RIFT VALLEY UNIVERSITY

DEPARTMENT OF BUSINESS ADMNISTRATION

THE AFFECTS OF ELECTRONIC BANKING ON SATISFACTION OF

CUSTOMERS INCOMMERCIALBANK OF ETHIOPIA,THE CASE
OFBURAYU BRANCH

BY:-DERARTU TSEGAYE ID.NO 0196/2019

ADVISOR: TEREFE Z. (PHD).

June, 2021
Addis Ababa, Ethiopia
 TABLE OF CONTENTS
Contents page

CHAPTER ONE: INTRODUCTION----------------------------------------------------------------------1

1.1. Background of the study--------------------------------------------------------------------------------1
1.2. Statement of the problem-------------------------------------------------------------------------------2
1.3. Research questions---------------------------------------------------------------------------------------4
1.4. Objectives of the study----------------------------------------------------------------------------------4
1.4.1. General objective---------------------------------------------------------------------------------4
1.4.2. Specific objective----------------------------------------------------------------------------------
4
1.5. Scope of the study----------------------------------------------------------------------------------------4
1.6. Significance of the study--------------------------------------------------------------------------------4
1.7. Organization of the paper-------------------------------------------------------------------------------5
CHAPTER TWO: LITERATURE REVIEW-------------------------------------------------------------6
2.Definition and concept of customer satisfaction and electronic banking---------------------------6
2.1. Theoretical literature-------------------------------------------------------------------------------------7
2.1.1. Banking history in Ethiopia--------------------------------------------------------------------------7
2.1.2. Background history of commercial bank of Ethiopia (CBE) ------------------------------------8
2.1.3. Major types of electronic banking-----------------------------------------------------------9
2.1.4. Advantages of e-banking----------------------------------------------------------------------------10
2.1.5. Disadvantages of e-banking-------------------------------------------------------------------------11
2.1.6. Customer satisfaction and factors affecting electronic banking-------------------------------12
2.2. Empirical evidences -----------------------------------------------------------------------------------13
2.3. Conceptual framework---------------------------------------------------------------------------------16
CHAPTER THREE: RESEARCH METHODS --------------------------------------------------------17
3.1. Research design-----------------------------------------------------------------------------------------17
3.2. Target population---------------------------------------------------------------------------------------17
3.3. Sampling design and procedure----------------------------------------------------------------------17
3.4. Types and source of data------------------------------------------------------------------------------18
3.5. Methods of data collection ---------------------------------------------------------------------------18
3.6. Methods of data analysis------------------------------------------------------------------------------18
3.7.Work plan and budget plan----------------------------------------------------------------------------18
4.7.1 Work Plan----------------------------------------------------------------------------------------------28
4.7.2Budget plan --------------------------------------------------------------------------------------------19
Reference

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LIST OF ABERRATIONS AND ACRONYS
ATM= Automatic Teller Machine

CBE= Commercial Bank of Ethiopia

E-banking= Electronic banking

ICT = Information communication technology

NBE=National bank of Ethiopia

PIN= PERSONAL Identification number

PC= Personal Computer

PDA= Personal Digital Assistant

POS= Point of sale

SERVERF=Service Performance

SMS= Short messages service

SWIFT=Society for worldwide interbank financial telecommunication

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 CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

The banking industry and its environment in the 21st century is highly complex and competitive
and therefore the need for information and communication technology to take center stage in the
operations of banks (Stevens, 2002).

The rapidly growing information and communication technology (ICT) is knocking the front
door of every organization in the world, where Ethiopian banks would never be exceptional. In
the face of rapid expansion of electronic payment (E-payment) systems throughout the developed
and the developing world, Ethiopian's financial sector cannot remain an exception in expanding
the use of the system (Gardachew 2010) hence the radical improvement of technology make the
world more comfortable, so that the large scale of the world continent can be referred as one
villageon other hands, our world communicate through easy ways by using information
communication technology.

Electronic banking is critical in the transformation drive of banks in areas such as products and
services and how they are delivered to customers. Thus, it is seen as a valuable and powerful tool
in the development, growth, promotion of innovation and enhancing competitiveness of banks
(Gupta, 2008; Kamel, 2005). Given the significant role of electronic banking in the
developmental drive of banks, information technology has been found to lead to improvement in
business efficiency and service quality and hence attract customers as well as retain them
(Kannabiran& Narayan, 2005)..
The previous research has shown now a day in the 21 th century due to the rapid changes in
business operations in the form of technological improvements require banks in Ethiopia to
service their customers electronically for better customer satisfaction and to be competitive in
banking industry(Shittu,2010).In relation to service supply within electronic equipment we can
define customer satisfaction as the number of customers or percentage of total customers, whose
respond experience with a firm, its products or its service exceeds specified satisfaction goals. It
is a measure of how quality products and services supplied by a company meet or surpass
customer expectation.

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Kotler and Armstrong (2012) preach that satisfaction is the post-purchase evaluation of products
or services taking into consideration the expectations. Technical quality refers to what the service
provider delivers during the service provision while functional quality is how the service
employee provides the service (Timothy,2012).
Customer’s satisfaction holds the potential for increasing an organization’s customer base,
increase the use of more volatile customer mix and increase the firm’s reputation. Consequently,
obtaining competitive advantage is secured through intelligent identification and satisfaction of
customer’s needs better and sooner than competitors and sustenance of customer’s satisfaction
through better products/services (Bultum 2014).
The use of information and communication technology concepts, techniques, policies and
implementation strategies to banking services has become a subject of fundamentals importance
and concerns to all banks and in fact qualification for local and global competitiveness in
banking industry (Worku G, Tilahun A, Tafa MA (2016).
Transfer of funds, viewing and checking account balances, paying mortgages, paying bills and
purchasing financial instruments and certificates of deposits processes have improved
significantly as a result of Internet banking (Mohammed et al. 2009). This implies that,
Electronic banking has resulted in efficiency in service delivering in the banking sector because
customer can transact business from one side of country to another and from both and short
distances and customers can make transactions and access data 24 hours a day, seven days a
week from most devices with internet access and customers .

1.2. STATEMENT OF THE PROBLEM

All banks compete with each other to attract their customers in different ways through providing
convenient, accessible and acceptable services or/and products to their customers. One of the
most important of these services is the electronic services that have contributed significantly to
increase the distance between costumers and the bank (Almazari and Siam, 2008).Electronic
banking is changing the banking industry towards a more competitive and efficient situation.
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 (Megersa, 2010).

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According to Bultum ,(2014) all most, all banks operated in Ethiopia with some exemptions
provide service to customers by using traditional systems, that is why every bank customer is
highly dissatisfied by the disappointing status of financial development in Ethiopia. Even the
time wasted in travelling for search of bank branches and the long waiting time to access the
account is really disappointing. This is particularly because of the non-integration of branches of
the same bank, i.e. even within individual banks their branches are not linked to each other and it
is a must to physically visit the branch in which an account has been opened (Tafa,2016).
According to state in the different previous research, some of the E-banking problems related
with adoption of E-banking are: Low level of internet penetration and poorly developed
telecommunication infrastructure (.Deribe B&Deribie E,2012).
Absences of financial networks that link different banks, frequent power interruption: lack of
reliable power supply is a key challenge for smoothly running e-banking in Ethiopia. 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; W,
2010, p.9).
Due to the above obstacles stated by different researchers, the area selected for this paper also
have been with the same problems, as different parts of the country. Hence, results that limit
customers, from benefit they obtained by using the modern banking technologies service.
This study is thus, aimed at finding out the reason why the above problems occur and in most
cases persist in commercial bank of Ethiopia and then to make recommendations based on the
outcome of the study.

1.3. RESEARCH QUESTIONS

 How efficiently are the services providedby the company to meet the customer’s need?
 What are the factors limiting the use of E-banking in CBE, Burayu branch?
 How much are customers awareness towards E-banking technologies?

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1.4. OBJECTIVES OF THE STUDY
1.4.1. General Objective
The general objective of this study is toassessthe effects of E-banking on customer satisfaction
in CBE, Burayu Branch.

1.4.2. Specific Objective

 To determine the factors limiting the use of E-banking in CBE, Burayu Branch,
 To dig out the gap between the practical service supply and the theory written as ground rule
of the company,
 To understand to customers have been aware towards E-banking service,
 To what extent has e-banking in CBE satisfied its customers

1.5. SCOPE OF THE STUDY

The scope of the research is only limited to the Commercial Bank of Ethiopia, Burayu branch,
from among financial institutions operating in Ethiopia. This study will focus on the assessing
the impacts of electronic banking on customer satisfaction by the service provided with
electronic banking by the Burayu branch. The depth of the study heavily depends on the
availability of data and the integrity of the respective bodies in providing the required data. In
addition, the institutional and regulatory factors will be addressed in this study.

1.6. SIGNIFICANCE OF THE STUDY

The study will help both public and private banks to understand the impact of variables of e-
banking on customer satisfaction, realize the existing limitations of e-banking within the sector,
formulate appropriate strategies in building customer satisfaction.And add value to the existing
knowledge related to electronic banking and customer satisfaction in financial
institution.Practically, the study is significant because, it will be provide crucial facts about the
drawback and impacts of the challenges of electronic systems on service delivery contrasting to
customer satisfaction.

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1.7. ORGANIZATION OF THE PAPER

This research paper is arranged in a way which sequentially answers the questions raised under
the introductory part. Thus there are five chapters in which Chapter One deals with introductory
aspects namely, Background of the study area, Statement of the problem, Objectives of the study
Significance of the study, Scope of the study throughout in this paper. Chapter two is dedicate to
the review of related literature consisting scientific review and empirical review. Chapter three
covers the methods that were used during data collection and data analysis; specifically,
background of the study area, research design, target population, sampling design and
procedures, types and sources of data methods of data collection, and data analysis. Chapter four
is dealing with result and discussion and chapter five cover the conclusion and recommendations.

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 CHAPTER TWO

LITERATURE REVIEW

Introduction

2. Definition and concept of customer satisfaction and electronic banking

According to Hansemark&Albinsson [26], satisfaction is overall customer attitude towards

service provider, or an emotional reaction to the difference between what customer anticipate
and what they receive, regarding the fulfilment of some need, goal or desire. Customer
satisfaction is a measure of how products and services supplied by a company meet surpass
customer expectation.

E-banking is the use of a computer to retrieve and process banking data (statements, transaction
details, etc.) and to initiate transactions (payments, transfers, requests for services, etc.) directly
with a bank or with other financial service provider remotely via a telecommunications network
(Yang 1997). The term of E-banking often refers to online banking/Internet banking which is the
use of the Internet as a remote delivery channel for banking services (Furst&Nolle 2002).
E-banking can be also defined as a variety of platforms such as internet banking or (online
banking), TV-based banking, mobile phone banking, and PC (personal computer) banking (or
offline banking) whereby customers access these services using an intelligent electronic device,
like PC, personal digital assistant (PDA), automated teller machine (ATM), point of sale (POS),
kiosk, or touchtone telephone (Alagheband 2006).
Banks offer Internet banking in two main ways. An existing bank with physical offices can
establish a Web site and offer Internet banking to its customers in addition to its traditional
delivery channels. A second alternative is to establish virtual branchless or Internet-only, Bank
almost without physical offices. Virtual banks may offer their customers the ability to make
deposits and withdraw funds via ATMs or other remote delivery channels owned by other
institutions (Furst&Nolle 2002:5). In the context of this study E-banking were not considered as
only transferring of service by using internet connection rather it considered as multi-channel
service provided through ATM, internet banking, Mobile banking (Modbirr system), point sale
terminal and telephone banking.

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2.1. THEORETICAL LITERATURE

2.1.1. BANKING HISTORY IN ETHIOPIA

Traditional institutions organized with a sense of cooperation and risk sharing has enabled
Ethiopians to experience saving and financial management within its cultural context. Eqqub and
Edir are some of the informal financial institutions that shaped the social bond and interaction
(GebeyawAychile 2008).
Modern banking in Ethiopia began in 1905 with the Bank of Abyssinia, a private company
controlled by the Bank of Egypt. In 1931 it was liquidated and replaced by the Bank of Ethiopia
which was the bank of issue until the Italian invasion of 1936. During the Italian occupation,
Bank of Italy banknotes formed the legal tender. Under the subsequent British occupation,
Ethiopia was briefly a part of the East Africa Currency Board. The establishment of privately
owned Addis Ababa Bank in 1964 and its growing branch network created relatively better
banking competition among commercial banks, with concentration of their branch offices in big
towns and trade routes in the country. Following the 1974 Revolution, on January 1, 1975all
private banks and 13 insurance companies were nationalized and along with state owned banks,
placed under the coordination, supervision and control of National Bank of Ethiopia (NBE,
profile, 2012).
The current status of banking industry of Ethiopia has been identified by Ncube (2008:4), that
the financial system of Ethiopia is very underdeveloped. There is no stock exchange and of the
eleven banks that exist, three are state owned and dominate the sector. There are no foreign
banks in the country, and the system remains isolated from the effect of globalization while
policy-makers fears that liberalization will lead to loss of control over the economy. The
government controls interest rates and sets them below the high inflation rate.

In terms of technological revolution in banking industry of Ethiopia, G.Worku (2010:2)

identified that Electronic Banking has been widely used in developed countries and is rapidly
expanding in developing countries. In Ethiopia however, cash is still the most dominant medium
of exchange, and electronic payment systems are at an embryonic stage. In the face of rapid
expansion of electronic payment systems throughout the developed and the developing world,
Ethiopian financial sector cannot remain in exception in expanding the use of the system.

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The appearance of E-banking in Ethiopia goes back to the late 2001, when the largest state
owned, commercial bank of Ethiopia (CBE) introduced ATM to deliver service to the local
users. In addition to eight ATM Located in Addis Ababa, CBE has had Visa membership since
November 14,2005. But, due to lack of appropriate infrastructure it failed to reap the fruit of its
membership.
Despite being the pioneer in introducing ATM based payment system and acquired visa
membership, CBE Lagged behind Dashen bank, which worked aggressively to maintain its lead
in E-payment system. As CBE continues to move at a snail's pace in its turnkey solution for Card
Based Payment system, DashenBank remains so far the sole player in the field of E-Banking
since 2006. (GardachewWorku 2010)
The agreement signed by three private commercial banks to launch ATM and POS terminal
network, in February 2009 is welcoming strategy to improve electronic card payment system in
Ethiopia. Three private commercial banks - Awash International Bank S.C., Nib International
Bank S.C. and United Bank S.C. have agreed in principle to establish an ATM network called
Fettan ATM network. If everything goes as planned, Fettan ATM will install over 140 ATM
machines and over 340 POSs across Ethiopia. There will be one ATM at every branch of the
consortium banks, all domestic airports serviced by Commercial service, shopping complexes
and merchants. The agreement is the first significant cooperation between competing banks in
Ethiopia, which others should be encouraged to follow as there is no single bank in Ethiopia that
can afford to provide Extensive geographical coverage and access (Binyam, 2009).
2.1.2. BACKGROUND HISTORY OF COMMERCIAL BANK OF ETHIOPIA (CBE)

The leading bank in Ethiopia, established in 1942. Pioneers introduce modern banking to the
country and to introduce Western Union Money Transfer Services in Ethiopia. It has more than
1140 branches stretched across the country and the leading African bank with assets of 384.6
billion birr as on June 30th 2016.CBE was the first bank in Ethiopia to introduce ATM service for
local customers. Currently CBE has more than 13.3 million account holders and the number of
Mobile and Internet Banking users also reached more than 1,352,000 (61% active users) and
active ATM card holders reached more than 3 million with active users of 61% as a September
30th 2016.It has strong correspondent relationship with more than 50 renowned foreign banks and
a SWIFT bilateral arrangement with 500 others. CBE has a SWIFT bilateral arrangement with

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more than 29,000 talented and committed employees CBE has reliable and long-standing
relationships with many internationally acclaimed banks throughout the world (CBE, Profile,
2016).

2.1.3. Major types of electronic banking:

1. Automated Teller Machines (ATM) - It is an electronic terminal which gives customers the
opportunity to get banking service at almost any time. To withdraw cash, make deposits or
transfer funds between accounts, a consumer needs an ATM card and a personal identification
number (PIN). For travellers, ATMs make it simple to access their checking or savings accounts
from almost anywhere in the world. When travellers use foreign ATMs, they receive a better
exchange rate than they would at most currency exchange offices.
Additionally, using an ATM is easier than cashing traveller’s checks, and arguably, it makes
travel safer, as the traveller doesn't have to carry a lot of cash. However, the account holder's
bank may charge transaction fee or a percentage of the amount exchanged. Most ATMs do not
list the exchange rate on the receipt, making it challenging to track spending.
http//www.investopedia.com/terms/a/atm.asp
2. Point-of-Sale Transfer Terminals (POS) - The system allows consumers to pay for retail
purchase with a check card, a new name for debit card. This card looks like a credit card but with
a significant difference. The money for the purchase is transferred immediately from account of
debit cardholder to the store's account (Malak 2007).
Retailers and online merchants use point-of-sale (POS) systems to complete sales and keep track
of transactions. A POS can be as simples a checkout register, or something more complex that is
linked to other systems. When most of us see the term POS, it refers to transaction – usually a
purchase you make with your debit card. On your bank statements(or online transaction history),
the label might be applied to the amount you paid a merchant, or it might signal that you were
charged additional fees for using your card. Justin Pritchard 2017.
3. Internet / extranet banking-
The Internet Banking Concept: There are two concepts of Internet banking: First, "A bank that
only exists on the internet and has no offices." In this case the operations are conducted
exclusively over the Internet. Seconda bank whose offices are physically and have a distribution

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channel for products and services operating on the internet. This case is currently the most
common. "
The Definition of Internet Banking: "You can set Internet banking as a set of technological tools
that offers financial institution for its customers to make banking transactions via the computer
using your Internet connection." The Internet banking service is based on awe interface or
connection that integrates the functionalities of a bank branch.
Richard. 2011. Electronic Banking
4. Mobile banking-
Barnes,S and Corbitt,B. 2003"The internet and the mobile phone - two technological
advancements that have profoundly affected human behavior in the last decade - have started to
converge. The products of this association are mobile data services. Using a variety of platforms,
services are being created to enable mobile devices to perform many activities of the traditional
internet, albeit in reduced format for mobile devices. One area of activity is mobile (m-) banking
(one of the first areas of commercial transaction on the wireless internet).Banking is an area that
has extended in many different ways in recent years, including telephone and online banking. M-
banking provides yet another channel for banking services, and in emerging markets, provides
some possibility for becoming a primary channel." International journal of Mobile
Communication 1(3), (273-288)
2.1.4. ADVANTAGES OF E-BANKING

Internet Banking has several advantages over tradition alone which makes operating an account
simple and convenient. It allows you to conduct various transactions using the bank's website
and offers several advantages. Some of the advantages of internet banking are:
Online account is simple to open and easy to operate.
 It is quite convenient as you can easily pay your bills, can transfer funds between accounts,
etc. Now you do not have to stand in a queue to pay off your bills; also you do not have to
keep receipts of althea bills as you can now easily view your transactions.
 It is available all the time, i.e. 24x7. You can perform your tasks from anywhere and at any
time; even in night when the bank is closed or on holidays. The only thing you need to have
is inactive internet connection.

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 It is fast and efficient. Funds get transferred from one account to the other very fast. You can
also manage several accounts easily through internet banking.
 Through Internet banking, you can keep an eye on your transactions and account balance all
the time. This facility also keeps your account safe. This means that by the ease of
monitoring your accountant anytime, you can get to know about any fraudulent activity or
threat to your account before it can pose your account to severe damage.
It also acts as a great medium for the banks to endorse their products and services. The services
include loans, investment options, and many others

2.1.5. DISADVANTAGES OF E-BANKING

Though there are many advantages of internet banking, but nothing comes without disadvantages
and everything has its pros and cons; same is with internet banking. It also has some
disadvantages which must be taken care of. The disadvantages of online banking include the
following:
 Understanding the usage of internet banking might be difficult for a beginner at the first go.
Though there are some sites which offer a demo on how to access online accounts, but not all
banks offer this facility. So, a person who is new might face some difficulty.
 You cannot have access to online banking if you don’t have an internet connection; thus
without the availability of internet access, it may not be useful.
 Security of transactions is a big issue. Your account information might get hacked by
unauthorized people over the internet.
 Password security is a must. After receiving your password, do change it and memorize it
otherwise your account may be misused by someone who gets to know your password
inadvertently.
 You cannot use it, in case, the bank’s server is down.
 Another issue is that sometimes it becomes difficult to note whether your transaction was
successful or not. It may be due to the loss of net connectivity in-between, or due to a
slow connection, or the bank’s server is down.
The advantages of electronic banking services such as increased convenience and functionality
are discussed in detail by Johnson et al. (1995). Bal dock (1997) uses the term “virtualization”,
by which he means “the removal of the constraints of time, place and form, made possible by the

11
convergence of computing, telecommunications and visual media'”, to describe the benefits
offered to both the bank and the customer by electronic banking.
2.1.6. CUSTOMER SATISFACTION AND FACTORS AFFECTING ELECTRONIC
BANKING

Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectation. Customer satisfaction is also defined as the number of customers
whose reported experience with a firm exceeds specified satisfaction goals (Farris, Paul et al.,
2010). Another definition of customer satisfaction refers to the extent to which customers are
happy with the products and/or services provided by a business. Further definition of customer
satisfaction states that it is a term generally used to measure a customer's perception of a
company's products and/or services (Ahmed, 2005). It's not a straight forward science. Customer
satisfaction will vary from person to person, depending on a whole host of variables which may
be both psychological and physical.

According to Saha& Zhao (2005), customer satisfaction is defined as a collection of outcome of

perception, evaluation and psychological reactions to the consumption experience with a
product/service. In other words, Saha and Zhao further defined customer satisfaction as a result
of a cognitive and affective evaluation where some comparison standard is compared to the
actually perceived performance. If the performance perceived is less than expected, customers
will be dissatisfied. On the other hand, if the perceived performance exceeds expectations,
customer will be satisfied. In a competitive market place where businesses compete for
customers, customer satisfaction is seen as a key differentiator and increasingly has become a
key element of business strategy (Carl & McDaniel, 2005).

It is seen as a key performance indicator within business and is often part of a Balanced
Scorecard. Therefore, it is essential for organizations to effectively manage customer
satisfaction. To be able do this, organizations need reliable and representative measures of
satisfaction. In researching satisfaction, firms generally ask customers whether their product or
service has met or exceeded expectations. Thus, expectations are a key factor behind
satisfaction. When customers have high expectations and the reality falls short, they will be
disappointed and will likely rate their experience as less than satisfying (John &Joby, 2003).

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2.2. Empirical Evidences

Some related studies are conducted by different researchers in different parts of the world.
However, there are limited numbers of studies conducted in Ethiopia on e-banking technology.
Specifically (Gardachew, 2010) conducted a research on the opportunities and challenges of e-
banking in Ethiopia. The study was focused on analyzing the status of electronic banking in
Ethiopia and investigates the main challenges and opportunities of implementing e-banking
system.

The author conducted a survey on the existing operating style of banks and identifies some
challenges of using e-banking system, such as, lack of suitable legal and regulatory frame works
for e-commerce and e- payments, political instability in neighbouring countries, high rates of
illiteracy and absence of financial networks that links different banks. Wondossen&Tsegai
(2005) also studied the challenges and opportunities of e-payments in Ethiopia; their objective
was studying of e-payment practices in developing countries. The authors employed interview
and on site observation to investigate challenges to e-payment in Ethiopia and found that, the
main obstacles to the development of e-payments are, lack of customers trust in the initiatives,
unavailability of payment laws and regulations particularly for e-payment, lack of skilled
manpower and frequent power disruption.

The study statistically analyses data obtained from the survey questionnaire. A research
framework developed based on technology-organization environment model (TOE) developed
by Tornatzky and Fleischer. The result of the study indicated that, the major barriers Ethiopian
banking industry faces in the adoption of electronic banking are: security risk, lack of trust, lack
of legal and regulatory frame work, lack of ICT infrastructure and absence of competition
between local and foreign banks.

The study suggests a series of measures which could be taken by the banking industry and by
government to address various challenges identified. These measures include establishing a clear
set of legal framework on the use of technology in banking industry, supporting banking
industry by investing on ICT infrastructure and banks needs to be focused on technological
innovation competition rather than traditional bases of retail bank competition. 20 Furthermore

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(Assefa, 2013) conducted a study on the impact of e-banking on customer satisfaction in two
privet banks in Gondar city.

The researcher employed descriptive and inferential statistics in analysing this study and it was
limited to customers of two privet banks only. The results of the study implied that majority of
users of e-banking are the young, the educated, salaried and students, business men and women
are not actively using the service of e-banking, e-banking currently provided for saving and
current accounts holders only, e-banking reduced frequency of bank hall for banking service,
reduced waiting time for customers, there are customers who don’t know the fee charged for
being e-banking users , the bank customers satisfaction increased after being e-banking users,
enabled customers to control their account movements and there is high opportunity to expand
e-banking service in the city. The study of (AlaEddin&Hasan, 2011) on e-banking functionality
and outcomes of customer satisfaction in Jordanian commercial banks, it aims to explore the
adoption of e-banking functionality and investigates the impact of e-banking on the outcomes of
customer satisfaction.

A purposive sampling technique was employed to recruit 179 customers representing the
desired range of demographic characteristics (e.g. gender, age, and computer use), previous
internet experience levels and product-related knowledge. The research showed that adoption of
e-banking (accessibility, convenience, security, privacy, content, design, speed, fees and
charges) had a positive effect on Jordanian Commercial Bank customers' satisfaction. Gerrard et
al (2006) in their study in Singapore identify risk to be an important factor for Internet Banking
adoption. All respondents who did not use internet banking services had a negative perception of
the security in Internet Banking.

The respondents perceived that there were many security risks when using the internet. They felt
the privacy was a concern, feeling all their financial information could be in jeopardy. Risk was
one of the two most frequently mentioned factors in their study, concern about risk was
mentioned by all respondents. An empirical investigation conducted by Sathye (1999) on the
adoption of Internet Banking by 21 Australian consumers also identified, security concerns as
key factor in internet banking adoption. A report on Internet Banking in Australia finds that,
security concerns among banks and customers are keeping both away from Internet Banking
(Sathye, 1999). The study of Kerem (2003) on the adoption of electronic banking: underlying

14
consumer behaviour and critical success factors conducted in Estonia, was intended to study the
further understanding of, how consumers perceive electronic banking in the heyday of
interactive channels in Estonia, as Estonia is internationally renowned for being a pioneer in the
acceptance of new technologies. A series of an in depth interviews was conducted with leading
industry experts in Estonia. The selection criterion for the respondent was mainly their
involvement with the development of Internet banking systems from the early days of its
emergence.

The survey conducted for this research addressed six different issues influencing the adoption of
Internet banking (Better prices, Recommendations, Better service, Marketing efforts, Better
access and higher privacy). The most important factors in starting to use Internet banking are
first and foremost better access to the services (convenience), better prices and higher privacy.
Better service (i. e. preferring self-service over office service) was also of above average
importance. Two factors that the respondents did not consider relevant to their adoption decision
were banks' marketing activities and personal recommendations from friends and colleagues.
Also the survey conducted six main obstacles (computers are difficult, no access to internet,
internet banking is expensive, low security, have had no chance to try and I prefer personal
contact) in adopting Internet banking (results of a preliminary study, 100 respondents), the most
important factors discouraging the use of Internet banking are lack of Internet access and not
having a chance to try out Internet banking in a safe environment.

Finally the research indicates that banking activities alone may not be sufficient in achieving
growth if general infrastructure, economic environment and government initiatives are not
supportive. The aim of the study was to collect South African data in order to test out the
hypotheses regarding the 22 factors, which affect adoption of Internet banking and compare
these results with those collected in other countries. Online questionnaire was used to collect
empirical data and the results of the study shows that intention to adopt Internet banking can be
predicted by attitudinal factors, perceived behavioural control factors to a lesser degree, and not
by subjective norms. All attitudinal factors except banking needs are found to be significant,
with complexity and risk showing a negative relationship. Jannatul (2009) in his study of e-
banking & customer satisfaction which focus on understanding the impact of variables of e-
banking, on customer satisfaction in Bangladesh, five service quality dimensions namely

15
reliability, responsiveness, assurance, empathy, and tangibles are established based on the
SERVQUAL model and the literature review. These variables are tested in e-banking to explore
the relationship between service quality and the customer satisfaction. Data were gathered
through survey interview by a structured questionnaire with 250 customers. The study shows
that these factors are the core service quality dimensions for customer satisfaction in e-banking.
It also explores that reliability, responsiveness, and assurance have more contribution to satisfy
the customers of e-banking in Bangladesh.

In general, most of e-banking related studies are too remote for our cases and even the study of
Asefa (2013) which is found to be similar to the present topic were done in qualitative approach
also ignores state owned e-banking customers. Thus to address the current gap in the literature,
methodology and question of representativeness this study is designed to examine the impact of
e-banking on the satisfaction of customers in two Private Banks and one public bank in Addis
Ababa.
2.3. Conceptual framework
The frameworkthat shows effect of E-banking on customer satisfaction.

Environmental Factors Technological Factors

-Infrastructure -ICT problems

-Security challenge -low network connection

-Introducing E-banking
Customer
satisfaction
Social Factors Company’s Factors

-Lack of awareness -Efficiency

-low illiteracy -Risk taking

-Advertising

Figure 2.1 The framework that shows impact of E-banking on customer satisfaction.
Source: the international journal of social science &humanities invention, vol.5,issue
06,Jun,2018

16
 CHAPTER THREE
RESEARCH METHODOLOGY
3.1. RESEARCH DESIGN
Singaliveru, (2003) categorize research design as the following: Causal study design;
Exploratory and Descriptive design. Causal study design is used to explore relationships between
variables. Its main purpose is to determine reasons or causes, for the current status of the
phenomenon under study. Exploratory study design investigation into a problem or situation
which provides insight to the researcher. Descriptive study design is a process of collecting data
in order to test hypothesis or to answer questions concerning the current status of subjects in the
study and also attempts to describe such things as possible behaviour, attitudes, values and
characteristics (M.Mugenda and G.Mugenda, 2003).
The study design will be implemented as it helped the researcher to get information from the
respondents on how e-banking impacts customer satisfaction in the banking industry within the
study of the organization. This research adopts with an explanatory research.
3.2. TARGET POPULATION
The targeted population of the study is customers of CBE, Burayu branch those who are using
the service related to E-banking. As information we get from the staffs of the branch 2000
customers are currently active, hence we focus on those customer by using the sample size of
those clients..
3.3. SAMPLE SIZE AND SAMPLE TECHNIQUE
From 2000customers of CBE, Burayu branchwho has been using at list one of the e-banking
types, 95 were selected by using purposive sampling technique, which means the selection of
the respondent is made in way to get sufficient data regarding the research topic.
To calculate sample size,simplified formula provided by Zikmund, et al. (2010) is used i.e.
n = N
1+N (e) 2
sample size will be=2000
1+2000(0.1)2 = 95
Where n=number of sample size
N=Total number of study population
e=level of confidence to have in the data or degree of freedom which is 90% for this
study
17
3.4. TYPES AND SOURCE OF DATA
For the purpose of this research, and in order to achieve the objectives of the study both primary
and secondary sources of data will be used. Secondary data will be collecting from different
websites, annual reports of banks, case studies, journal articles, magazines and different books
that are reviewed in the area of e-banking
3.5. METHODS OF DATA COLLECTION
As this research is conducted to measure the effects of electronic banking on customer
satisfaction, both primary and secondary data collection methods will be used.
Primary data will be collected using questionnaire. The data Collected from customers and Bank
officials will be gathered through self-administered questionnaire. Secondary data will be
collected from annual report of the bank.
3.6. METHODS OF DATA ANALYSIS
For the purpose of achieving the objectives of the study, the collected data will be processedand
analysedwith descriptive throughout the analysis process, percentages, mean, standard deviation
and other quantitative methods will be employed. Moreover, tables and graphs will be used to
present the findings of the study.
3.7. WORK PLAN AND BUDGET PLAN
3.7.1 Work plan
S.No ACTIVITIES M A M J J Responsible bodies
1 Title submission Researcher
2 Title approved Instructor
3 Proposal preparation Researcher
4 proposal submission Researcher
5 Proposal 1st draft Adviser
6 Proposal final submission Researcher
7 Data collection Researcher
8 Final paper 1st draft Researcher
9 Final paper submission Researcher
10 Paper presentation Researcher

3.7.2 Budget plan

S. No Activities Amount Unit price Total

1 Paper 1pack 110 birr 110

18
 2 Pen 5 5 25

3 Transportation

Ride Rent (4 times) 150 birr 600

Oil 40 litters 17.5 birr 700

4 Computer writing 100 pages 3.50 birr 350

5 Contingency 400

Total 2185

REFERANCES
AlaEddin, M., &Hasan, A. (2011). E-banking functionality & outcomes of customer

19
 satisfaction: An Emerical Investigation. International journal of marketing studies,
vol 3(1).
Ahmed, B. (2005). The Impact of E- Banking on customer satisfaction ( university of Zaria
Abuja Nigeria).
Armstrong, R.W. and Seng, (2000). Corporate- customer satisfaction in the banking
Industry of Singapore.International journal of Bank marketing, Vol.6 No.1.
Applegate, L. (1996). Electronic commerce: Building Blocks of New Business Opportunity.
Journal of Organizational Computing and Electronic Commerce, Vol 6 No.1
Assefa, M. (2013). The Empact of Electronic Banking On Customer satisfaction in
Ethiopian Bank industry. MBA Thesis, faculty of Business & Economics University of
Goder.
Avkiran, N. (1994). Developing an Instrument to measure Customer Service Quality In Branch
Banking.International journal of Bank Marketing. Vol.12 No.6,pp. 10-18.
Belay, D., &Ebisa, D. (2012). Evaluation of Customer Satisfaction on Bank Services: An
Imperical Analysis (Jimma Commercial Bank of Ethiopia.)
Kerem, K. (n.d). Adoption of Electronic Banking: Underlying Consumer Behavior Cretical
Success Factors Case Study of Estonia.The 2003 Conference of the Technology
Everyday Life Ne
Wondwossen, T and Tsegai, G (2005). `E-payment: challenges and opportunities in
Ethiopia‟, Economic commission for Africa, Addis Ababa Ethiopia

Gardachew, W (2010). Electronic -banking in Ethiopia: practices, opportunities and Challenges‟,

Journal of internet Banking and commerce, 15(2):2-9

AyanaGemecchu.(2012). adoption of electronic banking system in Ethiopia banking industry

barrier and drivers, AAU MBA thesis, May 14

Donald Wetzel.(1967). Automated teller machine and personal identification number (PIN).
USA, editor, CornellsRobat

20
Gardachew, W (2010). Electronic -banking in Ethiopia: practices, opportunities and Challenges‟,
Journal of internet Banking and commerce, 15(2):2-9

Gartner,( Retrieved 14 Aug.2014)

Dr. jaimenon, IT infrastructher (4th era)

Dr.RaneeJayamaha.(2008).Transia Asia 22ndJan

Jim smith.(1995). the development of ICT

Leady p 1989 practical research, planning and design 4thedmamilan of fact sheet, university of
strthlyde.

Margare Rouse. www.what is.com/elements of core banking.(reserved 1999-2017)

Wondwossen, T and Tsegai, G (2005). `E-payment: challenges and opportunities in

Ethiopia‟, Economic commission for Africa, Addis Ababa Ethiopia

Tefere, S. (2013, December).Prospects & Changes of private Commercial Banks in

Ethiopia.Department of Economics Unity University.

Kumar, M., Kee, F., & Charles, V. (2010). Comparative Evaluation of Critical Factors in

Delivering Service Quality of Banks: An Application of Dominance Analysis in Modified

SERVQUAL model.

APPENDIXES

Rift ValleyUniversity

Masters of Business Administration

21
Dear Sir

This questionnaire prepared for customer of commercial bank of Ethiopia, Burayubranch to

collect information about the assessment of system in the Bank. The research will be conducted
for the partial fulfilment of the requirement for the MBA (Masters of Business Administration of
Rift Valley University. I would like to assure you that the information you provide will be used
only for the purpose of achieving academic award. Your involvement is regarded as a great
input to the quality of the research results. Hence we believe that you will enlarge your
assistance by participating in the study. Your honest and thoughtful response is invaluable.

Please fill the following questionnaires by putting “×” sign in box.

Part I. Background of customer information.

Sex:

 Male
 Female

Educational level:

 MSc/BA Degree
 Diploma
 Certificate

Part II: Questions related with efficient provision of services

N Scale
O Strongly Strangely
Question Disagree Disagree Undecided Agree Agree Strangely

On Efficiency
E-Banking Provide Complete Help
1
Function ?            
2 Transaction Process is Fast            
On Performance

It is Provided in Multilanguage
3
4 It provides 24 hours 7day Service
It allows transfer between the same
5
banking

Part III: Questions related with factors that limit customers use of e-banking

22
On Reality of Service
E-Banking Delivery the Service
6 Exactly as Promise ?
E-Banking Provide Complete Help
7
Function ?            
E-Banking Perform the Service Right
8
at the First Time ?            

Support of Service Delivery

E-Banking Have Contained Enough
9
Service ?            

10 Case of Problem Happen can Contact

Staff Immediately?            
E-Banking Contains Responsible
11
Section to gain for Command ?            
E-Banking Provide Knowledge to
12 Solve Problem that can Describe Step
to Use ?            

On Security of Service Delivered

13 E-Banking Keep Accurately Cord of
Transaction ?            

14 E-Banking Provide Security for

Transaction Data ?            
No Problem During Using E-Banking
15
Service ?            

16 Feel Safe When Using E-Banking

Can Check Validity and Detail of Past
17
Transaction            
Part IV: Questions related with customers awareness towards E-banking technologies

On tangible
Easy to Find Information on E-
18
Banking            

19 E-Banking is Easy to Access and

Visually Appealing            
20
E-Banking is Service is Every Place            

21 Information and Text are Easy and

Clear to Understanding            
It Provides Clear Instructing and
22
Tangible            
On content
It provides information that exactly
23
fits needs
24
It provides accurate information
It provides information that thrust
25

23
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