CHAPTER ONE

1. INTRODUCTION
1.1. BACKGROUND OF THE STUDY
The new millennium brought with it new possibilities in terms of information access and
availability simultaneously, introducing new challenges in protecting sensitive information
from intruders while making it available to others. Today’s business environment is
extremely dynamic and experience rapid changes as a result of technological improvement,
increased awareness and demands Banks to serve their customers electronically. Banks have
traditionally been in the forefront of adapting technology to improve their products and
services (Aladwani 2001).

Cash less banking is defined as act of financial and banking transactions without using bills,
coins or cash .The tremendous competition in the world commercial banks improved the
number of banks in the world. The technological innovations improved customer demand of
services offered by the banks. This revolution has set a motion in the banking sector for the
provision of a payment system that is compatible with the demands of the electronic market
(ArnaboldiandClaeys 2008).
Electronic banking (e-banking) facilities provided by most Ethiopian Banks are very basic.
However e-banking facilities provided are at par with those in the regional states
(Birritu2011). In companies in particular this has invaluable significance to solve problems of
cost and delay, arising from the counting bundling, transporting and depositing of large
volumes of cash, as well as the risk and inconvenience of dealing with counterfeiting and the
treatment of damaged notes. Gemechu (2014) stated that the appearance of e-banking in
Ethiopia goes back to the late 2009, when the largest state owned, commercial bank of
Ethiopia (CBE) introduced automated teller machine (ATM) to deliver service to the local
users.

Gardachew (2010) evaluated the adoption of e-banking in the context of banks perception.
However, this paper investigated the impact of e-banking on the financial performance of the
Commercial Banks hitherto the adoption of e-banking
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High tech banking systems has been introduced and become adapted in the Ethiopian
financial system very recently. Currently, the e-banking services delivered at every corner of
the country are: ATM, Point of Sale (POS), mobile banking and online book transfer.
However, the online book transfer is not considered as transaction by the National Bank of
Ethiopia (NBE). Since June 2011 NBE made mandatory to use electronic banking that enable
banks to provide mobile, internet and card banking services. After the “National Payment
System Proclamation No.718/2011” has been issued all commercial banks operating in the
country are on the way to get the system from different companies (FDRE 2011).
Before the emergence of a modern banking system, banking operations were manually done.
The manual system which involved posting of transactions from one ledger to another
without the aid of computer systems accounted for inefficiency in settlement of transactions.
Computations done manually led to miscalculation due to human errors, and resulted in
extension of closing hours when account were not balanced on time.
The modern e-banking methods like alert, Internet banking, Mobile banking and others are
very new to the Ethiopian banking sector. E-banking which refers to the use of modern
technology that allows customers to access banking services electronically whether it is to
withdraw cash, transfer funds, to pay bills, or to obtain commercial information and advices
are nearly recent years adopted by commercial bank of Ethiopia.

1.2. STATEMENT OF THE PROBLEM

The introduction of e-banking services is considered a breakthrough of the banking industry,
bringing various benefits to both customers and financial institutions. In this era of modern
technology, the implementation of e-banking services plays a significant role in helping
financial institutions to remain competitive and adapt to the recent changes of the market.
According to Robinson (2000), the cost of an electronic transaction is dramatically lower
than the cost of a face-to-face branch transaction. Robinson adds that internet banking
strengthens the relationship between the service provider (e.g. bank) and the customer
because it brings banking services directly to a customer’s home, office or mobile phone.
This creates customer loyalty. The last point the author makes is that online services are a
must for banks that have to compete with a growing number of services from other financial
institutions, investment concerns and insurance companies. The new technology offers a

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 whole new possibility to the banking sector. Furthermore, banking is no longer tied to time
and place. As a result global competition is expected to broaden.

Sheshunoff (2000,) says that the single most important driving force behind the
implementation of full-service internet banking by banks is the need to create powerful
barriers to customers exiting. The author argues that once a customer moves to full–service
internet banking, the likelihood of that customer moving to another financial institution is
significantly diminished. The main reasons for this behavior can be found in the consumer
behavior theory that switching always requires much time and effort from the individual
consumer. The author concluded that the competitive advantage of internet banking for
banks is very significant.
Burns (2000) argues that electronic banking customers are more valuable to banks than
traditional customers.
A number of studies on the impact of financial innovations regarding the performance of the
banking system have been published although the outcomes of the research are contradicting
each other. For instance, the study by Pooja&Balwinder (2009) and Nader (2011) concluded
that electronic banking had insignificant impact on bank performance; in contrast,
The results of the research studies in general agreed that e-banking in Ethiopia is sluggish
and less adaptable (Gardachew 2010).

1.3 RESEARCH QUESTION

In line with the broad purpose statement the following research question will also formulated
for investigation.

Research questions are:

 Is e-banking contributed on profitability of bank?
 Is e-banking has a significant effect on technical and operational performance of bank?
 What are tools of e-banking that CBE used?
 What measure problem is solving by CBE by using e-banking?

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 1.4 OBJECTIVE OF THE STUDY
This study will have the following objectives:-

1.4.1 THE GENERAL OBJECTIVE OF THE STUDY

To assess the impact of cashless banking on banks profitability on Commercial bank of
Ethiopia (case of CBE in Dilla Town).

1.4.2 SPECIFIC OBJECTIVES

 To evaluate the contribution of e -banking on the profitability of bank.
 To identify the e -banking tools using by commercial bank of Ethiopia Dilla town.
 To assess the challenges of e-banking instrument in improving operational and technical
performance of commercial bank of Ethiopia Dilla town.
 To assess the measures taking by the bank in solving its problems.

1.5. SCOPE OF THE STUDY

In order to ensure that the research project is manageable, it is necessary to demarcate the
research. The research will be limited to commercial bank of Ethiopia in Dilla town.
Conceptually this study is confined to assess the impact of cashless banking on banks
profitability of commercial banks in Dilla town.

1.6. Significance of the study

The researcher aim is to investigate the current situations as well as the prevailing problems
and to come up with possible, attainable and relevant solutions. In general the study will
have the following significance.
 To improve the effectiveness of monetary policy in managing inflation and driving economic
growth.
 To avoid the effect of high cash usage which enables corruption, leakages and money
laundering amongst other cash related fraudulent activities to minimize high risk of using
cash which it encourages robberies and other cash-related crimes
 The study will provide an opportunity for the decision-makers and managers of the bank.
 Financial institutions can also benefit from designing and implementing successful
electronics payment system in line with technical and operational performance.

 Moreover the study will serve as additional source for reference and it will also serve as a
spring board for other researchers who want to conduct detailed research on the issue.
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 1.7. Limitation of the study
In conducting this research, the researcher may be faces on the following short comings.

 Shortage of finance
 Time to find relevant research

1.8. Organization of the paper

For the sake of convenience, the sequences of the study will be organized in to five chapters.
Accordingly; the first chapter deals with introduction, which include background of the
study, statement of the problem, objectives of the study, significance of the study, Scope of
study, limitation of the study .The second chapter focuses review of theoretical related
literatures on the study. The third chapter focuses on discussion on research design and
methodology, chapter four will be about data presentation and analysis, fifth and last
chapter will deal with summary, conclusion and based on the theoretical parts collected and
analyzed.

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CHAPTER TWO: 2. LITERATURE REVIEW
2.1. THEORETICAL LITERATURE
In examining the implications of cash-less system, it is necessary to review how conventional
money has evolved over time. Money performs a number of roles in economic activity; it is a
unit of account, store of value, medium of exchange and means of deferred payment. Also,
money has evolved over the centuries to minimize the friction of transaction costs that are
involved in mediating exchange. In fact, the process can be observed from the development of
the very first monetary products. For instance, conducting economic transactions in barter
economies involved high transaction costs as considerable time and effort was required in
finding suitable partner. Subsequently, another facet in the evolution of money was the need
for durability and divisibility. Hence, the advent of study money (notes and coins) made the
process less costly by allowing people specialize in production based on their strengths and
by enabling the monetary authorities to mint coins in convenient denominations, thereby
creating divisibility (Baddeley, 2004).
The theory of Money has its roots in the 16th century during which classical economists such
as Jean Boldin at that time sought to know the cause of the increases in French prices. He
concluded that, among other factors, increases in gold and silver which served as currencies
were responsible for the rise in the demand for French-made goods and, hence, French
prices, thus linking movements in prices to movements in money stock. By the 1690s, the
quantity theory of money was further advanced by John Locke to examine the effects of
money on trade, the role of interest rate and demand for money in the economy
(Omanukwue, 2010). In particular, the role of money as a medium of exchange to facilitate
trade transactions was born. Economists at the time inferred that the quantum of money
needed for such transactions would depend on the velocity of money in circulation and the
relationship between the demand and supply of money such that where there was excess
demand over supply interest rates rose and vice versa (Cantillon, 1755; Locke 1692 as cited
in Ajuzie, et al, 2008). The theory of money has been described by different school of thought
in their different opinions. For example, the modern classical schools of thought who are
also called the monetarist are concerned with the explanation for the changes in price level.
To them, a stable and equilibrating relation exists between the adjustments in the quantity of
money and the price level. In other words, they refute any form of monetary influence on real
output both in the short-and long-run. For the less stringent monetarist, they agree that
6
money influences output in the short-run, but only prices in the long-run. Nevertheless,
irrespective of the path of adjustment, the monetarist all seem to concur that in order to
reduce or curtail inflationary growth, money growth should be less than or equal to the
growth in output. The quantity theory of money is hinged on the Irvin Fisher equation of
exchange that states that the quantum of money multiplied by the velocity of money is equal
to the price level multiplied by the amount of goods sold.

It is often replicated as MV= PQ, M is defined as the quantity of money, V is the velocity of
money (the number of times in a year that a currency goes around to generate a currency
worth of income), P represents the price level and Q is the quantity of real goods sold (real
output). By definition, this equation is true. It becomes a theory based on the assumptions
surrounding it. The introduction of the modern banking system has to a great extent brought
about the gradual elimination of cash based economy in most countries. In Nigeria for
instance, most banks have adopted this cashless policy to form and gain a strong competitive
ground over other banks. There have been several arguments for and against the use of ICT
in the banking system. The arguments for the use of ICT in the banking system are as follows;
(Humphrey et al, 2001) supports the fact that the introduction and use of electronic payment
instruments holds the promise of broad benefit to both business and consumers in the form of
reduced costs, greater convenience and more secure, reliable means of payment and
settlement for a potentially vast range of goods and services offered worldwide over the
internet or other electronic networks. One such benefit is that electronic payments enable
bank customers to handle their daily financial transactions without having to visit their local
bank branch. Electronic payments products could save merchants time and expense in
handling cash (Appiah and Agyemang, 2006).
According to (Cobb, 2005), “electronic payments can thus lower transaction costs stimulate
higher consumption and GDP, increase government efficiency, boost financial
intermediation and improve financial transparency”. She further added that “Governments
play a critically important role in creating an environment in which these benefits can be
achieved in a way that is consistent with their own economic development plans”. However,
experts in the financial sector have stressed that unless something radically

7
Innovative functional and savvy is introduced, which accounts for attitudes as well as the
huge un-banked population, the country's dream of building a functionally cashless society in
the shortest possible time could be elusive (Ackorlie,2009).
Cash less banking is defined as act of financial and banking transactions without using bills,
coins or cash. The mode of transaction involves credit card, ATM card, telephonic and
electronic transfer of fund, internet and mobile banking.
In today’s digital world, technological changes are taking place quickly. These changes act
as stimulus for banks to move towards cashless banking foundations. Various studies
conducted to examine the impact of e-banking, internet banking or mobile banking on banks
profitability. Banks which early introduce Automated Teller Machines (ATMs) have more
market share then competitors, which give them competitive advantage specifically through
cost reduction. ATMs increases bank’s income for longer period. (Dos Santos).
There are numerous theoretical underpinnings that serve as basis to formulate a model to
practice a research. For instance, in determining the performance and profitability of the
bank service employing high tech devices and machines there are four significant theories.
These are innovation diffusion theory; task technology fit theory, theory of planned behavior,
and technology acceptance model. According to (Ajzen 1991), a theoretical framework
guides research, determining what variables to measure, and what statistical relationships to
look for in the context of the problems under study. Thus, the theoretical literature helps the
researcher to identify clearly the variables of the study; provides a general framework for
data analysis; and helps in the selection of applicable research design E-banking can offer
speedier, quicker and dependable services to the customers for which they may be relatively
satisfied than that of manual system of banking. E-banking system not only generates latest
viable return, it can get its better emerged as a result of innovative e-business models.
Abid and Noreen (2006:4) defined it as any use of information and communication and
technology and electronic means by a bank to conduct transaction and have interaction with
stake holders. Services offered by banks using the internet include: Mobile banking, PC
banking, electronic fund transfers, e-payments and ATM cards. Of all e-banking services on
offer, currently technological advancements is broadening the frontier of possibilities in all
human endeavor’s and thus more e-banking services are being developed and introduced.
The rapid spread of information and communication technology (ICT) has made electronic
banking the best channel to provide banking services/products to customers.
8
The quality of online banking services has become a major area of attention among
researchers and bank managers due to its strong impact on business performance,
profitability and customer service delivery. Hence, banks now consider online banking as
part of their strategic plan (Alhaji. A, & Josu. T, 2014:562).
Adoption of ICT has influenced the content and quality of banking operations. From all
indications, ICT presents great potential for business process reengineering of banks.
Investment in information and communication technology should form an important
component in the overall strategy of banking operators to ensure effective performance. It is
imperative for bank management to intensify investment in ICT products to facilitate speed,
convenience, and accurate services, or otherwise lose out to their competitors (Agboola,
2004:19).
The study of Mwangi (2007:31) found that Internet banking has playing great role in saving
costs and has encourage the competition severely, making the banking industry highly
demanded by and critical for customers, decreases operational costs, increases customers’
satisfaction and increase firms overall profile.
A previous study in Joze, Julie & Angela (2002:1607) investigated that the major benefits of
e-commerce adoption not anticipated by the sector are business efficiency, improved image,
competitive advantage, increased automation of processes and increased business turnover.
E–banking has thus become important channel to sell Products and Services; leading to a
paradigm shift in marketing practices, resulting in high performance in the banking industry
(Christopher et al. 2006; Brodie et al 2007; Singhal and Padhmanabhan, 2008). The banking
industry has been undergoing changes since the mid-1990s, in the form of innovative use of
information technology and development in electronic commerce (Kalakota and Whinston,
1996).
This development made e–banking pose as a threat to the traditional branch operations,
despite the fact that electronic commerce is still developing and is rapidly changing (Harris
and Spence, 2002; Turbin et al.; 2002). According to Oz ru et al.; 2010) “The importance of
electronic payment system in any country can never be over emphasized, due to the dramatic
transformation in technological advancements that is being experienced by the global
financial industry”. Now a day’s banks use different schemes so as to satisfy their customer
needs. Among these approach using card banking technology has get a wider concern. In this
regard CBE being a pioneer in introducing ATM has been working day and night towards
9
reaching a full-fledged service. With all ATMs installed at convenient places including
branches, hotels, malls and other public places one can enjoy a 24 hours a day and 7 days a
week service including cash withdrawals, bill payment, forex, fund transfer, mobile top up,
balance inquiry and the like. When compared with the banking industry operated in
developed country, without doubt the banking industry in Ethiopia is underdeveloped and
therefore, there is an immediate need to embark on capacity building arrangements and
modernize the banking system by employing the state of the art of technology being used
anywhere in the world. With a growing number of import export businesses, and increased
international trades and international relations, the current banking system is short of
providing efficient and dependable services (Gardachew 2010).

2.2. TASK TECHNOLOGY FIT (TTF) THEORY

Task technology fit (TTF) theory contends that information technology (IT) is more likely to
have a positive impact on individual performance and be used if the capabilities of the IT
match the tasks that the user must perform (Goodhue & Thompson 1995). Further,
Goodhue& Thompson (1995) mentioned the factors that measure task-technology fit as;
“quality, locatability, authorization, and compatibility, eases of use/training, production time
lines, systems reliability and relationship with users”. Their model is useful in the analysis of
various context of a diverse range of information systems including Effects of E-banking on
financial performance of Commercial Banks in Ethiopia 2015/16electronic commerce
systems and combined with or used as an extension of other models related to information
systems outcomes.

2.3. TECHNOLOGY ACCEPTANCE MODEL

User acceptance remains a barrier to the success of new information technologies (IT). In an
attempt to explain the idea, Davis (1989) introduced Technology Acceptance Model (TAM)
based on the attitude-behavior paradigm from cognitive psychology. Davis (1989,
P.35argues that “people adopt an application primarily because of the functions it
performs and secondarily because of the ease or difficulty associated with making the
system perform these functions”. The model provides a basis for tracking the impact of
external factors on internal beliefs, attitude, and behavior (Davis et al. 1989).
TAM assumes that behavior “the manifest, observable response in a given situation”
Ajzen(1991, P.60) is volitional. Behavioral intention indicates a person’s readiness to
10
perform the given behavior Ajazen (2006), which makes it the main predictor of the actual
behavior. In TAM, intention is a function of attitude and perceived usefulness (PU). Attitude
is “the degree of evaluative affect that an individual associates with using the target system”
(Davis, 1993,p.476). It represents what a person feels about a concept, which may be any
about which persons can think and attach feeling (East 1997).

2.4. Types of Electronic Banking Products

There are a number of electronic banking products. The following are some of the major
types of services coming under e-banking.

2.4.1 AUTOMATED TELLER MACHINES (ATMS)

Rose (1999) describes ATMs as follows: “an ATM combines a computer terminal, record
keeping system and cash vault in one unit, permitting customers to enter the bank’s book
keeping system with a plastic card containing a Personal Identification Number (PIN) or by
punching a special code number into the computer terminal linked to the bank’s
computerized Records, 24 hours a day”. Once access is gained, it offers several retail
banking services to customers. They are mostly located outside of banks, and are also found
at airports, malls, and places far away from the home bank of customers. At the outset they
were function as cash dispensing machines. However, because of the advancement of
technology, ATMs are able to provide a wide range of services, such as making deposits,
funds transfer between two or more accounts and bill payments.

2.4.2 ELECTRONIC FUNDS TRANSFER AT POINT OF SALE (EFTPOS)

Its cost efficient way of yielding higher productivity per period of time than human tellers.
Furthermore, as the ATMs continue when human tellers stop, therefore, there is continual
productivity for the banks even after banking hours.
An Electronic Funds Transfer at the Point of Sale is an on-line system that allows customers
to transfer funds instantaneously from their bank accounts to merchant accounts when
making purchases (at purchase points). A point of Sale uses a debit card to activate an
Electronic Fund Transfer Process (Rose 1999).
Electronic Fund Transfer at Point Sale would provide service for customers to pay cheques
and cash withdrawals for shopping without clerical duties.
11
In addition, the system continues safer banking hours and hence continual productivity for
bank even after bank working hours. In the same development it save the customer time
without going to bank branches and ATMs point.

2.4.3. PERSONAL COMPUTER (PC BANKING) AND INTERNET BANKING

PC banking is a service to bank customers to access information about their accounts via a
proprietary network installed on their personal computer. Once access is gained the
customer can perform a lot of retail banking functions. This service can also have all the
benefits provided by telephone banking and ATMs.
Internet banking offer bank customers access to their bank accounts via a web site and
tenable them to enact certain transactions on their account; by its nature internet banking
put up more convenience and flexibility to customers coupled with a virtually absolute
control over their banking. In other words, customers can have access to their accounts
around the clock, from all over the world; access up to minute information on their accounts;
perform their account transactions electronically with low cost. In the same relation banks
profitability also developed by use of automated e-banking. Hence, banks will offer services
at lower costs and with fewer staff that result in significant reduction in bank costs. Internet
banking, however, has also down sides such as security concerns, insufficient knowledge of
the technology and lack of personal computers by large customer populations.

2.4.4 Mobile Banking

This is a product that offers customers of a bank to access services as you go. Customers can
make their transactions anywhere such as account balance, transaction enquiries, stop
checks, and other customer’s service instructions, balance inquiry, account verification, bill
payment, electronic fund transfer, account balances, updates and history, customer service
via mobile, transfer between accounts etc.

2.4.5 Credit Card

Credit Card 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
12
capacity. This card facilitates the cardholder to purchase goods and services from the
merchant establishments and shops. The credit that is granted is either settled in full by the
end of a specified period, generally a month, or can be settled in part, with the
remaining balance extended as credit. Interest will be charged by the bank on monthly basis
for the credit provided through the card. And service charges also will be collected from the
cardholder for the transaction and processing (Asokan, et. al., 2000).

2.4.6 Debit Card

A Debit Card 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 to use the
debit card, the cardholder must have sufficient balance in his account.

2.4.7 Smart Card

The smart card 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 customers to provide
adequate and timely credit support for their cultivation needs including all purchases.
Customers can use this card wherever they needs. The loan amount sanctioned to the
customer will be recorded in the card. The merchants can sell the goods to the customer
based on the card and they can collect the amount from the local branch of the issued bank
or any other bank (Vassiliou, 2004).

2.4.8 Telephone and PC Banking

This is a facility that enables customers, via telephone calls, find out about their position,
with their bankers merely dialing the telephone numbers given to them by the banks. In
addition, the computers on the phone would require special codes given to the customers as a
means of identification of authentic users before they can receive any information they
requested for. This is a service introduced into the banking balance as a result of computer
13
telephone technology being made available. The technology banking has a universe of
possible application limited only by the imagination. These areas include: Account balance
enquiry; Account statement printing; intra-Banks Account to Account Transfer; inter-banks
Account to Account Transfer; Download Account Transaction, etc (Devamohan, 2002).
Telephone and PC banking brings the bank to the door step of the customer, it does not
require the customer to have his premises; interactive Voice Response becomes a regular
feature of operations; Text-to-speech capability becomes reality; A uniformed messaging
capability become permanent feature of the bank (Vassiliou, 2004).

2.5 EMPERICAL REVIEW LITERATURE

Burns (2000) argues that electronic banking customers are more valuable to banks than
traditional customers.
A number of studies on the impact of financial innovations regarding the performance of the
banking system have been published although the outcomes of the research are contradicting
each other. For instance, the study by Pooja& Balwinder (2009) and Nader (2011)
concluded that electronic banking had insignificant impact on bank performance; in
contrast, Batiz Lazo&Woldesenbet (2006) and Mugenda (2003) stated that electronic
banking had significant contribution to bank performance. It is at the center of such mixed
conclusions that it becomes imperative to carry out a study in Ethiopian context whether e-
banking has effect on financial performance of commercial banks.
The results of the research studies in general agreed that e-banking in Ethiopia
To increasing the customer needs and satisfaction the commercial bank of Ethiopia provide
the following e-banking services, these are ATM Card, mobile banking, internet banking and
mobile and agent banking or CBE Birr. The CBE Birr services starting a past few months
after the National Bank of Ethiopia approved the requests of Commercial Bank of Ethiopia.
The CBE Birr provides the following services, cash withdrawal, Cash deposit, balance
enquiry, statement enquiry or transaction reports, and customer buying goods, buying air
time, and other related services.
The fee gets from ATM in every customer 10 cents if the customer withdraws from the ATM
100 birr to attract the customer and to achieve the vision e –banking them to create a cash
less society should be reduce the tariffs of the ATM

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CHAPTER THREE
3.1. Introduction
Methodology is the way to identify the best and valuable techniques of collecting data for
particular study (Greener, 2008).The research methodology presents the description of the
study area, sources and types of data, methods of data collection, sampling method,
population and sample size and also and methods of data analysis and presentation.

3.2 Research design and Methodology

In the previous part of this chapter, the study presents background, statements of the
problems, research objectives, research question, limitation and scope of the study. To meet
the research objective, it is necessary to develop adequate research design and methodology.
Therefore, in this part the paper will present research approach, data source and type, data
collection and analysis instruments, sampling techniques and sample determination.

3.3. Research Approach

The approach that will be used in this research is a mixed research approach which makes the
use of both qualitative and quantitative approach. According to Kothari (2004:5) the
quantitative approach involves the generation of data in quantitative form which can be
subjected to rigorous quantitative analysis in a formal and rigid fashion. However, qualitative
approach to research is concerned with subjective assessment of attitudes, opinions and
behavior. Research in such a situation is a function of researcher’s insights and impressions.
Interviews will used as the qualitative tool to explore the themes and apply the knowledge
and beliefs of the respondents about the impact of cashless banking on banks profitability of
commercial banks in Dilla town.

3.4. Research Design

Research design is a master plan specifying the method and procedures for collecting and
analyzing the need of information. Research design is needed because it facilitates the smooth
sailing of the various research operations, thereby making research as efficient as possible
yielding maximal information with minimal expenditure of effort, time and money (Kothari,
2004:32). It helps the study to be relevant to the problem and it uses economical procedures.
It specifies which approach will be used for gathering and analyzing the data.
15
The types of research that will be employed under this study will be descriptive. The major
purpose of descriptive research is description of the state of affairs as it exists at present.
Then this study of cashless banking describes and critically assesses the impact on banks
profitability of commercial banks in Dilla town.

3.5. Types of data source

This study aims to the assessment of impact of cashless banking on banks profitability of
commercial banks in Dilla town. The researcher will use both primary and secondary data
for the research. The purpose of using primary source data is to check the extent of the
challenge faced by the banks and also to see possible opportunity for the banks. The primary
data will be considered as a major source of information as it will directly gathered from the
respondents through questionnaires and interviews. It also includes observed social
phenomenon and facts that may be discovered. On the other hand, the researcher will use
secondary sources of information. These include annual report of the bank, manuals and
documents, brushers, from web site, published & unpublished research materials.

3.6 Methods of data collection and data analysis

The method which will be used to collect data for this study will be interview and open and
close ended questionnaire. The interview questions will prepare in structured form and
conduct with the managers and customer services managers of the bank. Likewise,
questioners will be developed in both open and close ended form and will be distributed to
employee of the banks. These data will collect from various sources and using various
collection tools will be analyzed by employing different analysis tools. In this study both
Qualitative and quantitative method will be used. Finally the data obtained from survey will
be analyzed tables, chart and graphics methods.

3.5 Target Population and Sampling methods

In this study, from the total employees, all mangers, and position holder’s ( CSM, Auditor,
Accountant, loan officer) and employee who are assigned in electronic payment department
(VISA,/ATM, Mobile Banking, Internet banking and POS) and 100 customers who are using
at least one of the technology-based service/product of the banks for one year and above will
be selected purposively the researcher believe that they have the ability of providing
16
necessary and ample information and answering of the research questions to meet the
objectives of the study. With regard to the selection of customers, previous studies had
favored non-probabilistic sampling technique and thereby drew their sample from sampling
frame provided by branch offices. It is obvious that each branch offices keep records of its
active customers. However, it is believed in this study that relying on branches sampling
frame is contrary to the very definition of e-banking- banking from everywhere and also due
to the improper sampling frame of branch banks as it lacks the address of customers. Since
customers prefer proximity and speed over loyalty, they are no more confined to a single
branch services. Hence, this study will use convenience sampling method in order to select
100 customers who were available on the day of dispatching questionnaires.

17
4. TIME SCHEDULE AND BUDGET FRAME

4.1 Time Schedule

Description of
Duration Final date Remark
activity

Selected topics Nov 1.2018 Dec 31,2018

Select readers Jan 1.2019 Jan 15.2019

Obtain literature Jan 16.2019 Jan 25,2019

Complete literature Jan 26 ,2019 Jan 31, 2019

Develop research Feb 1.2019 Feb 10,2019

question

Feb 11.2019 Feb 20.2019

Complete draft
proposal

Develop research Feb 21, 2019 Feb 28.2019

method

18
Revise proposal Mar 01.2019 Mar 20.2019

Submit the first draft Mar 21, 2019 Mar 30.2019

Approved proposal May 01,2019 May 10.2019

Collect data May 15.2019 May 20.2019

Analyze data May 21,2019 May 30.2019

Finish first draft Jun 1.2019 Jun 5, 2019

Submit revised draft Jun 10.2019 Jun 15.2019

Defense Jun 18.2019 Jun 20.2019

Approved paper Jun 21.2019 Jun 22.2019

19
4.2 Budget Frame
.
Description of Unit Unit price Total cost Remark
activity

Internet cost 200h 20cents/min 2400

Paper 400 .50cents 200

Pen 10 8 80

Transportation 100 10 1000

cost

Print out 300 2 600

Mobile 20 100 2000

charging cost

Publish paper 3 500 1500

Total cost 7780

20
 Reference
 Ajayi, s.i., &ojo, o.o. (2006).money and banking: analysis and policy in the nigerian context,
ibadan, daily graphics.
 Baddeley, M. (2004). Using E-Cash in the New Economy: Economic Analysis
ofMicropayment Systems, UK Cambridge.Journal of Electronic Commerce Research, 5(4)
 Ernest .S. O., &Fadiya .B. B. (2013). Cashless banking in Nigeria: challenges, benefits and
policy implications, 8(12)
 Siyanbola, T. (2013). The effect of cashless banking on Nigerian economy, 1, Issue 2(9-19).
 Gardachew, W. 2010, "Electronic-banking in Ethiopia: Practices, opportunities and
challenges."Journal of Internet Banking and Commerce
(http://www.arraydev.com/commerce/jibc/). August2015) 15 .
 Ajayi,S.J and Ojo,O.O. (2006). Money and banking:Analysis and policy in the
Nigerian content. Ibadan, daily graphics.
 Akhalumeh.P.B and Ohiokha, F. (2012). Nigeria's cashless economy: the imperatives.
International journal of management and business studies, 2, 31-36
 Banuso, O. a. (2012). Cashless banking in Nigeria: challenges ,benefits and policy
implication. European journal, 8.
 Claudia, G. (2001). Monetary policy in cashless society Brussels,CEPR discussion study.
 Daniel, S. a. (2004). Economic of cashless society: An analysis’s od costs and benefits of
payment instruments.
 Efe, O. H. (2014). Cashless policy and bank's profitability in Nigeria. European journal
of accounting and auditing and financial research, 2.
 Ezejiofor, O. P. (2013). An appraisal of cashless economy policy in the
development of Nigerian economy. Research of journal of finance and accounting, 4.
 Grauwe, C. (2001). Monetary policy in a cashless society. Asian journal of research.
 Grauwe, C. (2001). Monetary policy in in Cashless society Brussels, CEPR discussion
study.
 Grauwe, C. C. (2001). Monetary policy in a cashless society, Brussels. Asina journal of
research
 Grauwe, Claudia C. and P. De. (2016). cashless banking police regime and firm level
performance in Nigeria. Asian journal of research in Banking and Finance.
 J, O. (2002). Payment system and the financial innovations. A paper presented at the
annual conference.
 Laoye, J. (2011). Benefits of cashless economy by experts.
 Lebas, M. (1995). Performance measurement and performance management.
International journal of production economics
 Marco, A. a. (2004). Monetary policy, Monetary areas and financial development
with electronic money, IMF working study.
 Melanthiou, L. D. (2006). Consumer perceptions of risk and uncertainty and the
implications for behavior towards innovative retail services: The case of internet
banking. Journal of retailing and consumer services, 13.
 Mieseigha, E. a. (2013). An empirical analysis of the benefits of cashless economy
on Nigeria's economic development. Journal of finance and accounts.
 Muteteri, N. (2015). Electronic banking and financial performance of commercial banks.
 Sana.H.S, M. K. (2011). The impact of e-banking on the profitability of banks.

21
Assessment of Impact of cashless Banking: on Bank performance of
Commercial Bank of Ethiopia, (in case of Dilla Town.)

A research proposal submitted to the school of post graduate studies of Dilla

University Business and Economics

By: TESHOME WOTATU

ID NO: EMBAF-019/18
SUB. TO: YONAS SENDABA (PhD)

Dilla Ethiopia

June, 2019

Table of Contents

22
 Page

Content

Table of content.................................................................................................................i

List of tables.........................................................................................................................ii

CHAPTER ONE:INTRODUCTION..................................................................................1

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

1.3. Research question.........................................................................................................3

1.4 Objective Of The Study..................................................................................................4

1.4.1 General Objective Of The Study............................................................................4

1.4.2 specific objectives Of The Study..............................................................................4

1.5. Scope of the study.....…………………………………………………………………….......4

1.6. Significance of the study………………...……………………………………………..........4

1.7 .Limitation of the study…………….……….………………………………………..…….…5

1.8 Organization Of The Paper...........................................................................................5

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1.Theoretical Review……………….…………………………………………………..….......6

2.2.TASK TECHNOLOGY FIT (TTF) THEORY ……………………………………............10

2.3 .TECHNOLOGY ACCEPTANCE MODEL .………………………………………..........10

2.4 Types of Electronic Banking Products………..…………………………………..............11

2.4.1 AUTOMATED TELLER MACHINES (ATMS)…………………………………...........11
2.4.2ELECTRONIC FUNDS TRANSFER AT POINT OF SALE (EFTPOS)….................11
2.4.3. PERSONAL COMPUTER (PC ) AND INTERNET BANKING…………………..…12
2.4.4 Mobile Banking………………………………………………………………..………..…12
2.4.5 Credit Card……………………………………………………………………….……..…12
23
 2.4.6. Debit Card ……………………………………………..............................................13

2.4.7. Smart Card………………………………………………………………………..….....13

2.4.8 Telephone and PC Banking………………………………………….……………...…13
2.5 Empirical Review Literature..................................................................................14

3.Research Methodology

3.1 Introduction.............................................................................................................15

3.2.Research Design and methodology.........................................................................15

3.3.Research Approach.................................................................................................15

3.4.research Design......................................................................................................15

3.5,types of Data source...............................................................................................16

3.6. Method of data collection………………………………………………….……….....16

3.7. Target Population And Sampling method…………………………………………....16

4. The cost breakdown and time schedule ….............................................................18

.4.1 Time Schedule.....................................................................................18

4.2.Cost Brakdown…….......................………………………......................20

REFERENCE…………..………………………………………………….….……….......…21

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A

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