COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Factors Affecting Customer Adoption of Mobile Banking usage: The Case of Oromia
Bank in Ambo Town.

Research Proposal Submitted To the Department of Accounting And Finance For Partial
Fulfillment of Bachelor of Art (BA) Degree In Accounting And Finance.

Prepared by:

NAME ID/NO
1. BONSA KIBEBEW -------------------------------------------- 0025/19
2. BIFTU TADESSE----------------------------------------------- 0105/19
3. CHALTU GUTEMA--------------------------------------------- 0005/19
4. SENA GADISA-------------------------------------------------- 0054/19
5. LELISA ALEMU ----------------------------------------------- 0012/19
6. SINTAYEHU MUZAYE--------------------------------------- 0085/19
7. DECHASA ABDISA-------------------------------------------- 0106/19
8. SEGNI GIRMA--------------------------------------------------- 0055/19

JANUARY, 2024

Advisor :- Mr. Merga G Ambo, Ethiopia

 ABSTRACT
This Paper Aims To The Factors Affect Customer Adoption Of Mobile Banking. The Study Is
Conducted Based on the Data Gathered from the Customer and Employees Of the four banks,
commercial banks in Ethiopia, Awash International Bank, Oromia bank, Dashen Bank in Ambo
town. The research design was descriptive type. More over primary data was collected from the
customers and secondary data from some internet, previous research on related issues and from
some books. A simple random sampling method was adopted to select the sample from the
customers and the formula was taken from (yemane, 1997), and by using the formula 98 customer
(sample) were selected Based on the analysis and finding, conclusions and recommendation were
made.
Key words Electronic Banking Adoption, Banking Customers, Technology, Environment Ambo
town

I
 ACRONYM AND ABBREVIATIONS
ATM Automated teller machine
CBE Commercial bank of Ethiopia
E –commerce Electronic commerce
E-banking Electronic Banking
ECX Ethiopian Commodity Exchange

EFTPOS Electronic Fund Transfer At Point Of Sales

ICT Information Communication Technology
M birr Mobile Birr
NBE National Bank Of Ethiopia

PC Personal Computes
PIN Personal Identification Number

POS Point Of Sale

PU Perceived Usefulness

TAM Technological Acceptance Model

TE Technological Environment
EC Ethiopian Calendar
PDA Personal Digital Assistant
PEOU Perceive Ease Of Use
AVR Automated Voice Response
TA Technological Associates

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 Table of Contents
ABSTRACT.........................................................................................................................................i
ACRONYM AND ABBREVIATIONS.............................................................................................ii
CHAPTER ONE.................................................................................................................................1
1. INTRODUCTION.......................................................................................................................1
1.1. Background of the study.......................................................................................................1
1.2. Statement of the problem.....................................................................................................3
1.3. Objectives of the study.........................................................................................................6
1.3.1. General Objective.........................................................................................................6
1.3.2. Specific Objectives........................................................................................................6
1.4. Significance of the study......................................................................................................6
1.5. Scope of the study................................................................................................................7
1.6. Organization of the study.....................................................................................................7
CHAPTER TWO................................................................................................................................8
2. LITERATURE REVIEW.......................................................................................................8
2.1. Theoretical Literature Reviews................................................................................................8
2.1.1. Definition of Mobile Banking...........................................................................................8
2.1.2. The evolution of E- banking system................................................................................10
2.1.3. Mobile Banking in Ethiopia.............................................................................................10
2.1.4 Forms of E-banking..........................................................................................................12
2.1.5 Benefits of Mobile banking..............................................................................................14
2.1.6 Factors influencing Banks to adopt Mobile banking system............................................18
2.1.7. Mobile banking Challenges in Ethiopia...........................................................................20
2.2. Empirical Studies Related With Mobile Banking Adoption..................................................22
CHAPTER THREE..........................................................................................................................22
3. METHODOLOGY.................................................................................................................23
3.1 Description of the Study Area......................................................................................................23
3.2 Research Approach..................................................................................................................23
3.3 Types and Source of Data...........................................................................................................23

3.4 Data Collection Instruments........................................................................................................24

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 3.5 Target Population........................................................................................................................24
3.6 Method of Data Analysis............................................................................................................25
4 COST BUDGET AND TIME SCHEDULE....................................................................................................26
4.1 cost Allocation…………………………………………………………………………… 26
4.2 Time budget…...............................................................................................................................26
Reference.......................................................................................................................................................27

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v
 Table of Figures

Table 1. Proportion of Sample in the Oromia bank..........................................................................24

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 CHAPTER ONE
1. INTRODUCTION

1.1. Background of the study

Electronic banking means the provision of information or services by a bank to its customers, via a
computer, television, telephone, or mobile phone. It is an electronic connection between the bank
and the customer in order to prepare, manage and control financial transactions. Furthermore,
electronic banking is said to have three different means of delivery: telephone, PC, and the
Internet. For example, it introduces four different channels for electronic banking: PC banking,
Internet banking, managed network, and TV-based banking. Electronic banking is the newest
delivery channel in many developed countries and there is a wide agreement that the new channel
will have a significant impact on the banking market (Daniel, 1999) cited in (Shaikh. 2014).

Mobile banking is the practice of offering banks goods and services via electronic channels, such
as internet banking, telephone banking, and other channels. Mobile Banking involves consumers
using the Internet to access their bank account and to undertake banking transactions. At the basic
level, Internet banking can mean the setting up of a web page by a bank to give information about
its products and services. At an advanced level, it involves the provision of facilities such as
accessing accounts, transferring funds, and buying financial products or services online.
Electronic banking is an umbrella term for the process by which a customer may perform banking
transactions electronically without visiting a brick-and-mortar institution. Mobile banking is the
result of the internet and e-commerce. Mobile Banking is a service provided by banks, in which a
customer is allowed to conduct transactions using the internet.

Usually, this service is offered by banks which give their customers the facilities of online banking
through which they can have access to their accounts within a few seconds and click. Online
Banking includes the facilities such as Account Statements, Fund transfers, Account Opening,
Financial Product Information, etc. There is no need for any human operator to respond to the
customers. The banks have a centralized database and everything is automated. It lowers the
banking cost and strengthens the banking relationship to the by adding value service. It provides
banking services via the internet and it is end-to-end encrypted, which means it is completely safe
and secure. It also promotes paperless/cashless financial transactions (mega-job-as-thon-2023).

1
Electronic banking or e-banking is a facility provided to bank customers or other financial
institutions to conduct various types of financial transactions electronically or through the bank's
website. Mobile banking has transformed traditional banking techniques and has now begun
gaining worldwide acceptance across developed and developing countries.

Due to globalization, technological advances and other factors money is circulating unimaginably
fast. Financial Institutions mainly Banks play a pivotal role in matching a depositor and lenders
and channeling money and making the economy more efficient. Although the history of Banking
goes back to the 14th century in Europe Banks are now everywhere. Banks play a significant role
compared to other financial Institutions (Hoque, 2012). Many banks are making huge investments
in technology to maintain and upgrade their infrastructure, in order not only to provide new
electronic information-based services but also to manage their risk positions and pricing
(Dwumfuo and Dankwah 2013).

The evolution of mobile banking started with the use of Automatic Teller Machines (ATMs) and
Finland’s the first country in the world to have taken a lead in mobile banking (Mishra, R. and J.
Kiranmai, 2009)in order to providing efficient and effective service to their customers. Electronic
banking has been widely used in developed countries and is rapidly expanding in developing
countries. However, the slow diffusion of e-commerce to African countries has been attributed to a
number of issues some of which may be unique to the African Continent (Darley, W. K, 2001).

Despite the growth of mobile banking worldwide, banks in Ethiopia continue to conduct most of
their banking transactions using traditional teller-based methods. Banking operation is still
underdeveloped backed by a low level of infrastructural development, lack of suitable legal and
regulatory framework, high rates of illiteracy, frequent power interruption, and security issues
(Gardachew, 2010). Moreover, e-banking is a new technology in Ethiopia that needs a lot of effort
and resources to be easily adopted by customers. Hence, in order to help banks improve mobile
banking adoption by their customers, it is necessary to examine factors that influence customers‟
intention to adopt mobile banking service channels (Yitbarek. and Zeleke. 2013).

Information system implementation is not likely to be considered successful if users are

unmotivated to use that type of technology, and thus it will not bring full benefits to the
organization. In order to motivate customers to use electronic banking, banks must make key
improvements that address the
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customers concerns. So, it is necessary to understand the key factors that influence the adoption of
electronic banking among banking customers (Mohamed [Link]-Smadi, 2012). Therefore, the
purpose of this research is to assess the factors that affect customers‟ adoption of mobile banking.

1.2. Statement of the problem

In the era of globalization, with increased competition around the globe in all sectors, a strong
banking industry is important in every country and can have a significant effect in supporting
economic development through efficient financial services; as a result, many banks in the world
are modifying their strategies to reach customers worldwide more easily and cheaply. Therefore,
banks are developing the technologies that will help them deliver banking products and services
through the most cost-effective channels and one such channel is the adoption of mobile banking
or internet banking. Mobile banking is a way to keep existing customers and attract new ones to
the bank. The transaction costs of providing these services are lower than the traditional approach.

E-Banking has been widely used in developed countries and is rapidly expanding in developing
countries. Nevertheless, in Ethiopia cash is still the most dominant medium of exchange, and
electronic payment systems are observed late to move with the rapid expansion of electronic
payment systems throughout the developed and the developing world, (Gardachew, 2010).

Even though mobile banking has a lot of benefits in delivering service to customers, in Ethiopia
customers were missed to enjoy the technological advancement in the banking sector which has
been entertained elsewhere in Africa and the rest of the world. Customer’s intention to involve in
and use of mobile banking services in Ethiopia is also very poor. Zeleke (2016) mentioned that
Ethiopian Banks‟ customers are not yet entertaining the benefits of mobile banking technologies.
Moreover, Muche (2017) strengthens the above idea by mentioning the stage of mobile banking as
an infant in the Ethiopian banking industry. This was due to security risk, lack of trust, lack of
legal and regulatory framework, lack of ICT infrastructure, and absence of competition between
local and foreign banks as major

3
barriers (Gemechu,2014). Mobile banking which refers to the use of modern technology that
allows customers to access banking services electronically whether it is to withdraw cash, transfer
funds, pay bills, or obtain commercial information and advice are not well known in Ethiopia
(Nigusa T &Mesay 2018).

Since the paradox between the availability of sophisticated mobile banking systems and very poor
adoption takes much attention, a number of studies were conducted to improve the situation. For
instance; a study conducted by Desta,y (2018) on the adoption of mobile banking in Ethiopia,
found that performance expectancy, habit, hedonic motivation, price value, and facilitating
conditions are the main influential factors of customers‟ behavioral intention to adopt mobile
banking technologies in Ethiopia.

On the other hand, Gemechu (2014) found that security risk, lack of trust, lack of legal and
regulatory framework, lack of ICT infrastructure, and absence of competition between local and
foreign banks as major barriers.

The research gap in the study of factors affecting customers' use of mobile banking in Ethiopia is
the lack of comprehensive research that considers various factors influencing the adoption of
mobile banking technologies. While some studies have focused on specific factors such as
performance expectancy, habit, hedonic motivation, price value, and facilitating conditions, there
is a need for a more holistic approach that considers demographic, environmental, and
technological factors. Additionally, most prior studies have concentrated on behavioral intention
and actual use behavior rather than examining the broader context of technology adoption.
Furthermore, there is a scarcity of research on the factors of customer adoption of mobile banking
in developing countries like Ethiopia, with most studies being conducted in different countries
around the world. Therefore, the research gap lies in the need for more comprehensive studies that
assess the factors affecting mobile banking adoption in Ethiopia, taking into account the specific
context and challenges of the country

However, most of these studies focus on one form of mobile banking services like ATM or Mobile
banking independently. However, Lai (2007) suggested that mobile banking technologies are
highly interrelated to each other that require a comprehensive study of technology adoption.
Moreover, most of the prior studies conducted to identify mobile banking adoption factors focused
on behavioral intention and actual use behavior rather than Demographic, environmental and
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technological factors.

The research gap in the study of factors affecting customers' use of mobile banking in Ethiopia is
the lack of comprehensive research that considers various factors influencing the adoption of
mobile banking technologies. While some studies have focused on specific factors such as
performance expectancy, habit, hedonic motivation, price value, and facilitating conditions, there
is a need for a more holistic approach that considers demographic, environmental, and
technological factors.

Additionally, most prior studies have concentrated on behavioral intention and actual use behavior
rather than examining the broader context of technology adoption. Furthermore, there is a scarcity
of research on the factors of customer adoption of mobile banking in developing countries like
Ethiopia, with most studies being conducted in different countries around the world. Therefore, the
research gap lies in the need for more comprehensive studies that assess the factors affecting
mobile banking adoption in Ethiopia, taking into account the specific context and challenges of the
country

Moreover, most of the research on mobile banking systems has been done in different countries in
the world. Most of the research focuses on the factors that affect the bank’s adoption; a very
limited number of researches have been done on the factors of customer adoption of mobile
banking in developing countries like Ethiopia. Therefore, more studies are still required to
assess customers affecting

5
factors of mobile banking in the country to identify areas in which the country lags behind that inhibit
their mobile banking adoption and diffusion (Zhao et al., 2008).

Therefore the purpose of the study is to identify the factors that affect customers‟ use of mobile
banking.
The study was fill the gap in the literature by answering the following research questions

1. What is the practice of mobile banking usage technology

2. What are the major factors affect mobile banking usage among customers

3. What are the major demographic factors for the adoption of mobile banking usage

4. What are the major technological factors that affect the adoption of E-banking technology

5. What are the Environmental Factors for the adoption of E-banking technology

1.3. Objectives of the study

1.3.1. General Objective

The general objective of the study is an assessment of factors affecting customer adoption of
mobile banking in the case of Oromia banks in Ambo Town.

1.3.2. Specific Objectives

The specific objectives of the study are:
 To Identify the practice of mobile banking technology
 To major factors that affect mobile banking among customers.
 To identify the major Demographic factors that affects the adoption of mobile banking.
 To identify the major technological factors that affects the adoption and development of
mobile banking services.
 To identify the environmental factors that affects the adoption and development of
mobile banking services.

1.4. Significance of the study

Analyzing customers‟ mobile banking use will enable us to recognize factors that influence mobile
banking adoption by customers. This recognition in turn adds new findings to the existing
knowledge of mobile banking adoption factors in the Ethiopian commercial banks‟ context. Since
Ethiopia is one of the

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Sluggish countries in technology adoption, such kinds of research are very important to build the
existing knowledge. This research is also significant for practitioners in Ethiopian banks to
consider the findings of this research in their strategies to increase deposit mobilization and
earning profit through E-banking channels. It will be very valuable in addressing the needs of bank
customers and taking measures to improve poor situations. The findings of this research are also
very likely to be used as input for strategic decisions in fostering E-banking adoption among their
customers. Customizing and presenting mobile banking services according to the customers‟
desires will be used to capture and retain more customers so that the bank will be benefited from
the profits of a large number of mobile banking users. This research is also significant for other
researchers as a reference who can take similar studies.

1.5. Scope of the study

Due to lack of necessary resources and time, the study focused on assessing factors affecting the
customers‟ adoption of mobile Banking of selected as Oromia Bank that found at Ambo town.

1.6. Organization of the study

The research report was organized into five chapters: Chapter one focus on the background of the
study, problem statement, objectives and significant of the study. In chapter two, a range of
literatures review were captured there to gather relevant information concerning mobile banking.
In chapter three, detail of methodology was followed to achieve results is outlined. It includes the
research design, sampling, sampling technique and data analysis

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 CHAPTER TWO

2. LITERATURE REVIEW

2.1. Theoretical Literature Reviews

2.1.1. Definition of mobile Banking

The definition of mobile banking varies amongst researchers partially because electronic banking
refers to several types of services through which a bank’s customers can request information and
carry out most retail banking services via computer, television or mobile phone (Daniel, 1999;
Mols, 1998; Sathye, 1999).

Different authors have defined it in different ways based on their understanding of the application
of electronic banking. The following are few of them: mobile banking is an electronic connection
between bank and customer in order to prepare, manage and control financial transactions (Burr,
1996).mobile banking is the use of a computer to retrieve and process banking data (statements,
transaction details, etc.) and to initiate transactions (payments, transfers, requests for services, etc.)
directly with a bank or other financial service provider remotely via a telecommunications network
(Yang, 1997, pp.2) same is shared by (Malak, 2007).

Daniel (1999) defines mobile banking as the delivery of banks' information and services by banks
to customers through different delivery channels that can be used with different electronic devices
such as computer and a mobile phone with browser software, telephone or digital television.
Magemhe et al. (2002) also defined E-banking (e-banking) is nothing but e-business in banking
industry. Mobile banking is a generic term for delivery of banking services and products through
electronic channels, such as the telephone, the internet, the cell phone, etc.

Pikkarainen et al. (2004) defines mobile banking as an "internet portal, by which customers can
use different kinds of banking services ranging from bill payment to making investments".

Timothy (2012) mobile banking alludes to the utilization of the Internet as a remote conveyance
channel for giving administrations, for example, opening a bank account, transferring funds among
diverse accounts and electronic bill presentment and payment. This can be offered in two principle
ways. A bank with physical offices can build up Website and offer these services to its clients
notwithstanding
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It’s customary conveyance channels. Second, is to set up a virtual bank, where the PC server is
house din an office that serves as the lawful location of such a bank. The banks offer their clients
the capacity to make deposits and withdraw funds by means of ATMs (Automated Teller
Machines) or other remote conveyance channels claimed by different foundations, for which an
administration expense is acquired.

Mobile banking is banking system which any user with electronic devise like a personal computer
and a browser can get connected to his banks website to perform any of the virtual banking
functions. In internet banking system, the bank has a centralized database that is web- enabled.
(Krishna et al., 2015)

According to Singh & Malhotra (2004), mobile banking can be defined as the deployment of
banking services and products over electronic and communication networks directly to customers.
These electronic and communication networks include Automated Teller Machines (ATMs), direct
dial-up connections, private and public networks, the Internet, televisions, mobile devices and
telephones. Among these technologies, the increasing penetration of personal computers, relatively
easier access to the internet and particularly the wider diffusion of mobile phones has drawn the
attention of most banks to mobile banking.

Mobile banking includes the systems that enable financial institution customers, individuals or
businesses, to access accounts, transact business, or obtain information on financial products and
services through a public or private network, including the Internet or mobile phone. Customers
access mobile banking services using an intelligent electronic device, such as a personal computer
(PC), personal digital assistant, automated teller machine (ATM), kiosk, or Touch Tone telephone.
Or „e-banking refers to the provision of retail and small value banking products and services
through electronic channels. Such products and services can include deposit-taking, lending,
account management, the provision of financial advice, electronic bill payment, and the provision
of other electronic payment products and services such as electronic money.

In general, mobile banking is an umbrella term for the process by which a customer may perform
banking transactions electronically without visiting a brick-and-mortar institution banking
transactions electronically without visiting a brick-and-mortar institution.

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2.1.2. The evolution of E- banking system

The evolution of the mobile banking industry can be traced to the early 1970s when banks began
to look at these types of services as an alternative to some of their traditional bank functions. First,
such a choice was considered appropriate since it ensures reduced costs as branches were very
expensive to set up and maintain. Second, mobile banking products and services like ATMs and
electronic fund transfer were an important element of differentiation used by banks (Driga & Isac,
2014). The evolution of banking technology has been driven by changes in distribution channels as
evidenced by automated teller machine (ATM), Phone-banking, Tele banking, PC-banking and
most recently internet banking (Chang, 2003). The term mobile banking became popular in the
early 1980‟s referring to using a computer to access banking service via a phone line. Mobile
banking first appeared in New York in 1981. Banks from the United Kingdom started to adopt the
concept in 1983 where the Bank of Scotland was the first to introduce it. The early electronic
banking services were basic, covering services like viewing bank statements and paying bills
online without being a full transaction banking service (Driga & Isac, 2014).

2.1.3. Mobile Banking in Ethiopia

Certainly, the banking industry in Ethiopia is underdeveloped and therefore there is an all
immediate need to embark on capacity building arrangements and modernize the banking system
by employing the state- of-the-art technology being used anywhere in the world. With a growing
number of import-export businesses, and increased international trades and international relations,
the current banking system is short of providing efficient and dependable services and therefore all
banks operating in Ethiopia should recognize the need for introducing mobile banking system to
satisfy their customers ( Gardachew , 2010).

The appearance of mobile banking in Ethiopia goes back to the late 2001, when CBE introduced
the service for local users with its eight ATMs located in Addis Ababa. Then after Dashen bank
comes to the picture in the year 2006 with its ATMs that provide service for local Dashen Visa
Card holders and international Visa Cardholders coming to Ethiopia. United Bank S.C is the first
to introduce tele-banking, including text messages or SMS by the end of 2008. Then, United Bank
starts to deliver mobile banking services like ATM, internet, mobile and agent banking (Abebe,
2016).

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The first ever mobile banking gateway was signed between Ethiopian Commodity Exchange
(ECX) and Dashen Bank and CBE. The mobile banking system being developed with both banks
is designed to give a secure electronic data sharing gateway between clients, banks and ECX,
facilitating a smooth transaction. As the Oromia Bank continues to move at a snail's pace in its
turnkey solution for Card Based Payment System, Dashen Bank remains so far, the sole player in
the field of mobile banking since [Link] agreements signed by other private banks to introduce
e-banking are welcoming (Gardachew, 2010).

Zemen Bank, the only Ethiopian bank attached in the idea of single branch banking, by launching
full-scale internet banking, a service which is new to Ethiopian banking industry in the year 2010.
The bank tested the venture through its first phase of the online service, and now it is already
started the full-fledged version, which enable customers to make online money transfer freely.
Previously, the online banking service, delivered by the bank, only gave access to bank statements
and exchange rate information. The new and never-been-tried service proposed by the bank is to
include free account money transfer, corporate payroll uploading system where employers could
upload payroll to the system and make payments to individual worker’s accounts online and online
utility bill settlement system, when utility companies are ready (Fikerselassie, 2017).

Currently, there are only a few agreements in place to share ATM resources. The first was the
Premium Switch Solutions (PSS), which was established by three banks in 2009 namely Awash
International Bank S.C., Nib International Bank S.C and United Bank S.C., with a capital of 165
million Br, and now has six-member banks, including Awash International Bank S.C., United
Bank S.C., Nib International Bank S.C., Berhan International Bank S.C., Addis International Bank
S.C and the Cooperative Bank of Oromia S.C. It is the first certified Third-Party Payment
Processor by the regulatory party, National Bank of Ethiopia and starts its operations in July 2012.
Moreover, PSS has made its system certified by VISA, Master Card and Union pay. Hence,
members connected to PSS network can issue and acquire cards with these brands. Per the plan of
PSS, there was one ATM at every branch of the consortium banks, all domestic airports serviced
by commercial service, shopping complexes and merchants. The agreement is the first significant
cooperation between competing banks in Ethiopia, which others should be encouraged to follow as
there is no single bank in Ethiopia that can afford to provide extensive geographical coverage and
access(Abebe, 2016)

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2.1.4 Forms of E-banking

The tools/channels use in executing mobile banking include plastic cards (debit cards, credit cards,
prepaid cards), personal computers, telephone, mobile phones, internet, ATM‟s, POS or point of
interaction machines (Morufu and Taibat, 2012). The description of the above mentioned
tools/channels are as follows: -

A. Plastic cards

Debit cards: - Debit card is a banking card enhanced with ATM and POS features so that it can be
used at merchant locations. Debit cards allow you to spend only what is in your bank account. It is
a quick transaction between the merchant and your personal bank account. A debit card is linked
to an individual’s account, allowing funds to be withdrawn at the ATM and point of sale without
writing a check. When using a debit card to pay for goods and services, the purchase amount is
deducted from the cardholder’s checking account. The types of debit card include online debit
card and offline debit card. With offline debit card, debit is not made immediately. Benefits of
using a debit card include making the payment process at the checkout counter quicker and more
convenient, eliminating the need to carry a cheque book and a lot of cash, using it at locations
where personal cheques are not accepted, and reducing the possibility of loss or theft of cash
(Okoye, 2013).

Prepaid debit cards: - These are debit cards not usually linked to a customers‟ Account. They
must be funded before being used by cardholders. Prepaid debit cards are identified with such
names like cash cards, value cards, and Naira cards etc. prepaid cards can be used as gift cards
students ID cards, Government payment card, payroll card, Bursary card, insurance cards, travel
cards etc. (Ibid).

Credit Cards: -A credit card is different from a debit card in that it does not remove money from
the user‟s account after every transaction. In the case of credit cards, the issuer lends money to the
consumer (or the user) to be paid to the merchant. A credit card allows the consumer to revolve
their balance at the cost of having interest charged. The parties involved in a credit card transaction
include card holder, card issuing bank, merchant acquiring bank independent sales organization,
merchant account credit card association transaction network, and affinity partner (Ibid).

12
B. Automated Teller Machines (ATM):
ATM is a machine where cash withdraw can be made over the machine without going in to the
banking hall. It also sells recharge cards and transfer funds, it can be assessed 24 hours/7 days with
account balance enquiry (Fenuga, 2010). Rose (cited in Prince, 2015), describes ATMs as follows:
“an ATM combines a computer terminal, database system and cash vault in one unit, permitting
customers to enter the banks book keeping system with a plastic card containing a PIN or by
punching a special code number into the computer terminal linked to the banks computerized
records 24 hours a day”. It offers a great deal of banking services to clients. However, as a result of
the rapid increase in technology, ATMs go to the extent of given accounts balances and bill
payments. Banks use this E-banking device, to gain competitive advantage. The combination of
automation and human tellers gives more productivity for the bank during banking hours (Prince,
2015).

C. Point-of-Sale (POS) -In the study Abebe (2016), POS is sometimes referred to as point of
purchase (POP) or checkout is the location where a transaction occurs. A "checkout" refers to a
POS terminal or more generally to the hardware and software used for checkouts, the equivalent of
an electronic cash register. A POS terminal manages the selling process by a salesperson
accessible interface. The same system allows the creation and printing of the receipt. POS systems
record sales for business and tax purposes. POS enhances customers to make payment for goods
and services without necessarily coming in contact with physical cash as the purchase price would
be debited on the buyers card and credited on the sellers account (Fikerselassie, 2017)

13
D. Internet / extranet banking

-According to Booz, Allen & Hamilton (1999), “Internet banking” refers to Systems that enable
bank customers to access accounts and general information on bank products and services through
a personal computer (PC) or other intelligent device.

E. Mobile banking:- can be defined as an occurrence when customers access a bank‟s networks
using cellular phones, pagers, personal digital assistants, or similar devices through
telecommunication wireless networks (Segun, 2011). It means performing banking activities which
primarily consists of opening and maintaining mobile/regular accounts and accepting deposits;
furthermore, it includes performing fund transfer or cash-in and cash-out services using mobile
devices (NBE Directive, FIS-01-2012).

F. Tele-banking: - according to Habibur , Mohammed and Sayeed (2012) Telephone Banking

service is provided by phone. To access an account it is required to dial a particular telephone
number and there are several options of services. Options included; Checking account balance,

Funds transfer between current, savings and credit card accounts and bill payments Stock
exchange transaction Receive statement via fax Loan payment information

2.1.5 Benefits of Mobile banking

Mobile banking service provides a lot of benefits both to the customer and the bank itself. It is
competitivebranding and as well as better appreciation to the market demands. As such banks that
provide services are known to be leaders in technology implementation and advancement. Thus,
the better image brand they enjoy. The approach and adoption of the informational technology by
businesses has uprooted the constraint of time, distance and communication making the globe
really a little village. With mobile banking customers can check accounts, transfer money and can
have access to numerous banking products and services (Prince, 2015).

Now a day, it is unthinkable that the success of a banking system without information and
communication technology. It has enlarged the role of banking sector in the economy. The
financial transaction and payment can now be released quickly and easily. The banks with the
latest technology and techniques are more successful in the competitive financial market by
generating more and more profitability (Endalkachew, 2013).

14
Mobile banking offers benefits to banks as well. Banks can benefit from lower transaction costs as
mobile banking requires less paperwork, less staffs and physical branches. Mobile banking leads to
higher level of customers‟ satisfaction and retention (Polatogu & Ekin, 2010).
Mobile banking has made common open doors for banks and businesses around the world, and that
is clear in the way they sort out financial transaction. Although opportunities to banks, there are
variousdifficulties such as the innovation of IT applications, the obscuring business sector limits,
rupturingmodern boundaries, the passage of emerging competitors, and the development of new
plans of action (Liao & Cheung, cited in Prince,2015).

Farshad et al., (2013) is of the view that disputes can be minimized between the employees as
there is a clear flow of processes. Conducting business outside the normal branch working hours
has also been a factor that has been considered convenient for bankers, inexpensive access to the
bank 7x24and seven days a week. Increase availability and accessibility of more self-service
distribution channels help bank administration in reducing the expensive branch network and
associated staff overheads.

According to Harrison (2012), companies can gain two fundamental types of benefits from E
banking. These are generally described as: Value creation or value enhancement for one or more of
a company‟s stakeholder‟s groups, and lower cost of providing goods and services to the market
place. Value creation includes; improvement in internal and external communication through
effective e-marketing, increment of sales through and e commerce website integrated with a back
office systems and improvement in supplier relations and productivity through collaborative work
spaces. Lower costs are: reduction in communication and travel cost using online meeting tools;
shared workspaces and; benefit from license free open source alternatives to proprietary software.

Businesses also see tremendous opportunities for cost saving, revenue generation, increased
market share, marketing and market access, and improving customer service through direct links
that facilitate speedy enquiry and feedback. Similarly, consumers can inter alia, access the world
market through the virtual economy on the internet, choose from a wider variety of products, and
shop in the comfort of their homes. Globalization and specifically liberalization of communication
networks have all facilitated this breakthrough that further presents a massive boost for
international trade. Harrison (2012) suggested that the commercial benefits of E-banking lie in five
areas; firstly, firms are able to expand their geographical reach. Secondly, important cost

15
benefits lie in improved

16
efficiency in procurement, production and logistics processes. Thirdly, there is enormous scope for
gaining through improved customer communications and management. Fourthly, the internet
reduces barriers to entry for new market entrants and provides an opportunity for small firms to
reorient their supply chain relationships to forge new strategic partnership. Finally, e-commerce
technology facilitates the development of new types of products and new business models for
generating revenues in different ways as well as different revenue streams.

In general, mobile banking service is important for several stakeholders, since it helps them to
derive benefits from it. Many Banks have already implemented or are planning to implement
mobile banking because of the numerous potential benefits associated with it.

Benefits of adoption mobile banking for banks and customer are described below.

[Link]. Benefit of E-banking for Customers

The benefit of mobile banking is not limited to banks but also to their customers. Thanks to the
emergenceof the Internet, banking transactions are no longer limited to time and geography. It is
very easy forconsumers throughout the world to access to their bank accounts 24 hours per day and
seven days a week. Customers can enjoy a variety of services, especially services which are not
provided by traditional bank branches (Pham 2010).It is argued that one of the greatest benefits
that mobile banking brings about is that it is not expensive or even free for customers to utilize E-
banking products/services. However, some people believe that prices appear to be one factor that is
impedimental to the diffusion of mobile banking (Sathye 1999). The price debates often revolve
around geographical differences and disparities between costs of Internet connections and
telephone call pricing. It has also been believed that mobile banks have been changing to respond
to customers‟ increasingly changing demands (Pham 2010). There has been a tendency that
customer don‟t want to travel to or from a bank branch to conduct some banking transactions. In
other words, they want to utilize mobile banking to save time and money. Mobile banking can
bring about convenience and accessibility, which will have positive effects on customer
satisfaction and loyalty (Pham 2010). It is totally possible for customers to manage their banking
transactions whenever they want and to enjoy improved privacy in their interactions with the bank.
In addition, customers can enjoy more benefits at lower cost levels by utilizing mobile banking
(Mols 1998). It is contended by Turban (2008), that mobile banking is really beneficial to
customers such as:-

17
 – mobile banking, customers can carry out their banking activities whenever you
want.E-banking is a 24 hour service, so customers are no longer tied to the branch‟s hours. On top
of that,they don‟t have to take the time to travel to the branch and wait in the inevitable lines, thus
giving you more time to do what you want.
– mobile banking can be done from anywhere, as long as customers have an
Internet
connection.

– Because an mobile bank doesn‟t have to worry about funding an actual bank location
with all of those additional costs, fees can be reduced and are often non-existent. Those checking
and savings accounts that are offered by completely online banks usually have no fees at all.

– Most online banks try to be as paper-free as possible. Most statements and

correspondence is done online, reducing the amount of paper used and sent out to you. This again
will help reduce the costs of the online bank. As an added bonus, this makes online banking a great
environmental choice. Be warned, some banks do charge if you do want a paper copy of
something. t Deposit – With any incoming money, such as salary, customers can arrange
for it to be directly deposited into the bank account by the company sending the money. This is
actually a double benefit, as customers don‟t have to take the time to deposit the check, plus the
money goes into customers account faster allowing them to earn interest that much quicker.
– With automatic bill paying, customers can automate paying their monthly
bills.
– Because customers can access their accounts anytime, they can
get up to date, real time information on the money in your accounts.
– Transfers between accounts with the same financial institution online can be done
almost instantaneously. Not only is there no hold on the money being moved around, you can do it
whenever you like and from wherever.

[Link]. Benefit of mobile banking for Banks

The first benefits for the banks offering mobile banking services is better branding and better
responsiveness to the market. In this competitive world, mobile banking helps the banks to attract
more number of customers and tackle the competition from other banks. According to Olga
(2003), those
18
banks that would offer such services would be perceived as leaders in technology implementation.
Therefore, those banks that provide the service can enhance the customer satisfaction through
sophisticated services. By providing secured e-Banking services, the banks can also avoid
fraudulent activities. With the help of mobile banking, banks can save time and hence they can
increase the numberof transactions and business (Devamohan, 2002). The other benefits of mobile
banking are possible to measure in monetary terms. The main objective of every company to
maximize profits for its ownersand banks are not an exception. In order to this, automated e-
banking services offer a perfect opportunity for maximizing profits (Olga, 2003).

2.1.6 Factors influencing Banks to adopt Mobile banking system

Many researchers have been used different frame works in the study of adopting new technological
innovation. Among frameworks that have been developed based on the past studies includes, the
Technology-organization-Environment framework (TOE) (Tornatzky& Fleischer 1990),which
identifies three basic Factors for the adoption of technological innovation, i.e. technological
factors, organizational and environmental factors. Technology Acceptance Model(TAM) (Davis,
1989), which posit the two sets of beliefs, i.e., perceived ease of use (PEOU) and perceived
usefulness (PU) to determine individual's acceptance of a technology. PEOU refers to the degree to
which an individual believes that using a particular system would be free of physical and mental
effort, PU on the other hand is related to users' perception of the degree to which using a system
will be beneficial (Alsabbagh&Molla 2004).

[Link]. Technology - Environment (TE) framework

TOE framework was proposed by Tornatzky and Fleischer; it is designed for studying the
likelihood of adoption success of technology innovations. This framework is a comprehensive and
well received framework in the context of innovation adoption by organizations and has been used
in many studies (Salwani, et al, & Ellis 2009; Chang et al 2007, Zhu & Kraemer 2006).

According to Tornatzky and Fleischer (1990), technology adoption within an organization is

influenced by factors pertaining to the technological context, the organizational context, and the
external environment. Based on this, the researcher adopt the TOE framework to summarize
possible key factors affecting mobile banking adoption as shown in Figure 2.1 The technological
factor refers to
19
adopter‟s perception of mobile banking attributes. Typical characteristics of technology considered
in technology adoption studies are based on the assumption of Roger‟s diffusion of
innovation(Rogers 2003), Which include relative advantages (perceived benefits), and relative
disadvantages (perceived risks).While the organizational factor refers to the organization‟s
characteristics that influence its ability to adopt and use of mobile banking system. The
environmental factor refers to the external environment in which an organization operates and its
condition for supporting the development ofmobile banking service.

[Link]. Technological Factors

It appears that there is a lack of consensus on what factors belong to this context. For example, one
study (Salwani 2009) includes technology competence covering existing technology infrastructure
and skills to utilize the technology in this context, while other studies (Ellias 2009 & Chang 2007)

consider some relevant characteristics of technology. To avoid overlapping between technology

and organizational contexts, researcher chooses two basic factors related to technology
competence, which have relevant to the organizational factors, i.e perceived benefits and perceived
risks are considered in this study from the technological factors.

1. Perceived benefits: - Perceived benefits of mobile banking cover both direct and indirect
benefits for the banking industry as well as for the consumers. Direct benefits include the savings
on operationalcost, improved organizational functionality, productivity gain, improved efficiency
and increased profitability. Indirect benefits include the opportunity or intangible benefits such as
improved customer‟s satisfaction through improved services, improved banking experience and
fulfillment oftheir changing needs and lifestyle (Lu et al. 2005; Kuan&Chau 2001 &Iacovou 1995)

2. Perceived risks: - One of the important risks faced by banking institutions in offering mobile
banking services is the customers‟ resistance to use the services which significantly hinder the
growth of mobile banking (Zhao et al. 2008 & Laforet 2005). Issues related to security have
always been a concern when dealing with technologies related to online transactions such as
mobile banking (Chang 2007 & Rogers 2003). Therefore, the perception of the risks regarding
mobile banking is expected to influence itsadoption and further growth.

20
[Link] Environmental factors
Researcher identified factors related to the environmental context that play a crucial role in
technology adoption and some factors in this category are arguably more influential than others,
especially when countries under study have an authoritative government leadership (Kvinz
metal ,2006). The three factors relevant for mobile banking adoptions included in this study are:-

1. Legal Frameworks: - The existence and maturity of E-commerce legal frameworks within a
country influence the diffusion of online transactions including mobile banking as demonstrated in
various studies (Tan & Wu 2002).

2. The National ICT infrastructure: - National ICT infrastructure is a major factor that supports
the adoption of mobile banking as the case for other E-commerce (Efendioghu 2004).

3. Competitive pressure: - Competitive pressure can strongly influence any bank to develop and
adopt mobile banking initiatives and it may affect the bank‟s perception towards mobile banking
system (Quaddus&Hofmeyer 2007).

[Link]. Technology Acceptance Mode (TAM)

TAM was developed to explain and predict particular IT usages. However, this particular Model
has been using by many researchers in studying adoption and diffusion of various IT technologies.
For this study researcher uses two basic factors of TAM, i.e., perceived ease of use and Perceived
usefulness to analyze the perception of users on the adoption of mobile banking system in
Ethiopia.

The frameworks discussed above have their own advantage and disadvantages based on the nature
of the study. In this study, Technology-organization-environment framework and technology
acceptance model were used to have a more precise forecast on the factors affecting the adopting
mobile banking system in three commercial banks.

2.1.7. Mobile banking Challenges in Ethiopia

Banking and Finance is an important sector for establishing e-commerce. There are some roles of
banking sector in ecommerce such as, online corporate banking, electronic fund transfer,
automated teller machines (ATM), debit card, credit card etc. Bank is the only authorized
organization which can store and transact money. Technological developments in banking sector
make trading activities much easier and cheaper for customers. It provides convenience in terms of
21
the capital, labor, time

22
and all the resources needed to make a transaction (Uppal, 2008). Banking in Ethiopia faces
numerous challenges to fully adopt mobile banking. Research result studied by Wondwossen &
Tsegai (2005) forward the following challenges:

 Low level of internet penetration and poorly developed telecommunication infrastructure

 Lack of infrastructure for telecommunications, Internet and online payments impede
smooth development and improvements in e-commerce in Ethiopia.
 Lack of suitable legal and regulatory framework for e-commerce and e-payment:
 Ethiopian current laws do not accommodate electronic contracts and signatures.
 Ethiopia has not yet enacted legislation that deals with ecommerce concerns.
 Political instabilities in neighboring countries: Political and economic instabilities in
Somalia, Southern Sudan, and Eritrea are threatening traits that do not provide a very
conducive environment for mobile banking in Ethiopia.
 High rates of illiteracy: Low literacy rate is a serious impediment for the adoption of
mobile banking in Ethiopia as it hinders the accessibility of banking services. For citizens
to fullyenjoy the benefits of mobile banking, they should not only know how to read and
write but alsopossess basic ICT literacy.

 High cost of Internet: The cost of Internet access relative to per capita income is a
critical factor. Compared to the developed countries, there are higher costs of entry into
the e- commerce market in Ethiopia. These include high start-up investment costs, high
costs of computers and telecommunication and licensing requirements.

 Absence of financial networks that links different banks (Banks are not yet automated):
Most of the banking-transactions currently taking place use credit and debit cards
supplied by Visa and MasterCard. For conducting mobile banking, the use of credit or
debit cards is mandatory thus requiring the need for specialized systems which are not
currently available.

 Frequent power interruption: Lack of reliable power supply is a key challenge for
smoothly running mobile banking in Ethiopia.

23
2.2. Empirical Studies Related With mobile Banking Adoption

Ram and Sheth (1989) argue that consumer resistance to the innovation is caused by functional
barriers and psychological barriers. Functional barriers can be divided into three: the usage barrier,
the value barrier and the risk barrier, whereas psychological barriers can be divided into tradition
barrier and image barrier. These functional barriers arise when consumers perceive changes would
take place when adopting innovation and the psychological barriers are caused by consumer‟s
beliefs.

According to Yang (1997) on the security of electronic banking aimed to identify the challenges
that oppose mobile banking which are the concerns of security and privacy of information. The
study suggests that solutions to the security issues require the use of software-based systems or
hardware- based systems or a hybrid of the two. These software based solutions involve the use of
encryption algorithms, private and public keys, and digital signatures to form software packets
known as Secure Electronic Transaction used by Master Card and Pretty Good Privacy. Hardware-
based solutions such as the Smartcard and the Me Chip provide better protection for the
confidentiality of personal information. Software-based solutions have the advantage over
hardware-based solutions in that they are easy to distribute and generally less expensive.

An empirical investigation conducted by Sathye (1999) on the adoption of Internet Banking by

Australian consumers also identified, security concerns as key factor in internet banking adoption.
A report on Internet Banking in Australia finds that, security concerns among banks and customer
is keeping both away from Internet Banking” Sathye (1999). Security was identified as the biggest
obstacle in adoption; it was found that 78 percent of personal and 73 percent of business
respondents had security concerns when it comes to the use of Internet Banking. Thus, pointing out
that personal users have more security concerns than business users. Sathye (1999) suggests that
banks use positive publicity to its customers to help ease the response from customer on security.
One of the major banks in Australia has taken responsibility in undertaking losses for any
unauthorized use, with exception of certain circumstances. It further states that, Banks tend to
promote their security features in their services using technical terminology. This makes it difficult
for normal customers to comprehend and resulting to a squander in the whole promotion(IMF,
2019)

24
 CHAPTER THREE
3. METHODOLOGY

3.1 Description of the Study Area

Ambo town is situated in the west shewa Zone, Oromia Regional State, Ethiopia. and 115 km east
of Addis-Ababa, the capital city of Ethiopia And it is the capital city of West Shewa zone. This
town has a latitude and longitude of 8°59′N 37°51′E and an elevation of 2,101 meters.

The town is divided into 6 kebeles The 2018 census reported this town had a total population of
108,000 of whom 53,400 were males and 54,600 were females.( Gemechu Shale, AU – Ogato 2018 )

This study focused on the current situation of the problem and answer the research questions
which are in the form of „„what ‟‟, and tried to highlight the most important factors that can affect
the customer adoption of mobile banking in Oromia Bank that found in Ambo, Ethiopia .
Moreover, this research aims atdescribing the phenomenon and assess the current practice of
mobile banking. Therefore, Descriptive research was used to achieve the research objectives.

3.2 Research Approach

In order to attain the objective of the study and answer the research questions, the researchers
adopted both quantitative and qualitative research approaches. The rational of using a mixed
approach is to gather data that could not be obtained by adopting a single method (creswell, 2003).
Hence, the basis of such approach helps to neutralize the limitation of applying a single approach
in connection with the qualitative and quantitative nature of the research questions

3.3 Types and Source of Data

The study was conducted by collecting data from both primary and secondary sources of data.
Primary data was collected from the managers, customer service officers and the customers of the
Oromia bank The data collection tool was structured questionnaire for customers and interview for
the manager and customer service officer. The questionnaire included both closed ended and
open-

25
ended questions, which gave the respondents an opportunity to adequately express their view on
the questions. As a secondary data, different books, different researches conducted in the past and
annual reports of the banks were also be reviewed.

3.4 Data Collection Instruments

In order to collect sufficient data so as to answer the research questions, researcher designed two
data collection mechanisms; the first one was questionnaire. Which is only for the customers of the
banks. This is intended to get specific answer for the research questions. The questionnaire was
prepared in English language . The second mechanism was an interview. This is only for managers
and customer service officers of the banks. In addition to questionnaire, the researchers also
reviewed secondary source data.

3.5 Target Population

The target population of this study was from managers, customer officers and customers of the
Oromia bank that found in Ambo, Ethiopia. In general, the target populationwas 1500 customers
from the oromia banks Sample Size and Sampling Technique

The research used stratified random sampling technique. We considered population consisting of
Oromia bank 1500 customers that are found in Ambo town. From the total population, the
researcher will take only 94 customers as a sample using the formula, n=N/1+N(e)2
(yemane,1997) . This formula was used at 90% confidence level and 0.1 level of significance
(margin of error).

n=N/1+N(e)2 = 1500/1+1500(0.1)2  94

n - Sample size N- number of population

e- Margin of error

To make the sample proportional the researcher used stratified random sampling. This sampling
method takes the sample calculated in simple random sampling formula and make the sample
proportional as shown in the table below.

26
Table 1. Proportion of Sample in the Oromia banks

Name of the Bank Population Percentage Sample

Oromia Bank 1500 100% 94

Total 1500 100% 94

3.6 Method of Data Analysis

In order to meet the stated research objectives, the collected data was analyzed using
Microsoft Office Excel software. The analysis was done in descriptive statistics. Finally,
the analysis result of the data was interpreted and conclusions drown.

27
 4. COST BUDGET AND TIME SCHEDULE

4.1 Cost Allocation

To undertake research there is the stationary material that will be needed. These items will be
needed are listed in bellow table as follows.

No Materials Cost/birr Total cost 1 in birr

1 Photo copy service 100*10 1000
2 Duplication paper 75*10 750
3 Computer paper 100*10 1000
4 Flash disk (4GB) 350*4 1400
5 Transport 10*10 100
6 Telephone 100 100
7 Internet 200*2 400
Sub Total 4750
Miscellaneous Cost (10%) 475
Grand Total 5525

4.2 Time budget

The following time budget will be require to accomplish the study

No Activity September October November

1 Topic selection 
2 Preparation of literature view 
3 Preparation of proposal 
4 Data collection 
5 Data analysis 
6 Report writing 
7 Presentation 

28
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