The Effect of Electronic Banking on The Performance of Commercial Banks in Ethiopia

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Date

2024-06-04

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A.A.U

Abstract

This study examines the impact of electronic banking (e-banking) on the performance of commercial banks in Ethiopia. This study examines how the adoption of different online banking channels such as ATMs, POS terminals; debit cards and mobile banking affect the financial performance and resource mobilization of commercial banks in Ethiopia. The study used an explanatory design and a quantitative research methodology. The profitability of commercial banks was measured and explained by ROA and ROE, and the quantity of deposits indicates how well the commercial banks mobilize resources. Debit cards, ATMs, POS systems, and M-Banking were the explanatory variables. In order to look into how bank size and bank liquidity affected bank profit, additional control variables were added. Several linear regression models were used to investigate the correlation. Data was analyzed using descriptive statistics and inferential analysis using Stata version 14 software. The finding reveals that number of ATM, number of POS and bank liquidity were the main contributors of bank performance. These e-banking channels have positive and significant effect on both ROA and ROE and deposit. Debit card (DC) has negative effect on ROA and positive but insignificant effect on ROE and deposit. Mobile banking and bank size affect the performance of the bank negatively. As a means of automating their banking system, banks are advised by the study to invest more in new e-banking channels like installing ATM that can accept deposit, digital lending and credit cared. Additionally, strategies involving partnerships and collaborations among commercial banks must be developed, to generate income by using other banks’ ATM and POS.

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