The Impact of Digitalization on the Profitability of Selected Commercial Banks in Ethiopia
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Date
2025-03-24
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AAU
Abstract
The banking sector in Ethiopia is undergoing significant transformation due to the increasing adoption
of digital banking services. This thesis investigates the impact of digitalization on the profitability of
selected commercial banks in Ethiopia, focusing on key factors such as Automated Teller Machine
(ATM) transactions, mobile banking, internet banking, and service excellence. A quantitative research
design was employed, utilizing survey data collected from 274 respondents across five major
commercial banks: Commercial Bank of Ethiopia, Awash Bank, Dashen Bank, Bank of Abyssinia, and
Zemen Bank. The findings reveal that all forms of digital banking services significantly contribute to
the profitability of commercial banks. ATM transactions demonstrate the strongest positive correlation
with profitability, supported by a p-value of 0.000, indicating high statistical significance. Mobile
banking transactions also exhibit a significant positive effect on profitability, with a p-value of 0.002,
while internet banking shows a similar trend with a p value of 0.005. Furthermore, the study highlights
that digitalization enhances operational excellence and service quality, which positively influence bank
profitability, with p-values of 0.004 for both factors. These factors collectively contribute to the
financial performance of commercial banks, as measured by Return on Assets (ROA) and Return on
Equity (ROE). By leveraging digital technologies, Ethiopian banks can achieve greater operational
efficiency, improved service quality, and enhanced profitability in an increasingly competitive financial
landscape. The results provide valuable insights for bank management and policymakers, emphasizing
the need for continued investment in digital technologies to maintain competitiveness and drive
profitability. Future research could explore longitudinal studies tracking the adoption and impact of
digital banking services over time, investigate emerging technologies such as artificial intelligence and
block-chain, and examine customer experience and satisfaction with digital banking services