IMPACT OF FINANCIAL INNOVATIONS ON FINANCIAL PERFOMANCE OF COMMERCIAL BANKS IN SOUTH SUDAN
BY
LONGAR MATHIEC WOL
UNITED STATES INTERNATIONAL UNIVERSITY- AFRICA
SPRING 2019
IMPACT OF FINANCIAL INNOVATIONS ON FINANCIAL PERFOMANCE OF COMMERCIAL BANKS IN SOUTH SUDAN
BY
LONGAR MATHIEC WOL MATHIEC
A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY- AFRICA
SPRING 2019
STUDENT DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any other college, institution or university other than the United States International University-Africa for academic credit.
Signature: ______Date: ______/______/2019 Longar Mathiec Wol (ID.NO: 639982)
This project has been submitted for examination with my approval as University supervisor.
Signature: ______Date: ______/______/2019
Timothy C. Okech, Phd
Signature: ______Date: ______/______/2019
Dean, Chandaria School of Business
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ACKNOWLEDGEMENT
I thank Almighty God for the gift of life, ability and courage to write this tiresome work. I would also like to appreciate all the people who contributed toward this journey whether directly or indirectly, my colleagues, my professors and particularly my supervisor Prof. Timothy C. Okech for his motivation and guidelines in the process of compiling this research work. Finally, I would like to thank my parents and siblings for their encouragement and immense contribution toward my education. In few words, to God for his mercy and to people on earth for their contribution toward this academic journey.
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DEDICATION
This project is dedicated to my cousin Ajok Ayok Akol and her husband Adim Adim Yak for their immense contribution in availing the financial resources at my disposal. To my parents, Mathiec Wol Mathiec and Aluet Agou Anyar for their endless love. To my sisters, brothers and the entire extended family, for their encouragement and moral support throughout this programme. Finally, to my late grandmother Ayen Lueth Bak, your love to me is exceptional and unforgettable, your words made a man who I am today, Rest in Peace.
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ABSTRACT
The purpose of this study was to determine the impact of technological financial innovations on financial performance of commercial banks in South Sudan. The study was guided by the following research questions: What is the effect of internet banking on financial performance of commercial banks?; What is the effect of mobile banking on financial performance of commercial banks?; and, What is the effect of electronic banking on financial performance of commercial banks?
Explanatory research design was used in this study. The study targeted 24 commercial banks in South Sudan. Employees from these banks formed the population of this study and a stratified sampling technique was used to select the study sample. A sample size of 92 managers was interviewed in this study. The researcher collected primary data by use of structured questionnaire which was self-administered. The data collected was analyzed using SPSS and the findings were presented using tables and figures.
The findings showed that there is a significant relationship between internet banking and financial performance of commercial banks. The study established that internet banking contributes greatly on banking operations, customer loyalty and revenues as well as on the profitability of commercial banks. The study found out that there exists a strong positive correlation between internet banking and financial performance of commercial banks.
The study revealed that there is a significant relationship between mobile banking and performance of commercial banks. The findings established that internet banking enhances customer security, profitability, efficiency in the banking operations, market accessibility and customer satisfaction in commercial banks. The study also found out that there exists a positive correlation between mobile banking and financial performance.
Furthermore, the findings showed that there exists a significant relationship between electronic banking and performance of commercial banks. The study established that electronic banking contributes in enhancing market penetration, resource utilization, and cost reduction, convenience in banking operations, customer security and fraud detection. The study established that there exists a positive correlation between electronic banking and performance of commercial banks.
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The study concluded that internet banking is crucial for the perfomance of commercial banks in terms of its profitability, market share and customer attraction. The study asserts that internet banking offers convenince in the banking operations as customers have the flexibility and an easily accessible platform to carry out transactions from any given location allowing banking operations to take place twenty fours hours a day (24/7) thus enhancing financial performance of commercial banks.
Recommendations for practice were made in respect to the findings of the study. The study recommended that commercial banks should focus on rolling out internet infrastructure throughout the nation so that more people can access financial services from their convenient location. The study showed that mobile banking services offered by commercial banks should be fully integrated with various telecommunication service providers to increase its usage and adoption among banking clients. Commercial banks in South Sudan should partner up with various telecommunication companies in offering mobile banking services through the use of a mobile enabled platform.
The study further indicated that commercial banks should have an integrated electronic platform that supports both internet and mobile banking for convenience purposes that is desired by banking customers. Hence the study recommends that electronic banking services should give freedom for clients to perform various business transactions without any limitations to enhance its usage.
Recommendations on further studies highlighted that since, this study investigated the effect of financial innovations on performance of commercial banks in South Sudan. Similar studies should be conducted in other countries like Cameroon, Malawi, Angola and Somalia to establish the impact of financial innovations on performance of commercial banks as well as raise the element of comparison.
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TABLE OF CONTENTS STUDENT DECLARATION ...... ii ACKNOWLEDGEMENT ...... iii DEDICATION...... iv ABSTRACT ...... v LIST OF TABLES ...... ix LIST OF FIGURES ...... x LIST OF ABBREVIATIONS AND ACRONYMS ...... xi
CHAPTER ONE ...... 1 1.0 INTRODUCTION...... 1 1.1 Background of the Study ...... 1 1.2 Statement of the Problem ...... 5 1.3 Purpose of the Study ...... 5 1.4 Research Questions ...... 5 1.5 Significance of the Study ...... 6 1.6 Scope of the Study ...... 6 1.7 Definition of Terms...... 7 1.8 Chapter Summary ...... 7
CHAPTER TWO ...... 8 2.0 LITERATURE REVIEW ...... 8 2.1 Introduction ...... 8 2.2 Internet Banking and Performance of Commercial Banks ...... 8 2.3 Effect of Mobile Banking on Performance of Commercial Banks ...... 12 2.4 Effect of Electronic Banking on Performance of Commercial Banks ...... 16 2.5 Chapter Summary ...... 20
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CHAPTER THREE ...... 21 3.0 RESEARCH METHDOLOGY ...... 21 3.1 Introduction ...... 21 3.2 Research Design...... 21 3.3 Population and Sampling Design ...... 21 3.4 Data Collection Methods ...... 23 3.5 Research Procedures ...... 24 3.6 Data Analysis Methods ...... 24 3.7 Chapter Summary ...... 25
CHAPTER FOUR ...... 26 4.0 RESULTS AND FINDINGS ...... 26 4.1 Introduction ...... 26 4.2 Response Rate and Background Information ...... 26 4.3 Internet Banking and Performance of Commercial Banks ...... 30 4.4 Effect of Mobile Banking on Performance of Commercial Banks ...... 37 4.5 Effect of Electronic Banking on Performance of Commercial Banks ...... 43 4.6 Chapter Summary ...... 50
CHAPTER FIVE ...... 51 5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...... 51 5.1 Introduction ...... 51 5.2 Summary ...... 51 5.3 Discussion ...... 52 5.4 Conclusions ...... 56 5.5 Recommendations ...... 57
REFERENCES ...... 59 APPENDICES ...... 65 APPENDIX I. COVER LETTER ...... 65 APPENDIX II: QUESTIONNAIRE ...... 66 APPENDIX III: LIST OF REGISTERED COMMERCIAL BANKS IN SOUTH SUDAN ...... 70
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LIST OF TABLES Table 3.1: Population Distribution ...... 22 Table 3.2: Sample Size Distribution Table ...... 23 Table 4.1: Response Rate ...... 26 Table 4.2: Internet Banking and Bank Operations ...... 30 Table 4.3: Internet Banking and Customer Loyalty ...... 30 Table 4.4: Internet Banking and Customer Security ...... 31 Table 4.5: Internet Banking and Service Delivery...... 32 Table 4.6: Internet Banking and Brand Reputation ...... 33 Table 4.7: Internet Banking and Speed of Transactions ...... 34 Table 4.8: Correlations between Financial Performance and Internet banking ...... 35 Table 4.9: Model Summary for Internet Banking and Financial Performance...... 36 Table 4.10: ANOVA between Internet Banking and Financial Performance ...... 36 Table 4.11: Regression Coefficients for Internet banking ...... 37 Table 4.12: Mobile Banking and Business Performance ...... 37 Table 4.13: Mobile Banking and Non-banking Transactions ...... 37 Table 4.14: Mobile Banking and Profitability ...... 38 Table 4.15: Mobile Banking and Market Presence ...... 40 Table 4.16: Correlations Analysis of Variable Mobile banking ...... 42 Table 4.17: Model Summary for Mobile Banking and Financial Performance ...... 42 Table 4.18: ANOVA between Mobile Banking and Financial Performance ...... 43 Table 4.19: Regression Coefficients for Mobile banking ...... 43 Table 4.20: Electronic Banking and Customer Security ...... 43 Table 4.21: Electronic Banking and Service Usage ...... 45 Table 4.22: Electronic Banking and Customer Satisfaction ...... 46 Table 4.23: Electronic Banking and Resource Utilization ...... 47 Table 4.24: Electronic Banking and Cost Reduction ...... 47 Table 4.25: Electronic Banking and Speed of Bank Transactions ...... 48 Table 4.26: Correlations Analysis of Variable Electronic banking ...... 48 Table 4.27: Model Summary for Electronic Banking and Financial Performance ...... 49 Table 4.28: ANOVA between Electronic Banking and Financial Performance ...... 49 Table 4.29: Regression Coefficients for Electronic banking ...... 50
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LIST OF FIGURES
Figure 4.1: Gender of the Respondents...... 27 Figure 4.2: Respondents’ Age...... 27 Figure 4.3: Work Experience ...... 28 Figure 4.4: Work Department ...... 29 Figure 4.5: Education of the Respondents ...... 29 Figure 4.6: Internet Banking and Sources of Income ...... 31 Figure 4.7: Internet Banking and Profitability ...... 32 Figure 4.8: Internet Banking and Market Share...... 33 Figure 4.9: Internet Banking and Bank’s Efficiency ...... 34 Figure 4.10: Mobile Banking and Service Delivery ...... 38 Figure 4.11: Mobile Banking and Efficiency ...... 39 Figure 4.12: Mobile Banking and Revenue Streams ...... 40 Figure 4.13: Mobile Banking and Customer Satisfaction ...... 41 Figure 4.14: Mobile Banking and Amount of Transactions ...... 41 Figure 4.15: Electronic Banking and Organizational Performance……………………. . 44 Figure 4.16: Electronic Banking and Convenience ...... 45 Figure 4.17: Electronic Banking and Market Penetration ...... 46
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LIST OF ABBREVIATIONS AND ACRONYMS
ATM Automated Teller Machine
CBSS Central Bank of South Sudan
SMS Short Message Services
SPSS Statistical Package for Social Sciences
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
Financial innovation constitutes of a firm developing new services, products or new production mechanisms that will help in improving their operations as well as performance as a whole throughout the company (Chen, Joshi, & Birthal, 2013). In the financial sector, innovation is regarded as the act of creating and popularizing new financial instruments, institutions, technologies, and markets that can facilitate information accessibility, trading and modes of payments (Hsiao & Lin, 2013). According to Bapat and Mazumdar (2015), innovations are not just critical for the companies in the financial sector but also significant to other sectors as it enables them to raise capital in large amounts at an affordable cost than they could otherwise, hence, making innovation an important phenomenon in any industry of the 21st century economy.
The global banking sector has undergone substantial change over the years (Nejad, 2016). Financial innovation has been a critical component of economic activity for several years. In ancient Rome in central Italy, private investors developed various features of limited liability firms among them being freely traded shares, stock exchange, and companies that owned property and drafted contracts independently of the individual shareholders (Zhang, 2013). These innovations enabled mobilizations of capital for innovation where, large scale mining technologies and financial entrepreneurs were able to develop highly specialized investment banks, financial instruments as well as improved accounting systems (Hsiao & Lin, 2013). A profound influence on the provision of financial services delivery has been the advance in information technology and communication (Hussien & Aziz, 2013). The capacity to assimilate data and performing of complex calculations has enabled marketers to develop new financial products that can decompose as well as repackage various components of the financial risk.
In India the banking sector is now a flourishing sector and the sector is mainly focused on the new financial innovations (Rishi & Saxena, 2014). In the 1990, the banks embraced the use of technology to offer quality services to the customers and at greater speed. Internet banking and mobile banking made it convenient for the bankers to carry out their bank transactions from geographically diverse locations. Commercial banks directed their
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focus on the rural markets by introducing variety of services that are directed towards special needs of the customers living in rural areas. In the recent scenario things are changing with close to 340 banks operating in the Indian banking sector both public and private (Al-Hawar, 2014). Indian banking sector has fully embraced the use of financial innovations and the sector is set to be the fifth largest banking sector in 2020 and while in 2025 it will be the third largest banking sector in the world (Kaushik & Rahman, 2015).
China on the other hand, it can be observed that the Chinese banking sector emphasizes on process innovation. Currently, almost all the banks operating in the Chinese economy offer online banking services among other multiple services like electronic funds transfers, checking accounts, foreign currency buying and selling and even personal financial services (Fu, 2013). As a matter of fact, internet banking technology in China is more than a brand new innovation since it is sometimes regarded as a process innovation that can leverage new avenues for more innovation as far as banking is concerned. China’s financial innovation is defined by technological inventions, institutional as well as product innovation (Deb & Agrawal, 2017). The most remarkable thing that had been overwhelmingly changing the dynamics of the Chinese banking sector is information and communication technology (Ferracane & Lee-Makiyama, 2017).
Information and communication technology is changing the way financial services as well as products are accessed by customers in sub-Saharan Africa (Hussien & Aziz, 2013). In Ghana, financial innovations have developed new delivery channels for services and products like the use of Automated Teller Machine (ATMs), mobile banking and internet banking. Over the years, these financial innovations have grown increasingly significant in the Ghanaian commercial banks (Nkegbe & Ustars, 2015). Traditionally, commercial banks have sought innovative ways which enabled them to cater for their customers more cost effectively and made them more useful to the customers with their main concern being to serve their customers more conveniently while at the same time growing their profits and gaining competitive advantage. It is argued that the most revolutionary banking innovation in Ghanaian economy has been the Automated Teller Machine. Banks in Ghana that provide ATM services have well-coordinated machines to increase their utility to the clients. Since Trust Bank of Ghana introduced ATMs in the year 1995, the innovation has gained acceptance on a large scale from the banking sector and today almost all the banks in Ghana offer ATM services to their customers (Idun &
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Aboagye, 2014). A combination of the automated services and human tellers implies that Ghanaian banks have now become more productive as well as their customers as they benefit immensely as a result of short queues during banking since ATM services serve as an alternative banking channel (Narteh, 2013).
In Ethiopia, both mobile banking and internet banking innovations have received a massive acceptance from the banking industry since most commercial banks team up with telecommunication firms in order to provide banking services through the use of internet and mobile phones for the banks to attract a competitive advantage in the long run (Verhoef, 2017). The whole idea of internet banking in Ethiopia is to enable customers in accessing their bank accounts via a website and helping them carry out transactions on their accounts, under the basis of compliance with stringent security checks. In Ethiopia most commercial banks have adopted internet banking technology in their operations (Sarpong-Kumankoma & Abor, 2017). Internet banking by its nature gives customers a great deal of convenience and flexibility, together with virtually absolute control over their banking activities. Mobile banking has also become a critical channel for delivering financial services and products to the Ethiopian banking customers since customers have been empowered to check their account balances and even tracking transaction history without physically visiting the banking halls (Nkegbe & Ustars, 2015).
Nigerian banking sector as well as the performance of Nigerian banks is highly influenced by financial innovation (Dauda & Akingbade, 2011). In the last decade, tremendous achievements were attained by Nigerian commercial banks in terms of service delivery, networking, profitability and enhanced customer’s responses. Commercial banks were forced to cope with the demands of information and communication technologies that proved to be the driving force of the global banking industry (Ani & Uchendu, 2013). At the same time customers benefited from improved service delivery and networking which inevitably enhance banks’ profits and competitiveness. Despite the achievements through financial innovations, Nigerian banks have also witnessed severe losses in their financial performance and many almost collapsed (Oluwatobi, 2015).
In East Africa, Kenya being one of the members of the East African Community, the country has adopted the use of information technology and has led to better use of the workforce and organizational resources, increased revenues and an increased accessibility
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to financial services by the public (Misati, 2014). In a span of four years that is between the year 2007 and 2011 the existence of mobile money transfer services in the country, four telecommunication companies had accumulated over 16 million customers and over 40,000 agents to help facilitate banking services through the use of telecommunication network. The role that financial innovation plays in efficiency and cost reductions in the banking industry is significant to the performance and profitability of commercial banks in Kenya. Kenyan banks have invested heavily in technology inventions as well as training of the workforce in handling new innovations (Narteh, 2013).
Commercial banks in South Sudan are regulated by the Central Bank of South Sudan (CBSS), it is also responsible for managing the conventional window of the dual system used by the commercial banks that is in line with its policies, regulations, and the monetary policy; it also responsible for supervision and chartering of financial institutions that operate in South Sudan in line with the recognized regulatory framework as well as standards set by Central Bank of South Sudan (Verhoef, 2017). South Sudan has a total of 24 commercial banks, and the banking industry is drastically growing, and this growth can be attributed to the effective financial innovations, reforms, and regulations that have been set by the Central Bank of South Sudan (Mahdi & Dawson, 2012).
Commercial banks operating in South Sudan are keen in automation of their banking services to enable customers enjoy good and desired customer service. Commercial banks are involved in financial product and services innovation, where internet banking is taking shape as the driving force of banking innovations in the country (Mahdi & Dawson, 2012). The banks are in the frontline of automating their banking functions in order to give customers quality service, this is done through product innovation whereby internet banking has taken its roots (Malak, 2013). Despite having an increase in the number of financial institutions, competition in the South Sudan banking sector is still limited and the products and services can only be found in the urban centers since commercial banks find it quite expensive to invest across the country. With technological advancements that are taking place, the banks are still offering the basic banking services like deposit accounts, foreign exchange, withdrawals, and transfer and remittance services (Mansour & Eljelly, 2016).
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1.2 Statement of the Problem
Due to the turbulent business environment that is dynamic in nature, globalization, changes in the economies and other related factors have forced commercial banks to run effectively and efficiently through the financial innovation to develop new products and services (Chen, Joshi, & Birthal, 2013). In South Sudan the emergence of new banking technologies, products, markets, processes and the competition from international banks has forced the commercial banks in the country to use any necessary skills and knowledge to remain competitive and achieve competitive advantage as they compete with other players in the international markets (Mansour & Hassan, 2016).
According to Mahdi and Dawson (2012), the banking industry in South Sudan has already been depicted as the industry exhibiting little market orientation and fulfilling services that has little regard to the customer needs as well as commercial bank branches that have dissimilar efficiency contributing to low financial performance of the banking sector. The financial sector in South Sudan is still small and underdeveloped despite a demonstrated demand of financial services, competition is still limited and the banking services are mainly focused in urban hubs, the commercial banks provide four main services that is transfer, deposit accounts, transfer and remittance services (Mansour & Hassan , 2016).
Despite the significance of financial innovations on financial performance of commercial banks in South Sudan, there is still a knowledge gap whether various banking innovations represent a positive change in the financial performance of commercial banks in the country (Mansour & Hassan, 2016). Therefore, this study sought to answer the question: what is the impact of financial innovations on financial performance of commercial banks in South Sudan?
1.3 Purpose of the Study
The purpose of this study was to determine the impact of financial innovations on financial performance of commercial banks in South Sudan.
1.4 Research Questions
This study was guided by the following research questions:
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1.4.1 What is the effect of internet banking on financial performance of commercial banks in South Sudan? 1.4.2 What is the effect of mobile banking on financial performance of commercial banks in South Sudan? 1.4.3 What is the effect of electronic banking on financial performance of commercial banks in South Sudan?
1.5 Significance of the Study
1.5.1 Banking Sector
The banking sector in South Sudan will benefit from the findings of this study by gaining insights on how various technological financial innovations can impact their financial performance, hence, enabling the players to make informed decisions that will help the banking sector as a whole to thrive.
1.5.2 Policy Makers
The policy makers that regulate the banking sector can benefit from the findings of the study by getting to understand the impact that financial innovations have on the performance of the banking sector and formulate policies that are in favor of the effects to enhance the performance of the banking industry in South Sudan.
1.5.3 Academia
Stakeholders in academics can benefit from additional knowledge pertaining to financial innovations and financial performance of commercial banks. They can also use the findings obtained from this study in their literature as long as the context of this study is acknowledged.
1.6 Scope of the Study
This study focused on determining the impact of financial innovations on financial performance of commercial banks in South Sudan. The target population of the study was 24 commercials banks in Juba, South Sudan using census to obtain the intended data. The study took a period of five months from 3rd September 2018 to 3rd March 2019. The study location was limited to Juba where all the 24 commercial banks are located.
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1.7 Definition of Terms
1.7.1 Internet Banking
Internet banking refers to the service which enables customers to have the accessibility as well as carrying out financial transactions on their bank accounts through a web enabled device with internet connection to the bank’s website at their own convenience (Mahendru & Bhatia, 2017).
1.7.2 Mobile Banking
Mobile banking is the use of a smartphone or any other cellular device in performing online banking transactions such as bill payments, transferring funds between accounts, withdraws and monitoring account balances at the customer’s convenience (Nejad, 2016).
1.7.3 Electronic Banking
Electronic banking refers to the use of electronic means that are used in transferring funds directly from one bank account to another rather than by cash or cheque (Priya & Gandhi, 2018).
1.7.4 Financial Innovation
Financial innovation refers to the process through which a firm or group of individuals working outside a structured organization takes initiative where the significance of technology as source of innovation has been recognized as a crucial success factor for the increased market competition (Tobbin, 2012).
1.8 Chapter Summary
In this chapter, the background of the study was provided. This was followed by the statement of the problem, significance of the study, research questions, and scope of the study as well as the definition of terms. The second chapter provides the literature review specific to the study, while chapter three presents the research methodology that was used in the study. Chapter four presents the results and findings of the study while chapter five provides the discussions, conclusions and recommendations based on the objective study.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter presents a preliminary a review of literature on the effect of internet banking on performance of commercial banks, second section presents a literature review on the effect of mobile banking on performance of commercial banks and the third section highlights a literature on the effect of electronic banking on performance of commercial banks and lastly a chapter summary.
2.2 Internet Banking and Performance of Commercial Banks
Internet banking refers to the use of internet or telecommunication network to provide a wide range of enhanced financial products and services to the customers through a website or a certain system that is operated by the financial institution (AbuShanab, 2014). The notion of internet banking can be traced back to the early 80s when the whole idea was first envisaged and tried. Then in October 1995, Presidential Savings Bank launched the use of internet banking to its regular customers. After which the idea spread quickly to various banks such as Wells Fargo, Chase Bank, Security First Network Bank among other financial institutions (Dauda & Akingbade, 2011). Currently, many banks and financial institutions run entirely via the internet and do not have the brick and mortar entities (Priya & Gandhi, 2018).
The use of internet banking has become very common due to the ease of accessibility to computers and mobile phones and has made it possible for customers to access financial services by enabling them to perform various functions like transfers from one account to another, inquiries about the balance, payment requests and loan applications (Acharya & Kagan, 2017). Initially banks risked having low or reduced profit margins due to increased costs that would be escalated with new technology adoption, banking employees’ feared loss of job opportunities and it was a trade-off between the benefits brought by the internet banking verses the costs to be incurred (Chen, Joshi & Birthal, 2013). The majority of commercial banks are offering it and their clientele find it useful since most consumers now demand better quality service with technology advancement and they have set their expectations higher for banks to deliver (Fu, 2013).
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According to Moghavvemi and Lee (2013), commercial banks that fail to respond to the technology of internet banking are likely to lose their customers and the cost of offering internet banking services is always less than the costs that are associated with keeping the branch banking. They further indicate that, the challenges of expansion and maintaining of bank market share have convinced many commercial banks to invest more than just internet and rethinking around Informational Technology strategies in competitive markets. The notion is in line with a study conducted in Saudi Arabia to determine the role of internet banking and the majority of commercial banks in Saudi Arabia had taken advantage of the internet technology and attempted to establish websites but few adopted to provide internet banking services (Rishi & Saxena, 2014).
2.2.1 Cost Reduction
Despite the potential advantages of Information and communication technology and electronic commerce, there is still a debate on whether their adoption improve bank’s performance in terms of reduced overhead costs (Acharya & Kagan, 2017). The two authors further indicated that commercial banks have shown high profit margins are more likely to be attained using greater numbers of advanced information technology such as internet banking. Improved customer service, increased market reach and cost reductions are now becoming basic expectations of internet banking services (AbuShanab, 2014). If consumers are to use new innovations, the new innovation must be priced reasonably to the alternatives, otherwise, its acceptance may not be viable from the customer’s perspective. Internet banking technology provides advantages for both customers and commercial banks, the internet offers banks with the capability of delivering products and services to the customers at a cost relatively lower than any existing mode of service delivery (Malhotra & Singh, 2010).
According to Akhlaq and Ahmed (2013), commercial banks are focusing increasingly on their electronic banking activities and are globally expanding electronic banking services that explore the use of wireless networks and venturing into some new areas of e- commerce. Banks offer internet banking services with an attempt of defending or expanding their market share or as a cost saving strategy that will reduce paperwork and personnel. Internet is now used as a differentiation channel to provide high valued financial services and complex products at the same or improved quality at a lower cost
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without having physical boundaries to cross in order to sell products such as credit cards and loans (Moghavvemi & Lee, 2013).
2.2.2 Innovation
Commercial banks that pursue internet banking are in position of developing innovative products and services for them to attract more customers through the use of internet banking (Hussien & Aziz, 2013). Internet banking gives the opportunity of extension product tailoring as well as extending of customer convenience for them to access banking services at their most convenient location and time without any restrictions of working hours. Internet banking uses telecommunication networks in delivering a wide range of value added products and services to the bank customers by importing data into personal accounting software (Nejad, 2016). Banks have been able to provide banking platforms that are in support of account aggregation that allow customers to monitor their main bank or any other financial institution from wherever geographical location they are. Banking through the use of internet can be considered as an additional delivery channel for banking services rather than a substitute for the brick and mortar banking branches (Mansour & Hassan, 2016).
The use of internet by banks has changed the dimensions of competition in the retail banking sector specifically, the introduction of internet banking and the automated teller machines which are the initial cornerstone of electronic finance. This increased adoptions as well as penetration of the internet have added a new distribution channel to the retail banking (Callaway, 2011). Internet banking is gaining worldwide acceptance as simply a new channel for carrying out different banking transactions since it provides customers with a way of conducting banking transactions at their convenience. Innovation through internet banking enables an existing bank with physical branches to set up a website and offer internet banking in addition to its traditional delivery channel or setting up a bank that is branchless to attend to its customers only through the internet (Callaway & Jagani, 2015).
Internet banking can also increase the breadth of the bank’s product line since a bank can be able to provide a greater number of services and products per each customer that they have and may be able to tailor-make products and services that will meet the individual expectations that the customers exhibit (Acharya & Kagan, 2017). Customers can be offered a one stop shopping since internet enables cross-selling opportunities being
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created by encouraging traffic to the website of their banks. The provision of full service internet banking can help in creating powerful barriers to the consumer defection (Deb & Agrawal, 2017). In the United States of America a typical consumer always deals with seven to ten financial service providers, this is inclusive of insurance, banking, investing and others. Internet banking offers a solution to its customers in consolidating their different financial services into a single banking website account presenting an opportunity for the banks to sell more and better products to increase deposits of their customers (Nielsen, 2012).
2.2.3 Market Accessibility
According to Callaway (2011), internet banking enables banks to expand their market reach as opposed to the traditional banking. The critical factor for an improved bank performance is that offering internet banking enables commercial bank to serve a greater geographical area with relatively small number of brick and mortar branches. Customers have an option of utilizing a few services through the branches to reduce congestion and waiting time at the individual branch while some may be willing to commute a greater distance to the local branch since they would need far few trips. As such the bank is able to acquire new customers through internet traffic rather than needing costly branches in a heavily congested geographical areas (Moghavvemi & Lee, 2013). Internet banking clients may be doing transactions for greater savings rate on loans and perhaps from other internet sites that search for such issues and therefore, a key metric for a commercial bank website may be the number of visitors from other sites or the number of external web sites that are linked to the bank’s website (Oluwatobi, 2015).
Nearly all the bigger banks have some kind of web presence (Ani & Uchendu, 2013). It is crucial for commercial banks to differentiate themselves from other banking web sites by finding a way to attract more customers that is the bank that has a strong traffic rank and reach can successfully secure current customers while at the same time bringing potential customers to their website for instance, the current customers can visit the website and sign up for internet banking. Further, a higher traffic rank is sign of a larger audience for the bank to advertise their various products and services that they offer since online consumers see a real benefit to securing useful information directly from a web site and believe that they can easily access such information online other than the traditional ways (Mastor & Sutanonpaiboon, 2010).
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2.3 Effect of Mobile Banking on Performance of Commercial Banks
Mobile banking is a term that refers to the use of mobile devices such as smartphone to perform banking transactions that is any transaction that involves the transfer ownership to the use of goods and service which is initiated or completed by mobile access to a computer linked network with the help of an electronic device (Abdul-Wahab & Haron, 2017). Mobile banking can also mean the provision of bank-related financial services that are facilitated with telecommunication devices. The scope of services performed through mobile banking can include facilities that help conducting bank transactions, administering accounts and accessibility to customized information from the commercial banks and this is mostly done via a short message services (SMS) or mobile internet (Priya & Gandhi, 2018).
Over the past years, advancements in the information technology have changed the way firms operate and conduct their businesses. Technological innovations have brought about the evolution of mobile banking in the banking sector revolutionizing the manner in which commercial banks carry out their business (Acharya & Kagan, 2017). Mobile banking and internet banking innovations have not only made the financial services accessible via mobile and online but also given the customer an easy access to financial services and other benefits (Chen, Joshi, & Birthal, 2013).
Brige (2016), indicates that mobile banking provides millions of people with a potential solution in emerging markets that have higher phone penetration but remain excluded from the financial mainstream. Mobile banking can make basic financial services more easily accessible by minimizing the time and distance to the nearest retail bank branches while at the same time reducing banks’ overheads and transaction related costs. The use of mobile banking presents an opportunity to the financial institutions to extend their financial services and products to new markets as they intend to increase their market share in the banking sector (Callaway, 2011). According to Amin (2012), mobile banking is highly driven by the prospects of operational costs minimization and revenues maximization for commercial banks. A comparison of online banking in developed markets as well as the emerging ones reveal that in developed markets low costs and higher revenues are more noticeable.
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Mobile banking being an innovation stemming from telecommunication revolution in the late twentieth century has had a strong influence in the banking sector, being viewed as a competition for the banking sector, it has forced banks to adopt the technology for them not to miss out on the diverse markets of customers that highly depend on mobile banking to carry out transactions (Hussien & Aziz, 2013). Mobile banking comes along with the convenience of making monetary transactions from one bank account to another an even presentation as well as printing of bank statements at a customer’s point of convenience (Barnes & Corbitt, 2013). This is whereby the banking service provider offers a platform in which their customers conveniently transact securely from remote areas usually an area of their convenience like their home or workplace. With mobile banking technology, customers do not need to visit the banking halls to do their transactions such as bill payments, withdrawals, money transfers and payments of goods and services. Banks are able to provide assistance to a customer on a twenty four hour basis to make sure mobile banking is serving their customers as intended (Kaushik & Rahman, 2015)
There is an existing rapid uptake of the mobile banking technology among the population as statistics indicate that two out of five customers in developed nations prefer to use mobile banking when carrying out transactions for the obvious reasons of the convenience that comes along with it (Zhou, 2011). Mobile banking has had significant effects on the performance of banks in the Kenyan economy posing interest for every commercial bank to adopt the technology. Technology is a necessity as well as a top priority for all the players in the financial sector (Barnes & Corbitt, 2013). Every year it is evident that the commercial banks set out a huge expenditure budget for expansion, adoption and maintenance of the mobile banking facilities and systems. For any financial institution to prosper in the banking environment there is great need of putting up innovations that will guarantee the convenience to its customers that is the convenience that links bank accounts through mobile gadget which customers find as an empowerment owing to the fact that they have total control over their funds at any time (Adewoye, 2013).
2.3.1 Consumer Attraction
Mobile banking is transforming the way customers in developing nations transfer money and now it is poised to provide more sophisticated banking services that would make a difference to people’s lives, hence, commercial banks have been able to attract a number
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of customers due to the benefits that are associated with the use of mobile banking (Ani & Uchendu, 2013). Mobile banking provides various services ranging from account information, which has more to do with customer update alerts and transactions on their bank accounts through mobile phones since customers are able to receive short messages on their mobile phones informing them of their immediate transactions that has taken place in the bank accounts (Abdul-Wahab & Haron, 2017).
The banking sector in the modern world is experiencing competition as compared to the past decades of traditional banking. With an expanding market it calls upon commercial banks to increase their presence (Lee, 2009). There is a run for new market opportunities at every wake and turn of a day and staying on top of competition depends on the bank’s ability to adopt any innovation such as mobile banking. Not only that the adoption of new technology will guarantee the ability of staying on top but the rate at which has the bank adopted it faster than the competitors (ChauShen, 2013). Speed is crucial for customer attraction in the banking sector. In addition the adoption of mobile banking platforms that exceeds the expectations of the consumers will guarantee a market for the commercial bank as they cater for their market in the best way possible, hence, gaining a competitive advantage from its customer base (Thakur, 2014).
2.3.2 Revenue Generation
Globally, mobile banking is simply an additional channel which is used in providing banking services to those already banked while at the same time banks charge their customers for the service which is accounted in their revenues (Moghavvemi & Lee, 2013). Mobile banking customers rely on the convenience offered by the technology in terms of their deposits, making payments and withdrawals. Ayuma and Ambrose (2016) have argued that M-pesa which is the biggest mobile money platform in the world is offering customers with a high level of convenience and reliability in small markets for customers to undertake transactions from their comfort, hence, a great opportunity for the formal sector to reach the low-income rural people to provide the same service that is crucial for their profitability increment and acquiring of market share in the competitive banking environment.
In the recent past, a growing range of developing nations have commenced on reforming and freeing their monetary systems into an effective intermediary and lengthening vibrant monetary services on property basis to any segment of the population (Ayuma &
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Ambrose, 2016). Being a step of increasing their monetary service establishments, some developing nations have significantly alleviated the condition through initiating a framework and infrastructure that encourages loans through public and personal credit reference bureaus with an attempt to spur economic development (Adewoye, 2013). With these attempts, a new world of finance has emerged which is demand-led and conforms to sound criteria of an effective monetary intervention presenting opportunities for the banks to generate revenues through mobile banking services (Ghosh, 2016).
2.3.3 Improved Access to Bank Products and Services
Mobile banking has enabled commercial banks to sell some of their products and services such as providing short-term loans by partnering up with telecommunication firms in doing the same through the platform (AbuShanab, 2014). Traditionally, bank loans to traders have been thought as a crucial supply of finance and the bank plays the role of credit suppliers in any economy. Ideally customers need mobile banking short-term finance to carry out day to day business that funds present assets of the business and one way of doing this is through the use of customer’s records to assess how they will provide short-term financing to the customer via mobile money (Ayuma & Ambrose, 2016). Mobile banking has enhanced accessibility of various products and services that the bank is involved with, for instance customers can use mobile banking for their insurance needs that is managing the insurance of their customers that are linked to their bank accounts.
Apart from the bank’s core business of taking deposits from customers, banks offer the much needed credit to the economy of the country (Al-Hawar, 2014). Commercial banks under the regulations from the central banks are able to make credit available to the businesses and individuals that seek extra funding for various development projects through the use of mobile banking (Adewoye, 2013). Furthermore, the technology allows deposits to be made directly into the banks and in order to achieve this, banks have integrated their mobile banking systems with mobile money technology that is offered by telecommunication companies in all the nations that support and license mobile money. Customers can deposit money at any time of their convenience, hence, the overall effect of liquidity of the commercial banks (Deb & Agrawal, 2017).
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2.4 Effect of Electronic Banking on Performance of Commercial Banks
Electronic banking refers to the automated, efficient and smooth delivery of the modern and traditional banking services via electronic and communicative channels, this includes systems that consumers use in accessing their accounts, business transactions, and obtaining information through networks, including the internet (Ani & Uchendu, 2013). Electronic banking is a term that describes the whole process of carrying out such transactions without the need of physically visiting the bank. Forms of electronic banking include; personal computer banking, online banking among others (Al-Hawar, 2014). According to Ibrahim and Ibeh (2016), electronic banking refers to the use of electronic means to deliver banking services and products via internet, the term can also be used in referring to automated teller machines, use of plastic cards and electronic funds transfers.
Electronic banking offers variety of online services such as request for cheque books, balance transfer instructions, balance inquiry, and other forms of transitional banking services. With electronic banking, customers are also able to check their account balances and make payments, gradually creating a cashless society where customers no long need hard cash to make their payments for instance, customers can buy airline tickets and subscribe to the initial public offering by simply transferring money directly from their banks accounts directly to the sellers (Sánchez-Torres & Sandoval, 2018). Electronic banking is making banking transactions a bit easy throughout the world and the technology is fast gaining acceptance in developing nations since almost all commercial banks have electronic banking platforms, at reduced cost of information access (Asongu, 2015).
Commercial banks have been pressured by increased globalization and competition from the non-banking functions to finding new ways of adding value to their banking services while at the same time addressing the drives of performance (Fu, 2013). A number of studies have tried to address this cutting across from the strategic level and escalating downward to the operational details. Customers that are in developing economies seem to be keeping the technological factor of services as a catalyst in differentiating the good and bad services as well as the human factor since employees seem to be playing a lesser role in discriminating the quality of service offered by the banks (Narwani, Randeree, & Mahal, 2012). The variation of services that are offered by the banks tend to develop the excellence for service quality, and banking is no longer regarded as a business dealing
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with money transactions alone but also as a business that is related to the information on financial transaction (Kingshott, 2013).
Since electronic banking is becoming more prevalent, the level of customer satisfaction also changes the scenario of the technological business environment (Abdul-Wahab & Haron, 2017). Information technology enabling electronic banking plays an important role in providing better services at a lower cost as several innovative IT based services and products like the use of plastic cards, automated teller machines, phone banking offer a number of convenient services to the clients in order to improve service quality and the probability of customer satisfaction also increases (Idun & Aboagye, 2014). The increase in customer satisfaction in turn increases a mutual understanding, retention of customers and a bond of trust that exists between the bank and the customers. Banks offering these services at greater extent to the clients tend to be more reputed in the eyes of the customers despite technology based products being relatively different in private and public sector (Gan & Clemes, 2014).
Electronic banking is an improvement over traditional banking system since it has reduced the cost of transaction processing, efficiency in payment systems, financial services and has enhanced banker-customer relationship (Mansour & Eljelly, 2016). The relationship existing between electronic banking and quality service can be researched with the level of satisfaction, while customer satisfaction being the level and quality service level offered by the organization. Electronic banking has a pivotal role in giving satisfaction to the customers because electronic banking fills the gap between the expected and the perceived service quality. For this gap to be filled, commercial banks should find ways of making electronic services more accessible by allowing consumers to verify accuracy of the electronic banking transactions (AbuShanab, 2014).
Some studies indicate that online bankers are the most profitable and form a crucial segment to the banks. Electronic banking thus provides various benefits to commercial banks as well as customers. However, there exist multiple reasons behind this as customers require having an access to the internet in order to use the service. Furthermore, new customers need first to learn on how to use the service, and non-users sometimes complain that electronic banking lacks the social dimension that is it is not served in way that promotes interaction just like the face to face interaction at the branch level. Electronic banking has continued to influence activities of the commercial banks as
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well as their income structure and some of the activities that may be subjected to the stronger pressures for change are still relatively insulated from information and communication technology developments.
2.4.1 Operational Efficiency
Efficiency is critical for any firm that is in transacting kind of business. The firm in this aspect being the commercial banks highly depend on operational efficiency in order to attract more clients and seeking a competitive market position (Abdul-Wahab & Haron, 2017). Retention and numeric growth of consumers are indications of a sound and efficient performance of any commercial bank and heavily borrows from good management of the company (Lee, 2009). With commercial banks, a fast growth is a guarantee when the investments finally pay off and that the commercial banks gain a strong footing in their markets. Electronic banking platforms adopted by financial institutions have been seen increasing a tremendous rate of efficiency, which is a sign of their return on investment that comes from investing heavily on technology (Ani & Uchendu, 2013). Customers have also been attracted into the wave of electronic banking as an attempt to add up to the numbers already using electronic banking platforms due to the efficiency associated with it. Electronic banking is efficient for the organization as well as customers as it provides services like opening of bank accounts, balance inquiry, cash transfer among others. In turn, this has boosted an additional customer base into the brackets of those that prefer banking online as opposed to physical banking that takes place in the banking halls (Hsiao & Lin, 2013).
It is evident that electronic banking has enhanced efficiency in the banking systems by solving various challenges that the commercial banks had faced before adopting technological innovations. For instance banks had challenges of bouncing cheques which does not happen with electronic banking as customers can constantly monitor the transactions taking place in their accounts and can track their transactions by getting to know which cheques have been cleared (Callaway, 2011). Customers are able to do that through electronic banking and they can further conduct any necessary bank transactions without any interaction. The convenience that comes along with data captured online, make it supportive in budgeting and tracking the streams where customer’s money goes since electronic banking enables consumers to access copies of their transactions and cheques, hence, enhancing a desirable efficiency in the banking operations while at the
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same time cutting down on the costs the banks would incur in offering the same service from their banking halls or branches existing in different markets (Matevu & Kerongo, 2015).
Electronic banking also plays a crucial role in the electronic fund transfer which enables commercial banks to transfer or exchange money from one bank accounts to another which can take place within the same bank or between multiple banks as well as other financial institutions (Gan & Clemes, 2014). Electronic banking supports the system of electronic funds transfer which acts as a mechanism of transferring money from one account directly to another without any use of paper money. One of the most widely used electronic funds transfer system is direct deposit whereby payroll is deposited directly into an employee’s bank account, making the work of the banks a little bit easier as opposed to traditional banking (Narteh, 2013).
2.4.2 Profitability
The capability of commercial banks to make profits is a key driver for their growth as it increases their margins of deposits with an attempt of making more profits (Adewoye, 2013). Electronic banking has enabled commercial banks to actually realize the quest as the electronic banking entity plays a crucial role in taking deposits from customers as well as increased use of electronic banking platforms that bring in more revenues for the banks. Despite the criticize of the electronic technology which suggests that in developing nations automation in banking platforms leaving deposits in an automated teller machine for instance is a bad idea since customers felt insecure with the use of technology (Barnes & Corbitt, 2013). According to Amin (2008), electronic banking is fundamental for any commercial bank operating in the modern business environment to attract revenues and ultimately profitability for their business to prosper.
Commercial banks have been offering electronic services to the individuals as well as businesses through the use of technology acting as the main driver for efficienct service delivery (Mahdi & Dawson, 2012). Commercial banks that have fully adopted technological innovations that are necessary for providing services and products that are desirable to their customers while at the same time saving customer’s cost in terms of accessing the products and services have been able to generate more revenues since electronic banking for example allows commercial banks to tap into various markets that they could not be able through the use of traditional banking, hence, generating more
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profits that comes along with a bigger customer base (Narteh, 2013). With electronic banking, not only have the banks been able to make profits through their customers but also through cost cutting advanatges of electronic banking. For instance commercial banks have deployed the use of systems instead of employing humans to manually provide the same services, hence, becoming more profitable through cost savings measures that have been brought as a result of electronic banking in the banking industry (Abdullai & Nyaoga, 2017).
2.5 Chapter Summary
This chapter has presented literature review based on the research questions introduced in chaptre one. It presents the literature review on the effect of internet banking on perfomance of commercial banks, the effect of mobile banking on perfomance of commercial banks and lastly the effect of lectronic banking on perfomance of commercial banks. The next chapter presents the research methdology that was used in conducting the study.
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CHAPTER THREE
3.0 RESEARCH METHDOLOGY
3.1 Introduction
The chapter presents the research methodology that was used in conducting this study, it begins with the research design that incorporates various elements of the study, followed by the study population and sampling design, data collection methods, research procedures and data analysis methods.
3.2 Research Design
Research design is regarded as an overall strategy adopted by the researcher to conduct the study and ensure that there is a logical sense to respond to the study objectives. This study used explanatory research design to enable the researcher to establish the relationship between the causes and effects among the variables. The study choose explanatory research design since it was the most ideal in conducting this study, because it sought to establish the impact of financial innovations on business performance. A structured questionnaire was used to obtain primary data from study respondents. In this method a questionnaire was sent or presented to the person selected randomly with a request to answer the questions and return the questionnaire. The questionnaire consists of the number of question printed or typed in a definite order on a form or set of forms (Kothari & Garg, 2019). The study adopted the quantitative approach to analyse the relationship between the internet banking, mobile banking and electronic banking in relation to the commercial banks financial performance as independence variable.
3.3 Population and Sampling Design
3.3.1 Population Population can be the subjects or objects that the study seeks to make inferences on by defining the context from which the study is conducted. The target population of this study comprised 120 managers drawn from all the 24 commercial banks operating in Juba, South Sudan. Each bank has five (5) managers spread across the level of management; top level manager, middle level managers and supervisors as indicated in Table 3.1.
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Table 3.1: Population Distribution
Level of Management Population Percentage (%)
Top Level Managers 24 20%
Middle Level Managers 36 30%
Supervisors 60 50%
Total 120 100%
Source: Central Bank of South Sudan
3.3.2 Sampling Design
3.3.2.1 Sampling Frame
Sampling frame is the absolute list that contains the entire population on which the researcher intends to investigate (Cooper & Schindler, 2013). Sampling frame defines the parameters of the popualtion and restricts the study within the boundaries of the population when a sample is being selecetd to represent the entire popualtion. For this particualr study, the sampling frame was obtained from Human Resource offices of commercail banks operating in Juba, South Sudan.
3.3.2.2 Sampling Technique
Sampling technique is a procedure that is used by the researcher with the attempt of ensuring equal chance of unit selection is adhered to within the popualtion that forms the sample size (Baltar & Brunet, 2012). There are two types of sampling that is probability and non-probability sampling methods. According to Kathari and Garg (2019), propability sampling is when the items of the universe has an equal chance of inclusion in the sample. This study used probabibility random sampling method, which the population does not constitute homegenous group, it is applied in order to obtain a representative sample (Kathari & Garg, 2019). This sampling method helped the researcher to select managers from various departments to form the sample size.
3.3.2.3 Sample Size
According to Cooper and Schindler (2014), sample size refers to the unit representation of an entire population with similar attributes and characteristics upon which the researcher
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draws inferences from. This study used Yamane’s formula in determining the sample size that represent the entire population.
From
Where, n = sample size
N = Study Population, =120
e = Alpha level of 0.05
Substituting these values in the above equation, the sample size will be:
The sample size of this study is 92 managers at a confidence level of 95%.
The estimated sample of this study will be 92 managers selected from commercial banks in South Sudan. The sample size distribution is represented in Table 3.2
Table 3.2: Sample Size Distribution
Level of Management Population Sample Size Percentage (%)
Top Level Managers 24 20 22%
Middle Level Managers 36 23 25%
Supervisors 60 49 53%
Total 120 92 100%
3.4 Data Collection Methods
Data collection method is the process of gathering the data and information that the researcher requires to answer the research questions (Baraldi & Bocconcelli, 2011). According to Cooper and Schindler (2014), data collection method is the systematic way
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that is used by the researcher to collect the information that is used in answering the research questions.
The questionnaire had four sections where by the first sections had general information of the respondents, second section had questions on the effect of internet banking on performance of commercial banks, the third section tackled the questions on the effect of mobile banking on performance of commercial banks and the fourth section had questions on the effect of electronic banking on commercial banks.
3.5 Research Procedures
With this study, a letter of approval had been sought from human resources managers of the commercial banks in Juba to allow the research to be conducted in their premises. Once the permission was guaranteed, a pilot test was carried using 9 respondents that account for 10 percent of the sample size. The pilot test enbaled the researcher to examine the validity and the reliability of the research instrument and any errors that had been found, and then were corrected. With the help of research assistants the researcher administered the questionnaire to the respondents by using a drop and pick method whereby the respondents had been given a maximum of three weeks to complete the questionnaire, the questionnaires were collected by the researcher for data analysis. The researcher had the responsibility of counter checking any errors and the completeness of the information provided by the respondents once that was done, then the data were coded and entered into data analysis software. The data was presented in forms of figures and tables.
3.6 Data Analysis Methods
Data analsyis refers to the process through which raw data from a survey is converted into the infromation that is meaningful and easily understood through data analysis tool (Cooper & Schindler, 2013). This study used descriptive statistics to analyze the data that was obtained in the filed. That enabled the researcher to summarize the qualities of data that could easily be understood. Both descriptive and inferential statistics whereby descriptive statistics were used to analyze frequencies and percentages and inferential statistics analyzed correlation and regression analysis of the study varibales to establish the relationship that exist between the varibales. The information was presented using
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tables and figures.The study used Statistical Package for Social Sciences (SPSS) in analyzing the infromation and data provided by the respondents.
The regression model given below will be use in analysis and intepretation of the data:
Y = a +β1X1 + β2X2 + β3X3 + ԑ
Where
Y = Financial performance
X1 = Internet banking
X2 = Mobile banking
X3 = Electronic banking
ԑ = Error term
3.7 Chapter Summary
This chapter presented the research methodology used in carrying out the study, explanatory research design was used in incorporating the research elements of the study. A sample size of 92 managers determined through a census formed the respondents for the study. The study relied on both secondary and primary data. Primary data was collected using a questionnaire and further analyzed as per the study objectives. The study used descriprive statistics to analyze frequencies and percentages while inferential statistics analyzed correlational and regressional analysis.
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CHAPTER FOUR
4.0 RESULTS AND FINDINGS
4.1 Introduction
This chapter presented the results and findings obtained from the target respondents of this study. Demographic information of the respondents was presented first, followed by the findings on the effect of internet banking on financial performance, the effect of mobile banking on financial performance and finally the findings on the effect of electronic banking on financial performance of commercial banks.
4.2 Response Rate and Background Information
In this sub-section, response rate and background information was provided starting with response rate followed by background information of the respondents.
4.2.1 Response Rate
Out of 92 questionnaires that were distributed to the respondents, the researcher managed to collect 67 dully filled questionnaires. This translates to a response rate of 73% which is considered sufficient for data analysis.
Table 4.1: Response Rate
Response Frequency Percentage (%) Response Obtained 67 73 Response Not Obtained 25 27 Total 92 100
4.2.2 Demographic Information of the Respondents
The study built up statistical data of the respondents included in this study. The statistical qualities incorporate; gender, age, work involvement, work division and level of education of the respondents.
4.2.2.1 Gender of the Respondents
In establishing gender of the respondents that were involved in the study, 56% were male while 44% were female as shown in figure 4.1
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Figure 4.1: Gender of the Respondents 4.2.2.2 Respondents’ Age The age bracket of the respondents was analyzed as follows; a majority of the respondents were found to be between the ages of 41-47 at 48 percent followed by those between 34- 49 years representing 23 percent whereas respondents between the ages of 26-33 years were at 12 percent. Respondents aged between 18-25 were at 9% while the least of the respondents were 48 years and above representing 8%. The analysis of age distribution is displayed in figure 4.2
48 and Above []%
41-47 Years []%
34-40 Years []%
26-33 Years []%
18-25 Years []%
0.0 10.0 20.0 30.0 40.0 50.0
Figure 4.2: Respondents’ Age
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4.2.2.3 Work Experience The study built up the respondents’ work experience based on the number of years each respondent had been serving in a particular bank. Out of the 92 managers, a majority of them representing 52 percent had worked within the same bank for 5-7 years while another 19 percent had served between 2-4 years. Only 13 percent of those interviewed had served for 8-10 years while another 8 percent had worked with their respective commercial banks between 0-1 year and above 11 years respectively as shown in figure 4.3.
Figure 4.3: Work Experience 4.2.2.4 Work Department The study also sought to establish the specific divisions/department for each of the respondents. The findings show that 25 percent of the respondents contacted worked under the Public Relation and Publicity department followed by another 21 percent under the Sales and Marketing department. Logistics and Procurement divisions had a representation of 18 percent with 15 percent providing their service in the Human Resource department. Administration and Finance and Customer Care departments had 12 percent and 9 percent respectively as shown in figure 4.4.
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Figure 4.4: Work Department 4.2.2.5 Education Level of the Respondents The other aspect under demographic information was the level of education of the respondents. The analysis revealed that 52 percent of the study respondents had attained Bachelors degree while a significant proportion representing 35 percent had attained Masters Degree. Only 7 percent and another 6 percent had attained diploma and certificate qualifications respectively. The analysis is illustrated in figure 4.5.
Figure 4.5: Education of the Respondents
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4.3 Internet Banking and Performance of Commercial Banks
As one of its objectives the study sought to determine the impact of internet banking on performance of commercial banks. The findings are presented as follows:
4.3.1 Internet Banking and Bank Operations
Respondents were asked whether internet banking improved their banking operations. The findings reveal that, 2% both strongly disagreed and agreed, followed by 5% who were neutral, while another 44% agreed and a significant 47% of the respondents strongly agreed giving an indication that internet banking improves banks’ operations. The findings are highlighted in table 4.2 below.
Table 4.2: Internet Banking and Bank Operations
Scale Frequency Percent Strongly Disagree 1 2.0 Disagree 1 2.0 Neutral 3 5.0 Agree 30 44.0 Strongly Agree 32 47.0 Total 67 100.0
4.3.2 Internet Banking and Customer Loyalty
When the respondents were asked whether internet banking enhanced customer loyalty, those who strongly disagreed, and disagreed were at 2 percent whereas respondents who agreed were at 58% agreed, while those who strongly agreed stood at 38% strongly agreed, and 0% was neutral as highlighted in table 4.3. The finding indicates that internet banking attracts customer loyalty for commercial banks.
Table 4.3: Internet Banking and Customer Loyalty
Scale Frequency Percent Strongly Disagree 1 2.0 Disagree 1 2.0 Agree 39 58.0 Strongly Agree 26 38.0 Neutral 0 0.0 Total 67 100.0
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4.3.3 Internet Banking and Customer Security
When the respondents were asked whether internet banking enhances customer security, 2% disagreed, 3% remained neutral, a significant 60% agreed, another 35% strongly agreed and none strongly disagreed as highlighted in table 4.4 below. This indicates that internet banking improves customer security.
Table 4.4: Internet Banking and Customer Security
Scale Frequency Percent Disagree 1 2.0 Neutral 2 3.0 Agree 41 60.0 Strongly Agree 23 35.0 Strongly Disagree 0 0.0 Total 67 100.0
4.3.4 Internet Banking and Sources of Income
The respondents were asked to indicate whether internet banking presented new sources of income to the bank. Whereas, 2% and 3% disagreed and strongly disagreed respectively, a significant 45% and another 50% agreed and strongly agreed respectively. None of the respondents was neutral on this objective. The findings are highlighted in figure 4.6. This finding indicates that internet banking has created new sources of income for commercial banks.
Figure 4.6: Internet Banking and Sources of Income
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4.3.5 Internet Banking and Profitability
The respondents were asked to indicate whether internet banking improved profitability of commercial banks, as highlighted in figure 4.7 below, more than half of the respondents agreed representing 53% and another significant 43% strongly agreed on the same. On the contrary, only 2% of the respondents disagreed and remained neutral while none of them strongly disagreed indicating that internet banking is significant to profitability of commercial banks.
Figure 4.7: Internet Banking and Profitability 4.3.6 Internet Banking and Service Delivery The respondents were asked whether internet banking enhances service delivery, both those who strongly disagreed or disagreed with this stood at, only 3% compared to more than half who agreed and strongly agreed at 56% and 36% respectively as highlighted in table 4.5 below. This implies that internet banking enhances service delivery to the customers of commercial banking.
Table 4.5: Internet Banking and Service Delivery Scale Frequency Percent Strongly Disagree 2 3.0 Disagree 2 3.0 Neutral 1 2.0 Agree 37 56.0 Strongly Agree 25 36.0 Total 67 100.0
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4.3.7 Internet Banking and Brand Reputation
The respondents were asked to indicate whether internet banking enhanced brand reputation for the commercial bank, 3% strongly disagreed, 4% disagreed, 2% neutral, 44% agreed, while 47% strongly agreed as shown in table 4.6. The implication of this is that internet banking has a positive impact on brand reputation for commercial banks in South Sudan.
Table 4.6: Internet Banking and Brand Reputation
Scale Frequency Percent Strongly Disagree 2 3.0 Disagree 3 4.0 Neutral 1 2.0 Agree 30 44.0 Strongly Agree 31 47.0 Total 67 100.0
4.3.8 Internet Banking and Market Share
The respondents were asked to indicate whether internet banking enhances market share for commercial banks in South Sudan, 3% disagreed 3% remained neutral, 0% strongly disagreed, 32% agreed and 62% strongly agreed indicating that internet banking is crucial for market share of commercial banks as highlighted in figure 4.8.
Figure 4.8: Internet Banking and Market Share
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4.3.9 Internet Banking and Bank’s Efficiency
When the respondents were asked whether internet banking is significant for the efficiency of banking operations, 59% agreed, another 37% strongly agreed while, 2% both disagreed and strongly disagreed, 0% neutral as highlighted in figure 4.9. It implies that internet banking is essential for efficiency of banks’ operations.
Figure 4.9: Internet Banking and Bank’s Efficiency 4.3.10 Internet Banking and Speed of Transactions
The respondents were asked to indicate whether internet banking had improved the speed of transactions, only 2% strongly disagreed and, 4% disagreed, as opposed to a significant 53% who agreed and, 41% who strongly agreed as highlighted in table 4.7 below. It implies that internet banking enhances the speed of transactions at the commercial banks.
Table 4.7: Internet Banking and Speed of Transactions
Scale Frequency Percent Strongly Disagree 1 2.0 Disagree 3 4.0 Agree 34 53.0 Strongly Agree 29 41.0 Neutral 0 0.0 Total 67 100.0
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4.3.11 Correlations Analysis of Internet banking and Financial Performance
Correlation is the strength of a relationship between two variables where a strong, or high, correlation means that two or more variables have a strong relationship with each other while a weak or low correlation means that the variables are hardly related. Pearson correlation analysis was used to examine the strength of the relationship while regression analysis showed the nature of the relationship. The result of the study as shown in Table 4.8 revealed that there was a positive and significant influence between internet banking and financial performance (r= 0.936, p value <0.05).
Table 4.8: Correlations between Financial Performance and Internet banking
Internet Financial banking Performance Internet banking Pearson Correlation 1 .936**
Sig. (2-tailed) .000 N 67 67 Financial Performance Pearson Correlation .936** 1
Sig. (2-tailed) .000 N 67 67 **. Correlation is significant at the 0.01 level (2-tailed).
4.3.12 Regression Analysis
Regression analysis was carried out to show the nature of the relationship between study variables. In this section R squared commonly referred as coefficient of determinations shows the model explanatory power summarized in model summary matrix. To test the extent of the relationship Adjusted R2 for internet banking on financial performance which indicated Adjusted R2=0.874 at 0.05 significance level. This implies that there is a linear relationship between internet banking and financial performance. The result of the findings as shown in Table 4.9 revealed that 87.4% of the changes in financial performance can be explained by internet banking while the remaining percentage can be accounted for by other factors excluded in the model.
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Table 4.9: Model Summary for Internet Banking and Financial Performance
Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .936a .876 .874 .15333 a. Predictors: (Constant), Internet banking
4.3.13 ANOVA between Internet Banking and Financial Performance
The results as shown in Table 4.10 reveal that internet banking had significant influence on financial performance for commercial banks in South Sudan since the p-value was less than 0.05, F = 458.499 and p-value <0.05. This implies that there is a linear relationship between internet banking and financial performance.
Table 4.10: ANOVA between Internet Banking and Financial Performance
ANOVAa Model Sum of df Mean F Sig. Squares Square 1 Regressio 10.779 1 10.779 458.499 .000b n Residual 1.528 65 .024 Total 12.307 66 a. Dependent Variable: Financial Performance b. Predictors: (Constant), Internet banking
4.3.14 Regression Coefficients for Internet banking and financial Performance
The results of regression coefficients as given in Table 4.11 shows a positive and significant influence between internet banking and financial performance for the commercial banks in South Sudan (β= 0.936, p value <0.05). This implied that a unit change in internet banking increases financial performance for commercial banks in South Sudan by units 0.936. The resultant regression model was as follows; Financial Performance = 0.800 + 0.815 Internet banking.
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Table 4.11: Regression Coefficients for Internet banking
Coefficienta Model Unstandardized Standardize T Sig. Coefficients d Coefficient s B Std. Error Beta 1 (Constant) .800 .167 4.797 .000 Internet .815 .038 .936 21.413 .000 banking a. Dependent Variable: Financial Performance
4.4 Effect of Mobile Banking on Performance of Commercial Banks
The second objective of the study was to determine the effect of mobile banking on performance of commercial banks. The findings are presented as follows:
4.4.1 Mobile Banking and Business Performance
The respondents were asked whether mobile banking is significant to the business performance. Whereas, 2% of the respondents both strongly disagreed and disagreed with this hypothesis, a significant 73% and 23% agreed, and strongly agreed respectively. It implies that mobile banking enhances business performance for commercial banks.
Table 4.12: Mobile Banking and Business Performance
Scale Frequency Percent Strongly Disagree 1 2.0 Disagree 1 2.0 Agree 49 73.0 Strongly Agree 16 23.0 Neutral 0 0.0 Total 67 100.0
4.4.2 Mobile Banking and Non-banking Transactions The respondents were asked whether mobile banking had increased non-banking transactions that are essential for profitability of commercial banks. Only, 2% strongly disagreed, and another 3% scored neutral. On the contrary, 44% of the respondents agreed and, 51% strongly agreed as shown in table 4.13. This implies that mobile banking enhances non-banking transactions that are essential for profitability.
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Table 4.13: Mobile Banking and Non-banking Transactions
Scale Frequency Percent Strongly Disagree 1 2.0 Neutral 2 3.0 Agree 31 44.0 Strongly Agree 33 51.0 Disagree 0 0.0 Total 67 100.0
4.4.3 Mobile Banking and Service Delivery The respondents were asked whether mobile banking enhances service delivery as opposed to traditional banking. To this question, a significant 61% agreed and, 37% strongly agreed as opposed to only, 2% who disagreed as indicated in figure 4.10. This implies that mobile banking enhances service delivery.
Figure 4.10: Mobile Banking and Service Delivery 4.4.4 Mobile Banking and Profitability The respondents were asked whether mobile banking enhances profitability, to which 3% strongly disagreed, and another 2% disagreed. On the same, a significant 50% agreed, and 45% of the respondents strongly agreed as shown in table 4.14. The implication is that mobile banking enhances profitability.
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Table 4.14: Mobile Banking and Profitability
Scale Frequency Percent Strongly Disagree 2 3.0 Disagree 1 2.0 Agree 33 50.0 Strongly Agree 31 45.0 Neutral 0 0.0 Total 67 100.0
4.4.5 Mobile Banking and Efficiency The respondents were asked whether mobile banking enhances efficiency in banking operations. The findings reveal that, 50% strongly agreed, and another 43% agreed to this as opposed to, only 4% and 3% who disagreed, and strongly disagreed respectively as highlighted in figure 4.11. This implies that mobile banking enhances efficiency.
Figure 4.11: Mobile Banking and Efficiency 4.4.6 Mobile Banking and Revenue Streams
The respondents were asked whether mobile banking has created new revenues for commercial banks; 2% strongly disagreed, 2% disagreed, 047% agreed and 49% strongly agreed as shown in figure 4.12. It implies that mobile banking creates new revenues.
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Figure 4.12: Mobile Banking and Revenue Streams 4.4.7 Mobile Banking and Market Presence
The respondents were asked whether mobile banking increases market presence for commercial banks; 2% both strongly disagreed and disagreed, 56% agreed while 40% strongly agreed as shown in table 4.15. It implies that mobile banking enhances market presence for commercial banks.
Table 4.15: Mobile Banking and Market Presence
Scale Frequency Percent Strongly Disagree 1 2.0 Disagree 1 2.0 Agree 38 56.0 Strongly Agree 27 40.0
Neutral 0 0.0 Total 67 100.0
4.4.8 Mobile Banking and Customer Satisfaction
The respondents were asked whether mobile banking enhances customer satisfaction to which, 3% of the respondents both strongly disagreed, and disagreed while another, 56% agreed, and 38% strongly agreed as shown in figure 4.13. It implies that mobile banking enhances customer satisfaction for commercial banks.
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Figure 4.13: Mobile Banking and Customer Satisfaction 4.4.9 Mobile Banking and Amount of Transactions
The respondents were asked to indicate whether mobile banking transactions has increased the amount of transactions. To this question, 49% strongly agreed and 47% agreed, 4% remained neutral, while 0% neither disagreed nor strongly disagreed as shown in figure 4.14. It implies that mobile banking increases the amount of banking transactions
Figure 4.14: Mobile Banking and Amount of Transactions 4.4.10 Correlations Analysis of Variable Mobile banking and Financial Performance Pearson correlation analysis was used to examine the strength of the relationship between financial performance and mobile banking. The result of the study as shown in Table 4.16
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revealed that there was a positive and significant influence between internet banking and financial performance (r= 0.825, p value <0.05). Table 4.16: Correlations Analysis of Variable Mobile banking
Mobile Financial banking Performance Mobile banking Pearson Correlation 1 .825**
Sig. (2-tailed) .000 N 67 67 Financial Performance Pearson Correlation .825** 1
Sig. (2-tailed) .000 N 67 67 **. Correlation is significant at the 0.01 level (2-tailed).
4.4.11 Regression Analysis between Mobile Banking and Financial Performance The model summary was tested to show the extent of the relationship between internet banking and financial performance which indicated that Adjusted R2 was 0.677 at 0.05 significance level. This implies that there is a liner relationship between mobile banking and financial performance. The result of the findings as shown in Table 4.17 revealed that 67.7% of the changes in financial performance can be explained by mobile banking while the remaining percentage can be accounted for by other factors excluded in the model.
Table 4.17: Model Summary for Mobile Banking and Financial Performance
Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .825a .681 .677 .24561 Predictors: (Constant), Mobile banking
4.4.12 ANOVA between Mobile Banking and Financial Performance The results of the findings as shown in Table 4.18 reveals that mobile banking had significant influence on financial performance for commercial banks in South Sudan since the p-value was less than 0.05, F = 139.020 and p-value <0.05. This implies that there is a linear relationship between mobile banking and financial performance.
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Table 4.18: ANOVA between Mobile Banking and Financial Performance
ANOVAa Model Sum of Df Mean Square F Sig. Squares 1 Regression 8.386 1 8.386 139.020 .000b Residual 3.921 65 .060 Total 12.307 66 a. Dependent Variable: Financial Performance b. Predictors: (Constant), Mobile banking
4.4.13 Regression Coefficients for Mobile banking and Financial Performance
The results of regression coefficients as given in Table 4.19 shows a positive and significant influence between mobile banking and financial performance for the commercial banks in South Sudan (β= 0.825, p value <0.05). This implied that a unit change in mobile banking increases financial performance for commercial banks in South Sudan by units 0.825. The resultant regression model was as follows, financial performance = -0.619+0.183 Mobile Banking.
Table 4.19: Regression Coefficients for Mobile banking
Coefficientsa Model Unstandardized Standardized T Sig. Coefficients Coefficients B Std. Error Beta 1 (Constant) -.619 .423 -1.465 .148 Mobile 0.813 .097 .825 11.791 .000 banking a. Dependent Variable: Financial Performance
4.5 Effect of Electronic Banking on Performance of Commercial Banks
The final objective of the study sought to determine the effect of electronic banking on performance of commercial banks. The findings are as follows:
4.5.1 Electronic Banking and Customer Security The respondents were asked whether electronic banking enhanced customer security and fraud detection. The findings reveal that, 2% both strongly disagreed and disagreed
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whereas, 49% agreed and another, 47% strongly agreed as highlighted in table 4.20. This implies that electronic banking enhances customer security.
Table 4.20: Electronic Banking and Customer Security
Scale Frequency Percent Strongly Disagree 1 2.0
Disagree 1 2.0 Agree 33 49.0 Strongly Agree 32 47.0 Neutral 0 0.0 Total 67 100.0
4.5.2 Electronic Banking and Organizational Performance The respondents were asked whether electronic banking enhances organizational performance of which 2% strongly disagreed, compared to a significant 28% who strongly agreed and 67% who agreed while only, 3% remained neutral, as shown in figure 4.15. It implies that electronic banking enhances organizational performance.
Figure 4.15: Electronic Banking and Organizational Performance 4.5.3 Electronic Banking and Convenience The respondents were asked whether electronic banking enhances convenience in the organization. The findings indicated that 32% of the respondents agreed and 61% strongly agreed whereas 2% disagreed and another 5% remained neutral as highlighted in
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figure 4.16. This indicates that electronic banking enhances convenience in the organization.
Figure 4.16: Electronic Banking and Convenience 4.5.4 Electronic Banking and Service Usage The respondents were asked whether electronic banking enhances bank service usage, 4% strongly disagreed, 2% disagreed, 2% remained neutral, while 34% agreed, and 58% strongly agreed as indicated in table 4.21. This is to mean that electronic banking increases the usage of banking services.
Table 4.21: Electronic Banking and Service Usage
Scale Frequency Percent Strongly Disagree 3 4.0 Disagree 1 2.0 Neutral 1 2.0 Agree 21 34.0 Strongly Agree 41 58.0 Total 67 100.0
4.5.5 Electronic Banking and Market Penetration The respondents were asked whether electronic banking enhances market penetration. The study findings indicates that, while 34% strongly agreed and 61% agreed, only 3% strongly disagreed and 2% disagreed indicating that electronic banking enhances market penetration for commercial banks. The findings are highlighted in figure 4.17.
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Figure 4.17: Electronic Banking and Market Penetration 4.5.6 Electronic Banking and Customer Satisfaction When the respondents were asked whether electronic banking enhanced customer satisfaction; 3% strongly disagreed, 2% disagreed while 56% agreed and another 39% strongly agreed as shown in table 4.22. This implies that electronic banking enhances customer satisfaction.
Table 4.22: Electronic Banking and Customer Satisfaction
Scale Frequency Percent Strongly Disagree 2 3.0
Disagree 1 2.0 Agree 37 56.0 Strongly Agree 27 39.0
Neutral 0 0.0 Total 67 100.0
4.5.7 Electronic Banking and Resource Utilization The respondents were asked whether electronic banking enhances resource utilization, 2% strongly disagreed, 3% disagreed, 54% agreed and 41% strongly agreed as shown in table 4.23 below. This implies that electronic banking enhances resource utilization in commercial banks.
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Table 4.23: Electronic Banking and Resource Utilization
Scale Frequency Percent Strongly Disagree 1 2.0
Disagree 2 3.0 Agree 37 54.0 Strongly Agree 27 41.0
Neutral 0 0.0 Total 67 100.0
4.5.8 Electronic Banking and Cost Reduction
When the respondents were asked whether electronic banking enhances cost reduction in the bank; 3% disagreed, 3% remained neutral, 30% agreed and a significant 64% strongly agreed as highlighted in table 4.24. This implies that electronic banking enhances cost reduction.
Table 4.24: Electronic Banking and Cost Reduction
Scale Frequency Percent Disagree 2 3.0 Neutral 2 3.0 Agree 20 30.0 Strongly Agree 43 64.0 Strongly Disagree 0 0.0 Total 67 100.0
4.5.9 Electronic Banking and Speed of Bank Transactions
When the respondents were asked whether electronic banking enhances speed of bank transactions. The findings indicated that 2% strongly disagreed, 2% disagreed, 61% agreed and 35% strongly agreed. This implies that electronic banking enhances the speed of bank transactions.
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Table 4.25: Electronic Banking and Speed of Bank Transactions
Scale Frequency Percent Strongly Disagree 1 2.0
Disagree 1 2.0 Agree 41 61.0 Strongly Agree 24 35.0
Neutral 0 0.0 Total 67 100.0
4.5.10 Correlations Analysis of Variable Electronic banking and Financial Performance Pearson correlation analysis was used to examine the strength of the relationship between financial performance and electronic banking. The result of the study as shown in Table 4.26 revealed that there was a positive and significant influence between internet banking and financial performance (r= 0.886, p value <0.05).
Table 4.26: Correlations Analysis of Variable Electronic banking
Electronic Financial banking Performance Electronic banking Pearson Correlation 1 .886**
Sig. (2-tailed) .000 N 67 67 Financial Performance Pearson Correlation .886** 1
Sig. (2-tailed) .000 N 67 67 **. Correlation is significant at the 0.01 level (2-tailed).
4.5.11 Regression Analysis between Electronic Banking and Financial Performance
The model summary was tested to show the extent of the relationship between electronic banking and financial performance which indicated that Adjusted R2 was 0.782 at 0.05 significance level. This implies that there is a linear relationship between electronic banking and financial performance. The result of the findings as shown in Table 4.27
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revealed that 78.6% of the changes in financial performance can be explained by electronic banking while the remaining percentage can be accounted for by other factors excluded in the model.
Table 4.27: Model Summary for Electronic Banking and Financial Performance
Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .886a .786 .782 .20142 a. Predictors: (Constant), Electronic banking
4.5.12 ANOVA between Electronic Banking and Financial Performance The results of the findings as shown in Table 4.28 reveals that electronic banking had significant influence on financial performance for commercial banks in South Sudan since the p-value was less than 0.05, F = 238.377 and p-value <0.05. This implies that there is a linear relationship between electronic banking and financial performance.
Table 4.28: ANOVA between Electronic Banking and Financial Performance
ANOVAa Model Sum of df Mean Square F Sig. Squares 1 Regressio 9.671 1 9.671 238.3 .000b n 77 Residual 2.637 65 .041 Total 12.307 66 a. Dependent Variable: Financial Performance b. Predictors: (Constant), Electronic banking
4.5.13 Regression Coefficients for Electronic banking and Financial Performance
The results of regression coefficients as given in Table 4.29 shows a positive and significant influence between electronic banking and financial performance for the commercial banks in South Sudan (β= 0.886, p value <0.05). This implied that a unit change in electronic banking increases financial performance for commercial banks in South Sudan by units 0.886. The resultant regression model will be as follows; Financial Performance = 0.698 + 0.834 Electronic banking.
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Table 4.29: Regression Coefficients for Electronic banking
Coefficientsa Model Unstandardized Standardize T Sig. Coefficients d Coefficient s B Std. Error Beta 1 (Constant) .698 .238 2.932 .005 Electronic .834 .054 .886 15.439 .000 banking a. Dependent Variable: Financial Performance
4.6 Chapter Summary
This chapter elaborated the results and findings of the study based on the responses obtained from the respondents under each objective. The first section presented demographic information, followed with the findings on internet banking and performance of commercial banks, then mobile banking and electronic banking on performance of commercial banks. The next chapter will present the discussion, conclusion and recommendations of the study.
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CHAPTER FIVE
5.0 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter presents the summary of the study, the discussion, conclusions, and recommendations. The study summary is presented first, then the discussion of the findings for each research question, conclusions and recommendations.
5.2 Summary
The purpose of this study was to investigate the impact of financial innovations on financial performance of commercial banks in South Sudan. The following research questions were used to guide the study; What is the effect of internet banking on financial performance of commercial banks in South Sudan?, What is the effect of mobile banking on financial performance of commercial banks in South Sudan? And what is the effect of electronic banking on financial performance of commercial banks in South Sudan?
Explanatory research design was used in this study. The study targeted 24 commercial banks in South Sudan which formed the population of this study. Stratified sampling technique was used to select the sample. A sample size of 92 managers was interviewed in this study. Primary data collection was done through the use of a structured questionnaire. The study used SPSS for data analysis and the findings were presented using tables and figures.
With regard to the effect of internet banking on financial performance the study revealed that there was significant relationship between internet banking and financial performance of commercial banks. The study found that internet banking contributed to the banking operations, customer loyalty, revenues generation as well as banks profitability.
With regard to the effect of mobile banking on financial performance, the study indicated that there was significant relationship between mobile banking and performance of commercial banks. The findings established that internet banking enhances customer security, profitability, efficiency, market accessibility and also customer satisfaction in commercial banks. Furthermore, with regard to the effect of electronic banking on financial performance the findings showed that there existed a significant relationship between electronic banking and performance of commercial banks. The study established
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that electronic banking contributes greatly on enhancing market penetration, resource utilization, cost reduction, convenience in banking operations, customer security and fraud detection.
5.3 Discussion
This section presents the discussion of the findings presented in the study in respect to the literature review introduced earlier in chapter two. The section will first introduce the discussion on internet banking and performance of commercial banks, mobile banking and then electronic banking and performance of commercial banks.
5.3.1 Internet Banking and Performance of Commercial Banks
This study sought to determine the effect of internet banking on performance of commercial banks. The findings of the study established a significant relationship between internet banking and performance of commercial banks. The findings of this study showed that internet technology was crucial for performance of commercial banks. These findings corresponds to the work of Moghavvemi and Lee (2013) who argues that commercial banks that fail to respond to the technology of internet banking are likely to lose their customers and the cost of offering internet banking services is always less than the costs that are associated with keeping the branch banking. They further indicate that, the challenges of expansion and maintaining of bank market share have convinced many commercial banks to invest more than just internet and rethinking around Informational Technology strategies in competitive markets. The notion is in line with a study conducted in Saudi Arabia to determine the role of internet banking and the majority of commercial banks in Saudi Arabia had taken advantage of the internet technology and attempted to establish websites but few adopted to provide internet banking services (Rishi & Saxena, 2014).
The study findings also indicated that internet banking was crucial for cost reduction as well minimization for commercial banks. According to Achary and Kagan (2017) despite the potential advantages of Information and communication technology and electronic commerce, there is still a debate on whether their adoption improves bank’s performance in terms of reduced overhead cost. The two scholars further indicate that commercial banks that have shown high profit margins are more likely to be using greater numbers of advanced information technology such as internet banking. Improved customer service,
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increased market reach and cost reductions are now becoming basic expectations of internet banking services (AbuShanab, 2014). Malhotra and Singh (2010) on the other hand, argues that if consumers are to use new innovations, the new innovation must be priced reasonably to the alternatives, otherwise, its acceptance may not be viable from the customer’s perspective. Internet banking technology provides advantages for both customers and commercial banks since the internet offers banks with the capability of delivering products and services to the customers at a relatively lower cost than any existing mode of service delivery.
The findings of the study also showed that internet banking enhances market accessibility for commercial banks. According to Callaway (2011) internet banking enables banks to expand their market reach as opposed to the traditional banking. The critical factor for an improved bank performance is that offering internet banking enables commercial bank to serve a greater geographical area with relatively small number of brick and mortar branches. Moghavvemi and Lee (2010) argue that customers have an option of utilizing few services through the branches to reduce congestion and waiting times at the individual branch while some may be willing to commute a greater distance to the local branch since they would need far few trips. As such the bank is able to acquire new customers through internet traffic rather than needing costly branches heavily trafficked geographical areas. Internet banking clients may be doing transactions for greater savings rates on loans and perhaps from other internet sites that search for such issues and therefore, a key metric for a commercial bank website may be the number of visitors from other sites or the number of external web sites that are linked to the bank’s website (Oluwatobi, 2015).
According to Ani and Uchendu (2013) nearly all the bigger banks have some kind of web presence. It is crucial for commercial banks to differentiate themselves from other banking web sites by finding a way to attract more customers. That is the bank that has a strong traffic rank and reach can successfully secure current customers while at the same time bringing potential customers to their website for instance, the current customers can visit the website and sign up for internet banking. Further, a higher traffic rank is sign of a larger audience for the bank to advertise their various products and services that they offer since online consumers see a real benefit to securing useful information directly from a web site and believe that they can easily access such information online other than the traditional ways (Mastor & Sutanonpaiboon, 2010).
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5.3.2 Effect of Mobile Banking on Performance of Commercial Banks
This study sought to determine the effect of mobile banking on performance of commercial banks. The study established a significant relationship between mobile banking on performance of commercial banks. According to Brige (2016) mobile banking provides millions of people with a potential solution in emerging markets that have higher phone penetration but remain excluded from the financial mainstream. According to Callaway (2011) mobile banking can make basic financial services more easily accessible by minimizing the time and distance to the nearest retail bank branches while at the same time reducing banks’ overheads and transaction related costs. The use of mobile banking presents an opportunity to the financial institutions to extend their financial services and products to new markets as they intend to increase their market share in the banking sector. According to Amin (2012), mobile banking is highly driven by the prospects of operational costs minimization and revenues maximization for commercial banks. A comparison of online banking in developed markets to the emerging ones reveal that in developed markets low costs and higher revenues are more noticeable.
The findings of this study suggested that mobile banking is essential for customer attraction for commercial banks in South Sudan. This finding corresponds to that of Ani and Uchendu (2013) who argue that mobile banking is transforming the way customers in developing nations transfer money and now it is poised to provide more sophisticated banking services that would make a difference to people’s lives, hence, commercial banks have been able to attract a number of customers due to the benefits that are associated with the use of mobile banking. Mobile banking provides various services ranging from account information, which has more to do with customer update alerts and transactions on their bank accounts through mobile phones since customers are able to receive short messages on their mobile phones informing them of their immediate transactions that has taken place in the bank accounts (Abdul-Wahab & Haron, 2017). The banking sector in a modern world is experiencing competition as opposed to the past decades of traditional banking, with an expanding market it calls upon commercial banks to increase their presence (Lee, 2009).
The findings of this study also indicated that mobile banking has created revenue streams for commercial banks. Ayuma and Ambrose (2016) indicate that, globally, mobile banking is simply an additional channel which is used in providing banking services to
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those already banked while at the same time banks charge their customers for the service which is accounted in their revenues. The two authors further suggest that M-pesa which is the biggest mobile money platform in the world is offering customers with a high level of convenience and reliability in small markets for customers to undertake transactions from their comfort, hence, a great opportunity for the formal sector to reach a low-income rural people to provide the same service that is crucial for their profitability increment and acquiring of market share in the competitive banking environment.
According to Adewoye (2013) in the recent past, a growing range of developing nations have commenced on reforming and freeing their monetary systems into effective intermediaries and lengthening vibrant monetary services on property basis to any segment of the population. Being a step of increasing their monetary service establishments, some developing nations have significantly alleviated the condition through initiating a framework and infrastructure that encourages loans through public and personal credit reference bureaus with an attempt to spur economic development. Ghosh (2016) also argue that with these attempts, a new world of finance has emerged which is demand-led and conforms to sound criteria of an effective monetary intervention presenting opportunities for the banks to generate revenues through mobile banking services.
5.3.3 Effect of Electronic Banking on Performance of Commercial Banks
This study sought to determine the effect of electronic banking on performance of commercial banks. The study established the existence of a significant relationship between electronic banking and the performance of commercial banks. According to Fu (2013) commercial banks have been pressured by increased globalization and competition from the non-banking functions to finding new ways of adding value to their banking services while at the same time addressing the drives of performance. Since electronic banking is becoming more prevalent, the level of customer satisfaction also changes the scenario of the technological business environment (Abdul-Wahab & Haron, 2017). Information technology enabling electronic banking plays an important role in providing better services at a lower cost as several innovative IT based services and products like the use of plastic cards, automated teller machines, phone banking offer a number of convenient services to the clients in order to improve service quality and the probability of customer satisfaction also increases (Idun & Aboagye, 2014).
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The study findings indicated that electronic banking improves profitability of commercial banks which is a key driver for their growth as it increases their margins of deposits with an attempt of making more profits. This finding is in line with the findings established by Barner and Corbitt (2013) that electronic banking has enabled commercial banks to actually realize the quest as the electronic banking entities plays a crucial role in taking deposits from customers as well as increased use of electronic banking platforms that bring in more revenues for the banks. Despite the criticize of the electronic technology which suggests that in developing nations automation in banking platforms leaving deposits in an automated teller machine for instance is a bad idea since customers felt insecure with the use of technology (Ani & Uchendu, 2013).
According to Amin (2008), electronic banking is fundamental for any commercial bank operating in the modern business environment to attract revenues and ultimately profitability for their business to prosper. Commercial banks have been offering electronic services to the individuals as well as businesses through the use of technology acting as the main driver for efficient service delivery (Mahdi & Dawson, 2012). Commercial banks that have fully adopted technological innovations that are necessary for providing services and products that are desirable to their customers while at the same time saving customer’s cost in terms of accessing the products and services have been able to generate more revenues since electronic banking for example allows commercial banks to tap into various markets that they could not be able through the use of traditional banking, hence, generating more profits that comes along with a bigger customer base (Narteh, 2013). With electronic banking, not only have the banks been able to make profits through their customers but also through cost cutting advanatges of electronic banking, commercial banks have deployed the use of systems instead of employing humans to manually provide the same services, hence, becoming more profitable through cost savings measures that have been brought as a result of electronic banking in the banking industry (Abdullai & Nyaoga, 2017).
5.4 Conclusions
This section presents conclusion based on the findings obtained from the respondents. The chapter presents the conclusion on internet banking and performance of commercial banks, followed by the conclusion on mobile banking and electronic banking on performance of commercial banks.
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5.4.1 Internet Banking and Performance of Commercial Banks
This study concluded that internet banking was crucial for the performance of commercial banks in terms of its profitability, market share and customer attraction. The study has established a significant relationship between internet banking and performance of commercial banks that can be attributed to the benefits of setting up internet banking. The study concludes that internet banking offers convenience in the banking operations as customers have the flexibility of carrying out business transactions from any given location allowing banking operations to take place twenty four hours a day. Furthermore, this study concludes that the integration of internet banking is crucial for market accessibility for commercial banks.
5.4.2 Effect of Mobile Banking on Performance of Commercial Banks
This study concluded that mobile banking was significant in enhancing financial performance of commercial banks as it enables banks to offer a platform to its customers in order to carry out business transactions. This study concludes that mobile banking enhances customer loyalty, brand reputation, service delivery, convenience, market accessibility and efficiency in the banking operations.
5.4.3 Effect of Electronic Banking on Performance of Commercial Banks
This study concluded that the use of electronic banking technology has enabled commercial banks to expand their markets due to the easy accessibility of financial services regardless of the geographical location. The study also concludes that electronic banking improves profitability of commercial banks that can be attributed to the increase in amount of transactions that customers have been empowered to conduct using electronic banking as opposed to the traditional banking.
5.5 Recommendations
This section presents recommendations for practice and recommendations for further studies based on the findings of the study.
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5.5.1 Recommendation for Improvement
5.5.1.1 Internet Banking and Performance of Commercial Banks
Since internet banking is significant to the performance of commercial banks, this study recommends that commercial banks should focus on rolling out internet infrastructures throughout the nation so that more people can access financial services from the convenience their location. The study also recommends that commercial banks should invent internet banking services in respect to the needs of consumers such as financial planning, mortgage funding and how to use the internet banking services effectively.
5.5.1.2 Effect of Mobile Banking on Performance of Commercial Banks
The study recommends that mobile banking services offered by commercial banks should be fully integrated with various telecommunication companies to increase its usage among banking clients. Commercial banks in South Sudan should partner up with various telecommunication companies in offering mobile banking services through the use of a mobile enabled platform.
5.5.1.3 Effect of Electronic Banking on Performance of Commercial Banks
This study recommends that commercial banks should have an integrated electronic platform that supports both internet and mobile banking for convenience purposes that is desired by banking customers. This study also recommends that electronic banking services should give freedom for clients to perform various business transactions without any limitations to enhance its usage.
5.5.2 Recommendation for Future Studies
Since, this study investigated the effect of financial innovations on performance of commercial banks in South Sudan. Similar studies should be carried in other countries like Cameroon, Malawi, Angola and Somalia to establish the impact of financial innovations on performance of commercial banks.
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APPENDICES
APPENDIX I. COVER LETTER
Longar Mathiec Wol
United States International University-Africa
P.O. Box -1463-00800, Nairobi.
November 27, 2018
Dear respondents,
RE: REQUEST TO PARTICIPATE IN MY RESEARCH.
As part of requirements to fulfill my degree of Masters of Business Administration (MBA) program as a student at the above mentioned institution; I am conducting a research study on, The Impact of Financial Innovations on Financial Performance Commercial Banks in South Sudan.
The data collection will be done in Juba among the 24 commercial banks that are based in Juba with 92 managers expected to fill the questionnaire.
Therefore, I request you to help me to fill my questionnaire to the best of your knowledge, knowing that the information you provide will be treated as private and confidential. They are only meant for the purpose of this study only.
Thank you for your time and cooperation.
Yours faithfully,
Longar Mathiec Wol
Researcher (MBA Student, USIU-Africa).
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APPENDIX II: QUESTIONNAIRE SECTION I: General Information
This section contains general questions. Kindly answer to the best of your knowledge
1. Kindly indicate your gender Male Female 2. Kindly indicate your age bracket below. 18- 25 Years
26- 33 Years
34- 40 Years
41-47 Years
48 and Above
3. Kindly indicate the number of years you have worked at your bank? 0-1 Years
2-4 Years
5-7 Years
8-10Years
Above 11 years
4. Kindly indicate your work department. Administration and Finance
Sales and Marketing
Customer care
Public Relations and Publicity
Human Resources
Logistics and procurement
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5. Kindly indicate your level of education. Certificate
Diploma
Bachelor’s degree
Master’s degree
Doctorate
SECTION II: The Effect of Internet Banking on Performance
Kindly answer the following questions on the effect of internet banking on performance to the best of your knowledge using the following Likert scale. Strongly disagree = 1, disagree = 2, neutral = 3, Agree = 4, strongly agree = 5.
No Questions 1 2 3 4 5
1. Internet banking enhances your banking operations.
2. Internet banking has contributed to customer loyalty.
3. Internet banking has increased customer security as opposed to traditional banking.
4. Internet banking has created new sources of income for the bank.
5. Internet banking contributes to the bank’s profitability.
6. Internet banking has improved service delivery to your customers.
7. Internet banking has enhanced your brand reputation.
8. Internet banking has increased your market share.
9. Internet banking has increased the level of efficiency.
10. Internet banking has improved the speed of transaction from one place to other.
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SECTION III: The Effect of Mobile Banking on Performance
Kindly answer the following questions on the effect of mobile banking on performance to the best of your knowledge using the following Likert scale. Strongly disagree = 1, disagree = 2, neutral = 3, Agree = 4, strongly agree = 5.
No Questions 1 2 3 4 5
11. Mobile banking is essential for your business performance
12. Mobile banking has increased non- banking transactions such as paying bills which is crucial for your profitability.
13. Mobile banking has reduced the number of branches that provide physical banking services.
14. Mobile banking has increased your profitability.
15. Mobile banking has brought efficiency in your banking operations to a great extent.
16. Mobile banking has created new steams of revenues for your bank.
17. Mobile banking has increased your market presence.
18. Mobile banking has enhanced customer satisfaction in your bank.
19. Mobile banking has enhanced the speed of transactions.
20. Mobile banking has increased the level of confidence and sense of security among the customers.
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SECTION IV: The Effect of Electronic Banking on Performance Kindly answer the following questions on the effect of mobile banking on performance to the best of your knowledge using the following Likert scale. Strongly disagree = 1, disagree = 2, neutral = 3, Agree = 4, strongly agree = 5.
No Questions 1 2 3 4 5
21. Electronic banking has improved security and fraud detection.
22. Electronic banking contributes to your organizational performance.
23. Electronic banking enhances convenience in your organization.
24. Electronic banking influences good customer retention.
25. Electronic banking has increased the usage of your banking services.
26. Electronic banking has enabled you to provide banking services to the unbanked.
27 Electronic banking enhance customer satisfaction in your organization.
28 Electronic banking has enhanced resource utilization in the company.
29 Electronic banking enhance the speed of transactions among the financial institutions.
30 Electronic banking has reduced the costs of transaction compare to traditional banking.
Thank you for your participation.
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APPENDIX III: LIST OF REGISTERED COMMERCIAL BANKS IN SOUTH SUDAN
1. Afriland First Bank South Sudan Ltd} 2. Alfa commercial bank Ltd 3. Bank of Khartoum Juba Ltd 4. Buffalo Commercial Bank Ltd 5. CFC Stanbic Bank Ltd 6. Charter One Bank South Sudan Ltd 7. Commercial Bank of Ethiopia (South Sudan) Ltd 8. Cooperative Bank of South Sudan Ltd 9. Ecobank South Sudan Ltd 10. Ebony commercial bank Ltd 11. Eden Commercial Bank Ltd 12. Equity Bank South Sudan Ltd 13. International Commercial Bank (South Sudan) Ltd 14. Ivory Bank Ltd 15. Kenya Commercial Bank (South Sudan) Ltd 16. Liberty Commercial Bank Ltd 17. Mountain Trade and Development Bank Ltd 18. National Credit Bank Ltd 19. Nile Commercial Bank Ltd 20. Opportunity Bank PLC 21. Phoenix Commercial Bank Ltd 22. South Sudan Commercial Bank ltd 23. Sudan Microfinance Institution Ltd 24. Qatar National Bank Ltd
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