The Effect of Digital Banking Fraud on Customer Service Utilization
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Date
2025-09
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Addis Ababa University
Abstract
This study investigates the effect of digital banking fraud on customer service utilization in Addis Ababa, Ethiopia, focusing on four major commercial banks: Commercial Bank of Ethiopia (CBE), Awash Bank, Dashen Bank, and Bank of Abyssinia (BOA). Using both qualitative and quantitative approaches, the research adopts descriptive and explanatory designs, collecting data from 400 digital banking users selected through purposive and convenience sampling. The data were analysed using descriptive statistics, Pearson correlation, and multiple linear regression, with all key regression assumptions fulfilled to ensure the validity and reliability of the findings. The results revealed that customers aged between 25 and 34 showed higher levels of digital banking utilization, likely due to greater digital literacy and familiarity with technology, while users with higher education levels were more aware of fraud risks and more engaged with digital platforms. Gender differences were present but not significant, indicating increasing adoption by both male and female users. The regression analysis confirmed that fraud-related factors such as fraud type, fraud prevention measures, fraud incidents, customer awareness, and perceived fraud were significant predictors of digital banking service utilization. Among these, fraud prevention measures had the greatest positive impact, suggesting that trust in security features motivates usage. Customer awareness also positively influenced usage, emphasizing the importance of educating users about fraud threats and protective behaviours. Interestingly, perceived fraud had a positive relationship with utilization, possibly reflecting greater user confidence in managing risks. Conversely, actual fraud experiences negatively impacted usage, indicating that exposure to fraud erodes trust and discourages continued use. Although fraud type showed a positive association, it was not statistically significant. The model explained 70.7% of the variance in digital banking utilization, confirming the strong predictive power of these fraud-related factors. Based on these findings, the study recommends that banks strengthen digital security systems through technologies such as multi-factor authentication, encryption, and fraud detection; launch regular awareness campaigns to educate users on emerging fraud types and safe practices; offer responsive support after fraud incidents, including compensation and emotional reassurance; promote best practices like using strong passwords and avoiding public Wi-Fi; and conduct regular customer feedback collection to align digital strategies with user concerns.
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Keywords
Service Utilization, Digital Banking, Digital Fraud, Financial Institution