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Cyprus Science Foundation



The Internet Banking Adoption: An Empirical Investigation of Ghanas Banking Sector



Eric Yeboah-Asiamah holds a Master of Business Administration (MBA Management) Degree from European University of Lefke during 2007/2008 academic year. His research interest includes -0measurement and metrics for marketing, e-commerce, e-marketing and, general management issues. E-mail: or Postal Address: Box CT 3450, Cantonments-Accra. Ghana West Africa

Recent years have witnessed phenomenal transformations in the operations of many businesses due to the immense advances in information communication technology (ICT). Banks have accordingly introduced webbased services, appropriately called internet banking. Many studies have looked at different aspects of this phenomenon, and their impacts on the banking industry. However, these studies generally focused on the adoption of the technologies in developed countries. This study, therefore, sought to help fill the literature and knowledge gaps by investigating and establishing the level of internet banking adoption in Ghana (a developing country) through critical evaluation of the functionality and interactivity of websites of selected banks in the country. The study also identified the major factors inhabiting internet banking adoption in Ghana. A descriptive research design was used. Twenty-one (21) banks indicating adoption of internet banking were randomly selected for the study. A ranking model (on ranks of 1 6) was used to ascertain the level of internet banking adoption by the sample banks by evaluation of the website contents of these banks. Self-administered questionnaires were used to collect, compare, and validate the data obtained from the websites. Data were analysed using SPSS version 16.0. Most of the 21 banks assessed operated a basic level of interactivity (only information provision on website). Approximately 24% were providing of transactional services. This was done to a limited extent. Cost was identified as the major inhibiting factor to the successful adoption of internet banking. This included the cost of obtaining proper security measures on the websites as well as the acquisition of other operational facilities. Lack of high speed internet connection followed as a major inhibiting factor to internet banking adoption, with government interference having no impact on the adoption of internet banking services in Ghana. The implications of the study are that, most of the market is still untapped in Ghana since the level of adoption of


internet banking remains inconsequential. There is, therefore a lot of scope for banking institutions to expand their Internet banking services to have a more sophisticated customer base.
Key words: Internet Baking, Adoption, Ghana, Functionality, Interactivity Eric Yeboah-Asiamah, 2008

Background The tremendous development in technology and the aggressive blend of information technology have brought about a phenomenal shift in banking operations the world over. For the banks, technology has not only emerged as a strategic resource for achieving higher efficiency, control of operations, productivity and profitability, but a means for survival. From customers perspective, it is the realization of their anywhere, anytime, anyway banking dream (Balwinder et al., 2004). Consequently, the banks have been compelled to embrace technology, recognizing that this will enable them to meet the increasing customer expectation, and also equip them to gain a firm stand in the highly competitive banking environment. Global internet access, as at December 31, 2007, reached 20.0 % of the total world population (6,606,971,659). This means that approximately

1,319,872,109 people all over the world were connected to each other, offering new market for internet-based services such as internet banking. Today, the situation is very different from that of a couple of years ago. In seven years the number of Internet users has been increasing by 265.6 %. Africa, with a total population of 941,249,130 accounts for a 4.7% penetration rate (44,361,940) of internet users. Out of these figures, Ghana, with a population of 22,931,299 accounts for 609,800 Internet users as at December 31, 2007, (2.7% of the population of Ghana). The statistics of global distribution of internet users is shown in Fig 1.


The generally high reported figures of global internet use, as shown in Figs. 1 to 4, clearly reflect the scope of this electronic network. Therefore, it can be said, arguably, that there is no other channel or platform that brings people closer to people, or people closer to business, or businesses closer to business like the Internet. .

Figure 1: Global distribution of internet users, December 2007

Figure 2: Growth in numbers of Internet users between 2000 and 2007

Figure 3: World Internet penetration rates

Figure 4: World Population by Regions


Overview of Global Internet Banking

The advent of e-Business, technological innovations and globalisation is increasingly driving businesses to change their traditional modes of operation. The Internet offers many opportunities to financial services providers in terms of modified value chains and disintermediation, which are, in turn, redefining the financial services marketplace. Diniz (1998), for example, observes that financial institutions are using the Internet for information presentation, two-way communication, interaction with users, and transaction banking. Globally, the financial sector is thus metamorphosing under the impact of competitive, regulatory and technological forces (Jeevan, 2000). The banking sector is currently in a transition phase (Cronin, 1998) and the re-alignment of banking and financial services on the World Wide Web is accelerating the pace of change. The famous quote by Bill Gates that banking is vital to a healthy economy, but banks themselves are not (Serwer, 1995), highlights the crucial nature of the electronic forces that are affecting banks above all other financial service providers.

Difference Between Online and Internet Banking

Akhtar and Dong (2004) have explained the differences between online banking and internet banking. They indicated that online banking involves the provision of special application software programs which, when installed on customers PCs, grants them access to their personal information through a modem. This service was first introduced in the early 1980s (Kalakota and Whinston, 1997). Internet banking, on the other hand, was defined as the conducting of banking transactions through the internet. The difference between internet banking and online banking lies in the fact that, in internet banking, no proprietary software has been installed for accessing the banks services over the internet. (Elliott and Loebbecke, 2000)

Earlier in the 1960s, computer-based programmes were primarily employed to automate the back offices (core process and support) of banks (Liao,

1999). This situation has been changed by a move of information technology (IT) into the front office, marking the advent of management information systems, which has moved the activities of banks beyond branch-level services (Llewellyn, 1995). The adoption of IT applications throughout the banking sector has therefore made the division between front and back office less relevant, as integrated systems increasingly blur the line (Liao, et al., 1999).

Ghana- Convergence, Broadband and Internet Market

Ghana was among the first countries in Africa to be connected to the Internet and to introduce asymmetric digital subscriber line (ADSL) broadband services. The rapid growth in this sector in recent years is set to continue. The sector is highly competitive with more than 140 Internet Service Providers (ISPs). In 2007, the government indicated its commitment to continue the privatisation of the national carrier, Ghana Telecom, as well as the fibre network of Voltacom, the countrys electricity company. The recent introduction of wireless broadband services such as WiMAX, in combination with the expected full liberalisation of VoIP telephony are other key developments that are expected to drive the market in 2008 and beyond (Paul Budde Communication Pty Ltd., Nov 2007) With these developments, e-Commerce has caught the attention of many forward-lookers who seize on its friction-reducing role in an economy its potential to reduce transaction costs and open up new distribution and marketing channels among economic stakeholders including businesses, consumers and even governments. Consistent with numerous other developing economies, the Ghana banking sector makes a significant contribution to the Ghanaian GDP (George M. & Gloria K.Bob-Milliar, 2007) The ability of banks to capitalize on the World Wide Web will not only enhance their contribution to country growth but will also help in making financial services cost effective and competitive and more accessible for customers. Additionally, internet banking better allows banks to satisfy their


customers through provision of mobility, flexibility, and independence of place and time. Unfortunately, Africa, with an internet penetration rate of 4.7% (Miniwatts Marketing Group, 2008) has lagged behind most of the worlds economies in tapping into these possibilities and is now playing catch-up.

Problem Statement
Despite the fact that literature on internet banking is abounding with studies carried out mostly in the developed countries, in the Ghanaian milieu where banks can no longer ignore the internet as a strategic weapon and distribution channel for their products in the face of intense competition from both home and abroad, this area is underrepresented as no studies to the best knowledge of the authors have been conducted.

Objectives and Significance of the study

The study sought to establish the extent of adoption and use of internet banking in Ghana, and to identify the major factors inhibiting the adoption of internet banking in Ghana. The need for consistent and reliable data on the current level of internet banking adoption by banks in Ghana and the subsequent adoption of forensic approach to create the enabling environment for effective internet banking activities in Ghana indicates the need for the study. The Internet and similar technologies provide huge opportunities to banks and other corporations. This is a fact acknowledged all over the world, and not the least in Ghana where internet usage and online banking in general are becoming very popular.

Research Design and Data Collection Methods
A descriptive research design was used for the study. Non-probability sampling was employed to select twenty one (21) banks having and operating functional websites for the study, out of a total of 151 banks


reported by Bank of Ghana at the time of the study. The banks excluded from the study (mostly rural banks) are those without websites, or whose websites were not functioning well, at the time of the study. Prior to the actual data collection, two pilot studies, each with a sample of 3 respondents, consisting of individuals with and without knowledge within the subject area, were conducted. According to Allison et al. (1996) and Fink (1995), for a pilot study, a sample size of 100 would require a minimum of 5 respondents. The number of respondents used for the pilot study in this research was therefore sufficient. Feedback from the first pilot study provided useful concerns regarding the wording and structure of the questionnaire. Based on the feedback, the first questionnaire was updated and was used in a second pilot .This helped to ascertain the suitability of the questions for individuals with and without knowledge of the subject of this research. Data from the pilot studies was not included in the final report of the research. In the actual data collection, a two-stage collection strategy was used. At the first stage, the Diniz (1998) model was used to collect primary information from the websites of the sample banks by dividing the functionality of websites into three (3) different categories. At the second stage, open-ended questionnaires were administered to the sample banks to collect information on the extent of internet banking they employed, and the factors they considered to be inhibitory to the adoption of the service.

The Diniz Model

Diniz (1998) proposed a model to evaluate the websites of banks in the United States of America (USA) in a study undertaken to learn about web banking models that used in the USA. The model provided a tool to classify and make comparisons between different kinds of banks from different groups and sizes. It divides the functionality of websites into three (3) categories (Table 1), namely:


(i) Information Delivery (Since banks often work as information disseminators) (ii)Transactions channels (as avenues for conducting loans actions in same way as bank branch offices or ATMs function) (iii) Customer Relationship (as a tool to improve customer

relationships) Each of these categories of activities was further divided into three levels of interactivity namely: BASIC, INTERMEDIARY and ADVANCED. The different levels of activities and their corresponding interactivity are shown in Table 1. Table 1: Modified Model Used for This Study

Source: (Accessed: 8 Mar 2008)

Due to the nature of the market in which the study was conducted, an additional component, security measures (Chimeke et al (2006), was added to the elements of the Diniz model. This was done to ascertain the level to which the online customers as the banks were protected from possible internet-based fraud.


Data Presentation and Analysis

The data collected from the websites of sample banks were evaluated using a binary score of zero (0) and one (1) for each feature in each of the functionality interactivity cells. A score of one (1) indicated the presence of a feature while zero (0) indicated an absence of the feature. If the requirements in a feature were partially fulfilled, a point was given. The websites of the sample banks were evaluated by assigning each bank a Grand Score obtained by addition of the scores of the model items. The maximum score a bank could get was 36 points. The banks were then ranked from 1 6 based on their scores to give an indication of their adoption of Internet Banking.

The relationships between Information Delivery and Transaction Channel, Information Delivery and Customer Relationship, Transaction Functionality and Security Measures, and Customer Relationship and Security Measures were assessed by correlational analyses using SPSS version 16.0.

Evaluation of Scores from websites of sample banks
The results (Table 3) indicate that Internet Banking in Ghana is being offered at the BASIC level of interactivity. Banks had scores between 2 and 9.5 out of the maximum score of 12 points. The banks were found to operate mainly information websites. The scores per bank for the information level activity functionality were accordingly higher than the scores for any other level (Table 3). The scores for the transactional level of activity functionality were at the lowest. Banks had scores between 0 and 5, indicating low Internet transactional services provision. Relative to information level functionality, scores for Security measures functionality scores were not high. It had a frequency of 53(19.96%). For instance, not all the banks had adopted the 128 bit SSL encryption security measures (6 out of 21 banks have not yet adopted 128 bit SSL encryption).


Table 2: Evaluation Scores of Websites of Sample Bank

Figure 5: Levels of Functionality of Websites of Sample Banks

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Ranking of evaluation scores showed that almost all the banks (15 banks had scores ranging from 3.5 to 16.5), had scores which were less than 50% of the total score (Table 3). Table 3: Ranking of Evaluation Scores

Table 4: Factors Inhibiting Internet Banking Adoption

The figures in Table 4 clearly indicates that cost and lack of high speed internet facilities rank high among the major inhibiting factors affecting internet banking adoption in Ghana. Of the banks assessed, 45.45% of the respondent banks regarded the cost of interconnectivity and general ICT

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costs as the reason why they had not adopted full internet banking services, and 36.36% considered the lack of high speed internet facilities as a major factor that inhibited their adoption of internet banking.

Correlation Analysis
Correlation analysis was used for identifying the relationship between various functionality features on websites of sample banks.

Relationship between Information Delivery and Transaction Channel

From Table 5, the value of correlation coefficient r for information delivery and transaction channel was 0.279. It implies that there is a slight weak direct correlation between these two factors. The slight weak relationship is suggests that most Ghanaian banks were using their well-developed information sites to cover for their non-transactional activities.

Figure 6: Relation between information delivery and Transactional Channel

Correlation between Information Delivery and Customer Relationship

The scatter for these two factors (Fig. 6) indicates a positive relationship between the extent of information delivery through websites and customer relationship. Here the correlation coefficient r was found to be 0.851,

indicating a strong positive relationship between information delivery and

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customer relationship these two factors. This is true since the quality of customer relationship is dependent to a large extent on the nature of information delivered. This suggests that the information delivery via the banks websites provided a good foundation for building strong customer relationships.

Figure 7: Relation between information delivery and customer relationship

Relationship between Transaction Functionality and Security Measures

No relationship was identified to exist between transaction functionality (an indication of the extent to which customers conduct web-based transactions) and security measures provided on the websites (Fig. 8). This was also true for security measures and customer relationship (Fig. 9).

Figure 8: Correlation between security and transactional functionality of websites of banks

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Figure 9: Correlation between security and Customer Relationship

Comparison of Website Evaluation Data and Questionnaire Respondents

The results of data gathered from sample banks websites, buttress the respondent answer that, almost all the banks are the basic level of information delivery functionality. However, there is significant difference regarding certain answers given and the evidence gathered from the websites of the sample banks. For instance, all the banks responded that they had search engines, which is a function of intermediate-level information delivery, on their website. However, the data gathered through the exploration of the websites of the sample banks revealed that only 48% were functional. There are other observed discrepancies between the two data. All the sample banks answered that they advertised on their websites. However, evaluation of their websites indicated that only 31% of the banks did effective advertising on their websites. The data from the banks websites indicated that 65% of the banks provided contact information (a feature of basic information delivery), contrary to a 24% affirmative response from the respondents. These discrepancies notwithstanding, about 80% of the data

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collected from sample banks websites are supported by evidence from respondents. This supports the validity and reliability of the research findings.

The findings of this study did not differ appreciably from those of previous studies. Relative to developed international markets and the empirical results of other studies, it can be inferred that Internet banking in Ghana is greatly embryonic. Clearly, only 6 banks out of 21 universal and commercial banks operating in Ghana offered (a limited number of) transactional, information delivery and customer relationship services through their websites, scoring above 3 in a rank of 6.

The findings that indicates that the major challenge facing further development of internet banking in Ghana is the high cost of

telecommunication services. Additionally, lack of high speed internet services and human resources, which facilitates optimum use of technology, was identified as another key challenge.

An indication that internet banking is still in its early stages of adoption and development in Ghanaian banks is shown by the fact that the application most mentioned by respondents was the provision of information about products and services. Ghanaian banks are required to make a conscious effort to move towards effective and efficient internet banking usage with a view to conducting real financial transactions and consequently, improving electronic customer relations.

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The main findings of the study can be summarized as follows: 1) Only 6 banks (28.57%) were ranked above a score of three (3). This is the number that scored above half of the six (6) score mark require to indicate that a bank had fully adopted internet banking services 2) Data from both the survey and the exploration and evaluation of sample banks websites revealed that at least 80% of the sample banks were operating at the basic level of interactivity, with the websites of most of the sample banks providing information only 3) Cost was identified as the major inhibiting factor to the successful adoption of internet banking in Ghana. The costs included the cost of securing proper security measures on the websites, and the acquisition of other operational facilities. Lack of high speed internet services followed the second major inhibiting factor to internet banking adoption. Government interference had no inhibitory influence on the adoption of internet banking services in Ghana 4) There was a direct relationship between information delivery and customer relationship. This suggests that the information websites operated by most of the sample banks were effective in building

customer relations, given that the quality of customer relationship is, to a large extent, dependent on the nature of information delivered 5) The nature of security measure available affected the extent of transactional services customers were likely to demand. However, customers were more likely to feel secure with internet banking activities if the banks developed and maintained good relationships with them 6) Private sector and foreign banks operating in Ghana were the drivers of most of the recent growth in internet banking in Ghana

7) Most of the market is still untapped in Ghana since the level of adoption of internet banking was very low. There is a lot of opportunity

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for banking institutions to expand their Internet banking services to have a more sophisticated customer base


The expectations of customers in recent years have increased with internet banking. Thus is it recommended, based on the findings of this study, that: 1) The websites of banks offering internet banking services should transcend information delivery purposes. Banks should put in place proper measures for maintaining and updating their websites, including the various security features and key ingredients of Internet banking (such as confidentiality, veracity, availability and effective communication) 2) Banks offering internet services must offer most, if not all, of the traditional banking services on the internet in order to attract more customers 3) The Government of Ghana and the appropriate authorities should endeavour to help in reducing the cost of internet connectivity, and general Information and Communication Technology (ICT) access. This will enable the general public to gain access to affordable and fast telecommunication services 4) The Government of Ghana, in collaboration with the banks, should embark on intensive public education on the workability, benefits, security and effectiveness of Internet banking. This will instil more confidence in the customers and hence guarantee their patronage of Internet banking services

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