DIRE DAWA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

DEPARTMENT OF MANAGMENT

Assessment of the Practice, Opportunities and Challenges of

E-Banking in the case Commercial Bank of Ethiopia at Dire
Dawa Districts

A Research Submitted in Partial Fulfillment of the

Requirements for the Degree of Masters of Business
Administration (MBA)

Done By:Hana Taye

Advisor:-Mikre Fikadu (Ass. professor )

June, 2023

Dire Dawa, Ethiopia

 Acknowledgement
First, I would like to express my sincere gratitude to my advisor Mikre Fikadu (Ass.prof)
for his valuable comments, corrections and guidance from the inception of my thesis to its
final stage.
Next to my advisor, I would like to express my gratitude to CBE workers who participated
in my research as respondents and who showed me their utmost cooperation and
professional assistance in providing me with valuable data and critical information.
Next, I would also like to express my heartfelt thanks goes to my fellow CBE staffs who
supported me throughout my study. Without your humble support and assistance my
dream could not come true.
Finally my acknowledgment goes to my families, particularly my mother who remains
always on my side in all ventures of my study and beyond.

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 Abstract
This study was intended to assess current practice, opportunities and challenges of e-
banking adoption in Commercial bank of Ethiopia in Dire Dawa district. The study
employed mixed research using qualitative and quantitative methods. The researcher
purposively selected commercial bank of Ethiopia Dire Dawa district due to proximity to
get data and the nature of the organizations research problem similarity. The study
employed random sampling technique to select 237 sample respondents for the study area.
To collect the desired data for the study, the researcher used both primary and secondary
data sources. Primary data were collected using questionnaires distributed to respondents
and secondary data were taken from CBE annual report depository, phone call from Dire
Dawa district HR officer. After, the required data were gathered it is tested and analysed
using Pearson chi-square test and linear regression econometric model. The Pearson chi-
square test result revealed that the null hypothesis that predicts opportunities and
challenges of e-banking adoption had no significant association is rejected. However, the
multiple regression result reveals that opportunistic has a statistical significant positive
relationship at less than 1% with e-banking adoption. However, technological and
strategic challenge shows that a statistical significant negative relationship with e-
banking services at less than 1%. But, organizational and environmental challenges
reveals that statistical insignificant negative relationship with e-banking services. Finally,
the researcher suggested that management body of commercial bank should expand
opportunities of e-banking services. CBE shall expand the e-banking infrastructure in
collaboration with stakholders.t. Again, management body of the bank and employees
should strive to increase number of customers who are using e-banking services to
increase profitability of the bank.

Key words: - Current practice, Opportunities, Challenges, e-banking adoption & Dire
Dawa District

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 Table contents
Table of Contents…………………………………………………………….……pages

Acknowledgement...............................................................................................................

Abstract...............................................................................................................................

Table contents....................................................................................................................iii

List of Tables....................................................................................................................vii

List of Figures..................................................................................................................viii

Abbreviations/Acronyms...................................................................................................ix

CHAPTER ONE.................................................................................................................

1 Introduction.....................................................................................................................

1.1. Background of the Study.............................................................................................

1.2. Statement of the Problem............................................................................................
1.3. Objectives.........................................................................................................................
1.3.1 General Objective...........................................................................................................
1.3.2 Specific Objectives.........................................................................................................
1.4. The Hypothesis of the study.............................................................................................
1.5. Significance of the study..................................................................................................
1.6. Scope of the Study............................................................................................................
1.7. Limitation of the Study.....................................................................................................
1.8. Organization of the Study.................................................................................................
1.9. Definition of Terms..........................................................................................................
CHA PTER TWO.............................................................................................................

2. LITERATURE REVIEW...............................................................................................

2.1. Introduction.......................................................................................................................
2.2 Theoretical literature review..............................................................................................
2.2.1. The Concept of E-Banking.........................................................................................10
2.3. Types of E-Banking........................................................................................................11
2.3.1. Plastic cards.................................................................................................................11
2.3.2 Automated Teller Machines (ATM).............................................................................12
2.3.3 Point-of-Sale Transfer Terminals (POS)......................................................................12

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2.3.4. Mobile banking............................................................................................................12
2.3.5. Tele-banking................................................................................................................12
2.3.6. Internet Banking..........................................................................................................13
2.4. Customer Satisfaction in E-Banking..............................................................................13
2.5. Benefits of Mobile Banking............................................................................................14
2.6. Trust in E-Banking.........................................................................................................14
2.7. E- Banking Practice in the Ethiopian Commercial Banks..............................................15
2.8 Challenges of E- banking.................................................................................................16
2.9. Opportunities of E-banking for the Customers...............................................................19
2.10. Empirical Reviews........................................................................................................20
2.11. Literature Gap........................................................................................................22
2.12. Conceptual Framework.................................................................................................23
CHAPTER THREE..........................................................................................................24

3. RESEARCH METHODOLOGY.................................................................................24

3.1. Introduction.....................................................................................................................24
3.2. Description of Research area..........................................................................................24
3.3. Research Design.............................................................................................................24
3.2. Research Approach.........................................................................................................25
3.3. Target Population............................................................................................................25
3.4. Sampling Techniques and Sample Size..........................................................................26
3.4.1. Sampling Techniques...................................................................................................26
3.4.2. Sample Size.................................................................................................................27
3.5. Data Sources and data types...........................................................................................27
3.6. Data Collection Tools and Methods...............................................................................28
3.7. Data Analysis Method....................................................................................................28
3.8. Model specification with variables.................................................................................29
3.9. Reliability and Validity...................................................................................................30
3.10. Ethical Considerations..................................................................................................31
CHAPTER FOUR.............................................................................................................33

4. Data Analysis and Presentation....................................................................................33

4.1. Introduction................................................................................................................33

4.2. Demographic Characteristics of Respondents................................................................33

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4.3. Reliability and Validity Test...........................................................................................35
4.3.1. Reliability Test.............................................................................................................35
4.3.2. Validity Test................................................................................................................36
4.4. Current Practice of Electronic Banking Service in the District......................................37
4.5. Opportunities of Adoption of Electronic Banking..........................................................38
4.5.1. Opportunities of Adoption of Electronic Banking.......................................................38
4.5.2. Association between Opportunities and E- banking Adoption....................................39
4.6. Challenges of Adoption and Growth of Electronic Banking Service.............................40
4.6.1. Organizational Challenges of E-banking adoption......................................................41
4.6.2. Technological Challenges of E-banking adoption.......................................................43
4.6.2.1. Association between Technological Challenges and E- banking Adoption.............44
4.6.3. Environmental Challenges of E-banking adoption......................................................45
4.6.4. Strategic Challenges of E-banking Adoption..............................................................47
4.6.5. Benefits of Adoption of E-banking Service.................................................................48
4.6.6. Key Challenges of E-banking Services.......................................................................49
4.7. Econometric Analysis.....................................................................................................50
4.7.1 Post-estimation Diagnosis Test.....................................................................................50
4.7.2. Linearly Test................................................................................................................52
4.7.3. Heteroscedasticity Test................................................................................................53
4.7.4. Multicollinearity..........................................................................................................54
4.8. Multiple Linear Regression Model Result......................................................................55
4.9. Discussion of the Standardized Beta Coefficients result................................................58
4.9. Discussion of the Un Standardized Beta Coefficients result..........................................60
4.10. Results of Hypothesis Test...........................................................................................61
CHAPETER FIVE............................................................................................................62

5. Conclusion and Recommendations...............................................................................62

5.1. Introduction.....................................................................................................................62
5.2. Summary and Conclusion...............................................................................................62
5.3. Recommendations...........................................................................................................64
5.4. Suggestions for future research......................................................................................65
REFERENCES.................................................................................................................65

APPENDIXES..................................................................................................................69

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List of Tables
Table 3. 1 Sample size determination....................................................................................27

Table 4. 1 Respondents characteristics..................................................................................32

Table 4. 2 Cronbach’s alpha for each variable......................................................................34
Table 4. 3 Current E-banking Users in the District...............................................................36
Table 4. 4 Opportunities of E-banking Adoption..................................................................37
Table 4. 5 Chi-Square Tests...................................................................................................38
Table 4. 6. Organizational Challenges of E-banking adoption..............................................40
Table 4. 7 Chi-Square Tests...................................................................................................41
Table 4. 8 Technological Challenges of E-banking adoption................................................42
Table 4. 9 Environmental Challenges of E-banking adoption...............................................44
Table 4. 10 Chi-Square Tests.................................................................................................45
Table 4. 11Strategic challenges.............................................................................................45
Table 4. 12 Chi-Square Tests.................................................................................................46
Table 4. 13 Adoption of E-banking adoption........................................................................47
Table 4. 14 Key challenges of E-banking adoption...............................................................48
Table 4. 15 Multicollinearity test...........................................................................................53
Table 4. 16 Multiple Regression Result on current practice, opportunities, and Challenges
of E-banking adoption...........................................................................................................54
Table 4. 17 ANOVA Regression on current practice, opportunities and Challenges of E-
banking adoption...................................................................................................................55
Table 4. 18 Regression Coefficients......................................................................................56

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List of Figures
Figure 2. 1 Conceptual Framework.......................................................................................23

Figure 4. 8 Tests of Normality...............................................................................................50

Figure 4. 9 Tests of Linearity................................................................................................51
Figure 4. 10 Tests of Heteroscedasticity................................................................................52

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Abbreviations/Acronyms
ATM= Automatic Teller Machine
CBE= Commercial Bank of Ethiopia
CSI= Cyber Security information
E-Banking= Electronic Banking
ETCO= Ethiopian Tele Communication Corporation
ICT= Information communication Technology
POS= Post of sales system
PIN=Personal Identification number
NBE= National Bank of Ethiopia
SMS= Short Message Service
TOE= Technology Organization Environment
WAP= Wide Area program

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 CHAPTER ONE
Introduction
1.1. Background of the Study

The advancement of Information and Communications Technology has led to the

proliferation of electronic-based banking products as an alternative channel for routing
banking services to customers. Electronic banking (e-banking) has changed the face of
commercial banking in recent times by bridging geographical, industrial and regulatory
gaps as well as creating innovative products and services and more market opportunities
for both banks and customers (Khan and Karim, 2010). Today, the world is becoming a
global village, given the growing complexity of business portfolios and expansion of
business groups, and the increase in decentralization in response to these changes. Thus,
electronic banking services have been gaining ground around the globe. This offers
banking industry a new leading edge of opportunities and challenges in the global banking
market.

Hence, the current business environment of today requires the use of information
technology for both financial and non-financial sectors. Financial institutions ate the first
to adopt and use the growing information and communication technologies. To keep up
with the current business environment, the banking industry shifts their way of payment
from cash based to an electronic payment system. The term "electronic payment system"
referred to a method of making payments online using electronic devices. The availability
of an electronic payment system has numerous advantages for both the banking sector and
its clients in terms of accessibility, cost, and time (Chavosh 2011).

Banking is a service industry that extends financial services to its customers. Since, the
main area of operation of a bank is very different from the area of operation of a
manufacturing concern or a trading concern, the norms for the customers and the
expectations of the customers are also different from those of the consumers of public
utilities and industrial product (Subathra, 2015).

The existence of internet service can create an opportunity to serve customers worldwide
without borders; in other words, it enables us to communicate with anyone without having
to physically contact them or spend a lot of time in doing so. Internet used not only for

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searching information, education, communication channels and entertainment but also it
uses as a source of income for the community (Anitha, 2012).

Again, the banking industry is being reshaped by globalization, competition and

innovation and customer needs. Due to the emergence of a knowledge-based economy and
society as information and communication technology (ICT) advanced, banking services
have undergone profound changes during the previous years (Sisay and Muvva, 2011).

Hence, e-banking is a term used for new age banking system, represents an automated
delivery of new and traditional banking products and services directly to customers
through electronic, interactive communication channels (Imola and Claudia, 2014). It is a
service that provides customers the opportunity to gain access to their accounts, execute
transactions, and obtain information on financial products and services through a public or
private network, including the internet (Imola and Claudia, 2014).

Further, e-banking service encompasses the provision of banking services and products by
banks to their customers through electronic device. The definition also extends to the use
of information and communication technology (ICT) by banks to provide services and
manage customer relationship more quickly and most satisfactorily. It also covers both
computer and telephone banking services provided to customers. For many banks,
inclination to e-banking services improves customer services while closely welding
customers to the bank. The adoption of e-banking is also seen as a new method of
expanding customer base and to also counteract the aggressive effort made by traditional
banking institutions. E-banking allows customers to inquire information and carry out
most banking services such as account balance inquiry, bill-payment and inter-account
transfers through the internet. E-banking, therefore, includes systems that enable financial
institutions, customers, individuals and businesses to access accounts, transact business,
and obtain information on financial products and services through public or private
networks (Bismark et al, 2015).

However, providing the service through e- banking is highly challenged by lack of

specialists and convenience to use the service for customers with the adequate
technological skills to build the infrastructure are among them. Again, several studies
conducted related to the research topic in Ethiopia reveals that unavailability of network
connection throughout the country; inadequacy of reliable and secure information
infrastructure especially telecommunication infrastructure; sluggish ICT penetration in

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banking sector; insufficient legal and regulatory support for E-banking etc. are the major
current challenges of E-banking in the country. Researchers have indicated that when
banks increase their service quality level to customers to create effective satisfaction
among them increases their profitability (Mutunga, 2013).

There are several operational challenges facing the implementation of e-banking by banks
and others due to customer’s perception, which are; failure of top management
commitments, operational and reputational risks, low skilled ICT personnel, unclear and
lack of good ICT policy in the country that favor conducive environment for banks under
study, perceived usefulness and ease of use of e banking products by customers, the level
of IT literacy of the users, cost of infrastructure among others. These factors can be a
challenge if not well addressed by the parties concerned and in most cases the operations
department is most affected because implementation process takes place within the
department (Mutunga, 2013; Fetu,2019).

The rapidly growing information and communication technology is knocking the front
door of every bank in the world, where Ethiopian banks would never be exceptional.
Electronic Banking has been widely used in developed countries and is rapidly expanding
in developing countries. In Ethiopia, electronic payment systems are at an evolving stage.
In the face of rapid expansion of electronic payment systems throughout the developed
and the developing world, Ethiopia’s financial sector cannot remain an exception in
expanding the use of the electronic banking system (Fetu, 2019).

Even though expansion of e- banking throughout the developed and the developing world
is rapid, Ethiopia’s financial sector remain behind in expanding the use of the service.
Certainly, the banking industry is not well developed with a growing number of
international trades; increase the demand of the customer and international relations. The
today’s banking system has problems of offering efficient and dependable services
(Worku, 2010:9).

Another similar study conducted by Megersa (2010) reveals that there exists number of
challenges which commercial banks operating in Ethiopia are facing in the provision of
electronic banking services. One of the major hindrances is lack of appropriate
technological infrastructure to support the service. The financial institutions also argue
with internet challenges including its congested connection, security and quality of service
to customers.

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Therefore, Ethiopian banking sector entered in to electronic based banking service to
customer in order to bring efficiency in operation by minimizing operating cost thereby
increasing customer satisfaction and profitability. Thus, the state owned Commercial bank
of Ethiopia is pioneer in introducing electronic banking service in the country with eight
ATMs machine in 2001 in Addis Ababa and then followed by Dashen Bank. However,
currently almost all public and private banks in the country are providing their customer
service through e-banking (Abbasi, 2001). Therefore, this study was designed to assess
what are the possible challenges and opportunities of providing e-banking service to
customers in practice by commercial bank of Ethiopia in Dire Dawa district.

1.2. Statement of the Problem

The advancement of technology and information technology in the 21 st century has
transformed many of the traditional banking operation and now dominated competitive
atmosphere of the financial sector in order to use the new technologies. This leads
stakeholders and managers in the financial sector to device methods and techniques of
handling competition globally through transformation of the financial sector. Thus, the
benefits of e-banking to the institutional banks includes; lower transaction costs as e-
banking requires less paperwork, less staffs and physical branches. Further, E-banking
may lead to higher level of customers’ satisfaction and retention in using the technology
(Mutunga, 2010).
However, though e-banking services has a paramount advantages; it has also its own
limitations. For example, financial sectors ability to adopt and utilize web technology
capabilities is one barrier to electronic commerce, and may include management attitudes,
resource constraints, and knowledge issues on new technologies. As a result, a study
conducted on e-banking shows negative attitudes among some managers as a major
hindrance (Farhoomand et al., 2010). Negative attitudes cause resistance to change and
lack of management commitment, reducing the company’s resource allocation and
motivation to use the technology. Implementing Web technology as a business channel
requires some additional investment and resources, such as hardware and software.
Shortages of information technology infrastructure remain a critical barrier in some cases
to the continuing growth of online commerce (Gilbert et al., 2009).
Several studies conducted on e-banking services in Ethiopia shows that banks adopted
modern e-banking payment methods such as ATMs, Debit cards, Credit cards, Tele
banking, Internet banking and Mobile banking systems (Beza,2010 & Worku, 2016).

4
However, the findings revealed that e- banking services is its infant stage and required
many improvements to provide efficient and effective services to customers. In addition,
even though there are opportunities for the adoption of e-banking service in the banking
industry, lack of concern or lack of giving priority on the side of the government and the
national bank of the country is the main cause for the low development of e-banking
service in the banking sector.

Henok, 2015 argued that information technology plays a key role in promoting inclusive
financial system as it is the only way to reduce the cost significantly and reach the masses.
But, of it doesn’t mean that technologies are not suitable for financial inclusion due to
affordability, accessibility, security and privacy. It enhances efficiency, offers access to
financial and banking services, generates new opportunities for income generation and
improves governance and gives poor people a voice.

Despite, e- banking services has its own advantage; it is characterized by many challenges
to utilize the service. According to (Bultum, 2014) some of the challenges of e-banking
services are lack of awareness, lack of sufficient skill, inexistence of suitable legal
framework, illiteracy, lack of infrastructure, weak security issue, political instability and
fear of risk are some of the hindrances in E-banking adoption.

Considering the low extent of development of ICT infrastructure in developing countries,

when compared with the developed countries E-banking has not really been able to diffuse
into society given the low rate of internet access in Africa (Banji & Catherine, 2004).

Commercial Bank of Ethiopia, as some private banks in the country, has hugely entered
into the implementation of e-banking but to some extent suffered from problem of e-
banking rejection. So far limited studies have been conducted to analyze practice,
challenges and opportunities of e-banking in Dire Dawa district. Therefore, this research
was conducted to fill the existing gap in relation to practice, challenges and opportunities
of e-banking in the CBE Dire Dawa district. To fill the existing gap in relation with e-
banking services, the following research questions are developed as follows:-

1. What does the present practice of E-Banking look like in CBE?

2. What are the main challenges that affect the adoption & growth of E-Banking in CBE?

3. What are the opportunities for adoption and growth of E-Banking by CBE?

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1.3. Objectives

1.3.1 General Objective

The general objective of the study was assessment of the practice, opportunities and
challenges of e-banking in CBE Dire Dawa district.

1.3.2 Specific Objectives

1. To assess the present practice of Electronic Banking in CBE at Dire Dawa district.

2. To identify the main challenges for the adoption and growth of E-Banking in CBE at
Dire Dawa district.

3. To identify opportunities for adoption and growth of E-Banking in CBE at Dire Dawa
district.

1.4. The Hypothesis of the study

The following are the research hypothesis:

H1: There is a significant association between technological challenges and the current
practice of e-banking in CBE Dire Dawa district.

H2: There is a significant association between organizational challenges and the current
practice of e-banking in CBE Dire Dawa district.

H3: There is a significant association between environmental challenges and the current
practice of e-banking in CBE Dire Dawa district.

H4: There is a significant association between strategic challenges and the current practice
of e-banking in CBE Dire Dawa district.

H5: There is a significant association between opportunities of e-banking and the current
practice of e-banking in CBE Dire Dawa district.

The research will aim to test these hypotheses by examining the relationship between the
independent variables (technological, organizational, environmental, and strategic
challenges as well as opportunities of e-banking) and the dependent variable (current
practice of e-banking in CBE Dire Dawa district).

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1.5. Significance of the study

Since E-banking system is in an infant stage in Ethiopia, by investigating the different

practices, challenges and opportunities for the adoption of this service delivery channel
and by recommending solutions for the identified problems, first of all, this study helps
first banks to provide efficient and effective financial service to their customers by using
this technology and to strengthen their business and attract customers.

Secondly, the finding of this paper have a great importance in filling the knowledge gap
that exists on the customers and the bank on the area of E-banking, it‘s significant and
means of adoption.

Thirdly, it helps to fill significant knowledge gaps about E-banking landscape in Ethiopia;
thereby it gives an insight to researchers and students about the problem and stimulate
further investigation of the issue. Finally for new researchers, this study served as a
standing stone and be a base for theoretical and empirical concept for their further study in
the same title and concept

1.6. Scope of the Study

This research was focused on the practice, opportunity and challenges of E-banking in
commercial bank of Ethiopia at Dire Dawa district. It was conducted in ten branches under
CBE Dire Dawa district. Conceptually; it merely focused on practice, opportunity and
challenges faced by customer of the banks in E-banking practice. It doesn’t include issues
other than the stated concepts and other related issues which are directly related to the
topic of the study.

1.7. Limitation of the Study

This study was conducted in Dire Dawa district CBE out of 30 districts. Hence, since data
were taken only from the specified district from ten branches; the output of this research
was may lack representation of CBE as a whole. The other limitation that was most of the
time peoples are instead of reading things carefully, answering the questionnaire carelessly
this allowed the researcher not get the right idea. Besides the study would have its own
limitation because of sampling techniques employed for the study. Again, since the study
was conducted at CBE; it may not represent the true picture of other public and private
banks working in Ethiopia. The above constrains or limitations are due to shortage of time
and budget to incorporate the limitation study.

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1.8. Organization of the Study

This study organized in to five chapters. The first chapter introduces the reader about this
research work. It presents the background of the organization, background of the study,
the statement of the problem, research questions, general as well as specific objectives of
the research, significance of the study, scope and limitation. The second chapter deals with
theoretical and analytical/empirical review. The third chapter discussed about research
methodology. The fourth chapter analyzed and interpret data and the last chapter included
the conclusion and the recommendations.

1.9. Definition of Terms

Electronic banking: is a blanket term used to indicate a process through which a
customer is allowed to carry out, personal or commercial banking transactions using
electronic and telecommunication network. It is a product offered by banks which
facilitates online banking, with the help of which the customer can have access to the bank
account in just one click. It covers facilities such as fund transfer, checking account
statements, utility bill payments, opening of bank account, locating nearest ATM, obtain
information on financial products and services, applying for loans, etc. using a personal
computer, smartphone, laptop or personal digital assistant.
POS Machine: - POS stands for 'point of sale', describing where purchases are paid for. A
POS machine is a device that adds up purchases and facilitates payment. POS machines
are powerful sales, accounting and stock control tools. POS machines integrate with
EFTPOS machines, which take card and device payments.
ATM: - An automated teller machine (ATM) is an electronic banking outlet that allows
customers to complete basic transactions without the aid of a branch representative or
teller. Anyone with a credit card or debit card can access cash at most ATMs, either in the
Ethiopia or abroad.

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 CHAPTER TWO
2. LITERATURE REVIEW
2.1. Introduction.

The banking industry has undergone significant changes due to the sweeping
developments in information technology. The introduction of internet banking has
revolutionized the industry and allowed customers to perform routine banking transactions
from the comfort of their homes or offices. This chapter aims to explore the concept of e-
banking and its various types, including plastic cards, automated teller machines (ATMs),
point-of-sale transfer terminals (POS), mobile banking, Tele-banking, and internet
banking. Each of these tools/channels has its unique features and benefits, which are
discussed in detail. The chapter explores theoretical and empirical researches previously
conducted in the area and after through exploration of relevant literature I come up with
conceptual framework of my research.

2.2 Theoretical literature review

Information Technology has become a necessary tool in today‘s organizations. Banks
today operate in a highly globalized, liberalized, privatized and a competitive
environment. IT has introduced new business paradigm. It is increasingly playing a
significant role in improving the services in the banking industry. Indian banking industry
has witnessed a tremendous developments due to sweeping changes that are taking place
in the information technology. Internet Banking refers to a system allowing individual
customers to perform banking activities at off-bank sites such as home, office and other
locations via internet based secured networks. Internet or online banking through
traditional banks enable customers to perform all routine transactions, such as account
transfers, balance inquiries, bill payments and stop-payment requests, and some even offer
online loan and credit card applications (Okoye, 2013).
Internet banking is a web-based service that enables the banks authorized customers to
access their account information. It permits the customers to log on to the banks website
with the help of banks issued identification and personal identification number (PIN). The
banking system verifies the user and provides access to the requested services, the range of
products and service offered by each bank on the internet differs widely in their content.

9
The banking industry can kill two birds with one stone that is with help of technology.
Tremendous progress took place in the field of technology which has reduced the world to
a global village and it has brought remarkable changes in the banking industry (Kumari,
2016).

2.2.1. The Concept of E-Banking

The concept of electronic banking has been defined in many ways; Daniel defines
electronic banking as the delivery of banks’ information and services by banks to
customers via different delivery plat forms that can be used with different terminal devices
such as personal computers and mobile phone with browser or desktop software, telephone
or digital television (Daniel, 1999).
According to Abide and Noreen electronic banking defined as any use of information and
communication technology and electronic means by a bank to conduct transactions and
have interaction with stakeholders (Abraham, 2012).
Stan also defined electronic payment as a system of payment whereby transaction takes
place electronically without the use of cash. Magembe BAS and Shemi AP defined
electronic banking (e-banking) is nothing but e-business in banking industry (Daniel,
1999). E-banking is a generic term for delivery of banking services and products through
electronic channels, such as the telephone, the internet, the cell phone, etc. The concept
and scope of e-banking is still evolving.
It facilitates an effective payment and accounting system thereby enhancing the speed of
delivery of banking services considerably (Uppal and Jantana, 2007). Ovia argues that
electronic banking is a product of e-commerce in the field of banking and financial
services (Ovia, 2001). In what can be describe as business to consumer domain for balance
enquiry request for cheque books recording stop payment instruction balance transfer
instruction account opening and other forms of traditional banking service. Banks are also
offering payment services on behalf of their customer who shop indifferent e-shops.
It also known as electronic funds transfer (EFT) is simply the use of electronic means to
transfer funds directly from one account to another, rather than by check or cash.
Electronic banking can also be defined as a variety of the popular services provided by
banks. E-banking is an electronic connection between bank and customer in order to
prepare, an age and control financial transactions (Burr, 1996).

10
2.3. Types of E-Banking
the tools/channels use in executing e–banking include plastic cards (debit cards, credit
cards, prepaid cards), personal computers, telephone, mobile phones, internet, ATM‘s,
POS or point of interaction machines(Morufu and Taibat, 2012). The description of the
above mentioned tools/channels are as follows: -

2.3.1. Plastic cards

2.3.1.1. Debit cards

Debit card is a banking card enhanced with ATM and POS features so that it can be used
at merchant locations. Debit cards allow you to spend only what is in your bank account. It
is a quick transaction between the merchant and your personal bank account. A debit card
is linked loan individual‘s account, allowing funds to be withdrawn at the ATM and point
of sale without writing a check. When using a debit card to pay for goods and services, the
purchase amount is deducted from the cardholder‘s checking account. The types of debit
card include online debit card and offline debit card. With offline debit card, debit is not
made immediately. Benefits of using a debit card include making the payment process at
the checkout counter quicker and more convenient, eliminating the need to carry a Check
book and a lot of cash, using it at locations where personal checks are not accepted, and
reducing the possibility of loss or theft of cash (Okoye, 2013).

2.3.1.2. Prepaid debit cards

These are debit cards not usually linked to a customer‘s account. They must be funded
before being used by cardholders. Prepaid debit cards are identified with such names like
cash cards, value cards, and Naira cards etc. prepaid cards can be used as gift cards
students ID cards, Government payment card, payroll card, Bursary card, insurance cards,
travel cards etc. (Kassahun, 2016).

2.3.1.3 Credit Cards

A credit card is different from a debit card in that it does not remove money from the
user‘s account after every transaction. In the case of credit cards, the issuer lends money to
the consumer (or the user) to be paid to the merchant. A credit card allows the consumer to
11 revolve their balance at the cost of having interest charged. The parties involved in a
credit card transaction include cardholder, card issuing bank, merchant, acquiring bank,

11
independent sales organization, merchant account, credit card association, transaction
network, and affinity partner (Kassahun, 2016).

2.3.2 Automated Teller Machines (ATM)

This is a computerized telecommunications device that provides the customer of a
financial institution with space to financial transaction in a public space without the need
for a human clerk or bank teller. Using an ATM, customers can access their bank accounts
in order to make cash withdrawals and check their account balance. ATM‘s rely on
authorization of a financial transaction by the card issuer or other authorizing institution
via the communications network. Many banks charge ATM usage fees for transactions
(Keshaun, 2016).

2.3.3 Point-of-Sale Transfer Terminals (POS)

The system allows consumers to pay for retail purchase with a check card, 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). Internet / extranet banking-According to Booz, Allen & Hamilton
(1999).
Internet banking‖ refers to systems that enable bank customers to access accounts and
general information on bank products and services through a personal computer (PC) or
other intelligent device (Booz, Allen and Hamilton, 1999).

2.3.4. Mobile banking

can be defined as an occurrence when customers access a bank‘s networks using cellular
phones, pagers, personal digital assistants, or similar devices through telecommunication
wireless networks. It means performing banking activities which primarily consists of
opening and maintaining mobile/regular accounts and accepting deposits; furthermore, it
includes performing fund transfer or cash-in and cash-out services using mobile devices
(NBE Directive, FIS-01-2012).

2.3.5. Tele-banking
Telephone banking service is provided by phone. To access an account it is required to
dial a particular telephone number and there are several options of services. Options
included; Checking account balance, funds transfer between current, savings and credit

12
card accounts Bill payments, Stock exchange transaction receive statement via fax loan
payment information.

2.3.6. Internet Banking

Internet banking means offering banking products and services through the Internet by
banking institutions using a variety of facilities including computer access and other
advanced equipment. Internet banking can also be defined as a service that does not
require in any software or special access to a private network, but it is done through the
Internet. Internet banking allows users to manage financial matters in anywhere around the
world during or outside banking hours. The technology is growing rapidly because
banking institutions in Malaysia are also moving forward in providing services in
accordance with the latest technology. Thus the existence of alternative channels through
bank electronic banking services such as Automatic Teller Machine(ATM), phone
banking, PC banking and Internet banking as a facilitator (Anita et.al, 2012).
In today’s highly technological world, the machine that destroys paper money and
converts it into electronic money is far from reality. But the part on the person interacting
with his or her banking account late at night is becoming more of a reality. The
information super high way has found its way into many homes, schools, businesses, and
institutions. Many people are cruising the Internet each day to obtain information on the
weather, latest sport scores, local news, and many other exciting information. These
people also buy and sell goods on this new media. Consequently, many businesses are
reaching out to customers worldwide using the Internet as its communication channel (Yi-
Jen Yang, 2011).

2.4. Customer Satisfaction in E-Banking

E-banking can offer speedier, quicker and a dependable service 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 dealings with customers (Nupur,
2010). E-banking system, such as ATM, mobile banking, internet banking and others were
not well adopted by Ethiopian banking industry. This is due to low level of ICT
infrastructure and lack of legal frame works at NBE, which can initiate banking industry to
implement the system. The level of security risk associated with E-banking product or
service, such as ATM, internet banking, mobile banking and others, pose different
challenges to different banks. Improvements are required to ensure client confidence. Lack

13
of competition among local and foreign banks is also another challenge for the adoption of
E-banking in the country (Ayana, 2014).

2.5. Benefits of Mobile Banking

A mobile payment service in order to become acceptable in the market as a mode of
payment the following conditions have to be met:
a) Simplicity and Usability: The m-payment application must be user friendly with little
or no learning curve to the customer. The customer must also be able to personalize the
application to suit his or her convenience.
b) Universality: M-payments service must provide for transactions between one customer
to another customer (C2C), or from a business to a customer (B2C) or between businesses
(B2B).The coverage should include domestic, regional and global environments.
Payments must be possible in terms of both low value micro-payments and high value
macro payments.
c) Interoperability: Development should be based on standards and open technologies
that allow one implemented system to interact with other systems.
d) Security, Privacy and Trust: A customer must be able to trust a mobile payment
application provider that his or her credit or debit card information may not be misused.
Secondly, when these transactions become recorded customer privacy should not be lost in
the sense that the credit histories and spending patterns of the customer should not be
openly available for public scrutiny. Mobile payments have to be as anonymous as cash
transactions. Third, the system should be foolproof, resistant to attacks from hackers and
terrorists. This may be provided using public key infrastructure security, biometrics and
passwords integrated into the mobile payment solution architectures.
e) Cost: The m-payments should not be costlier than existing payment mechanisms to the
extent possible. Mobile payment solution should compete with other modes of payment in
terms of cost and convenience.
f) Speed: The speed at which m-payments are executed must be acceptable to customers
and merchants.
g) Cross border payments: To become widely accepted the m-payment application must
be available globally, word-wide (Vishal. et.al, 2012).

2.6. Trust in E-Banking

The Internet has played a key role in changing how we interact with other people and how
we do business today. As a result of the Internet, electronic commerce has emerged,

14
allowing businesses to more effectively interact with their customers and other
corporations inside and outside their industries. One industry that is using this new
communication channel to reach its customers is the banking industry. To gain the loyalty
of customers, you must first gain their trust. That’s always been the case, but on the Web,
where business is conducted at a distance and risks and uncertainties are magnified, it’s
true.(Reichheld and Schefter, 2000).
Online, customers can’t look a sales clerk in the eye, can’t size up the physical space of a
store or office, and can’t see and touch products. They have to rely on images and
promises, and if they don’t trust the company presenting those images and promises,
they’ll shop elsewhere. In fact, when we asked Web shoppers to name the attributes of
retailers that were most important in earning their business, the number one answer was “a
Website I know and trust.” All other attributes, including lowest cost and broadest
selection, lagged far behind. Price does not rule the Web; trust does. When customers do
trust an online vendor, they are much more likely to share personal information. That
information enables the company to form a more intimate relationship with customers,
offering products and services tailored to their individual preferences, which is in turn
increases trust and strengthens loyalty. Such a virtuous circle can quickly translate into a
durable advantage over competitors (Reichheld and Schefter, 2000).
The electronic banking system addresses several emerging trends: customers’ demand for
anytime, anywhere service, product time-to-market imperatives and increasingly complex
back office integration challenges. The challenges that oppose electronic banking are the
concerns of security and privacy of information (Yi-Jen Yang, 2011).

2.7. E- Banking Practice in the Ethiopian Commercial Banks

The history of modern banking in Ethiopia goes back to 1900 when an agreement was
reached in1905 between Emperor Minilik II and Mr.MaGillivray, representative of the
British owned National Bank of Egypt. Currently as per National Bank of Ethiopia
estimates there are 27 private and 2 state owned banks. Out of these 25 banks, the state
owned commercial Bank of Ethiopia (CBE) is the largest and leading bank in financial
operations (Mohammed, 2014).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 and therefore all banks operating in
Ethiopia should recognize the need for introducing electronic banking system to satisfy

15
their customers and meet the requirements of rapidly expanding domestic and international
trades, and increasing international banking services.
Undeniably the largest state-owned bank, Commercial Bank of Ethiopia, is the pioneer in
introducing ATM service for local users in 2001 with its fleet of eight ATMs located in
Addis Ababa. Moreover, CBE has had Visa membership since November 14, 2005
(Gardachew, 2008).

2.8 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 unavailability of a backbone network connecting the whole country;
inadequacy of reliable and secure information infrastructure especially telecommunication
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.
However, in true sense, e-banking includes activities like payment of bills and invoices,
transfer of funds between accounts, applying for a loan, payment of loan instalments,
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 24hour services; ensure increased security and control
over transactions; reduces fraud risk; performs higher volume of 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-

16
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, cost of implementation,
security concerns, lack of expertise, inadequate legislation and consumer acceptance are
the major challenges for the adoption of e-banking in the country’s banking industry.
A.Language Challenge
Language is one of the most important powerful instruments to communicate with the
business partner and conduct a business. All humankind as much as possible it needs to do
anything by their own native language because that is much better than to understand
things in easy way. Otherwise there is certain impact on the economic activity. On the
other side, when it come to the e-payment system instruments such as ATM machine,
point of sale (POS) are provide a service only in a limited language. This creates a
difficulty to use E-payment System.
B. Network Challenges
E-payment system needs a network to provide services to the user. Most of the machines
fails to provide a service because of poor network connection.
C. Frequent Power Interruption
Lack of reliable power supply is a key challenge for smoothly running e-banking in
Ethiopia. Because, E-payment system are power dependent.
D. Lack of Awareness
In order to get E-payment service, first it needs to know how to operate the system. Even
the user also mentioned to that there is a lack of awareness how to use the systems. Even
the banks doesn’t confirmed to that at the time of taking the card.
E. Technological challenges:-According to the study conducted by Babatunde, and
Adebisi (2012) technological challenges include technological aspects such as research
and development activity, automation, technology incentives and the rate of technological
change. They can determine barriers to entry, minimum efficient production level and
influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality,
and lead to innovation. Specifically, this study investigates how technological invention,
advancement in technology, availability of the state of the art technology, nature of
technological changes and diversity of technology affect strategic decisions of
manufacturing firms.

17
F.Organizational challenges: - Daghfous and Toufaily (2009) directed a study on the
achievement and basic calculates selection of E-banking by Lebanese banks. The
exploration was directed on the components that can prompt to achievement the
appropriation of E-banking and alternate variables that can constitute as boundary to its
selection, it concentrate on the authoritative, auxiliary and vital elements which can
quicken or, actually, moderate the reception of this electronic mode. Lebanese market,
with an aggregate of 57 banks, 31 of them work globally and 26 are entirely nearby were
utilized to assemble information. The consequences of their study demonstrates that the
authoritative challenges (bank measure, utilitarian divisions, specialized staff, specialized
infrastructure, thought dangers, leaders' global experience and dominance of
advancement) are challenges which apply noteworthy effect on the reception of E-
banking, among the basic qualities, the outcome established that inner mechanical
environment of the bank is an essential calculate deciding the appropriation of E-banking,
additionally the outcome demonstrates that banks which are creating in the universal scale
will probably embrace E-banking developments. The other expressive contextual
investigation examination led other challenges of implementing electronic banking are
(Gardachew, 2008; Beza, 2011).
Abraham (2012) described that among the common problems known in Ethiopian which
are related to electronic banking few of them are lack of banking services through the web
or other electronic means such as using mobile phone, weak telecommunications, lack of
Internet awareness, broken and slow Internet connections, data and network security and
privacy, lack and limitation of government policies, regulations and e-commerce laws, as
well as legislation to protect workers and to make the Internet secure.
Banking in Ethiopia faces numerous challenges to fully adopt and adopt E-banking
application and seize the opportunities presented by ICT applications in general. Part of
key challenges for e- banking applications are low level of internet penetration and poorly
developed telecommunication infrastructure, lack of infrastructure for
telecommunications, lack of suitable legal and regulatory framework for e-commerce and
e-payment, high rate of illiteracy, high cost of internet, absences of financial institutions
networks that link different banks, frequent power interruption, resistance to changes in
technology among customers and staff due to lack of awareness on the benefits of new
technologies, fear of risk, lack of trained personnel in key areas, tendency to be content
with the existing structures and people may be resistance to new payment systems
(Gardachew,2010).
18
Ayana (2010) explored in his study on “Adoption of Electronic banking system in
Ethiopian Banking industry: Barriers and Drivers” that E-banking system, such as ATM,
mobile banking, internet banking and others were not well adopted by Ethiopian banking
industry. This is due to low level of ICT infrastructure and lack of legal frame work at
NBE, which can initiate banking industry to implement the system. In addition to the
above two basic factors affecting adoption of E banking in Ethiopia, result of the study
also shows that security risk and lack of trust on the use of technological adoption are
other major barriers for the system. The level of security risk associated with E-banking
product or service, such as ATM, internet banking, mobile banking and others, pose
different challenges to different banks. Improvements are required to ensure client
confidence. Lack of competition among local and foreign banks is also another challenge
for the adoption of E-banking in the country. Technical and managerial skills available in
Ethiopian banks for the adoption of E-banking are also limited.
On the other hand, with the service provided though ATM, Internet banking, telephone
and mobile phone by customers, Lack of technical and managerial skills on the use of
technological innovation and Lack of skills to implement E-banking system are considered
as barriers for the adoption of E-banking system. Compared with traditional banking
system, using different technological innovation in banking industry is used to perform
banking activities at lower costs. These issues can be either drivers or barriers. For
instance, if a country has managed to achieve a cost reduction greater than the investment
made in adoption of new technology, then the cost factor can be considered as a driver
rather than as barrier (Bultum, 2014).

2.9. Opportunities of E-banking for the Customers

UNECA and the World Bank are helping developing countries to design national e-
strategies, including e-commerce, via National Information and Communication
Infrastructure plans. According to Tekabe (2016), some of the opportunities of electronic
payment are reduced costs in accessing and using the banking services and increased
comfort and time saving transactions can be made, without requiring the physical
interaction with the bank. Further quick and continuous access to information are the
opportunities. Moreover, corporations will have easier access to information as, they can
check on multiple accounts at the click of a button.

Further, better cash management: E-banking facilities speed up cash cycle and increases
efficiency of business processes as large variety of cash management instruments is
19
available on internet sites. For example, it is possible to manage company‘s short term
cash via internet banks (investments in over-night, short- and long term deposits, in
commercial papers, in bonds and equities, in money market funds). Private customers seek
slightly different kind of benefits from E-banking (Kassahun, 2016).

According to Gardachew (2008) reduced costs in terms of the cost of availing and using
the various banking products and services and the banking transactions can be performed
from the comfort of the home or office or from the place a customer wants. In terms of
speed response of customers can actually wait till the last minute before concluding a fund
transfer.

Finally, fund transfer and withdrawing cash customers can also have mini banks
statements balance inquiry at these ATMs. Through Internet Banking customer can
operate his account while sitting in his office or home. There is no need to go to the bank
in person for such matter- Banking has also greatly helped in payment of utility bill. Now
there is no need to stand in long queues outside banks for his purpose (Bultum, 2014). All
services that are usually available from the local bank can be found on a single website.
The Growth of credit card usage also owes greatly to E-banking. Now a customer can
shop worldwide without any need of carrying paper money with him and banks are
available each day in a week and they are only a mouse click away (Wondwossen
&Tsegai, 2005).

2.10. Empirical Reviews

A number of empirical studies examined the challenges and opportunities of E-banking
service, adoption and implementation in both developed and developing countries in
general and also studies in Ethiopia are available. A brief review of each of different
studies is presented in the following discussions.
The study conducted in Bangladesh on the challenge of E-banking adoption and
implementation by M. M. Rahman (2008). The study result point out that 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 unavailability of a backbone network connecting the whole
country; inadequacy of reliable and secure information infrastructure especially
telecommunication infrastructure; sluggish ICT penetration in banking sector; insufficient
legal and regulatory support for adopting E-banking and so on.

20
Another study conducted by Khalfan et al., (2006) on Factors influencing the adoption of
internet banking in Oman. Data, used in their study were collected using semi structured
interviews and survey questionnaire as well as reviewing some bank documents. The
results of their study provide a Pragmatic picture about the adoption of E-Commerce
applications in the 23 core financial sector domain of Oman. One of the main findings is
that security and data confidentiality issues have been a major challenge. The banking
sector was reluctant to use Ecommerce applications as they felt that transactions
conducted electronically were open to hackers and viruses, which are beyond their control.
Lack of top management support is the other inhibiting factor in the adoption of electronic
commerce applications as per their finding.
Another study conducted by Seyed (2013) on studying the effect of E-Banking on Bank
Profitability; Case Study Selected Asian Countries stated E-Banking as one of the gifts to
human beings by computer technology. The study covers four banks that have adopted
online banking in Asian selected countries between 1990 and 2010 with support of a short-
run co-integration relationship after allowing for the heterogeneous country effect. The
long-run relationship is estimated using a full-modified OLS. By using bank specific and
macroeconomic control variables, the researcher investigate the impact of internet banking
on the return on assets (ROA) and equity (ROE). Accordingly, the results show that
internet banking variable has had a positive effect on the performance of the banking
system.
Another study on E-banking and profitability was done in Nigeria by Abaenewe et al
(2013) investigated the profitability performance of Nigerian banks following the full
adoption of electronic banking system using judgmental sampling method was adopted by
utilizing data collected from four Nigerian banks. The profitability performance of these
banks was measured in terms of returns on equity (ROE) and returns on assets (ROA).
With the data collected, we tested the pre- and post-adoption of E-banking performance
difference between means using a standard statistical technique for independent sample at
5 percent level of significance for performance factors such as ROE and ROA. The study
revealed that the adoption of electronic banking has positively and significantly improved
the returns on equity (ROE) of Nigerian banks. On the other hand and on the contrary, it
also revealed that e-banking has not significantly improved the returns on assets (ROA) of
Nigerian banks. The findings of this study have motivated new recommendations for bank
customers, bank management and shareholders with regard to electronic banking adoption
for banking operations.
21
Study conducted by Wondwossen &Tsegai (2005) on the challenges of E-banking
adoption in selected commercial banks in Ethiopia observed that the following reasons
considered being the hindrance factors for the use of electronic payment system in
Ethiopia. These hindrance factors include, lack of appropriate infrastructure for E-
payment, lack of internet facilities with customer and learning how to interact with bank
website. Moreover, factors that affect adoption of E-banking in the country regarding the
technological factor, organizational factor and Environmental factor.
Another study conducted in Ethiopia on Challenges and Opportunities of Electronic
Banking in Ethiopian Banking Industry by Kassahun (2016) indicated that, the major
challenges Ethiopian banking industry faces in the adoption and development of E-
banking technology are, high cost of implementation of E-banking, lack of customer
awareness, limitation in network infrastructure and internet related support services, low
levels of computer literacy, low level of ICT infrastructure, lack of sufficient government
support, legal and regulatory differences with cross-country security risk and lack of trust.
The study identified operational and services benefits from adopting and developing of E-
banking technology such as increase productivity, reduces paper work, reduce transaction
cost, generate foreign currency, increase reliability and reducing errors as operational
benefits and facilitate development of new products, facilitates marketing and market
access, improve customer service, reduce long queues in banking halls, increase
accessibility of the bank services, create good relation among banks and clients and
encourages price transparency as services benefits
The study on the impact of E-Banking on financial performance in Ethiopia, for the case
of commercial banks is done by Abebaw (2020) and result of the study supports that
Mobile Banking is statistically significant for capital, Non-performing asset, and deposit
performance. 25 ATM banking also has statistical significant effect on profit, capital,
Nonperforming asset, and deposit performance. Similarly, POS tanking has statistical
significant on profit, capital, and deposit performance. Card tanking is also has statistical
significant for profit, Non-performing asset, and deposit performance. The overall result
indicates that IT investment, in this case EBanking services, has effect on Banks major
financial performance. As effect of E-Banking product differ on Banks financial
performance measures to the in magnitude and direction.
The Study conducted by Dula ( 2019) on the E-Banking Service Quality of Ethiopian
Banks depicted that a significant proportion of the sample respondents e-banking services
like POS and Internet banking services potential were not adequately used by customers
22
and the major problem that customers experienced on mobile banking was the lengthy
steps in processing transactions.

2.11. Literature Gap

From the above review literature this paper identified different factor are the challenges of
E-banking and opportunity. Different researchers use different variable that affects E-
banking in different countries. But most of those variables are included in the five major
factors those are organizational challenge, technological and environmental challenge,
strategically challenge And opportunity .This paper used these five major factors as major
factors for the challenges and opportunity of E-banking in the case of Commercial bank
Ethiopia in Dire Dawa in selected branch. All the remaining major factors are parts of the
factors.
The Study conducted by Dula ( 2019) on the E-Banking Service Quality of Ethiopian
Banks depicted that a significant proportion of the sample respondents e-banking services
like POS and Internet banking services potential were not adequately used by customers
and the major problem that customers experienced on mobile banking was the lengthy
steps in processing transactions.

2.12. Conceptual Framework

The conceptual framework explains the path of a research and grounds it firmly in the
theoretical constructs. The overall aim of the framework is to make research findings more
meaningful, acceptable to the theoretical constructs in the research filed and ensures
generalizability. Jabareen 2009 defined conceptual framework as a network or plane of
interlinked concepts that together provide a comprehensive understanding of a
phenomenon.
A Conceptual framework is a hypothesized model identifying the model under study and
the relationships between the dependent variable and the independent variables (Mugenda
& Mugenda, 2006).
A dependent variable is the outcome variable, the one that is being predicted and whose
variation is what the study tries to explain. The independent variables, also known as the
predictor or explanatory variables, are factors that explain variation in the dependent
variable. Assessment of the practice, opportunities and challenges of e-banking in CBE
Dire Dawa district.

23
 The dependent variable in this research is e-banking within the allocated budget and time,
which is the goal of any organizational entity with the mandate of bringing a project to
life. In the case of in CBE Dire Dawa district as per the researcher observation, e-banking
was influenced by the following challenges among others; Technology, Organizationall,
Strategically and Environmental challenges which are the independent variables and the
indicators of the variables are also listed alongside the independent variables as presented
in this figure below.

Independent variables Dependent variables

Technology Challenges

Organizational
H1
Challenges E-banking
Environmental Challenges
H2
Strategic Challenges
H3
Opportunities of E- H4
banking H5
Figure 2. 1 Conceptual Framework

24
 CHAPTER THREE
3. RESEARCH METHODOLOGY
3.1. Introduction
This part of the paper presents the methodology part of my research. In this chapter the
details of research area, background information of the firm under research, the research
design, and the data collection instruments and data interpretation techniques are discussed
in this chapter.

3.2. Description of Research area

Commercial bank of Ethiopia is one of the popular Bank in Ethiopia Established in1942
G.C. It was started work on April 15 1943 with 2 branches and 43 employee. Now a days,
CBE has 30 districts, over 1950 branches and serving with 47,012 employee also having
40,071,243customers. The bank is pioneer to introduce modern banking to Ethiopia and
credited for playing catalytic role in the economic progress and development of the
country. It’s also the first bank in Ethiopia to introduce ATM. From the name and the
time, it serves that we do understand CBE has more responsibility to give quality service
and satisfy its customers. Now a days, banks are competing intensely in highly
competitive environment to provide quality oriented services as per customers’

25
expectations. CBE Dire Dawa district is also one of CBE district. The district has 70
branches and 1,462,090 customers and 1190 employees.

3.3. Research Design

Research design is the blueprint for fulfilling research objectives and answering research
questions (John A.H. et al., 2007:20-84). In other words, it is a master plan specifying
methods and procedures required for collecting and analyzing the needed information. It
ensures that the study would be relevant to the problem and that it uses economical
procedures. There are three major types of research design, namely exploratory
(emphasizes discovery of ideas and insights), descriptive (concerned with determining the
frequency with which an event occurs or relationship between variables) and explanatory
(concerned with determining the cause and effect relationships).
Thus, in this study the researcher employed descriptive and explanatory research design
methods. Descriptive research was used to describe the state of affairs as it exists at
present. However, explanatory research design was employed to see the relationship
between dependent and independent variables to estimate the integrated influence of the
challenges on e-banking. Moreover, the study used cross-sectional data to be taken from
the representative sample respondents at a single point in time from the study area. The
reason for preferring a cross-sectional study was due to shortage of budget and time.
Further, obtaining information from a cross-section of a population at a single point in
time was a reasonable strategy for pursuing many descriptive researches (Janet M. Ruane,
2006:94).

3.2. Research Approach

In order to achieve the desired objectives of the study, the research adopted mixed type of
research approach which comprises both quantitative and qualitative methods. According
to Leedy (1993), quantitative research is impersonally experimental, manipulating
variables and controlling natural phenomena, by constructing hypotheses and testing them
against the hard facts of reality through close ended questions. The qualitative technique
was used for the open ended questions to get the employees subjective assessment of
opinions, behavior and attitudes. It helps in-depth understanding of an individual’s insight
and their suggestions, but the quantitative approach assists the reader to analyze numerical
data that can be observed and associated with the subject matter (Tashakkori & Teddlie,
2003).

26
Tashakkori and Teddlie (2003) described a mixed-method research approach delivers the
chances to find and gain in-depth evidence and answer to the elevated issue or research
question. Therefore, the researcher used both quantitative and qualitative data gathering
method.

3.3. Target Population

According to data taken from CBE it has 30 districts that comprises (more than 1,950
Branches) stretched across the country. However, among these 30 districts operated
throughout the country, this study only considered Dire Dawa district. Therefore, the
researcher conducted this study on a total population of 237 employees who are working
in different branches of the specified district.

Thus, this study was focused on employees working at different managerial position and
all other employees who are responsible for clerical activities in the bank such as: - Branch
Managers, Business managers, Customer service managers, Operation managers, Quality
management & control managers, Senior Quality management & control officers, Quality
management & control officers, Digital banking officers, Senior Banking operation
officers, Senior Banking business officers, Customer relation officers, Banking operation
officers, Banking business officers, Junior officers and Bank trainees.

3.4. Sampling Techniques and Sample Size

3.4.1. Sampling Techniques

Commercial Bank of Ethiopia, Dire Dawa district has 70 branches. In these district the
bank has 319,364 active visa card, 128,845active mobile banking users, active CBE Birr
user 80060, internet banking users 509, 113 POS machines terminal deployed and 103
ATM terminal deployed.
CBE Dire Dawa District have the total of 70 branches and the total of 1190 employees.
Since it is impossible to cover all branches in the district the researcher selected 10
branches out of 70 Branches using simple random sampling. The selected 10 branches
accounts 19% of the total branches and to make it more representative the researcher used
census method to collect data from all employees in the selected 10 branches which are
237 respondents.
This sample size and sampling technique is justified because each of the 70 branches in
the CBE Dire Dawa District has an equal chance of being selected, and the selection of

27
one branch does not influence the selection of another. This technique is appropriate when
the population is homogeneous and there is no reason to suspect that some units are more
likely to be selected than others. By randomly selecting 10 branches out of the total of 70,
the researcher can obtain a representative sample of the population, which in this case is
all the branches of the CBE Dire Dawa District. The fact that the selected 10 branches
account for 19% of the total branches also indicates that the sample is a reasonable
representation of the population. Therefore, the use of simple random sampling is justified
in this case.
The selected branches are Sabin (Grade IV), Dire Dawa main branch (Grade IV), Chiro
(Grade III),Finkile(Grade III), Haromaya(Grade III),Megala (Grade III),Hirna (Grade
II),Bedeno (Grade II), Conel(Grade I),Asebot (Grade I).

3.4.2. Sample Size

Considering the nature of the study and the total population from the selected ten branches
of CBE Dire Dawa district the researcher used census to take the required data from
respondents. A census is applied to take the appropriate data from the 10 branches at the
time where the target population is too few in number. Therefore, means that the
researcher is obliged to sample hence the entire population.

Table 3. 1 Sample size determination

28
 No Branches Employees

1 Sabina (Grade IV) 36

2 Dire dawa main branch (Grade IV) 38

3 Chiro (Grade III) 28

4 Finkile(Grade III) 26

5 Haromaya(Grade III) 29

6 Megala (Grade III) 27

7 Hirna (Grade II) 18

8 Bedeno (Grade II) 15

9 Conel(Grade I) 12

10 Asebot (Grade I 8

TOTAL 237

Source: CBE Dire Dawa District HR database as of Jun 30, 2021/22

3.5. Data Sources and data types

This Study was conducted by collecting data from both primary and secondary
sources.The secondary data were used from CBE Dire Dawa District HR officer and other
concerning body (to assess the existing processes, policies, procedures, forms and
unpublished documents) and also use CBE website to published document related
practice, opportunities and challenges of e-banking in CBE and .
Primary data was collected through questionnaire that include close ended for respondents
and some open ended questions for all employees in the selected branches. In order to
collect sufficient data in order to answer the research questions, researcher was designed
questionnaire survey to get quantified results. The questioner incorporates both open
ended question and closed ended. In addition to questionnaire, secondary data source was
used.

29
 3.6. Data Collection Tools and Methods
Triangulation of data source has a number of advantages that no single source could have.
Carvalho and White (1997) pointed out that integrating methodologies help in
implementing better measurements, confirming, enriching, merging and explaining the
findings resulting in better analysis. White (2002) also indicates that using quantitative and
qualitative approaches together yields. Thus, for the purpose of attaining objectives of the
research and answering research questions, both quantitative and qualitative data was
used. Both primary and secondary data was collected employing the following methods
and tools:
The researcher used research questions on the study which is questionnaire use a five point
likert scale. The likert scale was used where by the respondents were asked to rate a
particular issue on a scale that ranged from strongly disagree to strongly agree. The
rationed scales have a number of choices ranged from a scale of one to five. The scales
used in the questionnaire were based on a 5-point likert scale (with 1= strongly disagree,
2= disagree, 3= neutral 4=agree, 5= strongly agree) for each close-ended question.
The questioner has two parts. Part one contains demographic information of each
respondent and part two was constitute sub sections with closed ended and open ended
items which reflect the identified factors.
The items in the questionnaires comprised of close-ended and open ended items on
assessment of the practice, opportunities and challenges of e-banking. To realize the
purpose of this research, the researcher was collected relevant secondary data from official
websites of CBE and other unpublished materials and direct phone call from CBE at Dire
Dawa district HR personnel and other concerning body with the practice, opportunities
and challenges of e-banking. This help to the researcher to cross checks and validity of the
results of primary data.

3.7. Data Analysis Method

Descriptive analysis was used to identify the background of respondents in the aspect of
age, gender, years of experience, and qualification. In order to analyze the quantitative
data obtained through questionnaire, first the data were tabulated, analyzed and
interpreted by using the appropriate statistical tools (descriptive statistics) like;
frequencies, and mean supported by SPSS software.

30
The research was used SPSS (statically package for social science) software, to analyze
the quantitative data collected from the questionnaire. The data analysis involves
descriptive and statistics.

Descriptive statistics like mean, frequency, and percentage were used to profile sample
characteristics and major patterns emerging from the data. As a result the demographic
characteristics of the respondents are easily visible to the reader.

Inferential statistics was used such as chi-square test has being employed in order to
explain the relationship between the variables, dependent (e-banking ) and the independent
(Technology Challenges,Organizational Challenges,Environmental Challenges, Strategic
Challenges of e-banking and opportunities). Chi-square test allows us how well variables
are related, their strength and direction of the linear relationship and regression analysis
was conducted to assess the influence of Challenges of e-banking.

3.8. Model specification with variables

The researcher used Regression model with SPSS (Statistical Package for the Social
Sciences) to define mathematically the relationship between independent variable and the
dependent variable. The following multiple linear regression equation was used for this
study.

Y = α+ β1X1 + β2X2 + β3X3 + β4X4+ β5X5+ε

Where:

Y is e-banking,

α = α is the regression constant,

β 1 = slope (regression coefficient) for variable X1,

β 2 = slope for variable X2,

β 3 = slope for variable X3,

β 4 = slope for variable X4,

β5=slope for variableX5,

ε= error (or residual) value.

X1 is opportunities

X2 is Technology Challenges,
31
X3 is Organizational Challenges and

X4 is Environmental Challenges,

X5 is Strategically Challenges

Generally, the co-efficient was found using the SPSS 20 version and further result showed
in the data analysis part of study.

3.9. Reliability and Validity

Validity refers to whether we are measuring or what we want to measure (Mooi and
Sarstedt 2011). It is related to research methodology because its primary purpose is to
increase the accuracy and usefulness of findings by eliminating or controlling as many
confounding variables as possible, which allows for greater confidence in the findings of
any given study (Marczyk et al. 2005). To protect the issue of validity the researcher
followed scientific research procedures, every data collected from appropriate information
providers and the collected data was measured by appropriate data analysis tools. Further,
different theories and empirical studies were assessed to assure its validity.

Reliability is the degree to which what researchers measure is free from random error
(Mooi and Sarstedt, 2011) and it is concerned with the consistency or stability of the score
obtained from a measure or assessment over time and across settings or conditions. If the
measurement is reliable, then there is less chance that the obtained score is due to random
factors and measurement error (Marczyk et al. 2005). To improve the clarity and
responsiveness of the questionnaire, before the actual data collection the researcher was
distributed 25 questionnaires for non-sampled staff as a pilot test. Then, after actual data
collection Cronbach Alpha reliability statistics was used to check reliability of the
instruments and the coefficient of the reliability of Alpha.

The data obtains from these respondents were analyzed using SPSS Cronbach's alpha.
According to Zinbarg, (2005) Cronbach's alpha is a coefficient of reliability that gives an
unbiased estimate of data generalizability. The reliability coefficient of 0.7 and above is
recommended.

32
3.10. Ethical Considerations

It could not be ethical to access some confidential documents of the organization.

Therefore, the organization’s code of ethics was taken in to account without significantly
compromising findings of the study.

A policy of secrecy for the employees and managers was adhered as various confidential
data was accessed by the researcher. As the researcher indicate in the questioner at the top
of the heading respondents were informed to not include their name, address, branch
working-in in order to make sure they don’t have any doubts on their identities being
exposed so it can help in getting the required and honest information.

33
 CHAPTER FOUR
4. Data Analysis and Presentation
4.1. Introduction
This chapter presents the results of the research. It is a mixed research where the data was
processed using the help of SPSS software. The outcome of the study is presented in
tables 1-17 accompanied by discussion for important issues relating to the variables
studied. The next section briefly presents how data was examined, prepared and
processed. Then, the descriptive statistics of the variables such as minimum, maximum,
mean, and standard deviation are shown.
This is followed by the presentation and discussion of the effect of key e-banking
adoption and factors affecting and challenging E banking services. Here, before
regression analysis, the chapter presents multiple diagnostics tests made to assure
whether the data organized in favor of the underlying assumptions of regression analysis.
Thus, tests such as normality, linearity, and autocorrelation are presented. The chapter
then presents the results of linear regression and the research hypotheses which are tested
on the basis of the linear regression results.
From the total questionnaires distributed to respondents 237 (100%) were returned. As a
result with 100 % response rate data analysis and presentation were made for the study.

4.2. Demographic Characteristics of Respondents

Table 4. 1 Respondents characteristics
Characterization of respondents Frequency Percent Valid Percent Cumulative
Percent
Sex of Respondents
Male 201 84.8 84.8 84.8
Valid Female 36 15.2 15.2 100.0
Total 237 100.0 100.0
Age of Respondents
18- 25 years 32 13.5 13.3 13.3
Valid 26-30 years 120 50.6 50.6 63.9
31-45years 77 32.5 32.5 96.4
46-60 years 8 3.4 3.4 100.0

34
 Total 237 100.0 100.0
Work Experience
Less than 2 year 12 5.1 5.1 5.1
2-3 years 70 29.5 29.5 34.6
4-5 years 84 35.4 35.4 70.0
Valid
6-10years 44 18.6 18.6 88.6
More than 10 years 27 11.4 11.4 100.0
Total 237 100.0 100.0
Educational Background
Diploma 21 8.9 8.9 8.9
Bachelor’s Degree 188 79.3 79.3 88.2
Valid
Masters 28 11.8 11.8 100.0
Total 237 100.0 100.0
Job Title
Bank Trainee 17 7.2 7.2 7.2
Junior Officers 87 36.7 36.7 43.9
Senior Officers 87 36.7 36.7 80.6
Valid
Customer Service Manager 34 14.3 14.3 94.9
Manager 12 5.1 5.1 100.0
Total 237 100.0 100.0
Source: - Own survey data, 2022
The above table presents characterization of respondents from the study area. From the
total respondents given their feedback for the questioner 201 (84.8%) are males and the
remaining 36 (15.2%) are females. This indicates that from the total respondents included
in the study majority of them are males. When we see respondents based on their age
category 32 (13.5%) of respondents are under the age category of 18-25 years and 120
(50.6%) of respondents are under the age category of 26-30 years. The remaining 77
(32.5%) are under the category of 31-45 years and 8 (3.4%) are under the age category of
46-60 years. This indicates that most of employees of the bank are under the age category
of 18-25 which is in the productive age category of the country.
The other question asked for respondents were work experience. The collected data
showed that 12 (5.1%) respondents had work experience less than 2 years and 70 (29.5%)
respondents had work experience in the district bank from 2-3 years. However, the
remaining 84 (35.4%) had work experience between 4-5 years, 44 (18.6%) had work
experience between 6-10 years and the remaining 27 (11.0 %) had served the bank more
than 10 years. This reveals that most employees in the district are served 4-5 years and

35
more based on the collected data. Hence, most employees in the district are well
experienced to perform their daily duties effectively.
Again when respondents are asked about their educational background 18 (8.6%) are
diploma holders, 167 (79.5%) are bachelor degree holders and the remaining 25 (11.4%)
are Master’s degree holders. This reveals that most of the employees are Bachler’s degree
holders and above in the district. This shows that the district has well educated employees
who can understand different rule and regulations of the bank, strategy, and directives sent
from national bank of Ethiopia.
The last question asked for respondents was about their job title in the bank and 17 (7.2%)
answered that they are working in a position of Bank trainee, 87 (36.7%) are working in a
position of Junior officer, 87 (36.7%) working in a position of Senior officer, 34 (14.3%)
working in a position of Customer service officer and the remaining 12 (5.1%) are
working in management position of different districts of the bank. Thus, the result reveals
that most employees are working in a position of senior officer since their work
experience in the bank is adequate enough to have the position.

4.3. Reliability and Validity Test

This section elaborates on the result obtained from reliability and validity test of the
survey instrument.

4.3.1. Reliability Test

In addition to respondents‟ rate, reliability test has to undertake to measure repeatability
(Bryman and Bell, 2007) and accuracy. Reliability test is essential to measure internal
consistency of scale i.e, the extent to which respondents rate the items in a similar pattern.
Cronbach‟s alpha coefficient is important measurement of reliability, which discussed
below in relation to this study.
Table 4. 2 Cronbach’s alpha for each variable
N Statement NO Cronbach's Alpha Internal
of consistency
Items
1 Opportunities 6 0.718 Acceptable
4 Organizational Challenges 4 0.648 Acceptable

3 Technological Challenges 9 0.882 Acceptable

36
4 Environmental Challenges 10 0.703 Acceptable

5 Strategic Challenges 5 0.779 Acceptable

6 E-banking adoption 8 0.810 Acceptable
Total 41 0.956 Acceptable

Source: Survey data, 2022

Cronbach Alpha coefficient can be between 0 and 1. As a number approach to one the
internal consistency of the items get stronger implying that all items measure the same
variable (quality and satisfaction). Further supporting this statement, Bass and Avolio
(1993) confirm that the instruments can be accepted as a reliable when reliability
coefficient is greater than 0.5.
Accordingly, the overall reliability of the scale for all explanatory variables is acceptable
as the overall Cronbach Alpha coefficient (0.956) is well beyond 0.5. Moreover, the scale
consistency of each predictors is also acceptable as the reliability coefficient of
opportunities, organizational challenge, technological challenge, environmental challenge,
and strategic challenge of value (0.718), (0.648), (0.882), (0.703), and (0.779)
respectively. Thus, all explanatory variables have a reliability coefficient of more than 0.6,
which asserts the presence of internal consistency among explanatory variables.
In addition, the same test is also conducted for the dependent variables (adoption of E-
banking service) items and their result indicates 0.810 that assert the existence of internal
consistency within all 8 items. Therefore, it is logical to conclude that reliability of the
scales is acceptable for both predictor variables as well as the dependent variable, which
confirm the presence of high level of internal consistency for all items.

4.3.2. Validity Test

Validity explains how well the collected data covers the actual area of investigation
(Ghauri and Gronhaug, 2005). Validity means, “Measure what is intended to be measured”
(Field, 2005).In other words, validity is the extent to which differences found with a
measuring instrument reflect true differences among those being tested. There are different
types of validity mainly face-validity, content-validity, criteria-validity and construct-
validity.
Face validity is the degree to which a measure appears to be related to a specific construct,
in the judgment of non-experts such as survey respondent. That is, a test has face validity
if its content simply looks relevant to the person taking the test. It evaluates the

37
 appearance of the questionnaire in terms of feasibility, readability, consistency of style and
formatting, and the clarity of the language used. In this study to examine, face validity of
the questionnaire instrument feedback of randomly contacted CBE staff ‘and peer review
opinion is gathered regarding readability, consistency of style and formatting, and the
clarity of each items listed in the questioner and thus positive feedback gained used as
proxy indicator of faced validity of the instrument.
Content validity defined as “the degree to which items in an instrument reflect the content
universe to which the instrument will be generalized” (Straub, Boudreau et al. 2004). In
this study to examine and validate content validity, a quantitative approach is followed
which involve evaluation of the questionnaire items by expert and calculating content
validity ratio (CVR) proposed by Lawshe (1975). In this research branch digital officer,
which specialized in digital banking areas, identified as expert (content validity survey
respondent). A content validity survey is generated (each item is assessed using three point
scale (not necessary, useful but not essential and essential). For simplicity due to cost and
time, constraint only five branch digital officers that work under five CBE branch to
evaluate the questionnaire. Based on evaluation of the respondent and using the formula
for calculating CVR, the computed value is 0.6, which is above the minimum score
requires 0.5 and accepted as indicator that ensure content validly of the instrument.
Further, to assure criteria and constructed validity the study rely on literature review and
logical thinning.

4.4. Current Practice of Electronic Banking Service in the District

Table 4. 3 Current E-banking Users in the District

SN E-banking users Total

users

1 Mobile Banking Active User’s 128,845

2 Internet Banking users 509

3 POS machine terminal deployed 113

4 ATM terminal deployed 103

5 CBE birr active users 80,060

38
6 CBE Birr Dormant 149,643

7 CBE Birr Pending 96,231

8 Debit card active users 319,364

9 Debit card issued 459,639

10 Total Grand e-banking users 1,234,291

Source: - District Report, 2022/2023

On the above table the current total number of e-banking service users are presented.
Based on the district report there are 319,364 Visa Card active users followed by 128,845
Mobile Banking active users, 80,060 CBE Birr active users and 509 Internet Banking
Users. In the additionally there are also about 113 POS machine terminal deployed and
103 ATM terminal deployed. The data revealed that majority of customers are Visa Card
users and the minimum is Internet Banking users. This is due easiness of the service to be
utilized by customers. In the study area the overall e-banking users are about 1,234,291.
Hence, in the study area most customers are preferred to use Visa Card followed by
Mobile Banking than internet banking due to internet banking is not permitted for
individual customers rather than Corporate Organization other e-banking services.

4.5. Opportunities of Adoption of Electronic Banking

This section discusses the descriptive analysis result as well as result obtained from non-
parametric test of independence between opportunities and adoption of E-banking service.

4.5.1. Opportunities of Adoption of Electronic Banking

This section elaborates on descriptive analysis of the survey result as related to existing
opportunities for adoption of E-banking service. In this study to examine whether, there is
conducive business environment that foster adoption of E-banking service represented in
the questioner by six questions (items).

Table 4. 4 Opportunities of E-banking Adoption

Opportunities N Mean Mod SD
score e

Late adopter opportunities 23 1.86 2 1.1

39
 7 3

Improvement in the banking habit of the society 23 4.07 4 1.2

7 6

Sustainable economic growth in the country 23 4.38 4 1.1

7 8

Willingness among banks to cooperate in 23 4.23 4 1.1

building infrastructure 7 6

Committed government to strengthen Banks 23 3.51 4 0.7

7 6

Committed government to facilitate expansion 23 3.95 4 0.6

of ICT 7 1

Source: - Own survey data, 2022

Respondents asked to reflect the degree/level of their agreement/disagreement on points
listed in the questioner as existing opportunities (driving force) for adoption and
implementation of E-banking service. As inferred from the above table and figure, the
majority of sample respondents agreed with the idea that the existence of improvement in
the banking habit of the society, sustainable economic growth in the country, willingness
among banks to cooperate in building infrastructure, committed government to strengthen
banks and commitment of the government to facilitate the expansion of ICT are existing
opportunities fostering the adoption and development of E-banking technology in Ethiopia
banking industry. This evidenced by the data collected from the respondents, which rated
the items with mean score of 4.07, 4.38, 4.23, 3.51, and 3.95 respectively. However almost
the entire respondent hardly considers late adopter opportunities as opportunity for
Commercial Bank of Ethiopia, which rated by the respondent with 1.86 mean score value.
Since, Commercial Bank of Ethiopia (CBE) is a pioneer in introducing digital banking
service in the country, instead of CBE late comers commercial banks may benefit in terms
of late adopter opportunities.
To sum up, the result of the respondent reveal the existence of conducive business
environment in the country that foster adoption and development of digital banking
service.

40
4.5.2. Association between Opportunities and E- banking Adoption
This section present the result obtained from Pearson Chi-Square test of independence to
identify weather statistically significant linear relationship exist between opportunities of
E-banking service and adoption of E-banking service.
Table 4. 5 Chi-Square Tests
Value Df Asymp. Sig.
(2-sided)
Pearson Chi-Square 172.093a 60 .000
Likelihood Ratio 177.023 60 .000
Linear-by-Linear Association 97.825 1 .000
N of Valid Cases 237
a. 67 cells (83.8%) have expected count less than 5. The
minimum expected count is .38.
The above table shows that there is a statistical significant association between
opportunities and e-banking adoption in the district. Hence, the null hypothesis (Ho)
which says there is no significant association between opportunities and e-banking
adoption will be rejected and the alternative hypothesis (Ha) is accepted with (2=172.093,
p=0.000) with the p value of chi-square test less than 1% level of significance. Further, the
linear- by-linear association also confirms the same.

4.6. Challenges of Adoption and Growth of Electronic Banking Service

As cited in chapter two, there are so many challenges that negatively affect adoption and
growth of the E-banking technology. The factors affecting the successful adoption and
growth of new technologies, such as E-banking are common in nature. Such as cost
factors, security and trust factors and lack of adequate ICT infrastructure (particularly in
developing countries like Ethiopia). However, reasons vary widely among banks and
countries and important to note that challenges to E-banking technology adoption and
development work differently according to organizational type and culture.
Questions on challenges of adopting and implementing E-banking technology obtained
from different literatures were asked to indicate the extent to which each respondent
agrees to corresponding closed ended statements rated on a five-point Liker type scales
ranging from 1-Strongly Disagree‖ to 5-Strongly Agree‖. Statistical results are presented
under each section of the factors considered using the table including the number of

41
frequencies, the Mean, Mode, and Standard Deviation of the data points. The mean tried to
tell the average where the data points fall for each specific variable, Mode indicated most
frequently answered points for each specific variable while the standard deviation column
showed the variability of data points for each variable under consideration.
Accordingly, the researcher tried to interpret the Mean and the Mode of the data points.
The
researcher tried to complement the result obtained from survey with the finding of
previous studies done on related topic.

4.6.1. Organizational Challenges of E-banking adoption

Most cited organizational factors in the different literature are; IT users ‘community;
organizational structure; firm‘s process; firm size; technological capabilities of the
organization‘s members; the technological and financial resources available; process of
selecting and implementing the IT; management backing and support for the project
(Harrison, 2012). In this study costs related to implementation and running of E-banking
technology, resistance to changes in technology, customer awareness, technical and
managerial skills required to implement E-banking technology are considered as
organizational factors and descriptive analysis of the survey result is reported on table 4.6
and figure 4.2 as follows.
Table 4. 6. Organizational Challenges of E-banking adoption
Organizational challenges N Mean Mode SD Rank
Score
High cost of implementation of 237 4.46 4 1.12
E-banking
Lack of technical and 237 4.68 5 1.53
managerial skills in
implementation and
development of E banking
technology
Lack of customer awareness 237 4.33 4 1.26
with E-banking products
Resistance to changes in 237 3.98 4 1.18
technology among by Board, top

42
 Management and staff
Source: - Own survey data, 2022
The above table and figure shows that high cost of implementing of E-banking technology
such as cost of ICT equipment and network, software and re-organization is the major
organizational challenge for implementation and growth of E-banking technology
identified by sample respondent, in which the mean score and mode were found 4.46 and
4.00 respectively. This is in line with finding OECD (2004) where high cost of ICT
equipment and network, software and reorganization is a factor that hinders adoption of E-
banking technology. The respondent also agreed that lack of social awareness regarding E-
banking services provided by banks considered as a factor that negatively affecting the
successful adoption and growth of E-banking technology as the average result in the Likert
scale found 4.33. The finding is in line with Vaithianathan, S. (2010) and Angelakopoulos
and Mihiotis (2011) in which all indicted that, the non- familiarity with E-banking
technology products and services by customers is the main factor that has a negative
influence on the adoption and growth of E-banking technology.
The result further revealed that lack of technical and managerial skills in implementation
and development of E-banking technology identified by respondent as the top constraint
factor that negatively impact adoption and growth of E-banking technology in Ethiopia
with a mean score and model value of 4.68 and 5.00 respectively. The finding is in line
with Vaithianathan, S. (2010) where lack of skilled human power in E-banking context is
considered as hurdles that prevent pervasive e-commerce adoption in developing
countries. The respondent also agreed that resistance to changes in technology by Board,
Top Management and staff considered as challenge for the adoption and growth of E-
banking technology as the average result in the Likert scale found 3.98.
In general, the result revealed that high cost of implementation of E-banking technology,
customers unfamiliarity with the E-banking products and their benefits, lack of technical
and managerial skills in implementation and development of E-banking technology and
resistance to changes in technology among the staffs are considered as organizational
factors that hinders adopt and develop E-banking technology to the desired level.

4.6.1.1. Association between Organizational challenges and E- banking Adoption

Table 4. 7 Chi-Square Tests
Value df Asymp. Sig.
(2-sided)

43
The above table shows that there is a statistical significant association between
organizational challenges and e-banking adoption in the district. Hence, the null
hypothesis (Ho) which says there is no significant association between organizational
challenges and e-banking adoption will be rejected and the alternative hypothesis (Ha) is
accepted with (2=187.148) with the p value of chi-square test less than 1% level of
significance. Further, the linear- by-linear association also showed a strong association.

4.6.2. Technological Challenges of E-banking adoption

The issues raised in this study in relation with technological factor are the relative
advantages (perceived benefit) the firm gained from adoption of e-banking system and the
relative disadvantages (perceived risk) which hinder banking industries from the adoption
of new technological innovations.
Table 4. 8 Technological Challenges of E-banking adoption
Technological Challenges N Mean Mode SD
Score
Low awareness of direct electronic baking’s 23 4.53 5 1.21
benefits 7
Low awareness of indirect opportunity or 23 4.74 5 1.45
intangible benefits of E banking 7
Electronic banking make difficult to perform 23 3.99 4 1.11
secure transactions 7
Banks feel insecure in using e banking 23 1.53 1 1.22
service and products 7
Security issues arise due to interruption of 23 4.78 5 1.26
internet service 7
Security issues arise continuous interruption 23 4.39 4 1.15
of electricity 7
Electronic banking gives less control over 23 3.89 4 1.18
accounts 7
Fear of customers` resistance to use e 23 4.25 4 1.19
banking services and products 7
On line banking makes banks vulnerable to 23 3.75 4 1.22
attacks by hackers 7
Source: - Own survey data, 2022
44
Table 4.8 and the figure 4.3 report the descriptive analysis result of the survey response as related to
issues pointed out in this study as technological challenges. As inferred from the above table
security issues arise due to interruption of internet service is the first major constraint factor
affecting adopting of E-banking service as evaluated by sample respondent with a mean score and
mode value of 4.78 and 5.00 respectively. Followed by low awareness of indirect
opportunity(intangible) benefits of E-banking and low awareness of direct electronic baking’s
benefits which is identified by sample respondent as the second and third major technological
factors that negatively affect adoption of E-banking service with a mean score and mode of 4.74
and 5.00 and 4.53 and 5.00 respectively. The result further revealed that most respondents agreed
that security issues arise due to continuous interruption of electricity (mean score=4.39); fear of
customers` resistance to use e banking services and products (mean score=4.25); electronic banking
make difficult to perform secure transactions(mean score=3.99); electronic banking gives less
control over accounts(mean score=3.89) and on line banking makes banks vulnerable to attacks by
hackers(mean score=3.75) are another critical factors that hinder adoption and development of E-
banking service. However, almost all respondent at least disagree on point that bank feel insecure in
using e banking service and products, which is evaluated with a mean score and mode value of 1.53
and 1 respectively.
To sum up, the descriptive analysis result depict the fact that low level of literately about
digital banking by the customers and security issue are the major challenges negatively
affecting adoption and development of E-banking service.

4.6.2.1. Association between Technological Challenges and E- banking

Adoption
Table 4.6. Chi-Square Tests
Value df Asymp. Sig.
(2-sided)
Pearson Chi-Square 186.767a 60 .000
Likelihood Ratio 169.168 60 .000
Linear-by-Linear Association 83.198 1 .000
N of Valid Cases 237
a. 69 cells (86.3%) have expected count less than 5. The
minimum expected count is .42.

45
The above table shows that there is a statistical significant association between
technological challenges and e-banking adoption in the district. Hence, the null hypothesis
(Ho) which says there is no significant association between technological challenges and
e-banking adoption will be rejected and the alternative hypothesis (Ha) is accepted with
(2=186.767) with the p value of chi-square test less than 1% level of significance.
Further, the linear- by-linear association also showed a strong association.

4.6.3. Environmental Challenges of E-banking adoption

In this study, ten issues identified as environmental related barriers for adoption and
implementation of digital banking service.
Table 4. 9 Environmental Challenges of E-banking adoption
Environmental Challenges N Mean M SD
Score o
d
e
Delivering E Banking services using internet is 237 4.39 4 1.19
difficult due to low internet access
Lack of sufficient government support will affect 237 4.32 4 0.29
customers willingness to use technological
innovation
Lack of sufficient legal frameworks that attracts 237 4.79 5 0.61
banking industries to adopt technological
innovation
Lack of available ICT infrastructure 237 4.64 5 .32
Lack of sufficient public awareness 237 3.89 1.15
Absence of computation in both public and 237 3.96 4 1.18
private banks in expanding e banking
Lack of business organization’s readiness to use 237 3.75 4 1.06
on line transaction
Inadequate development level and quality of a 237 4.25 4 0.99
national electricity infrastructure.
Slow Internet connection speed and continuous 237 4.59 4 1.06
failure
The infrastructure of commercial banks is not 237 1.92 2 1.15
46
 able to support online e banking
Source: - Own survey data, 2022
As it is noted from the above table and figure, the respondents were asked to reflect the
level of their agreement/disagreement on the ten items (issues) listed in the questioner as
environmental related challenges for adoption of digital baking service. As it can be
inferred from the table lack of sufficient legal frameworks that attracts banking industries
to adopt technological innovation, lack of available ICT infrastructure and slow Internet
connection speed and continuous failure are the top three critical challenges identified by
the respondent with a mean score value of 4.79, 4.64 and 4.59 respectively. Followed by
delivering E-banking services using internet is difficult due to low internet access, lack of
sufficient government support will affect customer’s willingness to use technological
innovation and inadequate development level and quality of a national electricity
infrastructure which are other factors identified by the respondent as the fourth, fifth and
sixth major constraint factor negatively affecting adoption of E-banking with a mean score
value of 4.39, 4.32 and 4.25 respectively. The result further reveal that absence of
computation in both public and private banks in expanding E-banking, lack of sufficient
public awareness and lack of business organization’s readiness to use online transaction
among challenges identified by the majority of the respondent which is rated with a mean
score value of 3.96, 3.89 and 3.75 respectively. The only exceptional result that the
respondent reflects their disagreement related to the question they asked whether they
believe the infrastructure of commercial banks is not able to support online E-banking
which is rated by the respondent with 1.92 mean score value.
As it noted from the survey result it is possible to conclude that issues raised, as
environmental challenges are binding constraint factor affecting the development of E-
banking service unless addressed to the best of sooner.

4.5.3.1. Association between Environmental challenges and E- banking

Adoption
Table 4. 10 Chi-Square Tests
Value Df Asymp. Sig.
(2-sided)
Pearson Chi-Square 104.847a 60 .000
Likelihood Ratio 110.277 60 .000

47
Linear-by-Linear Association 47.817 1 .000
N of Valid Cases 237
a. 67 cells (83.8%) have expected count less than 5. The minimum
expected count is .21.
The above table shows that there is a statistical significant association between
environmental challenges and e-banking adoption in the district. Hence, the null
hypothesis (Ho) which says there is no significant association between environmental
challenges and e-banking adoption will be rejected and the alternative hypothesis (Ha) is
accepted with (2=186.767) with the p value of chi-square test less than 1% level of
significance.

4.6.4. Strategic Challenges of E-banking Adoption

Table 4. 11Strategic challenges
Strategic challenges N Mea Mode SD
n
Scor
e
Regular check of an account after making any 237 2.36 2 1.15
transaction online insure secure E-banking
Disconnected the internet when not in use 237 2.53 2 1.25
ensure secure E-banking
Strong password helps to ensure secure E- 237 3.22 2 1.18
banking
Using licensed antivirus software reduces 237 3.18 3 1.14
challengers of E-banking
Typing your internet banking URL helps to 237 2.52 2 1.17
ensure secure E- banking
Source: - Own survey data, 2022
In the above table and figure, strategic challenges of E-banking adoption reported.
Respondents first asked whether regular check of an account after making any transaction
online insure secure E-banking services. The result reveals that the problem is not this
much sensitive and is not in a capacity to affect adoption of digital banking service, which
rated by the respondent with mean score, value of 2.36 that is below the average 3.
Second, the respondent asked whether they believe that disconnecting the internet when
48
not in use ensures security. Sample respondent evaluated this statement with mean score
value of 2.53 which is below the average. This shows the issue hardly affects adoption of
E-banking service. The third and fourth question raised to the respondent related to
whether they believe using strong password and licensed antivirus software’s helps to
ensure secure E banking. The result reveals the fact that the security issues really matter
and can affect adoption of digital banking service, which evaluated by the respondent with
a mean score value of 3.22 and 3.18 respectively. The last question raised for the
respondent is that whether they believe typing your internet banking URL helps to ensure
secure E banking. The result shows problem is not this much sensitive and is not in a
capacity to affect adoption of digital banking service, which rated by the respondent with
mean score, value of 2.52 that is below the average 3.

4.5.4.1. Association between Strategic challenges and E- banking Adoption

Table 4. 12 Chi-Square Tests
Value Df Asymp. Sig.
(2-sided)
Pearson Chi-Square 165.399a 60 .000
Likelihood Ratio 170.320 60 .000
Linear-by-Linear Association 92.604 1 .000
N of Valid Cases 237
a. 67 cells (83.8%) have expected count less than 5. The minimum
expected count is .34.
The above table shows that there is a statistical significant association between strategic
challenges and e-banking adoption in the district. Hence, the null hypothesis (Ho) which
says there is no significant association between strategic challenges and e-banking
adoption will be rejected and the alternative hypothesis (Ha) is accepted with
(2=165.399) with the p value of chi-square test less than 1% level of significance.

4.6.5. Benefits of Adoption of E-banking Service

This section discusses the result obtained from descriptive analysis as related to the
perceived benefits the bank derives by proving service through alternative electronic
banking channels.
Table 4. 13 Adoption of E-banking adoption
Benefits of adaptation of E-banking service N Mean Mode SD

49
 Score
Introduction of electronic banking can eased 23 4.23 4 1.18
banking transaction. 7
Electronic banking enhances effectiveness and 23 4.71 4 1.29
efficiency of Banks. 7
Improve the degree of customer satisfaction. 23 4.48 1.15
7
Adoption of electronic banking would enhance 23 4.63 5 1.25
the fortune of the bank by increasing bank 7
profitability.
Electronic banking improves bank customers’ 23 4.59 5 1.18
relationship by Improving customer Service. 7
It is a strategy to compete effectively in the 23 4.51 5 1.15
near future and essential for banks` survival. 7
Electronic banking cuts down operational costs 23 4.37 4 1.19
and increase bank turnover and profitability by 7
reducing banks operating costs.
Electronic banking helps banks to keep up with 23 4.11 4 1.08
industry trend and competitive position in the 7
market.
Source: - Own survey data, 2022

In this study eight question on benefits of proving banking service through digital channels
were raised for sample respondent to reflect the level of their agreement/disagreement on
the respective points. As reported in the above table the respondent rated all items with a
mean score value of 4.11 and above. This implies the fact that all sample respondent
believe that delivering banking service using digital channels have so many benefits for
the bank mainly digital banking eased banking transaction, improve operational efficiency
through reducing work load on employees for routine activity, help to build good customer
relationship, boost service quality, increase revenue streams, reduce operational costs and
serves as strategic tool for gaining a comparative and competitive advantage.

50
4.6.6. Key Challenges of E-banking Services
In this, section relatively the most critical challenges identified by sample respondent
elaborated. The following key challenges identified by the respondent.
Table 4. 14 Key challenges of E-banking adoption
Key Challenges on Average Mean Score Rank
Adoption of E-banking
Service
st
organizational challenges 4.36 1
rd
Technological Challenges 3.98 3
nd
Environmental 4.05 2
Challenges
th
Strategic challenges 2.26 4
Source: - Own survey data, 2022
As inferred from the above table and figure, among the four challenges pointed in this
study based on the rated of sample respondent relatively organizational challenge
identified by the respondent as the major challenge with 4.36 average mean score value.
Besides, out of the four issues pointed in the study as organizational related challenges, the
respondent relatively identified lack of technical and managerial skills in implementation
and development of E-banking technology and high cost of implementation of E-banking
on the top of all challenged. Out of ten issues raised in this study as environmental
challenges, the respondent identified lack of legal framework attracting banks to invest on
technological innovation, lack of sufficient ICT infrastructure and low internet speed and
coverage as the binding constraint factors affecting adoption and development of digital
banking service. Technological challenges is identified by sample respondent as the third
pressing challenge where low level of awareness about digital banking and security related
issues are the most critical barriers. Relatively, the respondent gives less weight for
strategic challenge as a factor negatively affecting adoption and development of E-banking
service.

4.7. Econometric Analysis

4.7.1 Post-estimation Diagnosis Test

Linear regression analysis is based on a certain assumption that necessary meet. The main
assumption of classical linear regression analysis includes :( 1) the dependent variable

51
must be continuous. (2)The variance of the distribution of the dependent variable should
be constant for all values of the independent variable. (3) The relationship between the
dependent variable and each independent variable should be linear in parameter. (4) The
error, or residual, is normally Distributed and uncorrelated with the predictors, and all
observations should be independent. (5) Independent variables should be uncorrelated or
there should not be perfect linear correlation among predictors (problem of
multicollinearity).
Violation of this binding assumption leads to none fulfillment of BLUE property of OLS
estimator that end up with invalid and biased inference. Thus, it is paramount important to
check the fulfillment of binding assumption before making inference and drawing
conclusion. In the following section, the result of tests for normality, linearity,
multicollinearity, autocorrelation, and heteroscedasticity discussed.

4.7.1.1. Normality Test

Normality assumption state that the error term or residual normally distributed with a zero
mean and constant variance. The normality used to describe a symmetrical, bell-shaped
curve, which has the greatest frequency of scores in the middle, with smaller frequencies
towards the extremes (Pallant, 2007). Univariate normality for the individual variables can
tested by reviewing the graphs such as histogram, and normal probability plots (Hair et al.,
2006; Tabachnick & Fidell, 2007; Pallant, 2007). Frequency histograms can also use for
assessing normality, particularly with the normal distribution as an overlay (Griffith,
2010). In this study, the fulfillment of normality assumption tested using histogram graph.
As inferred from the below figure 4.1 the shape of the histogram approximately follows
the shape of normal curve which indicate that there is no violation of the assumption of
normality.

52
Figure 4. 1 Tests of Normality

4.7.2. Linearly Test

Linearity condition requires a linear relationship between the dependent variable and
explanatory variables. Note that linearity is required in parameter rather than in variable.
In this study linearity checked by P-P, plot of residual. As we can see from figure 4.2
below observed cum. Probability and the expected cum. probability are approximately
along the 450 line. This indicates the fact that predictors linearly related with response
variable.

53
Figure 4. 2 Tests of Linearity

4.7.3. Heteroscedasticity Test

The other important assumption of CLRM is that the disturbance (error) term in regression
equation has a common (constant) variance, which known as homoscedasticity. However,
if the variance of the error term is not constant leads to heteroscedasticity problem. In this
study so as to detect heteroscedasticity plots of residual against the predictor variable or
against the fitted values used to examine whether the variance of the error term is constant
or not. As we can inferred from the below figure 4.3 the scattered plot of the residual has
no systematic trend with the dependent variable, which confirm no violation of
homoscedasticity.

54
Figure 4. 3 Tests of Heteroscedasticity

4.7.4. Multicollinearity
Multicollinearity refers to the situation in which the independent/predictor variables are
highly correlated. When independent variables are multicollinearity, there is “overlap” or
sharing of predictive power. This may lead to the paradoxical effect, whereby the
regression model fits the data well, but none of the predictor variables has a significant
impact in predicting the dependent variable. This is because when the predictor variables
are highly correlated, they share essentially the same information. Thus, together, they
may explain a great deal of the dependent variable, but may not individually contribute
significantly to the model. Thus, the impact of multicollinearity is to reduce any individual
independent variable’s predictive power by the extent to which it is associated with the
other independent variables. That is, none of the predictor variables may contribute
uniquely and significantly to the prediction model after the others is included. In this,
study tolerance and Variance Inflection Factor (VIF) used for detecting multicollinearity

55
problem. If the tolerance value for each predictor is greater than 0.1 or VIF value for each
predictor is less than 10 considered evidence for none existence of multicollinearity
problem. As inferred from the below table the value of tolerance is greater than 0.1 and
VIF value of the respective predictor is less than 10 which confirms none existence of
perfect linear correlation among the predictor variables (no multicollinearity problem).
Table 4. 15 Multicollinearity test
Predictor variables Tolerance VIF

opportunities .989 1.011

organizational challenge .979 1.022

Technological challenge .858 1.165

Environmental challenge .855 1.169

Strategic challenge .974 1.027

Source own computation, 2022

4.8. Multiple Linear Regression Model Result

Multiple Regression measures the strength of the influence of the multiple independent
variables on a single dependent variable (Seelbach, et al., 2011; Vesey, et al., 2011).
In this study, multiple regression analysis applied to quantitatively estimate and determine
the impact explanatory variables (opportunities, organizational challenge, technological
challenge, environmental challenge, and strategic challenge) on the dependent variable
adoption of E-banking service in the case of Commercial Bank of Ethiopia Dire Dawa
District. Because of the regression functions, the equation of multiple regressions on this
study generally built around two sets of variable, namely dependent variables (adoption of
E-banking service) and independent variables (opportunities, organizational challenge,
technological challenge, environmental challenge, and strategic challenge). The basic
objective of using regression equation on this study is to make the research more effective
at describing, understanding, predicting, and controlling the relationship among the stated
variables. The result of multiple regression analysis interpreted and discussed as follow.

56
Table 4. 16 Multiple Regression Result on current practice, opportunities, and Challenges
of E-banking adoption
Model Summaryb

Model R R Square Adjusted R Square Std. Error of the

Estimate

1 .777a .604 .595 2.43696

a. Predictors: (Constant), Stratgichallge, Technochallnge, orgnalchall,
Opportunities, Envtalchallge

b. Dependent Variable: Ebankadopt

First, coefficient of determination R is the measure of proportion of the variance of

dependent variables about its mean that explained by the independent or predictor
variables. It is conducted to investigate the effect of independent variable on the dependent
variable and identify the relative significant influence i.e., Independent variable
(opportunities, organizational challenge, technological challenge, environmental
challenge, and strategic challenge) have to the dependent variable; i.e. on customer
satisfaction. Higher value of R represents greater explanatory power of the regression
equation.
R square as shown in the above table, implies that on aggregate the dependent variable
(adoption of E-banking service) explained by the independent variables (opportunities,
organizational challenge, technological challenge, environmental challenge, and strategic
challenge) by 59.5 percent, which shows the model’s fitness to explaining the variability
in dependent variable. However, in small sample size, there is a possibility of over
estimation of the model by R square value. To avoid over estimation of the model, it
merits checking for adjusted R square. In the case under consideration, the R square not
over estimated while evaluating the model’s fitness as the value of adjusted R square 59.5
percent deviated from R square value with less than a percentage point. Accordingly, the
coefficients of determination adjusted R square is 0.595. This shows that independent
variables (opportunities, organizational challenge, technological challenge, environmental
challenge, and strategic challenge) predict/explain 59.5 percent of variations in the
dependent variable (adoption of E-banking service). The remaining 40.5 % of the variation
of e-banking adoption was explained by factors not included in this model. From this, it is

57
possible to conclude that the model applied in this study is a good fit in explaining and
representing the relationship between variables under the study.
The model summary indicated that explanatory variables (opportunities, Organizational
challenge, Technological Challenge, Environmental Challenge and Strategic Challenge)
explained 59.5% of the variation in E-banking adoption and implementation. The
remaining 40.5 % of the variation of e-banking adoption was explained by factors not
included in this model. The F-statistic value of 70.411 was significant at p<0.05 level of
significance. This means that explanatory variables taken together were significant for
variation in e-banking adoption in the specified district.
Table 4. 17 ANOVA Regression on current practice, opportunities and Challenges of E-
banking adoption
ANOVAa
Model Sum of df Mean Square F Sig.
Squares
Regression 2090.777 5 418.155 70.411 .000b
1 Residual 1371.855 231 5.939
Total 3462.633 236
a. Dependent Variable: Ebankadopt
b. Predictors: (Constant), Stratgichallge, Technochallnge, orgnalchall,
Opportunities, Envtalchallge

In the above ANOVA table, the column labeled, sum of squares describes variability in
the d value of the regression. The regression sum of the squares is the deference between
total sum of the squares and residual sum of the squares which is (TSS-RSS= 2090.777 –
1371.855=3462.633). When we compare the regression sum square with residual sum
square, the regression sum square is relatively very large relative to residual sum square
that assert the fact that as the model explain the lion share of the variation in the dependent
variable.

Moreover, the proposed model was adequate as the F-static=70.411 were significant at 5
percent level since the p value of F statistics sig .000 b (p <0.05). This represents and
indicates the overall significance of the model in predicting the variation in the dependent
variable and thus the models was reasonable fit and confirm the fact that the explanatory
variables specified in the model together have a significant power in explaining the
dependent variable (adoption of E-banking service). Therefore, we reject the null

58
hypothesis that regression coefficient of all predictors are zero and conclude that at least
one regression slope is none zero.

Table 4. 18 Regression Coefficients

Coefficients
Model Unstandardized Standardized t Sig. Collinearity
Coefficients Coefficients Statistics
B Std. Beta Tolerance VIF
Error
(Constant) 21.868 2.155 10.146 .000
Opportunities .624 .034 .754 18.171 .000 .995 1.005
Orgnalchallnge -.126 .227 -.023 -.554 .580 .999 1.001
1
Technochallnge -.165 .079 -.093 -2.101 .037 .869 1.151
Envtalchallenge -.055 .086 -.028 -.638 .524 .870 1.149
Stratgichallleng -.719 .293 -.103 -2.457 .015 .980 1.021
a. Dependent Variable: Ebankadopt

As presented in the above table 4.18, all independent variables (opportunities,

organizational challenge, technological challenge, environmental challenge, and strategic
challenge) were regressed against the dependent variable (adoption of E-banking service).
The data represents the results of a multiple regression analysis, where the dependent
variable is E-Banking. The model includes five independent variables: Opportunities,
Organizational challenge, Technological challenge, Environmental challenge, and
Strategic challenge.
The results show that Opportunities have a positive and statistically significant effect on
the dependent variable, as indicated by the unstandardized coefficient of 0.624 and the
standardized coefficient (beta) of 0.754. This suggests that as Opportunities increase, the
dependent variable also increases, holding other independent variables constant.
The regression coefficient for strategic challenge was statistically significant (ß = -0.719, p
= 0.015) and suggesting that it has a negative relationship with the dependent variable.
And, The regression coefficient for Technological challenge was statistically significant (ß
= -0.165, p = 0.037) and suggesting that it has a negative relationship with the dependent
variable.

59
On the other hand, none of the other independent variables have a statistically significant
effect on the dependent variable, as their p-values are greater than the conventional level
of significance of 0.05.
In summary, the results suggest that Opportunities have a positive and statistically
significant effect on the dependent variable, while Technological challenge and strategical
challenge has a negative relationship with the dependent variable, and its effect is
statistically significant at the conventional level of significance. The other independent
variables, Organizational challenge and Environmental challenge, do not have a
significant effect on the dependent variable.

4.9. Discussion of the Standardized Beta Coefficients result

Opportunities of electronic banking services
The first and the only variable that have the greatest positive effect/ influence on adoption
of E-banking service was opportunities of E-banking with coefficient beta (ß = 0.624).
Thus, a one standard deviation increase in opportunities of electronic banking leads to
0.624 standard deviation increases in adoption of digital banking service other variables
being constant. This implies the fact that if commercial bank of Ethiopia capitalizes the existing
opportunities of electronic banking (such as allowing the bank to provide banking service at
customer’s convenience 24 hrs./7 days improving excellence in service quality and thus build the
bank’s image and attract new customers, improving the bank’s accessibility for reaching new and
existing customers with minimum cost relative to branch expansion, boosting market share and
maximize profitability) strongly contribute toward successful adoption and implementation of E-
banking service.
The correlation analysis also found that opportunities of electronic banking strongly
correlated to adaptation of E-banking service with a significant Pearson correlation
coefficient of 0.995.
Technological challenges
Technological challenge is the third variable that significantly affect adaptation of E-
banking service with coefficient beta (ß = -0.165). The negative sign show the existence of
reverse causality relationship. One standard deviation deceases in environmental
challenges leads to 0.165 standard deviation increases in adoption of digital banking
service other variables being constant. This implies the fact that addressing technology
related barriers mainly lack of awareness, poor ICT infrastructure, high network, and

60
power interruption significantly positively contribute for ease adoption and
implementation of E-banking service.
Strategic challenge
The last explanatory variable strategic challenge is statistically significant in
influencing/predicting the dependent variable adaptation of E-banking service. Strategic
challenge significantly affect adaptation of E-banking service with coefficient beta (ß = -
0.719). The negative sign show the existence of reverse causality relationship. One
standard deviation deceases in environmental challenges leads to 0.719 standard deviation
increases in adoption of digital banking service other variables being constant. This
implies the fact that strategic related issue such as regular checkup of accounts after
transaction, interruption of internet connection, strong password usage, utilization of
licensed antivirus software and using banking URL significantly negatively contribute for
ease adoption and implementation of E-banking service. The correlation analysis also
confirms that strategic challenge strongly and negatively correlated to adaptation of E-
banking service with a significant Pearson correlation coefficient of 0.980.
To summarize, the standardized beta coefficients of the respective explanatory variables
and their corresponding p-value confirm that opportunities E-banking service,
technological challenge, and strategic challenge are statistically significant predictor of the
dependent variable (adaptation of E-banking service). However, the exceptional variable
environmental challenge and organizational challenge has found to be statistically
insignificant in predicting/influencing the dependent variable.

1 4.9. Discussion of the Un Standardized Beta Coefficients result

By using this regression analysis, one may assess the direct relationship between variables
as well as show the causal relationship and the nature of relationship between variables
(Aiken et al., 1991; Foster et al., 2004). Hence, the regression coefficients explain the
average amount of change in e-banking adoption (dependent variable) that caused by a
unit of change in the explanatory variables (independent variable). It revealed the relative
predictive power of each variable independently after the considerations of all other
variables in the model were controlled.
First, the study found that opportunities of electronic banking service have a statistical
significant positive relationship with E-banking adoption (β= 0.624, p=0.000). This
implies that capitalizing on opportunities of E-banking by 1%, on average strengthen E-
banking adoption and implementation by 6.24%. Second, the study found that

61
technological challenge have a statistically significant negative association with E-banking
adoption (β = -0.165, p=0.037) at 5% level of significance. This implies that addressing
technological related barriers of E-banking service by 1% will boost (strengthen) E-
banking adoption and implementation on average by 1.65 percentage. Third, the finding of
the study reveal that strategic challenge has a statistically significant negative association
with E-banking adoption (β = -0.719, p=0.015). This implies that minimizing strategic
related constrains of E-banking service will boost an effect on e banking adoption in the
study area. Finally, the study found that organizational and environmental challenges have
no any effect to influence adoption of E-banking service in the study area.
To sum up, the estimated regression coefficient of the respective explanatory variables and
their corresponding T-test statistics shows the fact that opportunities of E-banking,
technological challenge, and strategic challenge are a significant predictors of adoption of
digital banking whereas organizational and environmental challenge found to be
statistically insignificant in predicting/influencing the dependent variable.

2 4.10. Results of Hypothesis Test

Based on the regression results, here are my findings for testing each hypothesis:
H1: There is a significant association between technological challenges and the current
practice of e-banking in CBE Dire Dawa district.
Result: The regression coefficient for technological challenge was statistically significant
(ß = -0.165, p = 0.037). Therefore, I reject the null hypothesis and conclude that there is a
significant association between technological challenges and the current practice of e-
banking in CBE Dire Dawa district.
H2: There is a significant association between organizational challenges and the current
practice of e-banking in CBE Dire Dawa district.
Result: The regression coefficient for organizational challenge was not statistically
significant (p = 0.580). Therefore, I fail to reject the null hypothesis and conclude that
there is no significant association between organizational challenges and the current
practice of e-banking in CBE Dire Dawa district.
H3: There is a significant association between environmental challenges and the current
practice of e-banking in CBE Dire Dawa district.
Result: The regression coefficient for environmental challenge was not statistically
significant (p = 0.524). Therefore, I fail to reject the null hypothesis and conclude that

62
there is no significant association between environmental challenges and the current
practice of e-banking in CBE Dire Dawa district.

H4: There is a significant association between strategic challenges and the current practice
of e-banking in CBE Dire Dawa district.
Result: The regression coefficient for strategic challenge was statistically significant (ß = -
0.719, p = 0.015). Therefore, I reject the null hypothesis and conclude that there is a
significant association between strategic challenges and the current practice of e-banking
in CBE Dire Dawa district.
H5: There is a significant association between opportunities of e-banking and the current
practice of e-banking in CBE Dire Dawa district.
Result: The regression coefficient for opportunities was statistically significant (ß = 0.624,
p = 0.000). Therefore, I reject the null hypothesis and conclude that there is a significant
association between opportunities of e-banking and the current practice of e-banking in
CBE Dire Dawa district.

63
 CHAPETER FIVE
5. Conclusion and Recommendations
5.1. Introduction
The main purpose of this study is to assess current practice, opportunities, and challenges
of E-banking service in the case of Commercial Bank of Ethiopia Dire Dawa District.
Putting it differently, this research attempt to address three key research questions. In
order to achieve its object the study relay on both primary and secondary data. The data
collected from both sources are analyzed using both descriptive and inferential statistical
techniques.
Accordingly, this chapter focuses on summarizing the major finding of the study based on
the analysis and interpretation made in the previous chapter and forward best possible
recommendation driven with the finding of the study.

5.2. Summary and Conclusion

I. Descriptive analysis
The current practice of digital banking in Commercial Bank of Ethiopia under Dire Dawa
District resemble to the wider practice in the country, which found at infant stage. The
main digital banking product and service provided under the district includes mobile
banking and internet banking, ATM and POS banking, issuing debt cards, card payment
service through ATM and POS machine terminal deployed under the districts (acquiring
all debit cards issued by domestic banks and mobile, agent banking (CBE Birr). Card
payment service (facilitating card transaction via deployed ATM terminal) and, mobile
banking service are the dominant E-banking service provided under the district. However,
relative to existing customer base as well as the total population number, the progress
made and performance achieved is not satisfactory.

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Regarding existing opportunities, the survey result reveal that there is conducive business
environment that foster adoption and growth of E-banking mainly commitment of the
government for expanding ICT infrastructure as well as strengthen the banking industry,
sustainable economic growth registered in the country and improving banking habit of the
society.
As related to benefits of E-banking the survey result depict the fact that digital banking has
so many benefit which allow the bank to provide banking service to customers at their
convenience 24 hrs. /7 days and thus improve customers satisfaction and build the bank’s
image, improve efficiency and effectiveness of operation through reducing routine
workloads, serving as income generation stream for the bank and help to maximize profit,
to improve its accessibility at a minimum cost relative to branch expansion are few.
the finding of the study reveal that lack of suitable legal and regulatory framework, low
level of internet penetration, poorly developed ICT infrastructure, high cost of
implementing E-banking , low level awareness, lack of adequate quality human power and
security issues are the main challenges for adoption of E-banking service. From this, it is
possible to conclude that even if there are opportunities that foster adoption and growth of
E banking, the challenges are still there.
The Pearson Chi-square test result shows that explanatory variables such as (opportunities,
technological challenge, and strategic challenge) find to have a statistically significant
association with the dependent variable (adoption of E-banking Service) at all reasonable
level of significance in the exception of organizational and environmental challenges.
Accordingly, we reject the null hypothesis claiming no significant association between the
respect explanatory variables and the dependent variable and accepted the alternative
hypothesis claiming the existence of statistically significant relationship between the
independent variables (opportunities, technological challenge, and strategic challenge) and
the dependent variable adoption of E-banking service. Whilst, though the Pearson chi-
square test shows an association between organizational and environmental challenges; the
multiple regression result found that the two explanatory variables have statistically
insignificant and negative impact on the dependent variable. Accordingly, we accept the
null hypothesis claiming no significant association between the respect explanatory
variables and the dependent variable for organizational and environmental challenges.

II Multiple Regression Analysis

65
 The result of adjusted r square 0.595 shows the model is reasonable a good fit which
explains/predicate about 59.5% of variation in the dependent variable.

F-test result, shows overall significance of the fitted regression equation in terms of
explain the relationship described.

The estimated regression coefficient and their corresponding T-test result reveals
opportunities of E-banking is the only explanatory variable that have a statistically
significant positive relationship with the dependent variable(adoption of E-banking
service). On the other hands, the finding of the study shows technological challenge and
strategic challenge had a statistically significant negative association with the dependent
variable.

However, organizational and environmental challenge had found statistically insignificant

in explaining dependent variable.

5.3. Recommendations
Based on the conclusions drawn from the study, it is recommended that the Commercial
Bank of Ethiopia under Dire Dawa District should focus on addressing the challenges
identified in the study, such as the lack of suitable legal and regulatory framework, low
level of internet penetration, poorly developed ICT infrastructure, high cost of
implementing E-banking, low level of awareness, lack of adequate quality human power
and security issues. The Bank should also seize opportunities by investing in e-banking.
Thus, the researcher recommend the following:
 Improve regulatory framework: The bank should work with government regulators to
improve the legal and regulatory framework for E-banking in the district. This will help
to reduce the cost of implementing E-banking services and provide a clear roadmap for
the future growth of digital banking.
 Increase internet penetration and ICT infrastructure: The bank should collaborate with
internet service providers to increase internet penetration in the district and improve the
ICT infrastructure. This will help to provide a reliable and secure network for E-banking
services and increase the adoption of digital banking among customers.
 Provide training and awareness: The bank should provide training to its staff to improve
their knowledge of E-banking services and provide excellent customer service. The
bank should also increase awareness among customers about the benefits of using E-
banking services and how to use them safely.

66
 Implement appropriate security measures: The bank should implement appropriate
security measures to build customers' trust in digital banking. This includes using secure
authentication methods, encryption, and monitoring for suspicious activities.
 Invest in the latest technology: The bank should invest in the latest technology to
improve its E-banking services. This includes mobile banking and internet banking,
ATM and POS banking, issuing debt cards, card payment service through ATM and
POS machine terminal, and mobile agent banking (CBE Birr).
 Prioritize opportunities and address challenges: The bank should prioritize the
opportunities identified in the study, such as commitment from the government for
expanding ICT infrastructure, sustainable economic growth and improving banking
habits of the society. The bank should also address the challenges identified in the study,
such as low level of awareness and lack of adequate quality human power.
By implementing these recommendations, the Commercial Bank of Ethiopia under Dire
Dawa District can improve its E-banking services, increase customer satisfaction,
efficiency, and effectiveness of operation, and maximize profit.

5.4. Suggestions for future research

To obtain the full picture of the e-banking challenges and opportunities CBE shall sponsor
further researches on the following areas. Thus, CBE shall;
1. Conduct a comparative study between Commercial Bank of Ethiopia under Dire Dawa
District and other banks in the country to identify the factors that contribute to the
differences in the adoption and growth of E-banking services.
2. Conduct a longitudinal study to track the progress and performance of E-banking
services in Commercial Bank of Ethiopia under Dire Dawa District over time. This will
provide insights into the effectiveness of the measures taken to improve the adoption and
growth of digital banking.
3. Conduct a qualitative study to explore in-depth the challenges and opportunities for E-
banking services in Commercial Bank of Ethiopia under Dire Dawa District. This will
provide a more nuanced understanding of the factors that affect the adoption and growth
of digital banking.
4 Conduct a study on customer satisfaction with E-banking services in Commercial Bank
of Ethiopia under Dire Dawa District. This will provide insights into the factors that
contribute to customer satisfaction and help the bank to improve its E-banking services.

67
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APPENDIXES
Questionnaire

Dear Respondents:-
Above all, I would like to express my earnest appreciation for your generous time, honest
and prompt responses. This study is conducted for the partial fulfillment of the
requirements for the award of the degree of Master of business administration, Dire

Dawa University under the title “ASSESSMENT OF THE PRACTICE,

OPPORTUNITIES AND CHALLENGES OF E-BANKING IN COMMERCIAL
BANK OF ETHIOPIA (DIRE DAWA DISTRICT”. The response you provide will
primarily help to determine the PRACTICE, OPPORTUNITIES AND CHALLENGES
OF E-BANKING IN COMMERCIAL BANK OF ETHIOPIA (DIRE DAWA DISTRICT
and to improve the development of future programs in a more efficient and effective
manner. Furthermore, your response will enable the study to better articulate to what
extent does each challenges and opportunity influence the successful implementation of e-
banking with regards to utilize resources effectively and efficiently to attain the intended
objectives of responding to their circumstance. The researcher would like to assure you
that the questionnaire is confidential, and your identity is anonymous, and the information
provided is mainly for academic purposes only.
General Instructions

• There is no need of write your name.

• In all cases where answer options are available please tick (√) in the appropriate box
Thank you so much in advance.

I. Part I: Demographic or General information.

1. Gender  Female  Male

2. Age 18- 25 years  31-45years

71
 26-30 years 46-60 years
3. Work experience in the CBE: Less than 2 year 2-3 years  4-5 years 
6-
10years More than 10 years
4. Educational Background :-Diploma  Bachelor’s Degree  Masters  PhD and
above
5. Job title; Bank Trainee  Junior Officers  Senior Officers
Customer Service Manager Manager

II. OPPORTUNITIES OF E-BANKING related questions

Please indicate the level of your agreement with the statement below (Please put (“√”)
to indicate your answer). The response scale for the questions is as below:

1= Strongly Disagree (SD), 2= Disagree (D), 3= Neutral (N), 4= Agree (A), 5 =

Strongly Agree (SA)

No Items 1 2 3 4 5

1 Late adopter opportunities

2 Improvement in the banking habit of the society

3 Sustainable economic growth in the country

4 Willingness among banks to cooperate in

building infrastructure
5 Committed government to strengthen Banks

6 Committed government to facilitate expansion

of ICT

III. Questions related to e – banking and Challenges of e – banking

N organizational challenges 1 2 3 4 5
o
.

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1 High cost of implementation of E-banking
2 Lack of technical and managerial skills in
implementation and development of E banking
technology
3 Lack of customer awareness with E-banking products
4 Resistance to changes in technology among by Board,
top Management and staff
N Technological factor 1 2 3 4 5
o
.
1 Low awareness of direct electronic baking’s benefits
2 Low awareness of indirect opportunity or intangible
benefits of E banking
3 Electronic banking make difficult to perform secure
transactions
4 Banks feel insecure in using e banking service and
products
5 Security issues arise due to interruption of internet
service
6 Security issues arise continuous interruption of
electricity
7 Electronic banking gives less control over accounts
8 Fear of customers` resistance to use e banking
services and products
9 On line banking makes banks vulnerable to attacks by
hackers
N Environmental factors 1 2 3 4 5
o
.
1 Delivering E Banking services using internet is
difficult due to low internet access
2 Lack of sufficient government support will affect
customers willingness to use technological innovation

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3 Lack of sufficient legal frameworks that attracts
banking industries to adopt technological innovation
4 Lack of available ICT infrastructure
5 Lack of sufficient public awareness
6 Absence of computation in both public and private
banks in expanding e banking
7 Lack of business organization’s readiness to use on
line transaction
8 Inadequate development level and quality of a
national electricity infrastructure.
9 Slow Internet connection speed and continuous failure
1 The infrastructure of commercial banks is not able to
0 support online e banking
N Strategic challenges 1 2 3 4 5
o
.
1 Regular check of an account after making any
transaction online insure secure E-banking
2 Disconnected the internet when not in use ensure
secure E-banking
3 Strong password helps to ensure secure E-banking
4 Using licensed antivirus software reduces challengers
of E-banking
5 Typing your internet banking URL helps to ensure
secure E- banking
N e banking related questions 1 2 3 4 5
o
.
1 Introduction of electronic banking can eased banking
transaction.
2 Electronic banking enhances effectiveness and
efficiency of Banks.
3 Improve the degree of customer satisfaction.

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 4 Adoption of electronic banking would enhance the
fortune of the bank by increasing bank profitability.
5 Electronic banking improves bank customers’
relationship by Improving customer Service.
6 It is a strategy to compete effectively in the near
future and essential for banks` survival.
7 Electronic banking cuts down operational costs and
increase bank turnover and profitability by reducing
banks operating costs.
8 Electronic banking helps banks to keep up with
industry trend and competitive position in the market.
. Please explain what are the key CHALENGES and opportunity that push your institution to
introduce E-banking?
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 Coefficient Correlationsa
Model Stratgichallge orgnalchall Opportunities Envtalchallge Technochallnge

Stratgichallge 1.000 -.004 .045 .105 -.114

orgnalchall -.004 1.000 .017 .011 -.016

Correlations Opportunities .045 .017 1.000 -.040 .035

Envtalchallge .105 .011 -.040 1.000 -.353

Technochallnge -.114 -.016 .035 -.353 1.000

1
Stratgichallge .086 .000 .000 .003 -.003

orgnalchall .000 .051 .000 .000 .000

Covariances Opportunities .000 .000 .001 .000 9.352E-005

Envtalchallge .003 .000 .000 .007 -.002

Technochallnge -.003 .000 9.352E-005 -.002 .006

a. Dependent Variable: Ebanking

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77