CHAPTER ONE

INTRODUCTION

1.1 Background to the Study 

The revolution of information technology has influenced almost every facet of life, and the banking sector a lot more so. The financial service industry has recently been open to historical transformation. Electronic development (e-development) is emerging and advancing rapidly in all areas of financial intermediation and financial markets. Today we have quite a number of e-development models that include e-finance, e-money, e-banking, e-brokering, e-insurance, e-exchange and even e-supervision Lustsik, (2003). In a world moving at an overwhelming pace, technology has become the essential key driver in all aspects of our life. Internet is the catalyst without which, this would have never been possible. Now that Information Technology has been heartily accepted at home as well as at work, handling activities electronically can be envisaged Taro et al; (2004).

Bill Gates (2008) once said, “Banking is essential, banks are not”. By this, he meant that traditional banking will gradually disappear and electronic banking, which attracts more and more new users, will replace it. The evolution of electronic banking started with Automatic teller machines (ATMs) and has passed through telephone banking, direct bill payment, electronic fund transfer and the revolutionary online banking, which has been selected to be the future of financial electronic transactions Alter, (2002).

E-Banking services were introduced in the early 80s by the Nottingham Building Society and the Bank of Scotland Tait & Davis, (1989). Unfortunately these services were discontinued as the bank customers were wary and not fully ready to accept internet banking. With the rapid growth of IT in the 90s, banks launched internet banking again and this time, it met such an astonishing success that these electronic services ended up becoming industry standards Daniel, (1998).  Internet banking is the newest delivery channel that enables bank customers, through safe and appropriate systems, to gain access to general bank information on products and services offered and their accounts. Pikkarainen et al. (2004) defines internet banking to be the “internet portal through which customers can use different kinds of banking services ranging from bill payment to making investment”. This happens through the bank’s website “without any intervention or inconvenience of sending faxes, letters, original signatures and telephone confirmations” Henry, (2000), Thulani et al, (2009 ;). Through the bank’s website, the bank customers can carry out activities such as balance reporting, inter-account transfers, bill payment via a telecommunication network without having to leave their work or home Aladwani, (2001); Daniel, (1999); Mols, (1998); Sathye, (1999). With just a simple click of the mouse, Internet banking gives customers access to almost all types of bank transactions, apart from ultimate transaction, that is, the withdrawal of cash Young, (2001). Using Internet as an alternative channel for the distribution of financial services has become a necessity in order to achieve competitive advantage with the arrival of globalization and more hostile competition Flavian et al, (2004) ; Gan et al, (2006).

Nevertheless, electronic banking in Cameroon is at its infancy and rapidly growing. 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 electronic banking services. It was only in the 1997 that the first e-banking products were introduced. The country now has electronic services such as Automated Teller Machines (ATMs), SMS banking, Internet banking, Point of Sales (POS) machines, and telephone banking (Talla, 2013). The major banks in Cameroon are also investing a significant sum of their capital towards digital banking and digitizing their operations in order to meet up with international standards and also to gain domestic competitiveness. Top banks in Cameroon like UBA, BICEC, Afriland First Bank, SGBC and Ecobank are paving the way in digitizing their operations and providing electronic services to their customers. The most widely used e-banking medium in terms of service delivery to commercial bank customers in Cameroon is the ATM service through which customers are issued bank cards to redraw money from their account at their convenience without necessarily going to the teller. Other forms of E-baking like Online banking/Internet banking are still on a slow pace in terms of adoption by commercial banks in Cameroon as compared to other develop countries or developing nations.

The proliferation of electronic bank cards and the mushrooming of automatic Teller Machines (ATM) in every nook and cranny of cities is testament to the electronic craze that grips Cameroon Agnes, (2007). Banks in Cameroon also face fierce competition from mobile telecommunication networks like MTN and Orange Cameroon offering Mobile Money services and also Microfinance institutions which take a large percentage of the unbanked economy.

Before the integration of electronic banking into banking operations used to take far longer time to conduct not forgetting the extensive of man power that has to be put in to perform a task that a computer can do in seconds. Likewise, the provision of banking services where customers will have to deal with the brick-and-mortar of the commercial banking institution each time they need its services. Thus commercial banks in Cameroon are investing in in digital technologies that improve their efficiency and effective in daily operations as well as their service provisions to customers, UNCDF, (2014).

The rapid changes in business operations in contemporary times in the form of technological improvement require banks in Cameroon to serve their customers electronically. Traditionally, banks have been in the forefront of harnessing technology to improve their products and service delivery. The banking industry and its environment in the 21^stcentury are highly complex and competitive; hence the need for information and communication technology to take center stage in the operations of banks, Steven, (2002). The 21^st century has witnessed dramatic transformations in the financial sector as advances in information technology have created new ways of handling financial transactions through various e-banking platforms.  In Cameroon, all  banks  are  making  greater  use  of  e-banking  facilities  to  provide  better  services in order to excel in the competitive Cameroonian banking  industry.  The  spread  of  e-banking has  also  greatly  benefited  the  ordinary customer  in  general  and the corporate  world  in particular. Consequently, electronic banking (e-banking)  has  been  the  greatest  challenge to  the  banking  industry  going  by  the sophistication  and  volume  of  fraudulent practices  associated  with  this  form  of banking. In  the  past  few  years,  banking  activities in  Cameroon  have  increasingly  depended  on the  deployment  of  information  and communications  technology. Customers’ insatiable  appetite  for  efficient  services  has compelled financial institutions to fast-track to  a  more  radical  transformation  of  their business systems and models for embracing e-banking, Onay, (2008).

E-banking  appeal  as  well as its  product development  is  rapidly  growing,  and  the global  acceptance  has  strongly  encouraged its penetration. The success of e-banking is contingent upon reliable and adequate data communication infrastructure. Therefore, it is efficient for banks to invest in online transactions through the creation of networks.   However, there has been a mix-up between electronic banking and internet banking. The fact is that internet banking is subsumed in electronic banking. Banking has come a long way from the time of ledger cards and other manual filing systems. Most banks today have electronic systems to handle their daily voluminous tasks of information retrieval, storage and processing. Irrespective of whether they are automated or not, banks by their nature are continually involved in all forms of information management on a continuous basis. The computer is of course an established tool for achieving a competitive edge and optimal resource allocation.  The  most obvious  application of  computers  in  the banking  industry  is  in  the  area  of  customer services,  information  management and control.

Computerized banks respond to requests from customers for statement of accounts, balance and account activity enquiries. With signature and image verification systems, the time taken to offer typical  cashier  services  like  receiving  and paying  out  of  cash  is  minimized. Also, with  the  advent  of  automated  teller machines  (ATM),  banks  are  able  to  serve customers outside the banking hall all round the clock. All the banks considered observed that cost reduction and enhanced ability to deal with customers were drivers of extreme importance. The desire to reduce both operational and administrative costs has driven banks to the electronic world. However, cost reduction is only realizable with an increase in consumer adoption. E-banking is the use of internet and telecommunication networks to deliver a wide range of value added products and services to bank customers. Internet has changed the dimensions of competition in the retail banking sector.

Following the introduction of personal computer  banking, Automated  Teller  Machines and telephone banking which are the initial cornerstones of electronic finance, the increased adoption and penetration of Internet has added a new distribution channel to retail banking: Internet/Online-banking. E-banking has gained worldwide acceptance as a new delivery channel for performing various banking transactions. It provides the opportunity to the customers to conduct banking transactions at their convenience.  Generally,  the  automation  of  banks makes  transaction  and  data  processing  very easily  accessible  for  quick  management decision making. This has led to another level of benefit which has ushered in what is today referred to as electronic banking. Electronic banking  helps  the  banks  to  speed  up  their retail  and  wholesale  banking  services.  The banking  industry  believes  that  by  adopting the  new  technology, e-banking,  the  banks will  be  able  to  improve  customer  service level  and  tie  their  customers  closer  to  the bank

E-banking contributes significantly to the distribution channels of banks such as automated teller machine (ATM), Phone –banking, Tele-banking, PC-banking and now internet banking, Chang, (2003). In addition, transfer of funds, viewing and checking account balances, paying mortgages, paying bills and purchasing financial instruments and certificates of deposits processes have improved significantly as a result of internet banking, Mohammed, (2009).

This implies that e-banking has resulted in efficiency in service delivery in the banking sector because customers can transact business from one side of the country to another and from both long and short distances. In the world of electronic commerce, it is very important that banks should provide electronic banking services in order to have the long-term survival, Burnham, (1996). Consequently, most banks in developed and some in developing parts of the world are now offering electronic banking services with various levels of sophistication. It is expected that banks that do not offer electronic banking services may lose their customers to their competitors, Orr, (1999).

Electronic banking system allows customers to access their accounts, transact business, make enquiries 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. With the help of the internet, banks are providing benefits to their customers. From the customer’s point of view, electronic banking is providing convenient and valuable 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. E-banking is critical in the transformation drive of banks in areas such as products and services and the level of satisfaction customers derive in using these product and services. Thus, it is seen as a valuable and powerful tool in the development, growth, promotion of innovation and enhancing competitiveness of banks, Kamel, (2005).Given the significant role of e-banking in the developmental drive of banks, information technology has been found to lead to improvement in business efficiency and service quality and hence to attract customers and retain them, Kannabira and Narayan, (2005). This shows that the delivery of efficient and quality service is facilitated by information technology. Similarly, Christopher, (2006) indicated that e-banking provides an important channel to sell products and services of banks and is perceived to be a necessity for banks to be successful. Therefore, service quality and efficiency in the banking industry has increased tremendously in Cameroon due to the integration of information technology into banking operation. The present study seeks to examine the effects of e-banking on customer’s satisfaction in Cameroon.

1.2 Statement of the Problem

Banking institutions in emerging economies had been operating in a moderately stable atmosphere. Nevertheless, the advent of the Internet has drastically altered the industry due to aggressive competition brought in by ICT. To stay in the market while making a profit, banks in these economies are striving to adopt the new technologies to fasten and ease the banking processes in an attempt to meet customer demands and satisfy their clientele. Advocacy has been against poor quality and unsatisfactory services and products offered by banks to their customers. Moreover, such services barred majority of customers from accessing them due to lack of internet access, computers, and/or electricity. Also, the neglecting lies in the high cost of acquiring Internet facility and the poor cyber security. Therefore, income and literacy level of customers are important factors in adoption and effective use of the Internet banking tools and services.

Furthermore, e-banking services are lacking in remote geographical locations (such as typical rural areas) due to lack of electricity or poor security. Poor literacy levels among most individuals in the emerging world leaves e-banking in the hands of a few individuals with a reliable degree of literacy – reading and writing skills. Consequently, education is a factor in determining the customers’ satisfaction and willingness to subscribe to e-banking platforms. In addition, majority of the aged population are surpassed by the adoption of e-banking facilities.

Inspire of the aforementioned drawbacks, banking sector in emerging world is picking up the pace in adopting the new technologies in service delivery. Further advancements are being integrated into existing banking platforms to enhance customer satisfaction. However, little studies have been conducted on e-banking service quality and how they affect the customer satisfaction. Therefore, the current study will try to bridge the gaps in literature by investigating the effect of Internet banking on customers’ satisfaction in commercial banking sector.

1.3 Research Questions

1.3.1 Main Research Questions

 The main question this study intends to answer is “What are the effects of E-banking services on customer’s satisfaction in UBA PLC Bamenda?”

• Specific Questions

1. What is the effect of Automated Teller Machine on customer’s satisfaction in UBA PLC Bamenda?

• What is the effect of internet banking on customer’s satisfaction in UBA PLC Bamenda?
• Does SMS- alert affect customer’s satisfaction in UBA PLC Bamenda?

1.4 Objectives of the Study

• Main Objective

The main objective of this study is to evaluate the effects of electronic banking on customer’s satisfaction in UBA PLC Bamenda.

1.4.2 Specific Objectives

1. To investigate the effect of Automated Teller Machine on customer’s satisfaction in UBA PLC Bamenda
2. To evaluate the effect of Internet banking on customer’s satisfaction in UBA PLC Bamenda.

• To analyse the role of SMS alert on customer’s satisfaction in UBA PLC Bamenda.