Abstract

This study on the impact of e-banking on commercial banking operations in Cameroon: Case study UBA Bank Cameroon sought out to examine the relationship between e-banking services and the profitability of the banking institution and to identify the difference between those who use E-banking Services and Counter Service. Using T-test model and a simple correlation model we established that there is no relationship between e-banking services and the profitability of the banking institution whilst also establishing the fact that there is difference between customers who use e-banking services and customers who use the counter service. In conducting this research both primary and secondary data were used. Furthermore, quantitative and descriptive methods of analysis were adopted to examine the impact of e-banking services on the profitability of the banking institution. To add, we found out that there is no significant relationship between the electronic banking services and the level of profitability of the banking institution because savings are not much influenced by the level of e banking services available, and the amount of savings does not transform its self into interest unless a decision is taken by the bank to give out loans. Therefore, we recommended that, UBA Bank Cameroon should utilize e-banking service to its fullest advantage in order to improve her operations in terms of delivering retail banking services to her customers which will likely lead to favorable profitability situation.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Electronic banking has become an integral part in the operations of any commercial banking institution in Cameroon as well as globally. The emergence of information and communication technologies over the past three decades has facilitated banking operations as well as the provision of banking services in order to suit the ever changing needs of customers. Electronic banking (ebanking) has many definitions varying with different researchers, in simple terms electronic banking can be referred to in terms of services like internet banking (online banking), telephone banking, TV-based banking, mobile phone banking, ATM services and offline banking (Mahdi and Mehrdad 2012). The Basel Committee on Banking Supervision defined electronic banking as the provision of retail and small value banking products and services through electronic channels as well as large vale electronic payments and other wholesale banking services delivered electronically (BCBS, 1998).

Furthermore, a global perspective the evolution of Electronic banking took off in the early 1980s simultaneously with some of the major commercial banks around the world notably, The Bank of Scotland offering Nottingham Building Society (NBS) customers the first internet banking service in the UK and calls it “Homelink” aiding them in sending transfers and paying bills, which later on formed the basis of electronic banking services today (Pilcher, 2012). Whilst in 1981 in the United States in New York four of the city’s major banks (Citibank, Chase Manhattan, Chemical and Manufacturers Hanover) were also introducing the concept of electronic banking to their customers (Gobankingrates, 2016) which paved the way for electronic banking operations in commercial banks worldwide. According to a statistics conducted by Bain & Company in 2012 on the usage of electronic and mobile banking as measured by the percentage of people in a particular country South Korea was ranked first at the first with 47% followed by China 42% while the USA and UK are at the seventh and eleventh position with 32% and 26% respectively of its population undertaking electronic banking transactions. Globalization has also played an important role in the proliferation of electronic banking around the world since one of the main factors of globalization on the banking sector is increased competition, thus in order for commercial banks around the world to stay ahead of the competition and meet up to international standards they have to be innovative in terms of integrating electronic banking in their operations.

Moreover, in the United States of America, the widespread adoption of electronic banking took hold in the early 2000s with 80% of US offering electronic banking services, even though customer usage was growing at a very slow pace. The online medium of e-banking in the US actually started to develop in 1995, when the Maryland Presidential Bank, an American bank, allowed bank accounts to be opened online an in mid-2004, over 17% of Americans were already using online electronic banking service (Driga, 2014). However, in 2001, institutions like the Bank of America, Citigroup and JP Morgan had an average of 20% of their customer base on online transactions (Online banking – Wikipedia, 2017). According to a statistic conducted by Pew Research Center in 2013 on digital banking 51% of US adults use digital banking to conduct their transactions while 35% of cell phone users bank using their mobile phones (Pew Research Center survey, 20002013). Statistically the total number of digital banking users in the US is expected to reach 152.7 million users by 2018 (Statista, 2017). Electronic banking operations in the US most recently, has been transformed by the internet which serves as a new delivery channel for banking services that benefit both the banks and customers due to its convenience and round the clock availability.

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 BICEC, Afriland First Bank, SGBC and Ecobank are paving the way in digitizing their operations and providing 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 ebaking 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 F, 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, leading to a financial inclusion rate of 47% and the banking sector contributing to 15% while 32% constitutes the Mobile

Money services and Microfinance institutions according to the United Nations Capital Development Fund (UNCDF, 2014). 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. Thus, this study is simply looking at the impact of electronic banking technologies on the operations of commercial banks and also bringing in the aspects of cost and profitability in adopting e-banking in the institution.

1.2 Problem Statement

The application of e-banking in bank transactions is now a measure that is being adopted by almost all commercial banks in Cameroon. One of the main phenomenon this study focused on was to address the aspect of e-banking adoption on the cost and profitability on banking institutions. It is certain that the primary goal of private commercial banks like UBA Bank Cameroon is to maximize shareholder’s wealth, and in order to achieve this objective, bank management must be efficient and effective in their operations in terms of consolidating between profitability and cost. It has been proven that integrating e-banking in banking operations leads to increase efficiency and speed in terms of how transactions are conducted and service delivered thus leading to increase profitability in the long run. But at the same time significant investment will have to be put in order to achieve a fully integrated e-banking sector, therefore the aspect of cost also comes in here, thus this study is trying to establish the relationship between cost and profitability in e-banking implementation.

In addition to profitability and cost on the bank’s portfolio in integrating e-banking in their operations, the is also the problem of certain factors hindering the adoption of digital banking in banking operations in the institution, some these problems are; customer perception, cost involved in shifting from traditional banking to digital banking, security aspects since e-banking encompasses large sums of money and sensitive customer information, competing factors like Microfinance institutions and Mobile Money and other cost related problems. Lastly, this study evaluated the level of application of e-banking services in bank transactions by the commercial banking institution while also looking at the transition from traditional banking services to digital banking and what are the recommendations and requirements that have to be put in place to ensure a smooth transition from traditional banking to e-banking.

1.3 Research Question

Based on the above problems raised the following questions were developed;

1. How does e-banking impact commercial banking operations in a banking institution?
2. What is the relationship between e-banking and the profitability of the banking institution?
3. What are differences between those who use E-banking Services, and Counter Service?
4. What is the level of application of e-banking transactions in the institution?

1.4 Objectives of the Study

The main objective of this study is to determine the impact of e-banking on commercial banking operations in Cameroon. Specifically, the objectives of this research goes thus:

1. To examine the relationship between e-banking and the profitability of the banking institution.
2. To identify the factors that is influencing the adoption of digital banking in the institution.
3. To identify the difference between those who use E-banking Services and Counter Service.
4. To make necessary recommendations based on the findings.