See discussions, stats, and author profiles for this publication at: [Link]

net/publication/347510384

THE IMPACT OF DIGITAL BANKING ON THE PERFOMANCE OF COMMERCIAL

BANKS IN ZIMBABWE

Article · December 2020

CITATIONS READS

4 16,158

1 author:

Thabani Nyoni
University of Zimbabwe
386 PUBLICATIONS 1,726 CITATIONS

SEE PROFILE

All content following this page was uploaded by Thabani Nyoni on 20 December 2020.

The user has requested enhancement of the downloaded file.

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

THE IMPACT OF DIGITAL BANKING ON

THE PERFOMANCE OF COMMERCIAL
BANKS IN ZIMBABWE
Mr. Gladmore CHINDUDZI
Department of Economics, Midlands State University, Gweru, Zimbabwe

Mr. Takudzwa. C. MARADZE

Department of Economics, Midlands State University, Harare, Zimbabwe

Mr. Thabani NYONI

Department of Economics, University of Zimbabwe, Harare, Zimbabwe
ABSTRACT
The main objective of the study was to investigate the impact of digital banking on the financial
performance of commercial banks in Zimbabwe. The study was centred on 40 branches of
commercial banks in Zimbabwe making use of annual secondary data for the period 2013 to
2017 obtained from the banks’ annual financial reports and publications. Four digital banking
variables (online customer deposits, online banking transactions, internet fees and commissions
and internet banking expenditure) were adopted and return on assets (ROA) was used as the
measure of financial performance. Panel data analysis (the Random effects regression model)
and the Pearson’s Product Moment Correlation analysis were employed as the statistical data
analysis tools. The study established that digital banking has contributed positively to the
performance of Zimbabwe’s commercial banks through increased online customer deposits and
banking transactions. On the other side, the study found that electronic banking usage inversely
and significantly influenced the financial performance of commercial banks as measured by
ROA. The study recommends that commercial banks in Zimbabwe should partner and subscribe
to reliable local mobile network providers for uninterrupted and effective service delivery and
also ensure that the mobile network providers craft innovative services that are tailor-made to the
banks’ customers. The banks should continuously upgrade their electronic banking technology so
that they have an updated system in place for effective and efficient service delivery.

Keywords: - Commercial Banks, Digital Banking, Zimbabwe

1.0 INTRODUCTION

This research investigates the impact of digital banking on the financial performance of
commercial banks in Zimbabwe and overall service delivery to bank clients. Digital banking has
transformed the manner banks offer services, allowing individual and corporate customers to
view transactions, download statements and transact online without visiting banking halls
(Boniface & Ambrose, 2015). Improvements in technology have contributed to the distribution
channels of banks and these electronic delivery channels are collectively referred to as electronic

13251 [Link] 1190

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

banking (Goi, 2005 cited in Kombe & Wafula, 2015). Financial institutions have also revisited
their distribution strategies by closing branches in remote and loss-making regions, only
resorting to deployment of electronic banking services. In Zimbabwe, commercial banks are
reorganizing and restructuring their distribution networks by closing branches in less profitable
or loss-making areas, leaving agents to offer banking services such as collecting cash deposits
(Reserve Bank of Zimbabwe (RBZ), 2017). The goal of the research is to assess the impact of
electronic banking on business performance in the banking sector in Zimbabwe, assessing the
impact of digital banking on service delivery and bank performance in Zimbabwe.

1.1 Relevance and Timeliness of the Study

Zimbabwe has traditionally used cash as a medium of exchange for trade purposes; however, we
have started to see a growth in electronic transactions in Zimbabwe due to the current liquidity
crisis, which is characterized by the shortage of cash. The shift to digital products has posed a
threat to financial institutions in Zimbabwe as they are struggling to process electronic payment
instructions, both local and international requests, due to a huge increase in physical Real Time
Gross Settlement (RTGS) requests (RBZ, 2017). The bank systems can only accommodate
specific transaction volumes or limits before being maintained to allow additional transactions to
be processed. As a result, the transaction failure rates for both physical instructions and
electronic transactions are gradually increasing across the banking industry (RBZ, 2017).
However, the sector has been performing well in terms of profitability for the past years and this
is credited to increase in fees and commissions as a result of the rise in electronic transactions
(RBZ, 2017). So, despite the fact that transaction failure rate has increased significantly across
the digital platforms due to high transaction volumes banks’ profits have still been increasing
over the past few years. Therefore, this research seeks to examine if digital banking enhances
financial performance of banks in Zimbabwe.

2.0 LITERATURE REVIEW

2.1 Theoretical Literature Review
2.1.1 Relevant theories
Digital banking literature consists of several theories which include Technology Acceptance
Model (TAM), Unified Theory of Acceptance and Use of Technology (UTAUT), Transactions
Cost Innovation (TCI) Theory, Innovation diffusion theory (IDT) and Resource based view
(RBV) theory. The technology Acceptance Model (TAM) was designed by Davis (1989) to
examine the acceptance and usage of technologies. This concept is centred on analyzing users’
adoption behaviour according to external and internal factors in technology. TAM is utilized to
describe the way the client receives or decrease the usage of a technology predicated on
“perceived ease of use” and “perceived usefulness” of a technology (Safeena et al., 2014).
Perceived usefulness and perceived ease of use that are the principal factors of TAM have an
immediate influence on electronic banking adoption (Suping &Yizheng, 2010; Safeena et al.,
2014). These interactions could be illustrated as shown in Figure 2.1 below:

13251 [Link] 1191

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

Fi
gure 2.1: The TAM Model
Source: Adopted from by Davis et al., (1989)
The Unified Theory of Acceptance and Use of Technology (UTAUT) model was developed by
Venkatesh, Morris and Davis in 2003. A more comprehensive set of factors is obtained from
Venkatesh et al. (2012) UTAUT as a unified view of user adoption. These factors are seen as
having a direct effect on Internet banking adoption and are likewise used as fundamental
antecedents to untie internet banking adoption in the developing world (Yuen, 2013). Although
UTAUT is still a relatively new model and has not been as widely used as TAM, it has gradually
drawn researchers’ attention and has been recently applied to exploring the users’ acceptance of
online banking (Yuen, 2013; Alalwan et al., 2014; Martins et al., 2014). The Transactions Cost
Innovation (TCI) theory pioneered by Niehans (2006) advocated that the dominant factor of
financial innovation is the reduction of transaction cost, and in fact, financial innovation is the
response of the advance in technology which caused the transaction cost to reduce. The reduction
of transaction cost can stimulate financial innovation and improvement of financial service. It
states that financial innovation reduces transaction costs (Kombe & Wafula, 2015). TCI theory is
also relevant in this context: for instance, the use of digital banking technology can substantially
reduce a firm’s transaction costs as it enables efficient coordination, management and use of
information. Online banking may further lower transaction costs as it provides also off-site
access to the firm’s internal database and other relevant sources of information. Consequently,
reduction of operation costs through digital banking may influence growth in profitability for the
bank (Kombe & Wafula, 2015).
Innovation Diffusion theory (IDT) attempts to explain and describe the mechanisms of how new
inventions in this case internet banking is adopted and becomes successful. Sevcik (2004) cited
in Kombe and Wafula (2015) stated that not all innovations are adopted even if they are good it
may take a long time for an innovation to be adopted. Resistance to change may be a hindrance
to diffusion of innovation although it might not stop the innovation it will slow it down. The rate
of adoption of new innovations will depend on how an organization perceives its relative
advantage, compatibility, triability, observability and complexity. If any commercial bank in
Zimbabwe observes the benefits of digital banking they will adopt these innovations given other
factors such as the availability of the required tools. Adoption of such innovations will be
quicker in banks that have internet access and information technology departments than in banks

13251 [Link] 1192

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

without (Rogers, 2005 in Kombe & Wafula, 2015). RBV theory developed by Wernerfelt in
1984 puts emphasis on the importance of resources and their effect on the performance of the
firm. The theory is used to explain how business firms such as banks gain competitiveness
through innovatively delivering superior value to customers, focusing on identifying unique
resources and using them optimally to their advantage. This can only be achieved when firms
gather resources and use them optimally to their advantage (Barney, 2007 in Mwiti, 2016). RBV
theory also suggests that the various assets that a firm has are the inputs to its production process
(Crook, 2008 in Mwiti, 2016). The performance of firms is consequently primarily determined
by the capability of the resources that it has (Mwiti, 2016).

2.1.2 Comparison of Theories

TAM is a simplification of this Theory of Reason Action (TRA) and the Theory of Planned
Behaviour (TPB). Both of these theories are criticised for not recognizing the effect of outside
factors in the adoption of technologies and being restricted in measuring users' attitude towards
behaviour, subjective norm and perceived behavioural goals (Safeena et al., 2014). The RBV
theory is imperative to this study for its idea that firms with more resources are more likely to be
more innovative in digital banking channels to deliver quality services to customers thus, leading
in increased profits in the long run.

2.1.3 Impact of digital banking on bank performance

As the use and demand of electronic banking increases as more banks understand and appreciate
that electronic based banking provides advantages of low costs, and high return (Akhisar et al.,
2015). Nonetheless, in the context of developing nations such Zimbabwe and Botswana there is
lack of well –developed telecommunications resulting in non-realisation of cost-effectiveness
and financial performance related to electronic banking owing to limited technology
infrastructure ((Akhisar et al., 2015; Mazana, Rupere & Kabanda, 2016). This implies that banks
ought to have a significant initial capital expenditure in infrastructure prior to benefiting in terms
of performance and cost effectiveness. The purpose of digital banking is to directly affect the
profitability or return on assets and enhance the quality of assets (Gutu, 2014). Conversely, there
are significant indirect impacts. According to DeYoung (2001) online banking and other
electronic banking services reduce operational costs on banks that tolerate physical overhead
[Link] studies have been conducted concerning the connection between electronic
banking and its effect on bank performance. Surprisingly, studies on this subject matter provided
ambiguous outcomes. However, positive relationship was observed in some studies (Aduda &
Kingoo, 2012; Bagudu et al., 2017; Mehmood et al., 2015; Akhisa et al., 2015; Maduku, 2014;
Mazana et al., 2016). Studies which observed positive results revealed that banks which offer
extensive digital banking services tend to perform better than the ones that lag behind (Mazana et
al., 2016).

Studies carried out in developed countries (Mehmood et al., 2015; Soh et al., 2014) indicated
that electronic banking reduces operational costs and hence lead to greater profits for banks.
Another study conducted by Akhisa et al. (2015) found positive relationship between
technological innovations and bank performance in both developed and developing countries.
This resonates with research conducted in Africa especially Zimbabwe (Mazana et al., 2016),
Nigeria (Bagudu et al., 2017), Zambia (Lusaya & Kalumba, 2018) and South Africa (Maduku,

13251 [Link] 1193

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

2014), where results indicate that banks which have adopted digital banking have improved their
performance through improved productivity and efficiency. It is against this background that this
study attempts to investigate the impact of electronic banking among commercial banks in
Zimbabwe.

In financial services, the lifeblood of a lender is decided by how long it could collect funds from
the consumers at the lowest cost; purchase cash, do something with all the money, then sell it for
their benefit (Dew, 2012). Financial creations enable companies from all businesses to increase
cash in more significant quantities and at a more affordable cost than they might elsewhere
(Lerner, 2012). It will become evident that there's a trend for a lender to minimize expenditures
and costs. After implementing innovations, a lender, will discover new opportunities which may
be manipulated further and therefore, in the long run, provides more income to a lender (Nofie,
2011). Dependent on the nation level retail payment support information from around 27 EU
markets, proof verifies that banks perform much better in countries with more sophisticated retail
payment services, according to accounting ratios and benefit and cost efficacy scores (Iftekhar,
Schmiedel & Song, 2015). ATMs, as analysed by Massoud and Bernhardt (2012), think about
the chance that ATM surcharges could affect banks elevation, both directly in addition to
indirectly via a so-called consumer connection effect. To avoid paying ATM surcharges, this
impact results in a customer in a bank with few ATMs accounts to a bank with many ATMs. If
switching happens then greater, ATM surcharges must bring about a rise in the market share of
bank goods (e.g., deposits) and sustainability of bigger banks and a reduction in the market share
and viability of smaller banks (McAndrews, 2012). Performance of a lender is enhanced via the
following:

2.1.4 Revenue Generation

It is anticipated that banks offering e-banking will have some profitability edge over their
competitors. E-banking provides more avenues for income generation, because they generate
income from additional non-interest sources. Introduction of e-banking services and products,
which are accessible and convenient, has made it possible for banks to attract prospective
customers thus allowing them to boost their market share. Value is added by providing better
quality services and products to the client (Ciciretti et al., 2008). This leads to high levels of
satisfaction and client retention rate. The other major benefit from e-banking innovation is fee-
based income (Dew, 2012). If a bank joins in an ATM network, it can generate income from
other banks’ customers that use its ATM machines or from third parties that cooperate with it.
The more transactions with a third party, the more fee-based income acquired, enforcing the
bank to enrich the features of e-banking transactions, such as mobile telephone top ups, ticketing,
paying telephone or electricity bills and house taxes. Joining a certain ATM network will also
create customer awareness of that bank and influence the market share (Iftekhar, Schmiedel &
Song, 2012).

2.1.5 Improved Efficiency

E-banking strategy entails implementation of core banking systems which reduces manual tasks
and process time. To implement e-banking, create new practices that are working and
organizations have to reinvent their business systems. This leads to greater efficiency and
endurance in associations (Shah and Clarke, 2009). Elimination of data and error redundancies
results in branch productivity. This enriches reduction in processing and turnaround time,
enabling greater efficiency in service delivery and increasing output. More so, consumer

13251 [Link] 1194

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

dissatisfaction with division banking due to long-term and inadequate customer support is
removed, and this contributes to increased market share for electronic monies (Karjaluoto,
Mattila & Pento, 2012). But, the dedication of senior management is a driving force in the
adoption and exploitation of technologies (Shiels, McIvor & O’Reilly, 2013). Banks Services
were directed by are currently earning from innovation in a means of yearly and commission
deductions. The banks charge a particular amount or level fees or a specific percentage on goods
and services such as ATMs, capital transfer, etc... The results reveal that e-banking increased the
gains of banks and had led. Banks are transitioning into the way that is electronic instead of
jumping to banking methods. Performance has risen since the costs are decreased; costs of
labour, the supply of services, time stored, precision, reliability and high quality of providers has
increased (Sana, Mohammad, Hassan & Momina, 2011).

2.1.6 Cost Saving

In Addition to revenue enhancement may enable banks by letting them reduce expenses on
buildings, resource, and equipment. This contributes to costs associated with maintaining
branches. Jayawardhena and Foley (2000) assert that the cost savings come through joint effects
of reduction and greater use of workforce, more economical use of space and operational savings
that help increase the profit margin by a sudden large number. Banks with high costs of keeping
branch network are therefore motivated to adopt Internet banking from the possibility of future
cost savings (Furst et al., 2002). Processing offers a route for a bank to provide services and
reduces transaction costs and lower charges. These cost savings offer diverse and efficient
services and can give the banks and customers with fees of banks. The Internet supplies a
possible competitive advantage for both banks and also this edge can be found in the regions of
cost reduction and even much more satisfaction of consumer demands (Bradley & Stewart,
2013). Encouraging consumers to use the web for banking transactions could lead to substantial
operating costs savings, and thus increasing the gain margin (Sathye, 2013). The World Wide
Web is the most affordable distribution station for standardized banking operations, including
account management and capital transfer (Polasik & Wisniewski, 2013).

2.1.7 Cross-Selling Opportunities

E-banking Systems provide attributes for banks to deploy and design products for market
segments that are varying. The product bundling capabilities of this solution offer a wide
assortment of possibilities for banks to make products with advanced features (Tawfik and
Albrecht, 2008). This empowers banks to innovate and expand their suite of products. E-banking
system's capability to provide comprehensive information about customers' financial profiles and
buying behaviour which also offer detailed comprehension of customers enables customizing of
advertising and products and gives an opportunity for cross-selling (Shah and Clarke, 2009).The
end result is improved bank performance as it is able to meet each customer’s needs.

2.1.8 Benefits E-Banking over Traditional Banking

Electronic banking is changing the banking sector and it has the primary impact on banking
relationship. For instance, what used to perform in a branch such as to draw cash or deposit a
cheque or request a statement of accounts etc. today it is possible anytime and anywhere in the
world through any delivery stations. Providing e-banking is often becoming a “need to have”
than a “nice to have” (Shilpan, 2012). Banks are moving away from “handling branches” and
instead are “managing distribution” throughout the whole bank’s channels.

13251 [Link] 1195

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

Table 2.1: Comparison of e-banking and traditional banking services

Source: Adapted from Vyas (2012)

According Vyas (2012), e-banking service with all the functions and contains many Advantages
when compared with conventional banking services as shown in Table 2.1. E-banking
transactions are less expensive than branch transactions. It enhances competitive advantage
allowing e-banking to undercut bricks-and-mortar banks. According to the financial banking
services can be categorized in two basic theoretical groups traditional and modern. However, in
traditional banking, the presence of the customer is important but in modern it is not (Vyas,
2012).

2.1.9 Reasons for implementing e-Banking

E-banking is the newest delivery channel. It delivers information at much higher speed than
traditional banking. Lukic (2014), stated that e-banking is “a wave of the future”. Nowadays
customers expect new and effective techniques and services, so e-banking would be the best
choice to achieve this goal (Havasi, et al., 2013). E-banking is a significant investment, so the

13251 [Link] 1196

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

questions must be answered as to what motivates banks to participate and deal with the
associated problems and risk. Some of the reasons often cited by the bank to be their primary
motive for implementing e-banking include:

2.1.10 Customers’ demands

Good customer services are one of the best ways for the banks to develop their services.
Customers constantly are demanding better services, 24 hours per day and 7 days per week
availability, with a good customized to their exact needs, at less cost, and as quickly as possible
(Patgar & Arundhekar, 2015). Therefore, to meet these demands, banks need to develop
innovative ways of creating value and e-banking is seen as one of those innovative ways to meet
customers’ expectations. According to Kerem (2003), “customer needs at least minimum
comparative advantage in order to accept change”. This means new innovative services should
be better than its predecessor.

2.1.11 Increased sales to existing customers

The financial services markets have developed significantly, and there is a minimal chance for
the growth of new niches (Shah, and Clarke, 2009). This usually means that the perfect method
to improve revenue is to sell more. Banking is referred to as banking. Information technology
had given rise to inventions in the products, and their delivery from both the finance and banking
businesses; client satisfaction and customer support are the functions. Clients decide which of
these technologies will be approved, although e-banking decides what could be provided to
clients.
2.1.12 Change in the environment
Given today’s banking, a multichannel banking environment, new technologies like the internet
and mobile telecommunications play a key role in opening new markets and value creation.
Social changes are also forcing financial institutions to change the way they are doing business
with their customers (Shah, & Clarke, 2009). In business life, the banking sector is one of the
main users of information and communication technologies.

2.1.13 Achieving competitive advantage

Porter (1985) defined competitive advantage as an advantage over competitors gained by
offering consumers greater value, either by means of lower prices or by providing greater
benefits and services that justify a higher price. The goal of the most companies is to reach
competitive advantage, but only a few of them can succeed on it, even if they do, few of them
can maintain it (Kireru, Ombui & Omwenga, 2016). The banking sector is one of the first sectors
that have adopted a lot of electronics applications to improve performance and gain a
competitive advantage (Omari, & Bataineh, 2012). Internet and communication technologies
develop an innovative connection between customers and vendor of products or services
(Havasi, et al., 2013). Therefore, IT department of a bank can use this opportunity, which can
build another level of competitive advantage.

2.1.14 To achieve efficiencies

“Efficiency is using the resources at best, brings the saving in money and time, and consequently
leads to improve company’s performance” (Roghaniana, Raslia, & Gheysaria, 2012). Technical
efficiency measure reflects the ability of a bank to maximize outputs with a given set of inputs or
to produce a given amount of output with minimum inputs (Momparler, Lassala & Ribeiro,
2013). Through offering e-banking services, banks can achieve efficiencies whether personal or

13251 [Link] 1197

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

business. E-banking increases the efficiency of banks such as reductions in labour costs, quality
of transactions and maintenance improves as computer took a place of human, human errors
reduced, services and process are now quicker and safe which saves time, money, efforts and
decreases costs (Sumra, Manzoor, & Abbas, 2011).

2.1.15 Factors affecting the adoption and use of digital banking

Centeno (2004) cited in Baffour (2015) in his research of analyzing the acceding and candidate
countries (ACCs) adoption of e-banking, classified e-banking adoption factors in two areas
which are ICT factors and Banking factors. The ICT factors include the ability of customers in
utilizing internet and other related technologies, internet, concerns related to privacy and
security, penetration rates, and attitudes towards technology. Banking factors involve trust in
banking industry, Digital banking culture, banking culture, and Digital banking drive. Baffour
(2015) also points out that lack of online penetration and personal computers is a barrier for
growth in digital banking both in developing and developed markets. Cost of access to services is
a primary issue for internet penetration, and the personal computer in Eastern and Central Europe
countries. Conversely, there has been a lack of confidence in the banking industry because of
previous unstable periods in certain countries (Baffour, 2015). This study also concentrates on
identifying the factors affecting the adoption of digital banking in commercial banks in
Zimbabwe. The research framework for this study is based upon the expansion of the
decomposed theory of planned behaviour (Tan & Teo, 2000).

2.1.16 Customer Attitude

Attitude is described as the negative and positive emotions (evaluative effect) related to attaining
desired behaviour (Fishbein & Ajzen, 1975). The various aspects of attitudinal belief on
innovations could be quantified utilizing the 5 perceived characteristics (compatibility,
complexity, relative advantage, observability, and trial ability) especially initial three
characteristics of innovation (Taylor & Todd, 1995). These characteristics were initially
suggested in the diffusion of innovations theory by Rogers, (1983) who found practical
application within this model with the exclusion of observability that can be described as the
level to which the outcomes of an innovation are perceived by others (Rogers, 1983).
Observability was considered insignificant within this research because of a significant
characteristic of banking is privacy. Thus, observing others utilizing digital banking services can
appear to be daunting unless a conscious attempt to accomplish this is made (Tan & Teo, 2000).

2.1.17 Subjective Norms

Subjective norms denote an individual's perception that many people that are significant to
him/her believe that he/she should not or should behave in a certain way (Fishbein & Ajzen,
1975). It is behaviour related because individuals behave according to their understanding of
what others believe that they ought to do, it is associated with behaviour. Subjective norms are
found to be important before, or in the initial stages of implementation of innovation when users
have restricted direct expertise from which to produce attitudes (Taylor & Todd, 1995). Tan &
Teo (2000) provide that the majority of services can help determine an individual's adoption of

13251 [Link] 1198

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

digital banking facilities. Adopter's family, colleagues/peers, and friends are classes which will
possibly influence the adoption. Even though there is not any foundation on which to forecast
how every one of those groups will affect adoption of electronic banking, it is nevertheless
expected that the overall impact of these categories will likely be significantly associated to
individual adoption of digital banking (Tan & Teo, 2000).

2.1.18 Perceived Behavioural Control

Perceived behavioural control describes the aspects that might negatively affect behavioural
performance. An individual confident in possession of skills of utilizing the internet and a
personal computer is inclined to embrace electronic banking (Tan & Teo, 2000). Tan and Teo
(2000) attributes this to the fact that the person is at ease with the innovation. Government
authorities can perform a leader deliver and intervention role in information diffusion. Potential
customers subsequently could perceive new innovations like digital banking services in a more
favourable way and consequently be more inclined to utilise them (Tan & Teo, 2000). Past
studies have identified several factors that may influence behavioural performance. Nearly all the
studies highlight electronic banking perceived characteristics as major factors that influence
users' adoption and use of services. Regardless of the support for the usage of this TAM in
comprehending technology acceptance and usage behaviour, the study by Moon and Kim (2001,
p. 217) reveals the TAM does not precisely capture the consequences of technological and
utilization context factors that affect consumer approval of IT systems. Therefore, many studies
include additional characteristics such as confidence, subjective standards, privacy and security,
perceived self-efficacy and pleasure, demographic factors and information available concerning
online banking to supply a fuller comprehension of the subject (Maduku & Mpinganjira, 2012;
Yaghoubi, 2010). According to previous research, this research adds confidence from the e-
banking system, client awareness of e-banking perceived and services self-efficacy, and the
TAM constructs of perceived usefulness and ease of usage to enhance the comprehension of this
predicators of e-banking providers in Zimbabwe.

2.1.19 Perceived usefulness

Ease of use is one of the essential elements which determines the achievement of online banking
and can also be crucial for its growth and in addition to delivery of online banking services to the
clients of online banking (Al-Hajri & Tatnall, 2008). Quite a few researches underscore the
fundamental role that perceived usefulness plays on e-banking approval and utilization (Jeong &
Yoon, 2013; Maduku, 2014, Akturan & Tezcan, 2012). The ease of use at e-banking involves the
bodily or psychological effort that clients exert or are more very most likely to apply through e-
banking (Maduku & Mpinganjira, 2012, p. 174). Empirical evidence demonstrates that a system
that's perceived as simpler to utilize supplies inspiration because of its adoption and usage
(Maduku, 2014; Jeong & Yoon, 2013). There are two kinds of perceived usefulness and
therefore are categorized as planned and unintentional rewards (Lee, 2009). Lee (2009) clarified
the planned rewards would be the concrete and immediate rewards that customers love using
online banking services such as reduced transaction fees, higher deposit rates, chances to prizes
amongst others. The accidental advantages on the other hand those benefits which are tough to
quantify like services which enables customers to perform banking transactions everywhere
across the world (Lee, 2009). Complexity could be described as the contrary of simplicity of
usage. For that reason, it affects the adoption of their banking. The reduced the need for

13251 [Link] 1199

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

specialized skills, the more likely the user is to embrace a new technology (Al-Hajri & Tatnall,
2008).

2.1.20 Perceived Ease of Use (PEOU)

Refers to the degree to which an individual believes that using a specific system could be without
any attempt of bodily and psychological effort (Davis, 1993 cited in Kamutuezu, 2016). As
provided by (Singh & Agnihotri, 2015), PEOU is an important element which affects approval of
information system. Kamutuezu (2016) who commented about the association between PEOU
and PU indicates that “in a causal perspective that, regression results imply that simplicity of use
might be an antecedent of viability, instead of parallel, lead determinant of use”. This suggests
that if banking systems are simple to use; they're more inclined to be approved by the users.
Whether an online support is difficult to work with, the customer is more inclined to give the
service up and chose another manner of doing transactions which will be simpler. Haneen et al.
(2014) investigated the factors that influence the E-Banking adoption of customers who have net
access in Jordan. The research found that compatibility, PEOU, safety and PU positively impact
digital banking adoption. PEOU was found as an important element for digital banking adoption.

2.2 Empirical Literature Review

Table 2.2: Summary of empirical literature

Author(s) Year Variables used Method used Conclusion

1. Mbama, C 2018 Customer experience, loyalty, The research The major factors
satisfaction and financial surveyed UK bank determining customer
performance customers’ experience in digital
perceptions of banking are service and
digital banking. It quality, perceived
also used Structural value, employee-client
Equation engagement, perceived
Modelling, risk and usability.
ANOVA and There is a significant
Multivariate Factor connection among
Analysis tests. customer loyalty,
experience and
satisfaction which
enhances financial
performance.
2. Bagudu, 2017 Bank profitability, mobile Simple random Concluded that
H. D., banking services techniques were electronic banking
Mohd used in this positively and
Khan, S. research in significantly impacts
J.& choosing 22 the financial
Abdul- commercial banks performance of
Hakim, R in Nigeria. To commercial banks in
facilitate the Nigeria and advocated
obtaining of the constant adoption
relevant of mobile banking
information that services within their
was used for operations since the
analysis in this amount of individuals
study, structured using a cellular handset

13251 [Link] 1200

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

questionnaire was is increasing daily.

used.

3. Singh, S. 2014 Electronic banking use, A sample of 150 The main challenges
and challenges to e-banking use. respondents was customers encounter
Sharma, chosen by using while using e- banking
D.K. judgment sampling. are lack of knowledge,
ANOVA technique lack of proper training,
was also used to outdated technology,
confirm the study technical bottlenecks,
outcomes. frustration in getting
work done
electronically, reduced
personal efficiency and
strain due to e-banking
as compared to visits in
banks personally.

4. Giudice, 2016 The study used products The research High return on equity
M. D., offered by electronic banks contained 3692 for banks is achieved
Campanell (banks of things), relative banks located in 28 by offering internet
a, F & ROE European countries retail services, internet
Dezi, L so as to determine corporate services,
whether e-banking home banking services
influenced banks’ to customers.
profitability. The
researchers adopted
the classification
analysis
(classification and
regression tree)
method.
5. Mehmood, 2015 ICT surrogates, bank The analysis Majority of those ICT
D., Nisar, operation utilized the surrogates (like debit
M. & Transcendental cards) have favorable
Rehman, Logarithmic and effect on the operation
H. Cobb-Douglas of the banking industry
Production in Pakistan.
Functions with
OLS and
Seemingly
Unrelated
Regression
Estimation methods
to quantify
production change
on account of the
adoption of ICT by
30 Pakistan banks
from 2006 to 2014.

6. Rodrigues, 2017 Use of E-banking services, The study used an Lack of trust and lack
A. lack of trust, lack of personal analysis of a of personal contact are
contact proposed research the two main factors
model following preventing consumers
current tested from using electronic-

13251 [Link] 1201

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

theories present in banking services.

literature. Primary
data was collected
from a sample of
256 bank customer
in Portugal using an
online survey.

7. Alsamydai 2014 Customers’ acceptance and Used a model that PEOU is the most
, M. J. et adoption of mobile banking was designed using motivating factor
al. services, motivating factors motivating and towards the use of
and impeding factors of impeding factors. A mobile banking
acceptance and use of mobile questionnaire, services.
banking comprising 19
questions covering Personal desire is the
the hypothesis and most limiting factor to
dimensions of the mobile banking use.
study was designed. The effect of
Data collection motivating factors is
resulted in 36 more significant than
usable surreys for the effect of impeding
subsequent analysis factors in determining
mobile banking use.

8. Kimani, 2015 Mobile banking, Operational The research was a Mobile banking
N. efficiency of commercial census survey of positively and
banks the 43 Kenyan significantly impacts
commercial banks the operational
in. The study used efficiency of
secondary data on commercial banks in
the amount of Kenya. The research
registered mobile recommended policy
banking customers, makers to constantly
sums of money look at adopting mobile
transferred through banking technologies.
mobile banking,
earnings of the
banks and
operational cost for
the period 2011 to
2014. Data analysis
was created and the
correlation between
growth in mobile
usage and
expansion in
banking efficiency
was estimated.

9. Siddik, N. 2016 ROA, ROE The study used The study found out
A. et al. panel data of that electronic banking
13 commercial positively influences on
banks in the financial
Bangladesh over a performance of

13251 [Link] 1202

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

10 year period of commercial banks in

2003–2013. ROE terms of ROE but
and ROA were both insignificant in terms of
used as dependant ROA.
variables and the
Pooled regression
analysis was used.
A dummy variable
for internet banking
was used as the
main variable

10. Lusaya, S. 2018 Usage of e-banking, The study was Accessibility of

& accessibility of information descriptive, and a information regarding
Kalumba, regarding e-banking, expense sample of 50 e-banking, instruction
B. related to e-banking banking customers level and also the
in Kasama district expenses related to e-
in Zambia has been banking are the
used. substantial challenges
to embracing and using
e-banking by
customers.

11. Miwangi, 2014 ROA, Panel data analysis The study found out
K. D. Independent was used. Panel that investment in
Variables were; data for 44 electronic banking
Deposit to Assets Kenyan banks was enhances financial
Ratio, collected for the performance of banks.
Loan to Assets Ratio, Income/ years from 2009 to Fees and commissions
Total be 2013. was found to have a
Operating Loans), positive effect on ROA.
Fees and Commission

12. Katsika, 2014 Factors impacting internet The study used a The main factors
V. banking (perceived usefulness random sample of impacting internet
and self-efficacy) 200 retail bank banking use among
customers from Greek bank clients
Greece that were were Perceived
requested to fill in Usefulness and Self-
questionnaire Efficacy. Ideas for
relevant to the use bank supervisors were
of online banking. suggested and those
The results were included launching
analyzed by a string campaigns to stimulate
of statistical bank customers'
measures and were interest to e-banking.
generalized so as to
correspond to the
study objective.
13. Ozsoz, E. 2014 Financial growth in banks Used panel data in Aside from investment
and (ROA, ROE and Return on 14 savings and in e-banking becoming
Helvacıoğl financial intermediation commercial banks a process banking
u, A. D. margin), online banking from Turkey, the factor, it has a positive
nation that had influence on the
embraced net operation of the

13251 [Link] 1203

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

banking between banking system in

1996 and 2005. Turkey concerning
returns.
14. Taiwo, J. 2017 Operational efficiency of Used a case of Banks’ operational
N. and banks (bank revenue and commercial banks efficiency improves
Agwu, E. capital base, customer in Nigeria. Primary after e-banking
loyalty) data were obtained adoption. The
by administering improvement occurs in
questionnaires to the form of banks’
staff of four revenue and capital
purposively bases, as well as in
selected banks. customers’ loyalty.
Pearson correlation
was used to analyse
the results obtained
using the Statistical
Package for Social
Sciences (SPSS).

15. Maduku, 2014 Customer adoption of e- Cross-sectional Customers’ trust in the

D. K. banking services, customer’s descriptive survey electronic banking
trust in banking system research design was system is the strongest
adopted in the predictor of internet
study to collect data and cell phone banking
from 394 customers services adoption.
of the 4 major retail
banks in South Banks were
Africa through self- recommended to
administered formulate and
questionnaires. implement strategies
that could increase
customers’ trust in the
internet and cell phone
banking systems.

16. Mazana, 2016 Usage of self-service The study used a There is a lack of
R., et al. technology case of a local confidence in using
Zimbabwean bank banking services and
and data was the banks are failing to
collected using tap into the informal
questionnaires sector for the largely
administered to unbanked market.
bank clients,
workers and Strategy given was
management. alignment of
information technology
with the bank’s
business and corporate
unit strategies.

17. Akhisar, I. 2015 Technological innovations, Study encompassed There is a positive

et al. bank performance countries both in association between
the developed and technological
developing innovations and bank
countries. The performance in both
analysis covered a developing and

13251 [Link] 1204

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

period from 2005 to developed countries.

2013. Electronic However, the
banking data of the relationship is stronger
countries was in developed countries
obtained from BIS
(Payment Systems
Statistics), World
Bank’s (World
Development
Indicators) and
bank performance
data from the IMF
(Financial
Soundness
Indicators). The
data was analysed
using dynamic
panel data methods

18. Nader, A. 2011 Profit efficacy of banks, Sampled Saudi Accessibility to ATMs
accessibility of internet Arabian banks’ and quantity and
banking devices profit efficacy from telephone banking have
1998 to 2007. a positive impact on
profit efficacy of
banks.

19. Asante- 2015 Awareness of E-banking The methodology Many clients used the
Gyabaah, services, Use of e-banking used to conduct this bank's electronic
A. et al. services study consisted of products largely
interviews and because it was
surveys to collect convenient and saved
data. A sample size the clients' time. The
for the analysis research suggested that
consisted of 200 the management use
clients and 25 powerful presentations
workers of GCB through all types of
Bank Ltd in media advertising such
Kumasi, Ghana. as brochures, leaflets
and web pages to
present the products
and solutions to its
customers and a wider
audience.

20. Morufu, 2016 Internet Panel Internet banking

O. Banking Regression transactions were found
Transactions and ROA was used and to have a negative
secondary data was effect on banks’
collected from profitability.
10 banks in Nigeria
for the period 2005
to
2012.

21. Mulwa, F. 2017 ROA, Online bank Descriptive design The study concluded
N. transactions, online was used. The that online banking
transaction fees, online population studied transaction

13251 [Link] 1205

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

customer deposits. The comprised of 40 significantly and

regression model used was as commercial banks positively predicts
follows: in Kenya. Data ROA and that an
collection increase in online
Yit= α + β1X1t + β2 X2t+ β3 questionnaires were banking transactions
X3t+β4 X4t + ę where; used, and Pearson leads to increase in
Yit – ROA, X1t – Online correlation ROA.
Customer Deposits, X2 - coefficient and
Online Banking Transactions, inferential test
X3 - Internet Fees and multiple regression
Commissions, X4 - Internet analysis were used
Banking Expenditure for analysis

22. Vekya, J. 2017 Profitability of commercial The study adopted A rise in ATM and
M. banks (ROE), ATM a descriptive POS transactions leads
transactions, Point of sale design. The to a rise in bank
(POS) transactions population of the profitability.
study consists of
Kenyan 43
commercial banks
in operations as at
2014. A census
survey was
undertaken. The
study used
secondary data
obtained from
various Kenya’
central bank
publications. SPSS
was used.

23. Wanja, N. 2012 ROA, Secondary data for Internet banking has
C. Investment 43 banks in Kenya positive effect on bank
in Internet Banking, e- was used and profitability thus banks
banking regression analysis should invest in
Income was done internet banking

3.0 METHODOLOGY
3.1 Research Design, Population and Data Sources

The study adopted a descriptive research design for the purpose of seeking and illustrating the
nature and features of the unit of analysis which in this study is the banks (Mugenda & Mugenda,
2012). Descriptive survey research design is suitable since the research is designed to construct a
picture for the readers about observed effects of online banking on financial indicators among
commercial banks in Zimbabwe. A population consists of the larger set of observation elements
while the selected smaller set is known as the study sample (Cooper & Schindler, 2014). The
target population for the study was all the commercial bank branches in Harare as at 31
December 2017. The study collected secondary panel data. The study’s main data source was
secondary in nature and it is from the banks’ published financial statements and other reports on

13251 [Link] 1206

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

digital banking as at 31 December for each year for the period 2013 to 2017. Other secondary
data sources included RBZ reports and bank newsletters.

3.2 Empirical Model Specification

Based on empirical literature, the regression model used is presented as follows:
ROAit= α + β1OCDit + β2 IFCit + β3 OBTit +β4 X4t + Ωt……………………………………(1)

Where;

Where βj, j=1, 2, 3 are coefficients whose sign shows the how significant the effect internet
banking on financial performance of banks indexed by the return in assets. Moreover, the test of
hypotheses to find out the level of significance of an independent variable against the dependent
variable will also be tested. Data was analysed using panel data analysis. According to Gujarati
(2009) panel data refers to data from individual cross sections collected over a particular period
of time. Panel data regression was used and there are three main ways namely pooled OLS, fixed
effects and random effects regression models. Pooled regression assumes homogeneity data
whilst fixed effects model assumes data is heterogeneous (Gujarati, 2009). Lastly, the random
effects model assumes heterogeneity and is time invariant however individual specific effect is
not correlated with the explanatory variables (Gujarati, 2009). A random effect model assumes
that individual effect (heterogeneity) is not correlated with any regressors and then estimates
error variance specific to groups (or times). Hence, ui is an individual specific random
heterogeneity or a component of the composite error term. Random effect model can be called an
error component model. The intercept and slopes of regressors are the same across individual.
The difference among individuals (or time periods) lies in their individual specific errors, not in
their intercepts. Choice of the right model between the three models was based on the correlated
random effects Hausman test and the Wald test. The formula implies that a Hausman test
examines if the random effects estimate is insignificantly different from the unbiased fixed effect
estimate. If the null hypothesis of no correlation is rejected, you may conclude that individual

13251 [Link] 1207

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

effects ui are significantly correlated with at least one regressors in the model and thus the
random effect model is problematic. Therefore, you need to go for a fixed effect model rather
than the random effect counterpart. However the null hypothesis may not be rejected if the p
value is greater than 5% in which case we use the Random effects model. This study will use the
Random effects model since the p value in the Hausman test is greater than 5%.

4.0 DATA ANALYSIS AND INTERPRETATION OF FINDINGS

Outcome of the research is presented based on the data gathered from the field. The study aimed
at analysing the impact of digital banking on the performance of commercial banks in
Zimbabwe. Panel secondary data obtained from the banks’ audited financial reports was used.
Variables such as online customer deposits, online banking transactions, internet fees and
commissions and internet banking expenditure were used to explain financial performance of the
banks measured by Return on Assets. Panel Data analysis will be used in this research. The
results are interpreted such that the findings may be meaningful to all the scholars and students
that may be interested in the subject. A study period of 5 years, 2013 to 2017 was used.

4.1 Unit Root Test Results

Table 4.1: Unit root test results

Variable ADF (Fisher Chi- Intercept Trend P-value Order of

square) statistic and integration
Intercept

ROA 112.43 Yes Yes 0.0098* I(0)

IBE 378.28 Yes No 0.0000* I(0)

OCD 225.48 Yes No 0.0000* I(0)

OBT 246.86 No No 0.0000* I(0)
IFC 103.86 Yes No 0.0377* I(0)

NB: * means significant at 1%, 5% and 10% respectively

Unit root tests using the Augmented Dickey-Fuller (Fisher Chi-square) test were conducted for
all variables. As shown in Table 4.1 all the variables were found to be stationary at level that is
they were I(0). The series were examined graphically to find out whether they contain an
intercept or a trend and were therefore tested empirically using the ADF (Fisher Chi-square) test.
The dependent variable (ROA) was found stationary at level and was significant at 5% whilst
internet banking expenditure (IBE) was found to contain an intercept and was stationary at 5%.
Online banking transactions (OBT) and online customer deposits (OCD) were found to be
stationary at level and OCD was found to have an intercept without trend. Internet fees and
commissions (IFC) were found to be stationary at level and the ADF statistic was significant at
5%.

13251 [Link] 1208

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

4.2 Diagnostic tests

As mentioned earlier, diagnostic tests help in the detection of errors before running regression
and after running regression. Diagnostic tests also provide evidence of robust estimates since the
absence of errors such as serial correlation and stationarity imply that the findings are without
fault more reliable. The stability diagnostic tests also provide evidence that we are not running a
spurious regression model. The results for the diagnostic tests are presented in Table 4.2.
The Hausman test was used to check if the model was correct. As shown in Table 4.2, the test
estimated a p-value of 1.00 and is greater than 5% level of significance. Therefore, the null
hypothesis may be rejected and conclude that the Random effects model is appropriate.
From the DW d-statistic was found to be 2.33 (Table 4.2). The value is close to 2 therefore we
fail to reject the null hypothesis and conclude that there is no serial correlation.
Table 4.2: Diagnostic test results

As shown in Table 4.2, the computed JB statistic was found to be 38.18 with a probability value
of 0.23. The probability value is higher than 0.05, therefore, the study failed to reject the
hypothesised normality assumption and conclude that the residuals are normally distributed. The
absolute correlation coefficients are less than 0.8 implying that each variable’s effect on the
dependent variable can easily be isolated. The model does not suffer from serious problems of
multicollinearity (Table 4.3).
Table 4.3: Multicollinearity test results

4.3 Regression Results

As mentioned earlier, ROA is one of the most important benchmarks of profitability, which is
considered as the dependent variable in this study. Other ratios such as the Online Customer
Deposits/Total Assets (OCD), Online Banking Transactions/Total Assets (OBT), Internet Fees
and Commissions/Total Assets (IFC) and Internet Banking Expenditure/Total Assets (IBE) are

13251 [Link] 1209

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

used as independent variables. Table 4.4 represents the results obtained from the multiple
regression analysis of ROA. It is apparent that coefficients of all the variables (OCD, OBT, IFC
and IBE) are statistically significant. It means that, these variables are associated with
profitability of the banks. The results show that ROA of bank was significantly predicted by
Online Customer Deposits (OCD) (β1= 0.656533, p=0.0000<0.05). This implies that an increase
in Online Customer Deposits would lead to a significant increase in ROA in commercial banks.
The result of Online Banking Transactions positively and significantly predict ROA
(β2=0.582337, p=0.0000<0.05), Internet Fees and Commissions (IFC) predict ROA negatively
and significantly (β3= -0.57754, p=0.0000<0.05) and Internet Banking Expenditure (IBE) predict
a significant and negative effect on ROA in banks (β4= -0.359875, p=0.000<0.05). As shown in
Table 4.4, the coefficient of determination, R-squared of 0.67 is higher than 0.5 indicating that
the model is relatively of good fit. This value of 0.67 indicate that about 67% of the sample
variance in the dependent variable (ROA) is being jointly explained within the model by internet
banking expenditure, online banking transactions, online customer deposits and internet fees and
commissions. The remaining 33% represents other determinants of bank profitability which have
been omitted in this study. In addition, the whole model is significant at 5% level since the
probability value of the F-statistic is 0.0000 meaning that the whole model is valid and
significant.
Table 4.4: Regression output

NB: *, ** and *** means significant at 1%, 5% and 10% respectively

The regression model can therefore be presented as follows:
ROAit= 4.461907 + 0.656533OCDit + 0.582337OBTit - 0.577540IFCit - 0.359875IBEit + Ωt

4.4 Interpretation of Findings

The results indicate that when Online Customer Deposits increase by 10%, profitability (ROA)
increases by 6.5%, holding other variables constant. These results are similar to the findings of
Mulwa (2017) who established that the use of internet banking led to mobilisation of large sums
of customer deposits at relatively low interest rates resulting in accumulated deposits to long

13251 [Link] 1210

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

term investors at a higher rate able to cover the operation costs. This results in high bank profits.
From these results it can be concluded that digital banking increases bank customer deposits
which culminates in high profits. A 10% increase in Online Banking Transactions was also
found to increase profitability (ROA) by 5.8% when the other variables are held constant. The
findings corroborate Vekya (2017) findings who revealed that the adoption of internet results in
lower transaction costs, thus attracting more customers for those banks which embrace the
internet banking facilities. This would in turn improve the banks’ return on assets. It can
therefore be alluded that digital banking leads to increased transactions which then results in
improved performance of commercial banks in Zimbabwe. It was also established that a 10%
rise in Internet Fees and Commissions induces approximately 5.8% decrease in bank profitability
measured by ROA. The same finding was revealed in Mulwa’s (2017) study where it was
concluded that high internet fees and commissions add to overall bank costs thereby reducing
return on assets (performance). The findings are however contrary to those of Wanja (2012).
These findings indicate that digital banking may negatively influence banks’ performance due to
increased internet fees incurred by the banks. Internet Banking Expenditure was also found to
predict a significant and negative effect on ROA in banks. Holding the other variables constant,
it was established that a 10% increase in Internet Banking Expenditure would reduce return on
assets by 3.6%. Wanja (2012), Wanjiha (2014) and Mulwa, 2017also found that unnecessary
increase in banking expenditure leads to a decrease in ROA in banks. These findings leads the
researcher to the conclusion that financial performance of banks is sensitive to increase in
internet banking expenditure as clients transact using digital banking methods.

4.5 Correlation analysis

The study sought to test the hypothesis that there is no significant impact of digital banking on
financial performance of commercial banks in Zimbabwe. In order to test this hypothesis, the
Pearson's Product Moment Correlation coefficient was used. This statistical test rule of thumb
state that a correlation coefficient of 1 indicates a perfect correlation, between 0.9 and 1 indicates
a very strong relationship, between 0.7 and 0.9 indicates a strong relationship, between 0.4 and
0.7 indicates a moderate relationship and a zero coefficient indicates that no linear correlation
exists between variables (Mukaka, 2012). As shown in Table 4.5, a significant positive
coefficient of 0.761 (p=0.006<0.05) was found between ROA and online customer deposits
(OCD) implying that there exist a strong positive correlation between the two variables. The
results of the test showed a coefficient of 0.898 (p=0.021<0.05) between online bank
transactions (OBT) and ROA indicating a positive strong correlation. More so, a negative
coefficient (-0.678, p=0.068<0.1) was found implying that there exist a negative moderate
association between internet fees and commissions (IFC) and ROA. Lastly, a negative
correlation coefficient (-0.534, p=0.044<0.05) between ROA and internet banking expenditure
(IBE) inferring that there exist an inverse moderate relationship between internet banking
expenditure and ROA. Generally, these results indicate that there is a significant relationship
between digital banking and ROA, thus, the study may fail to accept the hypothesis and conclude
that digital banking significantly influence financial performance of commercial banks in
Zimbabwe.

Table 4.5: Correlation between digital banking and performance

13251 [Link] 1211

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

ROA
ROA Pearson Correlation 1
Sig. (2-tailed) -
N 200
OCD Pearson Correlation .761
Sig. (2-tailed) .006*
N 200
OBT Pearson Correlation 0.898
Sig. (2-tailed) 0.021**
N 200
IFC Pearson Correlation -0.678
Sig. (2-tailed) 0.068***
N 200
IBE Pearson Correlation -.534
Sig. (2-tailed) .044**
N 200
NB
: *, ** and *** means correlation significant at 1%, 5% and 10% respectively (2-tailed)
5.0 CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions

The study revealed that online customer deposits and online banking transactions had a positive
significant correlation with ROA whilst internet fees and commissions and internet banking
expenditure had a negative significant relationship with ROA. Guided by these findings the study
concluded that profitability of the Zimbabwe’s commercial banks is significantly predicted by
online customer deposits through increased online banking transactions which then results in an
increase in ROA. In addition, the study resolved that digital banking results in increased internet
banking fees and commissions which can therefore lead to a decrease in profitability since
increased banking fees reduce the banks’ total assets. Finally, the study established that
electronic banking leads to increased internet banking expenditure which then results in lower
bank assets and subsequently lower profitability. In general, it can be concluded that digital
banking can significantly influence financial performance of the commercial banks in
Zimbabwe.

5.2 Recommendations of the Study

Following the findings of the study, the following policy directions are suggested:

i. Based on the findings that digital banking leads to increased transactions, the commercial
banks in Zimbabwe should partner and subscribe to reliable local mobile network
providers for uninterrupted and effective service delivery so as to promote increased
use of digital banking by the customers. This will ensure that the mobile network
providers craft innovative services that are tailor-made to the banks’ customers.

ii. Given a positive correlation between online customer deposits and profitability, the
commercial banks should continuously upgrade their electronic banking technology

13251 [Link] 1212

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

so as to have an updated system for effective and efficient service delivery and attract
more customers.

iii. The study further recommended that the commercial banks in Zimbabwe keep embracing
the use of electronic banking in their daily business operations since the number of
people with access to mobile phones, internet and personal computers keeps swelling
day by day since this will result in increased profits through increased deposits and
transactions.

iv. In order to realise increased profits through digital banking, the banks’ management
should also establish a country wide training of the general public regarding usage of
several electronic banking applications for sustained use of digital banking which
then increases customer deposits.

REFERENCES
[1] Aduda, J., & Kingoo, N. (2012). The relationship between Electronic banking and
Financial performance among commercial banks in Kenya. Journal of Finance and
Investment Analysis, 1(3), 99-118.
[2] Akerlof, B. C. & Girardone, D, E. (2011). The Impact of Electronic Banking on the
Performance of Banks. Journal of internet banking and commerce, 16(2), 101-120.
[3] Akhisar, I., Tunay, K. B. & Tunay, N. (2015). The Effects of Innovations on Bank
Performance: The case of Electronic Banking Services. Procedia -
Social and Behavioural Sciences, 195, 369 – 375.
[4] Akturan, U., & Tezcan, N. (2012). Mobile banking adoption of the youth market
perceptions and intentions. Marketing Intelligence & Planning, 30(4), 444-459.
[5] Al-hajri, S. & Tatnall (2008). The adoption of e-banking: The Case of Omani Banks.
International Review of Business Research Papers, 4(5), 120-128.
[6] Asante-Gyabaah, G., Oppong, C. N. & Idun-Baidoo, N. (2015). Electronic Banking in
Ghana: A Case of GCB Bank Ltd. European Journal of Business and Management,
7(12), 239-256.
[7] Alsamydai, M. J, Saad Galib Yassen, S. G., Alnaimi, H. M., Dajani, D. M. & Al-Qirem,
I. A. (2014). The Factors Influencing Customer Usage Of Mobile Banking Services In
Jordan. International Journal of Business Management & Research (IJBMR), 4(2), 63-
78.
[8] Baffour, B. A. (2015). Examining the Impact of Information Technology on the Financial
Performance of Asutifi Rural Bank. Unpublished Master's Thesis, Kwame Nkrumah
University of Science and Technology.
[9] Bagudu, H. D., Mohd Khan, S. J. & Abdul-Hakim, R. (2017). The Effect of Mobile
Banking on the Performance of Commercial Banks in Nigeria. International Research
Journal of Management, IT & Social Sciences, 4(2), 71-76.
[10] Barney, A. W. (2011). Resources Management Guide (1st Edition). Hopkins
Publishers: New York.
[11] Bashuri, E. (2016). E-Banking and its features - Albania as a special case.
Academic Journal of Business, Administration, Law and Social Sciences, 2(1), 133 - 140.
[12] Boniface, R. M. & Ambrose, J. (2015). Mobile Banking and Financial
Performance of Commercial Banks in Kenya. International Journal of Finance and
Current Business Studies, 4 (12),16-31.

13251 [Link] 1213

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[13] Bradley, L., & Stewart, K. (2013).The Diffusion of Online Banking. Journal of
Marketing Management, 19(9-10), 1087-1109.
[14] Chovanová, A. (2006). Forms of Electronic Banking. International Journal of
Applied Research, 3(6), 44-66.
[15] Ciciretti, R., Hasan, I. & Zazzara, C. (2008). Do internet Activities Add Value?
Evidence from the Traditional Banks. Journal of Financial Services Research, 22, 95-
118.
[16] Cooper, D., & Schindler, S. (2014). Business Research Methods. New York:
McGraw-Hill Irwin.
[17] Davis, F. D., Bagozzi, R. P., Warshaw, P. R. (1989). User acceptance of computer
technology: a comparison of two theoretical models. Management Science, 35(8), 982-
1003.
[18] Del Giudice, M., Campanella, F., & Dezi, L. (2016). The bank of things: An
empirical investigation on the profitability of the financial services of the future. Business
Process Management Journal, 22(2), 324-340.
[19] Dew, K. (2012). Innovation Segregation by Two Australian Merchant Banks: A
Private Alternative to the Financial Patent for Protecting Financial Innovations and
Informing Investors. Working Paper, available at [Link]
accessed on 22 September 2018.
[20] DeYoung, R., Lang, W. W., & Nolle, D. L. (2007). How the Internet affects
output and performance at community banks. Journal of Banking & Finance, 31(4),
1033-1060.
[21] Drigă, I. & Isac, C. (2014). E-Banking Services – Features, Challenges and
Benefits. Annals of the University of Petroşani, Economics, 14(1), 49-58.
[22] Ekwueme, C. M., Egbunike, P. A. & Amara O. (2011). An Empirical Assessment
of the operational efficiency of electronic banking: Evidence of Nigerian banks. Review
of Public Administration & Management, 1( 2), 1-31.
[23] Eshna. (2012). Financial Performance - Understanding its Concepts and
Importance. Retrieved from Simple
Learn[Link] (Accessed on 5
September 2018)
[24] Fishbein, M. A. & Ajzen, I. (1975). Belief, Attitude, Intention and Behaviour: An
Introduction to Theory and Research, Reading. MA: Addison-Wesley.
[25] Forbes 2017 [Link]
(Accessed on 5 September 2018)
[26] Furst, K., Lang, W. W., Nolle, D. E. (2002). Internet banking: developments and
prospects. Program on Information Resources Policy, Centre for Information Policy
Research, Harvard University.
[27] Giordani, G. (2012). Essays on the Econometric Analysis of Electronic banking in
Greece (Doctoral dissertation, University of Portsmouth).
[28] Gu, S., Irshad, F. & Zaman, K. (2011). Factors affecting bank profitability in
Pakistan. Romanian Economic Journal, 24(39), 61-87.
[29] Gujarati, D.N. (2009). Basic Econometrics.5th Ed. McGraw Hill.
[30] Gutu, L. M. (2014). The impact of internet technology on the Romanian banks
performance. 12th Internetional Academic Conference, Prague, 1September 2014.

13251 [Link] 1214

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[31] Halili, R. (2014). The impact of Online Banking on Bank Performance.

Unpublished Report.
[32] Haneen A. Abu-Assi, Hani H. Al-Dmour1 & Zu’bi M. F. (2014). Determinants of
Internet Banking Adoption in Jordan. International Journal of Business and
Management, 9(12), 22-31.
[33] Havasi, F., Meshkany, F., & Hashemi, R. (August 2013 г.). E-Banking: Status,
Implementation, Challenges, Opportunities. IOSR Journal of humanities and social
science (IOSR-JHSS) 12(6), 40-48.
[34] Hernando, I. & Nieto, M. J. (2016). Is the Internet Delivery Channel Changing
Banks’ Performance? The Case of Spanish Banks. Banco de Espana, Unpublished
Manuscript.
[35] Iftekhar, H., Schmiedel, H., & Song, L. (2012). Return to retail banking and
payments. Working Paper Series 1135, European Central Bank.
[36] Jayawardhena, C. & Foley, P. (2000). Changes in the banking sector-the case of
internet banking in the UK. Internet Research: Electronic Networking Applications and
Policy, 10(1), 19-30.
[37] Jeong, B. & Yoon, T. E. (2013). An empirical investigation on consumer
acceptance of mobile banking services. Business and Management Research, 2(1), 31-40.
[38] Kamutuezu, E. U. (2016). The Adoption of Digital Banking in Namibia.
Unpublished Master’s Thesis.
[39] Karjaluoto, H., Mattila, M. & Pento, T. (2012). Factors underlying attitude
formation towards online banking in Finland. The International Journal of Bank
Marketing, 20, 261-273.
[40] Katsika, V. (2014). Factors influencing the adoption of internet banking in
Greece. Unpublished Master’s Thesis.
[41] Kerem, K. (2003). Adoption of electronic banking: underlying consumer behavior
and critical success factors. The case of Estonia. Tallinn: Tallinn Technical University.
[42] Kim, K. K., Prabhakar, B., & Kim, B. H. (2001). Initial trust as a determinant of
the adoption of Internet banking. Available: [Link]
[43] Kimani, N. (2015). The effect of adoption of mobile banking systems on
operational efficiency of commercial banks in Kenya. Unpublished MBA project.
Nairobi: University of Nairobi.
[44] Kireru, J., Ombui, K., & Omwenga, J. (2016). Influence of Product
Differentiation Strategy in Achieving Competitive Advantage in Commercial Banks: A
Case of Equity Bank Limited. International Journal of Business & Law Research 4(2),
40-52.
[45] Kombe, S. K., & Wafula, M. K. (2015). Effects of Internet Banking on the
Financial Performance of Commercial Banks in Kenya a Case of Kenya Commercial
Bank. International Journal of Scientific and Research Publications, 5(1), 1- 10.
[46] Kothari, C.R. (2014). Research Methods and Techniques: New Age International.
[47] Lee, M. (2009). Factors Influencing the Adoption of Internet Banking: An
Integration of TAM
& TPB with Perceived Risk & Perceived Benefit. Electronic Commerce Research &
Applications, 8(3), 130–141.
[48] Lerner, J. (2012). The new financial thing: The sources of innovation before and
after State Street, Journal of Financial Economics, 79, 223-255.

13251 [Link] 1215

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[49] Lukic, A. (2014). Reasons for introducing and basic advantage of electronic
banking in the modern business environment. International Journal of Management and
Social Science 2(1), 1-6.
[50] Lusaya, S. & Kalumba, B. (2018). The Challenges of Adopting the Use of E-
Banking to the Customers: The Case of Kasama District Banking Customers. Sch J Appl
Sci Res, 1(2), 26-31.
[51] Maduku, D. K. (2014). Customers’ adoption and use of e-banking services: the
South African Perspective. Banks and Bank Systems, 9(2), 96-100.
[52] Maduku, D. K. and Mpinganjira, M. (2012). Empirical investigation into
customers’ attitude towards usage of cellphone banking in Gauteng, South Africa,
Journal of Contemporary Management, 9, 172-189.
[53] Malhotra, P. & Singh, B. (2012). The impact of internet banking on bank
performance and risk: The Indian experience. Eurasian Journal of Business and
Economics, 2(4), 43-62.
[54] Massoud, N. & Bernhardt, D. (2012). The Impact of ATM Surcharges on Large
versus Small Banks: Is There a Switching Effect? The Journal of Business, 79(4), 2099-
2125.
[55] Mazana, R., Rupere, T., & Kabanda, G. (2016). An assessment of the impact of
self-service technology (SST) on firm performance: Case study of a bank in Zimbabwe
(2009-13). Journal of Payments Strategy & Systems, 10: 96.
[56] Mbama, C. (2018). Digital banking, customer experience and bank financial
performance: UK customers' perceptions. International Journal of Bank Marketing, 36
(2), 230-255.
[57] McAndrews, J. J. (2012). A model of ATM pricing: Foreign fees and surcharges.
Mimeo, Federal Reserve Bank of New York.
[58] Mehmood, B., Nisar, M. & Rehman, H. (2015). Technology matters: Evidence
from Pakistani banking sector using flexible transcendental logarithmic production
function. Pakistan Economic and Social Review, 53(2), 203–224.
[59] Miwangi, K. D. (2014). The Effect of Electronic Banking on the Financial
Performance of Commercial Banks in Kenya, Unpublished Report, University of Nairobi.
[60] MMC Capital (2017). Annual Report 2016-2017.
[61] Momparler, A., Lassala, C., & Ribeiro, D. (2013). Efficiency in banking services:
a comparative analysis of Internet-primary and branching banks in the US. Service
Business, 7(4), 641-663.
[62] Moon, J. M. & Kim, Y. G. (2001). Extending the TAM for a World-Wide-Web
context. Information and Management, 28, 217-230.
[63] Morufu, O. (2016). E-payments adoption and Profitability Performance of
Deposits Money Banks in Nigeria. IPASJ International Journal of Information
Technology, 4(3), ISSN 2321 -5976.
[64] Mugenda, O. M., & Mugenda, A. G. (2012). Research Methods: Quantitative and
Qualitative Approaches. Nairobi: Acts Press.
[65] Mulwa, F. N. (2017). Effect of Internet Banking of Financial Performance in
Kenya. Unpublished Master’s Thesis.
[66] Mwiti, B. (2016). The Effect Of Alternative Banking Channels On Financial
Performance Of Commercial Banks In Kenya. Unpublished Report, University Of
Nairobi.

13251 [Link] 1216

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[67] Nader, A. (2011). The Effect of Banking Expansion on Profit Efficiency of Saudi
Banks. 2nd International Conference on Business and Economic Research (2nd ICBER
2011) Proceeding 269.
[68] Ngango, M. A. (2015). Electronic banking and financial performance of
commercial banks in Rwanda: a case study of bank of Kigali. Unpublished Banking
Report.
[69] Njogu, J. N. (2014). The effect of electronic banking on profitability of
commercial banks in Kenya. Research project submitted to the School of Business,
University of Nairobi.
[70] Nofie, I. (2011). The diffusion of electronic banking in Indonesia, Manchester
Business School.
[71] Okun, D. M. (2012). The Effect of Level of Deposits on Financial Performance of
Commercial Banks in Kenya. Unpublished Master’s Thesis, University of Nairobi,
Kenya.
[72] Omari, H., & Bataineh, T. (2012). The Impact of e-Banking on Achieving
Competitive Advantage for Banks in Jordan. Interdisciplinary Journal of Contemporary
Research in Business, 4(7), 271-282.
[73] Omondi, O. M., Maokomba, C., Musiega, D. (2014). The effects of alternative
banking channels on profitability of commercial banks- case of the Cooperative bank of
Kenya. The International Journal of Engineering and Science (IJES), 3(3), 29-34.
[74] Ozsoz, E., & Helvacioglu, A. D. (2014). The impact of internet banking on bank
profitability: The case of Turkey. Oxford Business and Economics Conference Program,
Oxford, UK.
[75] Patgar, C. M., & Arundhekar, N. D. (2015). Facebook Banking – An emerging
way of E-Banking. International Journal of Applied Research 1(8), 464-466.
[76] Pikkarainen, T. (2015). Consumer acceptance of online banking: an extension of
the technology acceptance model. Internet Research,14(3), 224-35.
[77] Polasik, M. & Wisniewski, T. P. (2009). Empirical Analysis of Internet Banking
Adoption in Poland. The International Journal of Bank Marketing, 27(1), 32-52.
[78] Porter, M. E. (1985). Competitive advantage: creating and sustaining superior
performance p. 592. New York: A division of Simon & Schuster Inc.
[79] RBZ (2017). Quarterly Annual Report 31 December 2017.
[80] RBZ (2018). Analysis of the 2018 Reserve Bank of Zimbabwe Monetary Policy
Statement Presented by The Governor Dr. J Mangudya on 08 February [Link]
Budget Office.
[81] Reserve Bank of Zimbabwe (2018). National Payments Systems Reports for the
Quarter ending 31 March 2018.
[82] Rodrigues, A. (2017). E-Banking: Current Use and Factors Affecting its Adoption
in Portugal. Unpublished Master’s thesis, ISCTE Business School.
[83] Rogers, E. M. (2003). Diffusion of Innovations. New York: Free Press.
[84] Roghaniana, P., Raslia, A., & Gheysaria, H. (2012). Productivity Through
Effectiveness and Efficiency in the Banking Industry “The 2012 International Conference
on Asia Pacific Business Innovation and Technology Management”. Procedia - Social
and Behavioral Sciences, 40, 550-556.
[85] Rose, P. S. (2001). Commercial Bank Management; 5th Edition, McGraw-Hill
Irwin.

13251 [Link] 1217

Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[86] Safeena, R., Kammani, A., & Date, H. (2014). Assessment of Internet Banking
Adoption: An Empirical Analysis. Arabian Journal for Science and Engineering, 39(2),
837- 849.
[87] Sana, H. S., Mohammad, K. M., Hassan, H. S. & Momina, A. (2011). The impact
of e-banking on the profitability of banks: a case study of Pakistani Banks, Retrieved
from [Link] .org/jpeg.
[88] Sarreal, R. (2016). History of online banking: How internet Banking becomes
mainstream. Go Banking Rates: [Link]
online-banking/#disqus_thread.
[89] Sathye, M. (2013). The impact of online banking on performance and risk profile:
Evidence from Australian credit unions. Journal of Banking Regulation, 6(2), 163-174.
[90] Shah, M. & Clarke S. (2009). E-banking Management: Issues, Solutions and
Strategies. Hershey: Information Science Reference.
[91] Shiels, H., McIvor, R., & O'Reilly, D. (2013). Understanding the implications of
ICT adoption: insights from SMEs. Logistics Information Management, 16(5), 312-326.
[92] Shilpan, V. (2012). The impact of E-banking on Traditional Banking Services.
Rajasthan: School of Computer Science and Information Technology, Singhania
University, Pacheri Bari, Jhunjhunu – 333515. Cornell University Library:
[Link]
[93] Siddik, N-A. et al. (2016). Impacts Of E-Banking On Performance Of Banks In A
Developing Economy: Empirical Evidence From Bangladesh. Journal of Business
Economics and Management, 7(6), 1066–1080.
[94] Singh, S. & Sharma, D. K. (2014). Analysis of Problems Faced by Customers
during Use of Internet Banking. International Journal of 360 Management Review, 2(1),
1-11.
[95] Sumra, H., Manzoor, K., & Abbas, M. (2011). The Impact of E-banking on the
Profitability of Banks: A Study of Pakistani Banks. Journal of Public Administration and
Government, 1(1), 31-37.
[96] Sundaram, N., & Sriram, M. (2015). Financial Inclusion Determinants-An
Empirical Investigation in Rural Regions of Vellore District, Tamil Nadu. American
International Journal of Research in Humanities, Arts and Social Sciences, 110-114.
[97] Taiwo, J. N. & Agwu, E. (2017). The Role of E-Banking on Organization
Performance in Nigeria - Case Study of Commercial Banks. Basic Research Journal of
Business Management and Accounts, 6(1), 01-10.
[98] Tan, M. & Teo, T. (2000). Factors influencing the adoption of Internet Banking.
Journal of the Association for Information System. 1(5), 1-42.
[99] Tawfik, J. & Albrecht, E. (2008). Strategies for e-business: creating value
through electronic and mobile commerce : concepts and cases. 2nd ed. Harlow, England:
FT Prentice Hall.
[100] Torkzadeh, G. & Van Dyke, T. P. (2002). Effects of training on Internet self-
efficacy and computer attitudes. Information and Management, 18, 479-494.
[101] Vekya, J. M. (2017). Impact Of Electronic Banking On The Profitability Of
Commercial Banks In Kenya. Journal of Technology and Systems, 1(1), 18-39.
[102] Vyas, S. (2012). The impact of E-Banking on Traditional Banking Services.
School of Computer Science and IT, Singhania University, Pacheri Bari, Jhunjhunu –
333515 Rajasthan, India., 1-3.

13251 [Link] 1218

 Vol-6 Issue-6 2020 IJARIIE-ISSN(O)-2395-4396

[103] Wanja, N. C. (2012). The Effect of Internet and Mobile Banking on Financial
Performance of Commercial Banks in Kenya. the School of Business, University of
Nairobi, (Research Project).
[104] Wooldridge, J.M. (2008). Introductory Econometrics, 5th Ed. McGraw-Hill.
[105] Yaghoubi, N. M. (2010). Factors affecting the adoption of online banking-an
integration of Technology Acceptance Model and Theory of Planned Behavior.
International Journal of Business and Management, 5(9), 159-165.

13251 [Link] 1219

View publication stats