ASSESSMENT OF ON CHALLENGES AND PROSPECTS OF

ELECTRONIC BANKING (CASE STUDY IN LION INTERNATIONAL

BANK S.C)

A RESEARCH PROPOSAL SUBMITTED FOR THE ADVANCEMENT OF

ELECTRONIC BANKING IN ETHIOPIA

BUSSINESS ADMINSTRATION DEPARTMENT SCHOOL OF

POSTGRADUATE PROGRAM, SELECT BUSINESS AND TECHNOLOGY
COLLEGE
Name ID. No

1. Aklilu Tadesse 3214/20

2. Biruk Mulugeta 3228/20

3. Tenagne Dejene 3373/20

4. Bereket Berihe 3266/20

5. Mezmur Daniel 3267/20

6. Kidist Haile 1181/20

7. Bizunesh Kebede 2121/18

Advisor: Dr. Solomon

Feb, 2022
ADDIS ABABA, ETHIOPIA

ACRONYMS
 LIB…………………... Lion International Bank

 ATM………………… Automated Teller Machine

 AVR……………….… Automated Voice Response

 E- Banking…………... Electronic Banking

 EFT………….............. Electronic Fund Transfer

 IT………………….…. Information Technology

 PC………………….… Personal Computer

 PIN………………. ….. Personal Identification Number

 POS……………….…. Point of Sale

 PSS…………………... Premier Switch Solution

 SMS…………….…… Short Message Transfer

Table of Contents

CHAPTER ONE 1

INTRODUCTION 1

1.1 Background of the study 1

1.2 Statement of the problem 3

1.3 General Objective 3

1.4 Specific Objectives 3

1.5 Basic Research question 4

1.8 Organization of the study 5

CHAPTER TWO 6

2. REVIEW OF RELATED LITERATURE 6

2.1 Theoretical literature Definition of E- Banking 6

2.2 Empirical literature on Banking 7

2.3 Types of E-banking 7

2.3.1. ATM (Automatic Teller Machine) 7

2.3.2. Telephone Banking 7

1 Operator attended 8

2 Automated 8

3. Home banking 8

4. Internet Banking 8

5 Point-of-Sale Transfer Terminals (POS) – 8

6 Agent Banking Transaction 9

2.4 The Evolution of E-banking 9

CHAPTER THREE 10

3. RESEARCH METHOD AND METHODOLOGY 10

3.1 Research Strategy and Design 10

3.2. Target Population 10

3.3. Sampling Size 10

3.4 Sampling techniques 10

3.5 Data Type and Sources 11

3.6 Data Collections Tools 11

3.7. Method of data analysis 11

3.8. Cost and Time Budget 11

Cost budget11

Time budget 12

REFERENCE 13
 CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Electronic banking is a form of banking in which funds are transferred through an

exchange of electronic signals rather than through an exchange of cash, checks, or
other types of paper documents. Transfers of funds occur between financial
institutions such as banks and credit unions. They also occur between financial
institutions and commercial institutions such as stores. (encyclopedia.com).

E-banking allows customer of a financial institution to conduct financial

transactions on a secure website operated by the institution, which can be a retail or
virtual bank, credit union or building society. Electronic or online banking is the
latest delivery channel to be presented by the retail banks and there is large
customer acceptance rate which means delivery of banking service to customers
using electronic technology either at their office or home. The E-banking offers
massive opportunities in every sphere of business as the competitive advantage;
member client retention increased revenue and reduced costs. (www.quora.com)

As the technology of e-banking prevails, electronic transfer services like Internet

banking, ATM and mobile banking took over the banking system. And many
activities of banks around the globe are handled electronically due to the
acceptance of information technology at home as well as at workplace steadily.

It is evident that bank and other financial institutions in developed and developing
countries are adopting E-Banking. As technology changes, different kind of
electronic banking systems are emerging and being practiced, each bringing a new
dimension to the interaction between user and bank. (Gikandi, 2010) Among these
E- banking facilities, the ATM is the first well- known and widely adopted system
that was introduced to facilitate the access of the user to its banking activities
(Nyangosiet al. 2009). online banking is becoming more sophisticated in the
developing countries that a person can not only withdraw but can also deposit cash
or check in an ATM that accepts deposits for their bank (in countries like Ghana,
Kenya, Nigeria)

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In Ethiopia, Online banking is in its infant stage. Even though, the concept of
online banking implemented in Ethiopia with a single service of SMS message
during late 2008. Nowadays, almost all banks are adopting E- banking system
which is the state of the art. All banks in Ethiopia are too late to move with
technological advancement and they should clearly chart out the time schedule for
their integration and technological advancement. In order to encourage further E-
banking adoption in developing countries, a better understanding of the challenges
and drivers impacting E-banking adoption is critical (Zhao et al. 2008).

Now, when we come to where the study is conducted, Lion International Bank S.C
is a privately owned Share Company, established on October 2, 2006 G.C in
accordance with Proclamation 84/94 and the commercial code of Ethiopia.
Officially inaugurated for public services on January 6,2007 G.C

Vision of the bank

“To be the leading Bank in Ethiopia by 2035” (Annual report 2019/20)

Mission of the bank

“In as much as we are committed for the shareholders’ value, we care for the
satisfaction of the public’s partners, and employees’ needs through service
excellence, innovation, passionately focused team, to the society with qualified and
dedicated staff in a profitable and socially responsible manner.” (Annual report
2018/2019)

Corporate values;

 Integrity

 Teamwork and Diversity

 Social Responsibility

 Innovation and Learning Organization

 Customer Satisfaction

 Employee Satisfaction

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Aside from other activities, the bank provides full-fledged digital banking services
which includes ATM cards, Internet Banking (Mobile banking (transfer, view
balances, transactions and account history, and get mini statements) Agent banking
(a mobile phone service which is available in 5 languages that enables customers to
access Lion hello cash account, deposit and withdraw cash using their mobile
phone)

1.2 Statement of the problem

Within a short period of time, the Internet has moved from an intermittent tool to
one of the significant ways we communicate, entertain ourselves, and do day to
day activities. And all that time we spend online has to come at the expense of
something else. One main advancement technology has brought to us is the
introduction of online banking or E-banking. Traditional banking is characterized
by physical decentralization, with branches scattered around populated areas to
give customers easy geographical access (Ainin et al., 2005). Favoring the
traditional banking, Locket & Littler (1997), physical banks assure customers that
their banks has substantial resource and guarantee the security of their savings.
Technology is changing at a rapid pace making it difficult for both the customer
and the bank to determine the best approach. Particular problems arise with trying
to integrate new channels with legacy channels. It is for these reasons that
academic research is needed in this newly emerging delivery channel (Daniel
&Storey, 1997).

Similarly, in one of the prestigious banks of Ethiopia, Lion International Bank S.C,
which is practicing online banking is also facing challenges such as customer
preference of the online banking facility, very poor connection, trust of the people
in the modern tools, convenience and ability of clients to utilize and adopt online
banking facilities. Though several studies have been undertaken to examine issues
in the wider perspective of Economic and Financial implication online banking,
problem and prospect, comprehensive research in the area of online banking issues
in the specific context of Ethiopia has been rather limited. This study attempted to
identify prospects and influencing challenges inhibiting acceptance of online
banking in Lion International Bank S.C.

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1.3 General Objective

The main objective of the study is to determine the challenges and prospects of e-
banking in Lion International Bank S.C

1.4 Specific Objectives

Specific aims of the study are: -

1. To discover the current e-banking practice of LIB

2. To explore the benefits LIB realized by giving e-banking services to its

customers

3. To determine the major challenges that LIB faces towards adopting e-

banking service in Ethiopia.

4. To forward feasible recommendations on how to improve the E-banking

system in the Lion International Bank.

1.5 Basic Research question

The research will try to answer the following research questions based on the
above objectives: -

1. What are the current e-banking practices of Lion International Bank S.C?

2. What are the benefits Lion International Bank realizing by giving e-banking
services to customers?

3. What are the challenges faced in adopting E-banking system in Lion

International Bank?

4. How to improve the E-banking system in the Lion International Bank?

1.6 Significance of the study

Recently banking industry is rapidly growing in Ethiopia. The overall effect of

electronic banking is not limited to Lion International Bank S.C, but also it affects
the overall economy of the country.

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Therefore, the outcomes and results of this research will have potential value to
financial institutions, particularly banks to understand the challenges and
opportunities related with adoption of new technology and its advantages in
providing service to their customers. In addition, this study is expected to help
other researchers who will be interested to conduct further study regarding the
issue under investigated by providing use full information. Finally Based on the
factors found to be influencing user decision on E-banking, the study may provide
recommendations for banks about changes needed in order to accelerate users ‟
adoption of the services offered through technological innovation.

1.7 Scope and Limitation of the study

With the vast growth of users of digital banking of Lion International Bank, the
users of card banking/ATM reached more than 108 thousand 262 branches. To
make transactions feasible to these users, the bank deployed 69 ATMs in different
areas. Whereas, the number of Mobile Banking users reached 122 thousand and
agent banks reached 2,868 with over 428 thousand customers of the service
(According to LIB’s annual report of 2019/20). The study is conducted in 3
selected branches of the bank. The branches are Main Branch (yeka), Weha Limat
Branch and Arada Branch. The branches are selected under the assumption that
they have a better digital banking experience than other of its branches. The study
involves staffs of the banks’ and users of the selected branches.

We don’t find any limitations of the study at the moment. The difficulties we pass
through doing the research will be our limitation

1.8 Organization of the study

This study will be organized in to four chapters. The first chapter will deal with the
problem and its approach. The second chapter focuses on the literature review
followed by the third chapter that deals with data presentation and analysis.The last
chapter presents the conclusion and recommendation part of the study.

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

The purpose of this chapter is to review the literature in the area of E-banking
Practice and mainly focused on the challenge and prospect of E-banking system.

 Nowadays, banks are increasingly adopting information technology-based

solutions, for providing better services to their customers at a minimal cost. One
way of transforming the traditional banking system is integrating the system
with technology, which enable many banks to introduce different payment
systems. Payment card, POS, Mobile banking internet banking and other E-
banking systems are considerably the fruits of technology in the history of
modern banking. With this highlight, this review of literature establishes the
theoretical frameworks for the study and highlights different frame works used
in different studies.

2.1 Theoretical literature Definition of E- Banking

Electronic banking has been defined differently by different scholars, but they all
have the same meaning rather the difference of word. Let’s see the main definition:

 E-banking refers to electronic banking. E-banking is also called as "Virtual

Banking" or "Online Banking". Online banking can simply be defined as the
process of entering into transactions by a particular client and the bank using
modern technology. With the various capabilities of the computer and other
technological developments (Prin. Dr. Babasaheb Sangale et al June 2003).

 E-banking as the delivery of banks’ information and service by the bank to

customer via different delivery platforms that can be used with different
terminal devices such as PC, Mobile phone with browser or desktop
software, telephone. (Daniel, 1999)

 E- Banking is an enterprise multi-channel online banking solution that

enables Banks to provide full range of banking services and content to
customers with different user profiles, efficiently and reliably. (Miracle
software solution, 2008).

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  E-banking, also known as EFT is simply the use of electronic means to
transfer funds directly from one account to another, rather than by check or
cash (Malak, 2007).

2.2 Empirical literature on Banking

If you use online or mobile banking for your business, you want to be assured that
effective safeguards are in place to make your accounts more secure. Due to recent
regulations, (FFIEC) is providing guidance to banks to increase their vigilance for
business and consumer accounts. Electronic banking system provides easy access
to banking Services. The interaction between user and bank has been substantially
improved by deploying ATM’s, Internet banking, and more recently, mobile
banking (Claessensetal, 2002).

 The main advantages of E-banking are; -

1. The operating cost unit services are lower for the bank.

2. It offers convenient to customers as they are not required to go to the

bank’s premises.

3. There is very low incidence of errors.

4. The customer can obtain funds at any time from ATM machines.

5. The credit cards and debit cards enable the customers to obtain discounts
from retail outlets.

6. The customers can easily transfer the funds from one place to another
place electronically.

2.3 Types of E-banking

There are different types of e-banking. They can be process as with ATM
transactions, home banking transactions, Phone-banking transactions, Internet
transactions, POS transaction and Agent Transaction.

2.3.1. ATM (Automatic Teller Machine)

Automatic teller machines (ATMs) of LIB work 24 hours a day, and are deployed
in 69 different feasible areas of the country in many different places, which makes
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them easy to use. Using an ATM requires an ATM card and a personal PIN
allowing customers secure 24 hours access to banking services such as deposits,
withdrawals, transfers, inquiries about account balances, requests for check books
account statements, direct deposits, etc.

2.3.2. Telephone Banking

By the 1970s consumers were able to use their old system home phones to dial the
phone to check their balance, transfer funds, and pay bills, Telephone banking
allows customers to conduct banking services using the phone from anywhere and
anytime, but its only disadvantage is that it doesn’t involve vision for the
customers while producing their transactions. Customers can knowledge their
balance and listen to the transaction, but with the ability to vision it such as
viewing it on a computer or on a paper will ass more confidence, and evidence to
the customer. The phone banking services can be divided to two types:

1. Operator attended

These functions are for customers who have very complicated inquiries and needs
that can’t be completed through automated services, or who are not comfortable
with automated services, or who have need for services that require high security.
Phone banking is one of the most used and valuable electronic services.

2. Automated

These functions are for the requests that can be executed and solved by the
automated system without the need for human operators.

3. Home banking

The roots of Internet banking can be found in home banking. By the beginning of
1970s home banking was available vie touch-tone telephones, at the time banks
considered this service as home banking even though it involved the use of phones.
Consumers were allowed to pay bills, transfer funds, and check their accounts. By
the mid-1980s banks started to offer home banking services to customers by
allowing them to install software that enabled them to connect to the bank through
a dial up connection.

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4. Internet Banking

Internet banking is conducted by completing bank transactions by directly

accessing the bank through the Internet Nowadays, Internet banking customers can
access many different services online, which makes physical banks open even after
office hours. In means of offline banking is becoming to be online banking while
physical banks are not opened (out of office hours), so customers do not need to go
to the banks or call them any more unless there is an issue that cannot be handled
online. (Dr. Debendra Sagar, 2014).

5. Point-of-Sale Transfer Terminals (POS) –

The system allows consumers to pay for retail purchase with a check card, a new
name for debit card. This card looks like a credit card but with a significant
difference. The money for the purchase is transferred immediately from account of
debit card holder to the store's account (Malak 2007).

6 Agent Banking Transactions

A banking agent or postal outlet contracted by a financial institution or a mobile

network operator to process clients’ transactions. Rather than a branch teller, it is
the owner or an employee of the retail outlet who conduct the transaction and lets
client deposit, withdraw, and transfer fund, pay their bills, inquire about an account
balance, or receive government benefits or direct deposit from their employer.
Banking agent can be pharmacies, supermarkets, convenience store, lottery outlets,
post office, and many more (Wiki for banking agent, 2015).

2.4 The Evolution of E-banking

Innovative banking has grown since 1980, aided by technological developments in

the telecommunications and information technology industry. The early decade of
the 1990s witnessed the emergence of (AVR) technology. By using the AVR
Technology, banks could offer telephone banking facilities for financial services.
With further advancements in technology, banks were able to offer services,
through PC owned and operated by costumers at their convenience, through the use
of intranet propriety software. The users of these services were, however, mainly
corporate customers rather than retail ones (Sohail & shanmugham 2003).

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 CHAPTER THREE

3. RESEARCH METHOD AND METHODOLOGY

3.1 Research Strategy and Design

The research will be carried out by describing the existing E-banking services
situation as it exists because of this the researchers prefer descriptive research
design.

In order to attain the objective of the study and answer the research questions, the
researchers will adopt both quantitative and qualitative (Mixed) research approach.
The rationale of using such a mixed approach is to gather data that could not be
obtained by adopting a single method and for triangulation. Hence, the basis of
such an approach helps to neutralize or cancel the limitations of applying any of a
single approach.

3.2. Target Population

As per to Lion International Bank Annual report of 2019/20, the bank has 262
branches, out of these 176 branches set up with in Addis Ababa. The target
population of the present study consists of 3 branches which are stuff of
individuals working at different level in the head office and branches.

3.3. Sampling Size

The researchers selected three branches (Main Branch, Weha Limat Branch and
Arada Branch) which are located in Addis Ababa. The researchers classify
individuals from three branches of Lion International bank S.C. in to two which
include Employees and customers. These 3 branches have 37 employees and from
these employees 15 of them have E-banking experience and around
5000customers.The questionnaire will be administered to the management of each
by using purposive sampling technique. Purposive sampling represents a group of
different non-probability sampling techniques and it also relies on the judgment of
the researchers when it comes selecting the unit (e.g. people, case, events, pieces of
data) that are studied.

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3.4 Sampling techniques

The researchers use all target populations of employees because employees located
on three target branches are small so no need of selecting samples out of them for
employees the researchers will select 15E-banking experts from Addis Ababa Lion
International bank branches (Main, Weha Limat and Arada Branches). A total of
53 (LIB customers) are selected to participate in the study. We will select
customers that use E-Banking service actively and will use accidental sampling
because to provide full information, quicker and to use small size than other
sampling techniques. Accordingly, 53 customers and 15 employees participated as
samples in the study to fill the questionnaire and answer interview questions.

3.5 Data Type and Sources

In conducting this study, the researchers will make use of both primary data and
secondary data. Primary data it will be collected by distributing questionnaires to
the E-banking customers. Interview will be expected to be conducted with the
professional staffs of E-banking and Information Technology Departments of the
bank. Secondary data, different documents obtained from records and reports of
the industry, from web site, books, broachers, annual reports and magazines,
articles and Journals will be analyzed.

3.6 Data Collections Tools

The methodologies to be used in collecting and organizing the data includes: the
formal techniques namely; Survey, interviews and document analysis. Interviews
will be conducted with professional staffs of E-Banking and Information and
Technology Departments of the bank. Closed and open-ended questionnaire will be
prepared and distributed to selected E-banking users. In addition to this, as one
way of triangulation, observation will be used to check the validity and reliability
of information gathered through questionnaire and interview.

3.7. Method of data analysis

This study will summarize the response of the sample population by grouping
similar responses together to avoid repetition of ideas. Data on the challenges and
prospects of E-banking will be analyzed using simple descriptive statistics like
percentage. Finally, the data will be presented using tables and graphs

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3.8. Cost and Time Budget

3.8.1. Cost budget

To complete the study, the source will be financed from researchers. The money
will be allocated based on different requirement for the study to be completed.

S Item Unit of Amount Unit cost Total

n measure
(Unit) (Birr) Cost(birr
o. ment
)

1 Stationary expense

-Pen 2 10.00 20.00

-Ruler 1 6.00 6.00

-Pencil 1 3.00 3.00

Packs
-Paper 1.5 90 135

2 Printing for soft copy data

and another downloaded Page 25 1.50 37.5
article

3 Printing and typing draft Page 40 4.00 160

4 Travel expense Home- 10 17.00 170

Mexico/d
ay

5 Miscellaneous expense Various Various 150

TOTAL 80.5 681.5

Table 1

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 3.8.2. Time budget

The study would be last for two months in the year 2021. The table gives when
each of the important case will be completed and also shown the weak requirement
along with the size of the research phase.

Activity Jan Feb Mar Apr may

Proposal 
preparation

Data collection and 

screening

Writing
Table 2 and analysis 

Conclude and 
summarized

Finalize paper 

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REFERENCE

 http://www.quora.com/thechallengesof e-banking

 Claessens, J., Dem. V & Vandewalle, J. (2002) “On the security of

Todays online electronic banking systems”.

 Dr. Debendra Sagar(2014), “Importance of E-banking” kaav

publications.

 Malak, J (2007), Readiness of the Palestinian banking sector in adopting

the electronic banking system: exploratory study, MA thesis, The Islamic
University of Palestine.

 Nyangosi, R., Arora, J.S., &Sings.s. (2009). “The Evolution of E-

banking”

 Prin. Dr. Babasaheb Sangale, Prin. Dr. T. N. Salve&Dr. M. U.

Mulani(2013) “Fundamental of Banking”

 Sohail, S & Shanmugham, B (2003), `E-banking and customer

preferences in Malaysia: an empirical investigation, information sciences-
informatics and computer Science’, international journal of banking,
150(3/4):207-217

 Wiki for banking Agent. (2015) {online} Available from:

http://en.Wikipedia.org/wiki/Banking-agent.

 Zhao, et al. (2008), ‘Perceived risk and Chinese consumers' internet

bankin Service Adoption’

 2019/20 Annual Report of Lion International bank

 http://www.encyclopedia.com/meaningandhistoryofe-banking

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