ABSTRACT

This study is to investigate THE IMAPACT OF DIGITALIZATION ON DIGITALIZATION ON CUSTOMER SATISFACTION IN BANKING SECTOR. Chapter one includes the introduction background to the study definition of terms, statement of the problem, objectives of the study, hypothesis scope and limitations and significance of the study. Chapter two is made up of the literature review and other related literature regarding the topic under study and   Chapter three is based on research methodology and consists of the study area, sample size, research design, research instruments, like the instrument that will be used to analyze the data is, the statistical package for socials.  In collecting my data, I will use questionnaires to analyse the data, the study made use of Qualitative and Quantitative analysis. Qualitative analysis involves Descriptive statistics which was presented using bar charts, frequency tables and pie charts. The Quantitative analyses involves testing the hypothesis in the study and procedure of data collection and ethnical consideration while Chapter four focuses on data presentation analysis and findings, here reliability test was tested using IBM SPSS Statistics of 30, descriptive Statistics was also used to test result and inferential statistics was also use to determine performance using IBM SPP Statistics and lastly chapter five is focused on the summary of the work , recommendation conclusion and reference.

CHAPTER ONE

INTRODUCTION

1.1 Introduction

The precursor to the modern home banking services were the distance banking services over electronic media from the early 1980s. The term online became popular in the late 1980s and referred to the use of a terminal, keyboard, and TV or monitor to access the banking system using a phone line. Home banking can also refer to the use of a numeric keypad to send tones down a phone line with instructions to the bank. The first home banking service was offered to consumers in Deer 1980 by united American Bank, a community bank with headquarters in Knoxville, Tennessee. United American partnered with Radio Shack to produce a secure custom modem for its TRS-80 computer that allowed bank customers to access their account information securely. Services available in its first years included bill pay, account balance checks, and local applications, as well as game access, budget and tax calculators and daily newspapers.

In this first chapter, the researcher outlines the importance of prioritizing research on the factors that influence customers decision to adopt digitalization offered by Commercial banks Buea. The first section of the chapter provides the introduction of the study, the second section presents the background of the study, the third section discusses the problem statement, and the research question, the research objectives and the research hypothesis of this chapter are presented in the fourth, fifth, and sixth section respectively. The seventh section of the chapter focus on the scope of the study, the eighth section describes the significance of the study and the ninth section talks on the operational definition of terms and the final section of this chapter presents a layout of the remaining chapters of this study.

1.2 Background of the Study

Computer has eased human life. Everyday new dimensions of its utility are emerging. Digitalization is one of the gifts to human beings by computer technology. Use of computers have automated banking process and thus has given birth to digitalization. Digitalization is a fast-spreading service that allows customer to use computer to access account-specific information and possibly conduct transactions from a remote location such as at home or at the workplace. Use of internet has made everything available at your finger tip. Lot of websites are ready to serve you, just at your mouse click. Mobile Banking, credit cards, debit cards, smart cards, all this have eased human life up to such an extent that today life without these seems to be hard, full of misery, internet banking (Digitalization) is a remote service, where access to account information and any transactions is granted at any time from any computer with an internet connection.

Digitalization started after Second World War with the use of proprietary software and private networks.  But the whole credit of making digitalization big hit goes to internet. Internet makes digitalization trustworthy and useful. International trade has increase significantly in post-world war period and with-it monetary transactions between different countries have increased. Digitalization has facilitated trading between distant corners of the world without worrying about monetary transactions. E-commerce has grown exponentially over the last 30years. Electronic Data interchange (EDI) and electronic funds transfer (EFT) were introduced in the 1970s, to send commercial documents like purchase orders or invoices electronically. In 1980s digitalization got a new dimension by the use of credit cards, automated teller machines (ATM) and telephone banking. The evolution of digitalization started in the developed countries before spreading to developing countries.

The affection of technology in business in the past left as an uncompleted puzzle. The lack of its consideration evolved to a deeper impact in nowadays. Developments in technology also touched the bank department, giving birth to a new product called online banking or digitalization. What an online banking offers is an opportunity to perform different bank operations, where a customer can access his or her bank account via the internet. Such operations can be performed at a variety of assuage from personal computer to a mobile phone. Customers can check current account, saving account, transfer payment and make their payments. Online banking is becoming very common due to increase usage of computers and mobiles which avail the transfers. Despite doubts at its first introduction, customers took time to adjust their activities to this technology. On the other hand, there some uncertain thoughts whether online banking is seen more as a supplement rather than a substitute product. Nevertheless, majority of banks today are offering it and customers most importantly find it useful. Online banking was initiated as a different way of banking and less expensive. In customer’s perspective, it meant less time to spend.

The majority of customers at the beginning were confronted with some difficulties but after a period it was very productive. Whereas from the bank point of view at the beginning they had some expense and feared for a big loss. According to some studies, results for adoption of online banking generally would come after two or three years. In the literature review I will present the studies that provides theoretical and empirical analysis relating my study.

The banking industry is one of the areas of business that has been influenced the most by technology. Banking operations have evolved from the mere exchange of cash, cheques and other negotiable instruments to the application of information and communications technology (ICT) to banking transactions. Through technology banks are now able to offer convenience services to their customers.  According to molla (2005), information and communication technology have changed the way of conducting business transactions and meeting the growing demands of customers for most organizations. The promise of ICTs in the banking sector has been seen in terms of its potential to increase customer base, reduce transaction costs, improve the quality and timeliness of response, enhance opportunities for advertising and branding, facilitate self-service and service customization, and improve customer communication and relationship.

Business via the internet or electronic commerce is providing a competitive advantage for banks by lowering operational cost and providing best satisfaction of customer’s needs. A strong banking industry is important in every country and can have a significant effect in supporting economic development through efficient financial services in Ghana the role of banking of the banking industry needs to change to keep up with the globalization movement. This change will include moving from traditional distribution channel banking. Give the most complete adoption of digitalization in developed countries, the reason for the lack of such adoption in developing countries like Ghana is important research that needs to be addressed. In the world of electronic commerce, it is very important that banks should provide digitalization services in order to have the long-term survival (Burnham, 1996). Most banks in developed and some in developing parts in the world are now offering digitalization services with various levels of sophistication. It is expected that banks that do not offer digitalization services may lose their customers to their competitors (Orr, 1999).

Digitalization is the automated delivery of new and traditional banking products and services directly to customers through electronic medium. This system allows customers to access their accounts, transacts business, make enquires and have prompt responses from banks (Parisa, 2006). Automated teller machines (ATMs), telephone banking, internet banking, mobile banking, debit cards, credit cards, online bill payment and many others are examples of how technology is changing traditional banking.

In a further development, Simpson (2002) contends that digitalization has survived in a number of countries given its ability to increase banks market share and facilitation of business transaction.  More linkage is therefore drawn on the importance of digitalization to improve the business environment of any economy. Awareness, information, consumer protection, response time, reliability security, technology readiness all are considered to be important elements for digitalization.

Technology has played a vital role in today’s world. In recent years, the adoption of digitalization began to occur quite expensively since it is the automated delivery of new and traditional banking products and services to customers, through electronic channels due to fast advances in IT and intensive competitive banking markets (Toor et al, 2016). And also, Digitalization offers several benefits to the customers such as convenient, quick, time saving and better cash management. In the background of Sri Lanka, most of the banks in the banking industry have already introduced

ATM mobile banking, internet banking and POS to their customers. Therefore, the researcher is willing to evaluate the impact of digitalization on customer satisfaction in Sri Lanka, since some other authors from different countries have already analyzed the customer satisfaction based on some variables.

With the help of the internet, banks are providing benefits to their customers. From the customers point of view, digitalization is providing convenient and available source to deal with funding because it provides convenience to access account 24/7(Applegate et al, 1996), customers can use these services anywhere that is homes, offices and so on and anytime without visiting the banks. The banks can use the electronic commerce technology for meeting the competitive              advantage and gaining the best level of profitability while providing best services to its customers.

Developed countries found out that technology is essential in providing faster and more efficient services to customers. Technology acquisition must be based on actual needs and the proven ability to deliver customer friendly solutions. But with globalization developing countries banks have no choice but to adopt digitalization services to enhance effective service delivery that transcends to customer satisfaction, if they want to stay in the business race, let alone be profitable (madueme, 2009). But it should be realized that digitalization service is a brain child of information and communication technology (ICT) that made it possible for service providers and their customers in developing economies to enjoy a good semblance of the services enjoyed in the developed societies. While financial institutions took steps to implement digitalization services in the mid-1990s, many customers were hesitant to conduct monetary transactions over the web, it took widespread adoption of electronic commerce, based on trailblazing companies such as America online, amazon.com and eBay to make the idea of paying for items online widespread. By 200, 80 percent of U.S banks offered digitalization. Customer use and grew slowly. At bank of America, for example it took 10years to acquire 2million digitalization customers. However, a significant cultural change took place after the year 2000 scare ended.  In 2001, bank of America became the first bank to top 3 million online banking customers, more than 20 percent of its customer base. In comparison, larger national institutions, such as Citi group claimed 2.2 million online relationships globally while J.P Morgan chase estimated it had more than 750,000 online banking customers. Wells Fargo had 2.5 million online banking customers including small businesses. Online customers prove more loyal and profitable than regular customers. In October 2001, Bank of America customers executed a record 3.1million electronic bill payments, totally more than $ 1billion. In 2009 a report by Gartner Group estimated that 47 percent of U.S adults and 30 percent in the United Kingdom bank online.                         

The banking system in developing countries is significantly different from that in developed countries such as the United States of America, Britain and South Africa. As with most developing countries, Ghana has been undergoing a process of financial sector restructuring and transformation as an integral part of a comprehensive strategy for some time (Acquah 2006). According to Bawumia (2007) banks in developing countries will need to reinvest themselves in this new conducive but challenging environment. This is important because electronic transactions will continue to grow and only countries that make a move towards embracing electronic business will participate in this revenue generation (Akoh, 2001).

Furthermore, digitalization was adopted by banks in developing countries so as to improve their service delivery, decongest queues in the banking hall, enable customers withdraw cash 24/7, aid international payment and remittance, track personal banking transaction, request for online statement, or even transfer deposit to a third-party account. Existing literature posits that electronic commerce gives competitive advantage for banks by reducing operational cost and provides best satisfaction of customer needs. For example, Burnham (2013) recounted that in the world of electronic commerce, it is very important that banks should provide digitalization services in order to service.

The recent consolidation exercise in Cameroon baking sector has drawn the attention of many banks to application of various technological devices in promoting/achieving better customer service delivery that guaranteed customer satisfaction that translates into increase profitability and higher return on investment. With the advantages involved in satisfying customers, the researcher decided to carry out a study that will help other banks in Cameroon to see the need to engage in Digitalization and gain more customers and profitability. Timothy (2012) posits that three or four decades ago, banking around the world was a simple business, customers saved their money with and received their financial services from banks.

When customers open savings account, they received passbook from the bank with which the account would be operated ‘, and when it is a current account, they receive cheque books for same purpose. In addition, Timothy (2012) also states that customers satisfaction holds the potential for       increasing an organization’s customer base, increase use of more volatile customer mix and increase the firm’s reputation. Consequently, obtaining competitive advantage is secured through intelligent identification and satisfaction of customers’ needs better and sooner than competitors and sustenance of customer’s satisfaction through better products/services.

Digitalization is considered as a new revolution in the digital technology and traditional banking services which implies the provision of banking   products and services through electronic delivery channels such as the internet, the telephone, the cell phone etc. (Worku, Tilahun and Tafa, 2016). On the other hand, Digitalization gives customers access to almost any type of banking transaction at a click of a mouse, expect of cash withdrawals (De young, 2001, cited in Nupur, 2010). Therefore, the use of information and communication technology by banks provide digitalization services and manages customer relationship more quickly and most satisfactorily than traditional banking (Addai et al, 2015).

An ATM, which stand for Automated Teller Machine is a specialized computer that makes it convenient to manage a bank account holders funds. it allows a person to check account balances, withdraw or deposit money, print a statement of account activities or transactions, and even purchase stamps.

Online banking is also known as internet banking, web banking or home banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transaction through the financial institutions website, the online banking system will typically connect to or be part of the core banking system operated by a bank to provide customer access to banking services in place of a traditional branch banking. Online banking significantly reduces the bank operating cost by reducing reliance on the branch network, and offers greater convenience to customers in time saving incoming to a branch the convenience if being able to perform banking transactions even when branches are closed. Internet banking provides personal and corporate banking services offering features such as viewing account balances, obtaining stamen, checking recent transactions, transferring many between accounts, and making payments.

Mobile banking is a service provided by a bank or other financial institutions that allows its customers to conduct financial transaction remotely using a mobile device such as a smart phone or tablet. Unlike the related internet banking it uses software, usually called an app, provided by the financial institution for the purpose. Mobile banking is usually available on a 24hours basis. Some financial institutions have restriction on which accounts may be accessed through mobile banning, as well as a limit on the amount that can be transacted. Mobile banking is depending on the availability of internet or data connection to the mobile device. Transactions through mobile banking depend on the features of the mobile banking app provided and typically includes obtaining account balances and lists of latest transactions, electronic bill payments, remote check deposits, peer to peer payments and funds transfers between a customer and another’s accounts.

1.3 Problem Statement

Cameroon has experience stable economic growth over much of the past decade. Before the independence of the country in 1960, the banking system in Cameroon was dominated by foreign banks. After independence, foreign financial institutions were French banks, which were there to finance French investments in the country. Subsequently the government starts involving itself in foreign banks and acquired partial ownership of BICIC, BIAO, SGBC and credit lyonias. This continued until 1987 when a financial crisis occurred in the country. The crisis resulted in rising prices in Cameroon, trade deficits and loss of government revenue. It changed the evolution and health of each depending on whether it was a foreign or a domestically owned institution. Many financial institutions closed while others exchanged ownership. Several other banks are being established in the country since then, thus an increase in banks in Cameroon with the emergence of new technology, all sectors are introducing a variety of innovative services; this is also the case with the banking sector which is now offering customers a wide range of electronic services. This has eventually increased the level of competition between banks.

In Cameroon, until 1997 banks were only offering services through the physical branch. Now, with the changes in the banking environment, they are also offering digitalization services. The country now has electronic products and services such as ATM, internet baking and mobile banking. In many banks throughout the world, Digitalization is now the focal area of bankers because it reduces the cost of doing transaction, attracts new customers, makes transaction faster than before, creates new markets, enhances service quality. In Cameroon Digitalization is a new industry and consumer acceptance and use of digitalization is still limited, there is only a void understanding of the effect of digitalization on customer satisfaction. While carryout the study, I came across factors that satisfied and dissatisfied customers in Commercial banks using Digitalization products and     services. The dissatisfied factors include machines out of order sometimes, machine out of cash, card  block, frequent breakdown of ATM services, unreliability of ATM services, lack of technicians to attend to breakdown of ATMs, lack of alternative systems of ATM services when problems occur, lack of mobile banking services, lack of reliable telebanking networks, lack of credit and services, underdevelopment of technological infrastructure, low level of knowledge creation and innovation, interruption of networks. For the satisfied part, I found out that customer satisfaction in Digitalization has significant relationship with convenience, reasonable and fees (charges) during transaction; efficient service of Digitalization, privacy, security, reliability and responsiveness of employees to solve Digitalization service failure.

1.4Research Questions

This study is divided into two research questions, which are the main research question and the specific research question.

1.4.1 Main Research Question.

The main research questions is;

• What is the effect of digitalization on customer satisfaction in commercial banksin Buea?

1.4.2. Specific Research questions

• What is the effect ATM services on customer satisfaction in commercial banksin Buea?
• How has the use of Mobile Banking services affected customer satisfaction in commercial banksin Buea?
• What is the effect of electronic funds transfer on customer satisfaction in commercial banksin Buea?

1.5. Objectives of the study

1.5.1. Main Objective

• To examine the effects of digitalization on customer satisfaction in commercial banks in Buea

1.5.2. Specific objective

• To determine the impact of ATM services on customer satisfaction in commercial banks in Buea.
• To determine the impact of mobile banking on customer satisfaction in commercial banks in Buea.
• To examine the effect of electronic funds transfer services customer satisfaction in commercial banks in Buea.

1.6 Research Hypothesis

Null hypothesis

H₁: Digitalization does not have an e Effect on customer’s satisfaction in Commercial banks

H₂: Digitalization has an effect on customer’s satisfaction in Commercial banks.