
the respondents were suggest that high and 1(10%) medium in the capacity and growth.
Currently the capacity and growth of e-banking system user are increase more effective in
Dashen bank Hawassa branch. From this the researcher concludes that the growth of e-banking
system is increasing.

From the above table respondents provided their justification about the capacity and growth of e-
banking these are:

 Online banking is accessible via mobile and phones that have internet access.

 Customers are readily accessing their account from any branch.

 It has avoided technology problems.

 Due to network access and infrastructure problem it is not fully implemented and e-
banking is not widely diversified.

 The main problem of e-banking is network failure

 Its related with the awareness of the customer the bank did not make enough
promotion

Source: Data collected through open ended questionnaire. On May, 2021

Table 4.5: How do you evaluate the level of effectiveness of e-banking activity of dashen bank?

Item Respondents
No. %
Extremely high 0 0%
Very High 6 60%
High 2 20%
Medium 2 20%
Low 0 0%
Total 10 100%
Source: Data collected through Questionnaire. On May, 2021

29
Understanding the level of effectiveness of e-banking system is important .As shown in table 4.5:
6 (60%) of the respondent responded that the level of effectiveness of e-banking were very high,
2(20%) of the respondent were high and 2 (20%) were response medium level in their
effectiveness so e-banking activity in Dashen bank is effective this is due to the user know the
importance of e-banking.

Table 4.5.1: How do you express benefit of e-banking in reducing cost?

Item Respondents
No. %
Very extremely important 1 10%
Very important 9 90%
Important 0 0%
Less important 0 0%
Not important 0 0%
Total 10 100%
Source: Data collected through Questionnaire, On May, 2021
As indicated in the above table,1(10%) of respondent responded that e-banking system were very
extremely important and 9 (90%) were very important in reducing cost.The use of e-banking
system is important and it have different benefits like reducing transportation cost, time, it save
money for cost of employees salary, save money, protect the money from theft and other related
problem.
The question to employees what is the competitive advantage of dashen bank
by providing e-banking service?

Respondents responded that the bank that adopt e-banking system have a competitive advantage
over the banks that give bank service traditionally. The clear justification given by the
respondents are shown below;-

Attracting High Value Customers:-E-Banking services attracts high profit customers with
higher than average income and education levels, which helps to increase the size of revenue
streams of the bank.

Enhanced Image (goodwill): E-banking helps to enhance the image of the organization as a
customer focused innovative organization. This was especially true in early days when only the

30
most innovative organizations were implementing this channel. Despite its common availability
today, an attractive banking website with a large portfolio of innovative products still enhances a
bank’s image. This image also helps in becoming effective at e-marketing and attracting
young/professional customer base.

Increased Revenues: Increased revenues as a result of offering e-channels are often reported,
because of possible increases in the number of customers, retention of existing customers, and
cross selling opportunities. It has also allowed banks to diversify their value creation activities.
E-banking has changed the traditional retail banking business model in many ways, for example
by making it possible for banks to allow the production and delivery of financial services to be
separated into different businesses. E-banking has also resulted in increased credit card lending
as it is as sort of transactional loan that is most easily deliverable over the internet.

Easier Expansion: Traditionally, when a bank wanted to expand geographically it had to open
new branches, thereby incurring high startup and maintenance costs. E-channels, such as ATM
and POS have made this unnecessary in many circumstances. Now banks with traditional
customer base in one part of the country or world can attract customers from other parts, as most
of the financial transactions do not require a physical presence near customers living/working
place.

Load Reduction on staff workers and Other Channels: E-Channels are largely automatic, and
most of the routine activity such as account checking or bill payment may be carried out using
these channels. This usually results in load reduction on staff workers and other delivery
channels, such as branches. This trend is likely to continue as more sophisticated services such as
mortgages or asset finance are offered using e-Banking channels.

Cost Reduction: The main economic argument of e-banking so far has been reduction of
overhead costs of other channels such as branches, which require expensive buildings and staff
presence. It also seems that the cost per transaction of e-banking often falls more rapidly than
that of traditional banks once a critical mass of customers is achieved. The general consensus is
that fixed costs of e-banking are much greater than variable costs, so the larger the customer base
of a bank, the lower the cost per transaction would be.

Organizational Efficiency: To implement e-banking, organizations often have to re-engineer

their business processes, integrate systems and promote agile working practices. These steps
which are often pushed to the top of the agenda by the desire to achieve e-banking often result in
31
greater efficiency and agility in organizations. However, radical organizational changes are also
often linked to risks such as low employee morale, or the collapse of traditional services or the
customer base. In addition, Electronic banking has also helped banks in proper documentation of
their records and transactions.

Source: Data collected through open ended questionnaire. On May, 2021

It has been said regarding the question in the interview what method you are using to
obtain feedback from customer regarding visa card service The Junior officer said that the
branch set opinion box to accept customer complains according to the Junior office there is also
stand by telephone call desk at head officer level that helps customer regarding the following
point:-
 Gather information and supply report to the relevant payment card service.
 Assist card holder facing a problem at ATM.
 Help merchant with they fail to operate the terminal by card holders
 Block loss or stolen cards immediate up on declaration by card holders
 Check the cash position of ATM and notify the relevant cash superior when the
balance in an ATM reaches its minimum.
Source: Data collect through interview. On May, 2021
Question regarding what are the barriers for the adoption of e-banking. The junior officer
classified the barriers in to two these are:

1. Internal barriers (challenges):-as the name implies this type of barriers arise from the
institution or the bank itself. As respondents replied internal barriers are:-

• Lack of technical and managerial skill on the use of technological innovation in the bank.
In dashen bank Halaba city administration there is no technological innovation
department, which works for new technology adoptions to the bank rather than copy the
technology done by other bank or branches.

• Lack of skill to implement E-banking system. As usual employees who do in e-banking

related works in the bank have not special knowledge in e-banking differ from other bank
employees rather than graduate in accounting or other business related field. There are no
employees who have a special knowledge on e-banking employed in the bank.

32
 • Customers of our bank are not familiar with service provided through ATM and POS. the
main reason for this was the banks weakness in introductions services that the bank
provides.

2. External barriers (challenges):-it also called non controllable factors. This type of
challenges arise from external environments or from different parties out the bank and bank
employees like Government, customers, competitors, policy makers etc. As junior officer replied
the external barriers to adopt e-banking services are:-

• The first and the major factor which can affect the adoption of e-banking in banking
industry from an external environment is the low level of ICT infrastructure. Despite the
recent some improvements made by Ethiopian government on the national infrastructure,
the overall ICT infrastructure in Hawassa area remains inadequate. ICT infrastructure in
Hawassa cannot see insolently from over all of the country. ICT infrastructure in Ethiopia
for internet access is not sufficient to use online banking service; Mobile banking
services also not perform well because of network problems. Similarly, an interview
script received from the bank manager indicates that the poor quality of
telecommunication network service is a major obstacle for all banks in Ethiopia to
effectively deliver some services such as internet banking, mobile banking and others.

• High rates of illiteracy: - Low literacy rate is a serious impediment for the adoption of E-
Banking in Halaba or as a whole in Ethiopia that hinders the accessibility of banking
services. For citizens to fully enjoy the benefits of E-Banking, they should not only know
how to read and write but also possess basic ICT literacy.

• Lack of suitable legal and regulatory framework that govern and regulate e-banking
transaction in the country, absence of financial networks that links different banks, Lack
of government initiation or lack of government prioritization , high cost of internet,

• One of the basic barrier a firm faces, while adopting technological innovation is the
perceived risks. Customers fear to use e-banking services. It means that the bank
customers cannot easily interact with the new technology of the bank because of fearing
risk.

• Finally, even though it may be temporary, frequent power interruption is another

challenge that affects the provision of e-banking service among those banks that are
currently providing the service. Therefore, from the above discussion it is possible to
33
 conclude that there are challenges for the adoption of e-banking service among those
banks that are not yet adopted the system and for the sufficient adoption of the service
from the viewpoint of those banks that are currently providing the service in the country.

Source: data collected through interview. On May, 2021

CHAPTER FIVE
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
For the purpose of having a clear picture about service delivery of electronic payment on visa
card, the previous chapter has analyzed the collected data properly. In this chapter the analyzed
data’s were going to be summarized, concluded and possible recommendations for the research
questions would be forwarded.
5.1. Summary of Findings
The following points are significant and should be mentioned based on the study conducted and
the remarks made:-
Regarding the personal information about the respondents was categorized on gender, age,
education level, customer experience, availability of ATM and pos- terminal and customer
satisfaction are summarized below:-
 The Gender of respondents, the number of male respondents 75% of customers and 60%
for employees are the majority of respondents male respectively
 For customers 37.5% of the respondents are found within 18-25 and 26-30 age groups
and for employees 50% of the respondents are within 31-35 age groups.
 Out of the total number of respondents of customers 50% of respondent are first degree
and 100% for the bank employees respectively.
 With regard of customer experience 87.5% of the respondents have better information
about visa card
 75% of the respondents used visa card.
 Regarding the availability of ATM and pos terminal of visa card75% of the respondents
claimed that there is moderate or no enough ATM at their convenience places. This is
also true for the case of pos terminals for which 75% of the respondents witnessed that
the chance of getting pos terminal is low.

34
  From service delivery quality, the most important measurement tools are dependability of
ATM services for visa card. However it has been clearly shown by the study 75% of
respondents said that the service of ATM rated to cash carry is moderate and 25% of
respondents said low.
 Regarding the satisfaction of the respondents 50% of customers were less satisfied.
 It was also indicated that respondents said that the bank has made any effort in searching
for feedback from customers about visa card.
5.2. Conclusions
Based on the data collected and responses collected from the respondent the researcher has
drawn the following conclusions:-
 The bank has made various efforts in promoting the visa card service. However most of
the customers of these services were already using other services of the bank which
shows that the bank was not able to attract more customers from outside.
 The purpose of the card was to make customers carry less cash and thereby reduce theft
or loss of actual currency notes. However the bank has also ignored customer demand to
find ATM machines at their convenience which affects the acceptance and dependability
of the service to general public. This is also true for the case of pos terminals which
shows that the bank has ignored the very purpose of providing acceptance of
convenience.
 The feedback from its customers at branch level, this has made many complaints from
customers on network system, power supply, shortage of changes, machine break down.

 Even though there is some improvement currently, lack of customer awareness regarding
the service of the bank offered is another challenge in order to provide the service.
Therefore, from this, it is possible to conclude that there are challenges for the adoption
of e-banking service among those banks that are not yet adopted the system and for the
sufficient adoption of the service from the viewpoint of the banks that are currently
providing the service in the country.
 Still there is also problem of infrastructure like electric power and network connection it
need fast improvement.
5.3. Recommendations
Dashen bank has made effort in introducing electronic payment of visa card. However, this is not
to say the service is without fail. There are future developments and improvements in the
35
existing services. The existing electronic payments services of the bank have been a best help to
customers but in short of continuous follow up by the bank. The following are among the various
options and can face improving the existing service:-
 The bank has to promote the electronic payment services in a view to attract people from
every walk of life
 The bank should also keep uses of the card services with increase their volume of
transaction and raped installation network system.
 The bank has improve the network and the infrastructure system.
 The bank has to wider availability of post terminals and ATM systems in consideration
with every market places and branches.

 In recent years, due to its convenience, mobile banking and internet banking are the
latest electronic banking channel, so in this context, it is important to the bank to
formulate relevant acts, policies, and adopt operative guidelines
 Because of the E-banking benefits are not limited only to the bank, it is advisable that
other organizations (institutions) collaborate with the bank to adopt e-banking services
and operate it. E.g. by accepting banks POS terminal at places of in wholesale and retail
business shops etc.
 The bank has to strengthen its ICT department through providing training to IT
personnel and procuring required hardware and software. Create separate unit in each
branch for rendering ICT related operational activities under the supervision of the ICT
department. Train all staff in basic ICT related matters in phases.
 Banks that are currently providing the service has to promote the system in order to raise
public awareness on the use of e-banking service.
 Since sufficient power supply is mandatory for the uninterrupted and efficient provision
of e-banking service, therefore, ongoing effort by the government to address adequate
power supply to the country should be encouraged.
 Ongoing efforts by the Ethiopia telecommunication corporation to expand ICT
infrastructure should be encouraged by the government and gradually they should try to
reduce the service charge. Because support banking industry by invest on ICT
infrastructure initiate banks to focus on technological innovation competition rather than
traditional bases of banking competition

36
REFERENCE
 Frederic S. Mishkin. (2004). THE ECONOMICS, MONEY BANKINGAND.

FINANCIAL MARKETS. 7th ed. New York: Wesley

 Stephen G (2006) Money banking and finance markets .American New York, McGraw-

hill company.

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

International Journal of Bank Marketing, Vol. 17 No. 2, pp.72-82

Journal references

 Booz, D., and Hamilton, K. (1997). ‘E-banking: A Global Study of Potential Effects’,
New York, NY.
 (The History of Banking and other Financial Institutions in Ethiopia,

(www.dashenbanksc.com.htm)

 Alhaji Ibrahim H. (2009). Understanding the e-payment system in Nigeria

 Al-Sabbagh, I., and Molla, A. (2004). "Adoption and Use of Internet Banking in the
Sultanate of Oman: An Exploratory Study. “ Journal of Internet Banking and Commerce
9(2): 1-7.
 Business in Ethiopia, Dashen bank payment news, Dashen bank

(www.dashenbanksc.com), retrieved on April, 2010

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

and Challenges’, Journal of internet Banking and commerce
 Isaac Awuondo (2005). The Future of e-Banking in Africa

 Mahdi Salehi(2004). E-Banking in Emerging Economy: Empirical Evidence of Iran

(Corresponding author) Accounting and Management Department, Zanjan University,
Iran
 Mohammad Mizanur Rahman (2008). E-Banking in Bangladesh: Some Policy
Implications.
 Sherah Kurnia, Fei Peng, Yi Ruo Liu, (2005). Understanding the Adoption of Electronic

37
 Banking in China, the University of Melbourne Sherahk@unimelb.edu.au.
 Leow, Hock, Bee (1999). New Distribution Channels in Banking Services, Bankers
Journal
 Chitura T., Chuma W., Dube T and Runyowa L (2008). “Electronic Commerce benefits
and adoption barriers in small and medium enterprises in Gweru, Zimbabwe”, Discussion
Paper University of KwaZulu Natal, South Africa

Website references
 Dashen bank official web site available at: http://www.dashenbank.com
 http://www.epolafrica.org/events/2007/ethiopia

 www.e-payment.com

 www.epolafrica .org/event/2007 Ethiopia

38
 New Global Vision College
Department of Business Administration

Appendix

NEW GLOBAL VISION COLLEGE

COLLEGE OF MBA

PART ONE: ELECTRONIC BANKING CUSTOMERSQUESTIONARIES

This questionnaire is prepared by prospective graduating student from WERABE University to

identify the prospect and challenges of e-banking from customers prospective. The outcome of
the study will help to suggest possible solution for the problems observed. You are kindly
requested to response the questions as reasonable as possible, the researcher assures you that the
response is it kept confidential and for academic purpose only.

Thank you in advance for your cooperation.

Dear respondent for the questions followed write a mark (x) in the space provided

Information regarding respondents back ground

1) Gender male female

2) Age 18-25year 26-30year

31-35 year 36-45year

39
 3) Your educational back ground

12 complete and below certificate

Diploma Bachelor Degree

Master degree

4) For how long have you been served by Dashen bank?

0-2 3-5 6-10 10>

5) What is your occupation?

Student Merchant employee other

6) Have you heard about Dashen visa card?

Yes No

7) If you have not heard why?

I don’t know anything about visa

I don’t know that I can withdraw money outside the bank

Other reason…………………………………………………………………………………

8) Do you use Dashen visa card?

Yes No

9) What is your chance of getting Automated teller machine (ATM) at your convenience
for making cash withdrawals?

Very high High moderate low very low

10) If your answer to question no (9) is low or very low how much has it will affected you?

Very greatly greatly moderately slightly very slightly

40
 11) What is the chance of getting point of sale (POS) terminals at your convenience or your
preferred shopping area?

Very high high moderately low very low

12) How do you express your satisfaction on visa card?

Very satisfied satisfied less satisfied not satisfied neutral

13) Has the bank made any effort to enquire about your opinion of service?

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
…………..

14) What improvement and development you suggest that the bank should make on visa card
service?

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………..

15) Are there any challenges and causes for the adequate infrastructure?

Yes No

16) If your answer from question No (15) is yes or No write your justification?

………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………

41
NEW GLOBAL VISION COLLEGE

COLLEGE OF MBA

PART ONE; ELECTRONIC BANKNIG EMPLOYES QUESTIONNAIRE

This questionnaire is prepared by prospective graduating student from Hawassa University to

identify the prospect and challenges of e-banking from employees prospective. The outcome of
the study will help to suggest possible solution for the problems observed. You are kindly
requested to response the questions as reasonable as possible, the researcher assures you that the
response is it kept confidential and for academic purpose only.

Thank you in advance for your cooperation.

Dear respondent for the questions followed write a mark (x) in the space provided

Information regarding respondent background.

1) Gender Male Female

2) Age 18-25 year 26-30 year
31.35year 36-40 year

3) Your educational back ground.

PHD special training

Master-degree high school

Bachelor-degree Diploma

Other please specify

42
 4) How do you evaluate the contribution of e-banking in increasing customer satisfaction?

Very extremely helpful Very helpful helpfulless helpful not

helpful

5) What extent is the attitude of customer towards e-banking?

Extremely high very high high Medium low

6) In what extent the capacity and growth of e-banking?

Extremely high very high high Medium low

7) What is your justification for question no (6)

…………………………………………………………………………………………………
…………………………………………………………………………………………………
………………

8) How do you evaluate the level of effectiveness of e-banking activity of dashen bank?

Extremely high very high high Medium low

9) How do you express benefit of e-banking in reducing cost?

Very extremely important Very important Important

Less important Not important

10) What is the competitive advantage of Dashen bank by providing e-banking service?
………………………………………………………………………………………………………
………………………………………………………………………

Interview for junior officer

1. Do that the bank achieved

 In terms of expansion of pos terminal and ATM?

43
2. What methods the bank is using to obtain feedback from customer and also the company
going to improve?
3. What are the barriers for the adoption of e-banking?

New Global Vision College

Department of Business Administration

PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF

DASHEN BANK HALABA BRANCH).

By:

44
 June, 2021

SHASHEMENE, ETHIOPIA
PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF
DASHEN BANK HALABA BRANCH).

By:

Advisor: ANDINET ASMELASH (Asst.prof)

A Master’s Thesis Submitted to New Global Vision College, Department of Business

Administration in Partial Fulfillment of the Requirements for Mater Degree in Business
Administration

45
 June, 2021
SHASHEMENE, ETHIOPIA

46
New Global Vision College
Department of Business Administration

PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF

DASHEN BANK HALABA BRANCH).

By:

Approved by Board of Examiners:

__________________ ________________ ______________

Advisor Signature Date

__________________ ________________ ______________

Internal Examiner Signature Date

__________________ ________________ ______________

External Examiner Signature Date

47
PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF
DASHEN BANK HALABA BRANCH).

Master’s Thesis presented by:

()

June 2021

48
 SHASHEMENE, ETHIOPIA

PROSPECT AND CHALLENGES OF E-BANKING (IN CASE OF DASHEN

BANK HALABA BRANCH).

Master’s Thesis presented by:

()

Advisor : ANDINET ASMELASH (Asst.prof)

A Master’s Thesis Submitted to New Global Vision College,

Department of Business Administration in Partial Fulfillment of the
Requirements for Master Degree in business administration

June 2021
49
 SHASHEMENE, ETHIOPIA

50