Wachamo University of Management

Faculty of Business and Economics

Post Graduate Department of Business Administration

Challenges and Opportunities of Electronic Banking (E-payment) Adoption in

Ethiopian Banking Industry A case CBE.

Prepared By: Tseganesh Asfaw

Advisor: H/Mariam (phd)

A proposal submitted to Management Faculty of Business and Economics

Department of Business Administration
Chapter One
1. Introduction
As an introduction of the study, this chapter presents: background of the study, statement of the problem,
research objective, research questions, research method adopted, scope and limitation of the study,
significance of the study and organization of the whole paper respectively.

1.1 Background of the Study

Like all other social entities financial institutions are being constantly shaken by technological
innovations and inventions (Shyamapada et al., 2011). For instance, till now bank clients were used to
stand in line to get financial services, but now because of the development of the Information and
Communication Technology (ICT) and introduction of electronic banking services they can perform it at
anytime from anywhere even from home. In electronic banking system, funds are transferred through
electronic signals between financial institutions and individual accounts, and between individual accounts
(Shyamapada et al., 2011).

Electronic funds transfer has been described as the third of the great ages of payment, the first being
payment by cash (notes and coins) and the second being paper based payment (for instance, cheques)
(Kilonzo, 2007). E-payment systems refer to the automated processes of exchanging monetary value
among parties in business transactions and transmitting this value over the Information and
Communication Technology (ICT) networks. The common E-banking channels include the payment
cards (debit or credit), online web portals, Point of Sales (POS) terminals, Automated Teller Machines
(ATM), mobile phones, Automated Clearing House (ACH), direct debit/ deposit and Real Time Gross
Settlement System (RTGS) (Nnaka, 2009).

E-banking has many advantages and interesting diversities including more number of customers, services
in higher quality and lower price, preservation and enhancement of share in market, unlimited space for
market, concentration in new distribution, making competition between commercial brands, concentration
on expenses and improvement of revenue, providing extensive services, improvement in management
system, decreasing the expenses of contractions, close intra banking connection, controlling ecological
pollution, etc.( Farshad Havasi1 et al., 2013). E-banking are closely related systems with huge
interactions and their development needs social identity, a reliable legal system, well-built
communication network, and strong government support (Zheng, et al., 2009). Since there can be many
potential problems related with E-banking system, it is necessary to develop a sound atmosphere for E
banking like strengthen the construction of the network infrastructure, improve risk mitigation
mechanisms, develop skill man power, suitable legal and regulatory framework for E-commerce and E-
payment that deals with e-commerce including enforceability of the validity of electronic contracts,
nurture more practitioners in this area and finally strengthen communications with government for policy
support (Zheng, et al., 2009).

Most banks in developed and some in developing parts of the world are now offering E banking services
with various levels of sophistication (Ackah, 2014). Hence, given the almost complete adoption of E-
banking technology in developed countries, the reason for slow adoption of E-banking technology in
developing countries like Ethiopia commercial banks is an important research that is to be addressed by
this paper.

Therefore, the purpose of this research is to assess the current practice and extent of E banking service,
benefits realized by banks as well as users of the bank services, driving forces, opportunities and
challenges for the adoption of E-banking service in Ethiopia commercial banks

1.2 Statement of the Problem

E-banking has been widely used in developed countries and is rapidly expanding in developing countries
because Electronic banking is a driving force that is changing the banking industry towards a more
competitive and efficient situation. Electronic banking presents both an opportunity and a challenge in
terms of being able to provide the convenience, efficiency, and effectiveness of electronic banking to its
customers. The main driver behind electronic banking is convenience. It is available around the clock, is
extremely time-saving, and is accessible from anywhere around the world. Electronic banking is very
efficient, and has helped cut down a lot of costs, and in the case of virtual banks it has cut down almost all
costs (Alam, 2010). But the influences of electronic banking go far beyond this. E-banking has been
widely used in developed countries and is rapidly expanding in developing countries. Ethiopia’s financial
sector remain behind in expanding the use of the technology. According to the branch banking
procedure(March,2019), the goal of CBE is to be a world class bank by the year 2025 with creating
cashless society through expanding and providing the access of e payment like point of sale machines,
visa cards, CBE birr, mobile banking and internet banking. But in Ethiopia cash is still the most dominant
medium of exchange, and electronic payment systems are observed late to move with rapid expansion of
electronic payment systems throughout the developed and the developing world. With a growing number
of import-export businesses, and increased international trades, increase the demand of the customers and
international relations, the current banking system is short of providing efficient and dependable services
(Gardachew, 2010). Lots of researches on E-banking system have been done in different countries in the
world. Different factors in the adoption of E-banking have been taken as the main factors of the adoption
of new technology by different researchers such as environmental factors (like lack of suitable legal and
regulatory framework for e-commerce, poor ICT infrastructure, lack of competitive pressure in the
industry), organizational factors (Lack of skilled man power, resistance to changes in technology among
staff) and technological factors (security risk and functionality). However, despite the importance of these
adoptions and development of E-banking, very limited number of research has been done on the
challenges and opportunities of E-banking in developing countries like Ethiopia. Therefore, more studies
are still required to assess challenges and prospects of E-banking in the country to identify areas in which
the country lags behind that inhibit their E banking adoption and diffusion (Zhao et al., 2008), (Jesse
Ndubi Nakhumwa, 2011),(Meaza Wondimu, 2013) (Mattewos Kinfe, 2016).

Therefore, the purpose of this paper is to identify the challenges and opportunities for adoption and
development of E-banking technology in Ethiopian banking industry especially in hosanna town

commercial banks.

1.3 Objectives of the Study

1.3.1 General Objective

The main objective of the study is to assess and identify the challenges and opportunities of adoption
and development of E-banking technology in Ethiopian banking industry.

1.3.2 Specific Objectives

The specific objectives of the study are:

 To identify the driving forces towards the adoption and development of E-banking service in
Ethiopia
 To find benefits realized by the banks in the adoption of E-banking technology to compliment
their service delivery channels.
 To identify the challenges encountered in the adoption and development of E banking in
Ethiopian banking industry and
  To identify the existing opportunities for the adoption and development of E banking service in
Ethiopia.

1.4 Research Questions

Based on the above stated objectives, the following research questions will be addressed and answered:

1. What are the driving forces towards the adoption and development of E-banking technology in the
Ethiopian banking industry?

2. What benefits have been realized by the Ethiopian banks in hosanna city in the adoption of E-banking
technology?

3. What are the challenges that affect adoption and growth of E-banking technology in the Ethiopian
banking industry?

4. What are the existing opportunities for the adoption and development of E banking technology?

1.5 Limitation of the Study

The study is limited to surveying, interviewing and documentary analysis of the purposely selected banks.
Which is commercial bank of Ethiopia in Hossana purposely selected and it excluded other banks to
explore the intent of the study. CBE selected from the total population based on the familiarity with E-
banking technology i.e. It has long years services in providing E-banking products to public.
1.6 Scope of the Study

The study is only to identify the adoption and development of E-banking technology in the Ethiopian
banking industry in Hosanna city with respect to its Challenges, Benefits, Driving forces and
Opportunity from the banks and Customer perspective. Thus, the study focuses on the opinion of bank
officials and does not include the customers or public opinion on the subject matter.

1.7 Significance of the Study

The purpose of the study is to assess the benefits realized by Banks, driving forces, challenges and
opportunities for the adoption and development of E-banking technology in Hossana city Comercial Bank
of Ethiopia branches. In general the study will have the following significance. Since E-banking
technology is in an infant stage in Ethiopia, identification of opportunities and challenges for the adoption
of E-banking can impact positively on the performance of banks that wish to adopt and/or have adopted
E-commerce applications. Provide an opportunity for decision-makers and managers of the Bank to
consider and evaluate the opportunities and problems observed in the existing practices, in order to take
appropriate corrective measures in the area or to accelerate the positive factors (if any) for the promotion
of E-banking practices. The finding will provide a framework for the Banks for the design of their future
directions and to adjust their goals and objectives as per real opportunities and challenges. The study will
enables government organizations and trade associations to develop banks E-banking assistance programs
that are designed to address the factors identified by this research.

This study will also assist all stakeholders in the banking industry identify and formulate strategies that
will promote E banking. And also seeks to address the lack of studies on E-banking adoption in
developing countries such as Ethiopia. In addition, the study will also provide input for further research
on the area, especially with respect to the challenges and opportunities related with the adoption and
provision of E-banking services to customers or the public at large.

1.8 Organization of the study

The proposal is organized into three chapters: Chapter one focuses on the background of the study,
problem statement, objectives and significant of the study. In chapter two, a range of literatures review is
captured there to gather relevant information concerning E-banking. In chapter three, detail of
methodology followed to achieve results is outlined. It includes the study design, sampling, sampling
technique and data analysis.
Chapter Two

2. Literature Review
The purpose of this chapter is to review the literature in the area of E-banking adoption and development
and mainly focused on the challenges, benefits, drivers and opportunities of adopting E-banking
technology. This review of literature establishes a framework, which can guide the study. The review has
seven sections. Section 2.1, presents the definition of E-banking, in section 2.2 Evolution of E-banking
technology in section 2.3. Forms of E-banking presented, in section 2.4. Innovation adoption and
conceptual frame work used to guide the study, in section 2.5 E-banking risks, while the empirical studies
related with E banking technology is presented in section 2.6. Finally E-banking challenges in Ethiopia
presented in section 2.7.

2.1 Definition of E-banking

The definition of electronic banking (E-banking) varies amongst researchers partially because electronic
banking refers to several types of services through which a bank’s customers can request information and
carry out most retail banking services via computer, television or mobile phone (Daniel, 1999; Mols,
1998; Sathye, 1999). Different authors have defined it in different ways based on their understanding of
the application of electronic banking. The following are few of them E-banking is an electronic
connection between bank and customer in order to prepare, manage and control financial transactions
(Burr, 1996). Electronic 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 other financial service provider remotely via a telecommunications
network (Yang, 1997, pp.2) same is shared by (Malak, 2007), (Commercial Bank of Ethiopia E-
Payment Procedure Document, 2016 )

2.2 Evolution of E-banking

Since the late 1990s E-banking has developed from virtual insignificance to tens of millions of users
worldwide (OECD, 2004). However, E-banking is the product of different generations of electronic
transactions. The current web-based internet is the latest of several generations of systems:
Automated Teller Machine (ATMs), Phone Banking, PC or House Banking. Automated Teller
Machines (ATMs) were the first well-known machines to provide electronic access to customers
where as in phone banking, users call their bank’s computer
2.3 Forms 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)., (Commercial Bank of Ethiopia E-Payment Procedure
Document, 2016 )The description of the above mentioned tools/channels are as follows: -

A. Plastic cards

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

Prepaid debit cards: - These are debit cards not usually linked to a customers’ account.

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 revolve their balance at the
cost of having interest charged

B. 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.

C. 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.

D. 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.

E. 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 (Segun, 2011). 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),
(Commercial Bank of Ethiopia E-Payment Procedure Document, 2016 ) F. Tele-banking: - according
to Habibur, Mohammed and Sayeed (2012) Telephone Banking service is provided by phone. To access
an account it is required to dial particular telephone number and there are several options of services.
Types of Cards Issued By CBE

The Commercial Bank of Ethiopia issues the following type of Payment Cards.

 CBE PROPRIETARY (PRIVATE-LEVEL) CARDS :-Co-Branded Pre-paid Gift Cards and General
Purpose Pre-paid Gift Cards (CBE Wallet and others)
 DOMESTIC VISA CARDS :-like Visa- Classic Debit Cards, Visa- Classic Women Debit Cards,
Visa classic IFB & Selam card ,Visa- Gold Debit Cards, Visa- Platinum Debit Cards and
Co-Branded Visa Platinum Debit Cards
 INTERNATIONAL VISA DEBIT CARDS :- Visa- Classic Debit Cards , Visa- Gold Debit Cards ,
Visa- Platinum Debit Cards and Visa- Infinite Debit Cards
 INTERNATIONAL VISA PRE-PAID CARDS : Visa- Classic Pre-paid Cards , Visa- Gold Pre-paid
Cards and Visa- Platinum Pre-paid Cards (CBE E-Payment Procedure Document, 2016)

2.4 Innovation Adoption

Today the world is witnessing profound transformations and acceleration as a result of the tremendous
development of information technology and steady growth of volume of information that has led to the
emergence of new types of activities and transactions in various fields (Joseph N, 2005). The banking
sector has been one of the first area that adopted different electronic applications to improve performance
and gain a competitive advantage strategy. In light of the extensive use of information and
communication technologies, the financial services industry and banking has provided new systems and
applications that maximizes the use of modern technology and are now available (Francis, 2014).
According to Rogers (1983), the rate of adoption is defined as the relative speed with which members of a
social system adopt an innovation. Therefore, it has become necessary for banks to change the concept of
traditional banking service to because of the rapid growth of electronic banking services and ever
increasing among banks to raise efficiency, reduce costs and attract more customers (Francis, 2014).

2.5 E-banking Risks

Although E-banking has bright prospects, it involves some financial risks as well. The major E-banking
risks according to FSA (2010) include:-

Operational risks; Banks faces three main types of operations risk: such as volume forecasts,
management information systems and Outsourcing. Accurate volume forecasts have proved difficult -
One of the key challenges encountered by banks is how to predict and manage the volume of customers
that they will obtain. Many banks going on-line have significantly misjudged volumes. When a bank has
inadequate systems to cope with demand it may suffer reputational and financial damage, and even
compromises in security if extra systems that are inadequately configured or tested are brought on-line to
deal with the capacity problems.

The second type of operations risk concerns management information systems. Again, this is not unique
to E-banking. Banks may have difficulties in obtaining adequate management information to monitor
their eservice, as it can be difficult to establish/configure new systems to ensure that sufficient,
meaningful and clear information is generated. Such information is particularly important in a new field
like E-banking.

Reputational risk: This is considerably heightened for banks using the Internet. For example, the
Internet allows for the rapid dissemination of information, which means that any incident, either good or
bad, is common knowledge within a short space of time. Internet rumors can easily become self-fulfilling
prophecies .

Strategic Risk:- E-banking is relatively new and as a result there can be lack of understanding among
senior management about its potential and implications. People with technological but not banking skills
can end up driving the initiatives.

Business Risk: - Business risk is also significant in E-banking. Given the newness of E banking, nobody
knows much about whether E-banking customers will have different characteristics from the traditional
banking customers.

Security: - Security issues are sources of concerned for everybody more especially as it concerns
banking industry. E – banking are prone to security breaches such as fraud, theft of commercially
sensitive or financial information, defacement of web sites or denial of service and flaws in system
design and/or set up leading to security breaches. All these security breaches have potentially serious
financial, legal and reputational implications.

2.6 Empirical Studies Related with E-banking Adoption and

Development

A lot of related studies were conducted by different researchers in different countries. Nevertheless, there
are limited numbers of studies were conducted in Ethiopia on the adoption and development of the
technological innovation particularly on E-banking services. Specifically, Gardachew (2010) ,(Zhao et
al., 2008), (Jesse Ndubi Nakhumwa, 2011),(Meaza Wondimu,2013) (Mattewos Kinfe, 2016)
conducted research on the opportunities and challenges of E-banking in Ethiopia. The aim of his
study was focused on analyzing the status of E-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 neighboring countries, high rates of illiteracy and absence of financial networks that
links different banks. According to Gardachew (2010), Opportunities offered by ICT through e-
learning programs and Commitment of the governments on development of ICT infrastructures is
considered as drivers of using E-commerce and E-payment systems.

2.6.1 Challenges of E-banking

According to Harrison (2012), it is hypothesized that many of the factors affecting the successful
adoption of new technologies such as e-commerce and E-banking are generic in nature and that the
successful adoption of internet technologies in part depends on how these are used in conjunction with the
other technologies and management practices that form a technology cluster. However, the most critical
challenges can be ascribed to the very limited information and communication infrastructure available in
most developing countries. Reasons vary widely among sectors and countries and are most commonly
related to lack of applicability to the business, preferences for established business models, (OECD,
2004). Common challenges includes; enabling factors (availability of ICT skills, qualified personnel,
network infrastructure); cost factors (ICT equipment and networks, software and re-organization);
security and trust factors (security and reliability of ecommerce systems, uncertainty of payment methods,
legal frameworks and intellectual property right); and challenges in areas of management skills,
technological capability, productivity and competiveness. Lack of reliable trust and redress systems and
cross country legal and regulatory differences was also impede e-commerce adoption (OECD, 2004). It is
however important to note that challenge to e-commerce adoption work differently according to
organizational type and culture. Areas of training and people development need to be addressed Harrison
(2012). The study that was conducted by Isaac (2005) indicated that the challenges for the adoption of E-
banking in Africa are security, human face i.e. customers still value personalized and responsive services
from their bankers, poor and/or lack of technological infrastructure especially in the rural areas, lack of
proper legislation governing e-transactions and preference to paper money, as opposed to “virtual” cash in
transactions etc. Ziad et al., (2009) also analyzed E-commerce challenges in terms of three categories:
economic, socio-political and cognitive. The economic obstacles include several factors that affect the
diffusion of e-commerce such as slow internet diffusion, unavailability of credit cards, unavailability of a
physical delivery system, and low bandwidth availability

2.6.2 Benefits of E-banking

Banks just like other businesses are tuning to information technology to improve business efficiency,
service quality and attract new customers. Farshad et al., (2013) aver that the most important factors
encouraging consumers to use online banking are lower fees followed by reducing paper work and human
error. Subsequently electronic channels can lead to lower transaction costs which are very competitive
(Claessens and Kliengbiel, 2000). Farshad et al., (2013) is of the view that disputes can be minimized
between the employees as there is a clear flow of processes.

Conducting business outside the normal branch working hours has also been a factor that has been
considered convenient for bankers, inexpensive access to the bank 7x24 and seven days a week. Increased
availability and accessibility of more self service distribution channels help bank administration in
reducing the expensive branch network and associated staff overheads. A reduction in the percentage of
customers visiting the banks with an increase in alternative channels of distribution will also minimize the
queues in branches (Thornton and White, 2001). According to Thornton and White (2001) this ultimately
leads to improved customer satisfaction. Jayawardhena and Foley (2000) observe that electronic banking

increases competition within the banking system and also from non-bank financial institutions.

2.6.2.1 Benefit of E-banking for Banks

According to Jayawardhena & Foley, 2000 the primary benefits of E- Banking are as follow:-Price- In
the long run a bank can save on money by not paying for tellers or for managing branches. Plus, it's
cheaper to make transactions over the Internet.
Customer Base- the Internet allows banks to reach a whole new market- and a well off one too, because
there are no geographic boundaries with the Internet. The Internet also provides a level playing field for
small banks who want to add to their customer base.

Efficiency- Banks can become more efficient than they already are by providing Internet access for their
customers. The Internet provides the bank with an almost paper less system.

Customer Service and Satisfaction- Banking on the Internet not only allow the customer to have a full
range of services available to them but it also allows them some services not offered at any of the
branches. The person does not have to go to a branch where that service may or may not be offer. A
person can print of information, forms, and applications via the Internet and be able to search for
information efficiently instead of waiting in line and asking a teller. With more better and faster options a
bank will surely be able to create better customer relations and satisfaction.

Image- A bank seems more state of the art to a customer if they offer Internet access. A person may not
want to use Internet banking but having the service available gives a person the feeling that their bank is
on the cutting image.

2.6.2.2 Benefit of E-banking for Customers

The main benefit from the bank customers’ point of view is significant saving of time by the automation
of banking services processing and introduction of an easy maintenance tools for managing customer’s
money. The main advantages of E-banking for corporate customers as per (BankAway! 2001; Gurău,
2002) are as follows:- Reduced costs in accessing and using the banking services. Increased comfort and
timesaving — transactions can be made 7x24, without requiring the physical interaction with the bank.
Quick and continuous access to information: Corporations will have easier access to information as, they
can check on multiple accounts at the click of a button. Better cash management: E-banking facilities
speed up cash cycle and increases efficiency of business processes as large variety of cash management
instruments are 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.

The main benefits from E-banking for private customers are as per BankAway (2001) are as follows:-

Reduced costs: This is in terms of the cost of availing and using the various banking products and
services. Convenience: All the banking transactions can be performed from the comfort of the home or
office or from the place a customer wants to. Speed: The response of the medium is very fast; therefore
customers can actually wait till the last minute before concluding a fund transfer. Funds management:
Customers can download their history of different accounts and do a “what-if” analysis on their own PC
before affecting any transaction on the web. This will lead to better funds management.

In addition,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. E- 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.
Challenges and Opportunities of Electronic Banking in Ethiopia 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 7x24 and they are only a
mouse click away. Electronic Banking as already stated has greatly serviced both the public and the
banking industry. This has resulted in creation of a better enabling environment that supports growth,
productivity and prosperity. Besides many tangible benefits in the form of reduction of cost, reduced
delivery time, increased efficiency, reduced wastage, banking electronically controlled and thoroughly
monitored environment and discourage many illegal and illegitimate practices associated with banking
industry like money laundering, frauds and embezzlements. Further E-banking has helped banks in better
monitoring of their customer base. This is a useful tool in the hand of the bank to device suitable
commercial packages that are in conformity with customer needs. As E-banking provide opportunity to
banking sector to enlarge their customer base, a consequence to increase the volume of credit creation
which results in better economic condition. Besides, Ebanking has also helped in documentation of the
economic activity of the masses (Mahdi Salehi, 2004).

2.6.3 Drivers for Adoption of E-banking Technology

An exploratory research conducted by Mahdi Salehi (2004) in Iran indicated that the adoption status of E-
banking is the transition of pre-development to development phase and the main drivers for adopting E-
banking are downsizing, gaining competitive advantage, increasing market share and improving bank’s
image. In addition to the above factors, the case study that was conducted in china by Sherah Kurnia, Fei
Peng, Yi Ruo Liu (2005) suggested that the government support is also a strong driver for E-banking
adoption. The government support is manifested in two ways. Firstly, the Government is establishing an
electronic commerce (EC)-friendly environment in the country. The government in recent years to
revamp the national ICT and logistic infrastructures has committed heavy investments.
New EC laws and regulations have also been passed and adjusted to provide legal protections for EC
activities in general. Secondly, the government also directly offers financial incentives to promote E-
banking adoption.

The study that was conducted by Isaac (2005) indicated that the drive forces for the adoption of E-
banking in Africa are rapidly changing customers’ needs and preferences, government support,
competitive forces and product differentiation strategies and pressure to reduce transactional and
operation costs. In the study on online banking drivers Aladwani (2001) has found, that providing faster,
easier and more reliable services to customers were amongst the top drivers of E-banking development.

2.7 E-banking Challenges in Ethiopia

Banking and Finance is an important sector for establishing e-commerce. There are some roles of banking
sector in e-commerce such as, online corporate banking, electronic fund transfer, automated teller
machines (ATM), debit card, credit card etc. Bank is the only authorized organization which can store and
transact money. Technological developments in banking sector make trading activities much easier and
cheaper for customers. It provides convenience in terms of the capital, labour, time and all the resources
needed to make a transaction (Uppal, 2008). Banking in Ethiopia faces numerous challenges to fully
adopt E-banking. Research result studied by Wondwossen & Tsegai (2005) forward the following
challenges like

Low level of internet penetration and poorly developed telecommunication infrastructure: Lack of
infrastructure for telecommunications, Internet and online payments impede smooth development and
improvements in e-commerce in Ethiopia. Lack of suitable legal and regulatory framework for e-
commerce and e-payment:

Ethiopian current laws do not accommodate electronic contracts and signatures. Ethiopia has not yet
enacted legislation that deals with ecommerce concerns. Political instabilities in neighboring countries:
Political and economic instabilities in Somalia, Southern Sudan, and Eritrea are threatening traits that do
not provide a very conducive environment for E-banking in Ethiopia. High rates of illiteracy: Low
literacy rate is a serious impediment for the adoption of E-banking in Ethiopia as it hinders the
accessibility of banking services.
For citizens to fully enjoy the benefits of E-banking, they should not only know how to read and write but
also possess basic ICT literacy. High cost of Internet: The cost of Internet access relative to per capita
income is a critical factor. Compared to the developed countries, there are higher costs of entry into the e-
commerce market in Ethiopia. These include high start-up investment costs, high costs of computers and
telecommunication and licensing requirements. Absence of financial networks that links different banks
(Banks are not yet automated): Most of the banking-transactions currently taking place use credit and
debit cards supplied by Visa and MasterCard. For conducting E-banking, the use of credit or debit cards is
mandatory thus requiring the need for specialized systems which are not currently available. Frequent
power interruption: Lack of reliable power supply is a key challenge for smoothly running E-banking in
Ethiopia.

Chapter Three

Research Methodology

3.1 Introduction

This chapter will present the methodological framework applied to solve the research problem and to
answer the research questions. The chapter starts with the chosen research design, research approach and
study area. Afterwards, the sample selection and the data collection methods will be presented.

3.2 Research Design

A research design is the arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure. In fact, the research
design is the conceptual structure within which research is conducted; it constitutes the blueprint for the
collection, measurement and analysis of data (Kothari, 2004).

This study will focuses on describing the current situation of the problem and answer the research
questions which are in the form of ‘‘what’’, and to highlight the most important factors that can
negatively or positively affect the adoption and development of E banking in Hossana city CBE branches.
Moreover, this research aims to explain the phenomenon and assess the current practice of E-banking.
Therefore, Descriptive research is being used to achieve the research objectives.

3.3 Study Area

The area chosen for this study will be Hosanna city Commercial Bank Branches because all Provide e-
payment service to the banks customer and they can fully represent the whole branches in the country.

3.4 Population, Sample Size and Sampling Techniques

In research methods, population is the entire aggregation of items from which samples can be drawn
(Yahiya, 2011).The population of the study will consist public commercial bank that has operated. Hence,
According to National Bank of Ethiopia Quarterly Bulletin (2015), the total number of Commercial
Banks which had been operated in the year 2015 is 19, Banks. In order to undertake this study, the
researcher purposely sampled commercial bank of Ethiopia, which is adopted E-banking
technological.The researcher chooses to take six commercial bank Branches as a sample, because it is
often impossible or too much expensive to collect data from all the potential units.Thus, this research
paper will use purposive sampling method to draw the sample from the population.

3.5 Sources of Data

The study will be done by collecting data from both primary and secondary sources. Primary data will be
collected from the city branch staffs of the commercial banks based on a structurally designed
questionnaire. It includes both closed ended and open-ended questions, which will give the respondents
an opportunity for adequate expression of their view on the questions .In addition, semi-structured
interview with the higher city branch official of commercial bank E-banking staffs and Regulatory organ
reports, from web site, books, annual reports and magazines, articles and journals Will be analyzed.

3.6 Data Collection Instruments

In order to collect sufficient data so as to answer the research questions, researcher designed two surveys;
the first was a questionnaire to get quantified results. The second survey is interviews aimed to collect
data from E-Banking managers. In addition to questionnaire and interview; secondary data source will be
used.

3.6.1 Secondary data Sources:

The secondary sources of data gathered from CBE E-payment procedure document, records and reports of
the industry, World Wide Web (www) of commercial bank of Ethiopia, literature on E banking, books
and journals, and unpublished theses.

The most important use of this secondary data source is to corroborate and augment evidence from other
sources (Yin, 1989; pp. 86). Thus, the document examination helps to substantiate the patterns that
evolved from the data collected via questionnaires and interview, so that the validity of the findings could
be enhanced through secondary sources.

3.7 Method of Data Analysis

In order to meet the stated research objectives, the collected data will be analyzed based on the nature of
the objective. Accordingly, the data collected via questionnaires is analyzed with descriptive statistics
using statistical package for social scientists (SPSS) Furthermore, Wolcott (1994) cited in Creswell
(2003; pp. 184), suggested that qualitative research is fundamentally interpretative i.e. the researcher
makes an interpretation of the data. Thus, the data that is collected from the interview and reviews of
documents will be interpreted qualitatively. To sum, the analysis of quantitative data and interpretation of
qualitative data combines to seek convergence among the results (Creswell, 2003).

REFERENCES

Aduda, J., &Kingoo, N. (2012). The Relationship between Electronic Banking and Financial
Performance among Commercial Banks in Kenya. Journal of Finance and Investment Analysis, 1(3),
99-118.

Adriana, C. (2006). Forms of electronic banking. Journal of internet banking, Vol. 16(6),
Bank of Slovenia, Narodna

CBE e-payment team (2016) .Commercial Bank of Ethiopia Electronic payment procedure
Document.www.-----------------------
Gardachew, W 2010, ` ‘Electronic -banking in Ethiopia: practices, opportunities and Challenges’,
Journal of internet Banking and commerce, 15(2):2-9

Malak, J 2007, Readiness of the Palestinian banking sector in adopting the electronic

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

Akintoye, K. A., &Araoye, O. I. (2011, July). Combating E-Fraud on Electronic Payment System.
International Journal of Computer Applications, 25(8), 48-53.

AL-Adwan, M. M., AL-Zyood, M., &Ishfaq, M. (2013, January). The Impact of Electronic Payment
on Saudi Banks. International Journal of Research and Reviews in Applied Sciences, 14(1), 100-113.

Ayo, C. K., Adewoye, J. O., & Oni, A. A. (2011, July 4). Business-to-consumer e-commerce in
Nigeria: Prospects and Challenges. African Journal of Business Management, 5(13), 5109-5117.

Bandyopadhyay, G. (2009). Banking the Unbanked: Going Mobile in Africa. Bangalore: Infosys
Technologies.

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

Ethiopia‟, Economic commission for Africa, Addis Ababa Ethiopia

Birch, D. (2010, June 8). Making a silk e-purse. Retrieved April 17, 2013, from Digital Money:
http://digitaldebateblogs.typepad.com/digital_money/2010/06/making-a-silk-e-purse.html

Bizina, E. (2012, February 19). Payment Systems for eCommerce Websites: Which One to Choose?
Retrieved February 27, 2013, from Business2Community.com:
http://www.business2community.com/tech-gadgets/payment-systems-for-ecommerce-websites-
which-one-to-choose-0132530

Bolt, W., Humphrey, D., &Uittenbogaarda, R. (2008, March). Transaction Pricing and the Adoption
of Electronic Payments: A Cross-Country Comparison. International Journal of Central Banking,
89-123.
Boping, Z., &Shiyu, S. (2009). An Improved SET Protocol. Proceedings of the 2009 International
Symposium on Information Processing (pp. 267-272). Huangshan: Academy Publisher.

Botha, J., Bothma, C., &Geldenhuys, P. (2008). Managing E-commerce in Business (2 ed.). Cape
Town: Juta.

Boyd, C., & Jacob, K. (2007). Mobile Financial Services for the Underbanked: Opportunities for M-
banking and M-payments. Chicago: Center for Financial Services Innovation.
 Timescale

Year 2018

Activity July August2018 Sep. Oct.

2018 2018 2018

W W W W W W W W W W W W W W W W
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Review literature
Finalize objectives

Draft literature review

Review methodology
literature

Choose research strategy

Agree formal access to data

collection

Collecting data

Data analysis

Draft findings chapter

Witting the first draft of the

report

Writing final research report

Budget Breakdown

No Material No of Unit cost Total cost

requirement
unit requirement

1 Pen and pencil 6 and 1 86 86

2 Paper 4 Pack 580 580

3 Flash memory (8GB) 1 330 330

4 Telephone 8 Pcs 1000 1000

5 Transport 5000 5000

6 Typing & printing 500 page 4.50 2250

7 Miscellaneous 1000 1000

8 CD/R 2 32 64

9 Internet 800MB 0.9 720

10 Contingency 2000

Total 13030
Chapter Three

3. Research Methodology
3.1 Introduction

This chapter will present the methodological framework applied to solve the research problem and to
answer the research questions. The chapter starts with the chosen research design, research approach and
study area. Afterwards, the sample selection and the data collection methods will be presented.

3.2 Research Design

A research design is the arrangement of conditions for collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure. In fact, the research
design is the conceptual structure within which research is conducted; it constitutes the blueprint for the
collection, measurement and analysis of data (Kothari, 2004).

This study will focuses on describing the current situation of the problem and answer the research
questions which are in the form of ‘‘what’’, and to highlight the most important factors that can
negatively or positively affect the adoption and development of E banking in Hossana city CBE branches.
Moreover, this research aims to explain the phenomenon and assess the current practice of E-banking.
Therefore, Descriptive research is being used to achieve the research objectives.

3.3 Study Area

The area chosen for this study will be Hosanna city Commercial Bank Branches because all Provide e-
payment service to the banks customer and they can fully represent the whole branches in the country.

3.4 Population, Sample Size and Sampling Techniques

In research methods, population is the entire aggregation of items from which samples can be drawn
(Yahiya, 2011).The population of the study will consist public commercial bank that has operated. Hence,
According to National Bank of Ethiopia website (htt://www.nbe.gov.et/), the total number of Commercial
Banks which had been operated in the year 2019 is 18, Banks. In order to undertake this study, the
researcher purposely sampled commercial bank of Ethiopia, which is adopted E-banking technological.
The researcher chooses to take six commercial bank Branches as a sample, because it is often impossible
or too much expensive to collect data from all the potential units. Thus, this research paper will use
purposive sampling method to draw the sample from the population.

3.5 Sources of Data

The study will be done by collecting data from both primary and secondary sources. Primary data will be
collected from the city branch staffs of the commercial banks based on a structurally designed
questionnaire. It includes both closed ended and open-ended questions, which will give the respondents
an opportunity for adequate expression of their view on the questions .In addition, semi-structured
interview with the higher city branch official of commercial bank E-banking staffs and Regulatory organ
reports, from web site, books, annual reports and magazines, articles and journals Will be analyzed.

3.6 Data Collection Instruments

In order to collect sufficient data so as to answer the research questions, researcher designed two surveys;
the first was a questionnaire to get quantified results. The second survey is interviews aimed to collect
data from E-Banking managers. In addition to questionnaire and interview; secondary data source will be
used.

3.6.1 Secondary data Sources:

The secondary sources of data gathered from CBE E-payment procedure document, records and reports of
the industry, World Wide Web (www) of commercial bank of Ethiopia, literature on E banking, books
and journals, and unpublished theses.

The most important use of this secondary data source is to corroborate and augment evidence from other
sources (Yin, 1989; pp. 86). Thus, the document examination helps to substantiate the patterns that
evolved from the data collected via questionnaires and interview, so that the validity of the findings could
be enhanced through secondary sources.

3.7 Method of Data Analysis

In order to meet the stated research objectives, the collected data will be analyzed based on the nature of
the objective. Accordingly, the data collected via questionnaires is analyzed with descriptive statistics
using statistical package for social scientists (SPSS) Furthermore, Wolcott (1994) cited in Creswell
(2003; pp. 184), suggested that qualitative research is fundamentally interpretative i.e. the researcher
makes an interpretation of the data. Thus, the data that is collected from the interview and reviews of
documents will be interpreted qualitatively. To sum, the analysis of quantitative data and interpretation of
qualitative data combines to seek convergence among the results (Creswell, 2003).

REFERENCES

Aduda, J., & Kingoo, N. (2012). The Relationship between Electronic Banking and Financial
Performance among Commercial Banks in Kenya. Journal of Finance and Investment Analysis, 1(3),
99-118.

Adriana, C. (2006). Forms of electronic banking. Journal of internet banking, Vol. 16(6),

Bank of Slovenia, Narodna

CBE e-payment team (2016) .Commercial Bank of Ethiopia Electronic payment procedure
Document.www.-----------------------
Gardachew, W 2010, ` ‘Electronic -banking in Ethiopia: practices, opportunities and Challenges’,
Journal of internet Banking and commerce, 15(2):2-9

Malak, J 2007, Readiness of the Palestinian banking sector in adopting the electronic

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

Akintoye, K. A., & Araoye, O. I. (2011, July). Combating E-Fraud on Electronic Payment System.
International Journal of Computer Applications, 25(8), 48-53.

AL-Adwan, M. M., AL-Zyood, M., & Ishfaq, M. (2013, January). The Impact of Electronic Payment
on Saudi Banks. International Journal of Research and Reviews in Applied Sciences, 14(1), 100-113.

Ayo, C. K., Adewoye, J. O., & Oni, A. A. (2011, July 4). Business-to-consumer e-commerce in
Nigeria: Prospects and Challenges. African Journal of Business Management, 5(13), 5109-5117.

Bandyopadhyay, G. (2009). Banking the Unbanked: Going Mobile in Africa. Bangalore: Infosys
Technologies.
Wondwossen, T and Tsegai, G 2005, `E-payment: challenges and opportunities in

Ethiopia‟, Economic commission for Africa, Addis Ababa Ethiopia

Birch, D. (2010, June 8). Making a silk e-purse. Retrieved April 17, 2013, from Digital Money:
http://digitaldebateblogs.typepad.com/digital_money/2010/06/making-a-silk-e-purse.html

Bizina, E. (2012, February 19). Payment Systems for eCommerce Websites: Which One to Choose?
Retrieved February 27, 2013, from Business2Community.com:
http://www.business2community.com/tech-gadgets/payment-systems-for-ecommerce-websites-
which-one-to-choose-0132530

Bolt, W., Humphrey, D., & Uittenbogaarda, R. (2008, March). Transaction Pricing and the Adoption
of Electronic Payments: A Cross-Country Comparison. International Journal of Central Banking,
89-123.

Boping, Z., & Shiyu, S. (2009). An Improved SET Protocol. Proceedings of the 2009 International
Symposium on Information Processing (pp. 267-272). Huangshan: Academy Publisher.

Botha, J., Bothma, C., & Geldenhuys, P. (2008). Managing E-commerce in Business (2 ed.). Cape
Town: Juta.

Boyd, C., & Jacob, K. (2007). Mobile Financial Services for the Underbanked: Opportunities for M-
banking and M-payments. Chicago: Center for Financial Services Innovation.

Site,CBE’s official “Commercial Bank of Ethiopia”|Home “(htt://wwwcombaneth.et/).

www.combaneth.et. Retrieved 2017 -06-21