THE EFFECT OF E-BANKING SERVICE QUALITY ON CUSTOMER

SATISFACTION: (THE CASE OF COMMERCIAL BANK OF ETHIOPIA IN

DEBRETABOR CITY)

A Thesis Submitted to University of Gonder in Partial Fulfillment of the

Requirements for the Degree of Masters of Arts in Marketing Management

ABEBECH WORES

Advisor : Aschalew A (pro)

JUN, 2024

Gonder, Ethiopia
THE EFFECT OF E-BANKING SERVICE QUALITY ON CUSTOMER
SATISFACTION :( IN THE CASE OF COMMERCIAL BANK OF
ETHIOPIA IN DEBRE TABOR CITY)

A Thesis Submitted to University OF Gonder in Partial Fulfillment of the

Requirements for the Degree of Masters of Arts in Marketing Management

By: Abebech Wores

University of Gonder College of Business and Economics

Marketing management Postgraduate Program

Approval sheet

Approved by

___________________ _______________ _____________

Advisor Signature Date

___________________ _______________ _____________

External Examiner Signature Date

_______________ _______________ _____________

Internal Examiner Signature Date

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ACKNOWLEDGEMENT
First I want to thank the almighty God for his help guidance and encouragement, which enabled
me to complete my work.
Next I would like to express my sincere gratitude to my advisor pro. Aschalew Adane for his
constructive comment, guidance, continual advice.
I also would like to say thank you to all the five commercial banks of Ethiopia staff and
management for their response to research interview and their support in motivating customers to
fill the research questionnaire.
My deep gratitude also goes to my families and friends for their invaluable support on the paper.

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Acronyms

ANOVA Analysis of variance

ATM Automatic teller machine

CSEB Customer satisfaction in e-banking

EBSQ E-banking service quality

EFT Electronic fund transfer

ICT Information communication technology

POS Point of sale

SERVQUAL Service quality

SMS Short message service

TA Technology associate

TOE Technology- organization environment

CBE Commercial bank of Ethiopia

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Table of content

Contents
page
ACKNOWLEDGEMENT.............................................................................................................................ii
Acronyms.....................................................................................................................................................iii
Table of content............................................................................................................................................iv
LIST OF TABLES........................................................................................................................................vi
LIST OF FIGURE.......................................................................................................................................vii
Abstract.......................................................................................................................................................viii
CHAPTER ONE............................................................................................................................................1
1. INTRODUCTION.................................................................................................................................1
1.1 Background of the Study.....................................................................................................................1
1.2 Statement of the Problem.....................................................................................................................3
1.3 Objectives of the Study........................................................................................................................4
1.3.1 General Objective.........................................................................................................................4
1.3.2 Specific Objectives.....................................................................................................................4
1.4 Research Questions..............................................................................................................................4
1.5 Research Hypothesis............................................................................................................................5
1.6 Significance of the Study.....................................................................................................................5
1.7The Scope of the Study.........................................................................................................................6
1.8 Limitations of the Study.......................................................................................................................6
1.9 Organization of the Paper....................................................................................................................6
CHAPTER TWO...........................................................................................................................................7
Review of Related Literature.........................................................................................................................7
2.1 Definition of service............................................................................................................................7
2.1.2Characteristics of Services.............................................................................................................7
2.1.3 E- service......................................................................................................................................9
2.2 Definition of E-Banking......................................................................................................................9
2.2.1 Forms of E-Banking....................................................................................................................10
2.3 Benefits of E-banking........................................................................................................................12
2.3.1. Benefit of E-banking for Banks.................................................................................................14
2.3.2 Benefit of E-banking for Customers...........................................................................................14

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 2.4 E-banking Service Quality.................................................................................................................15
2.5 Customer Satisfaction........................................................................................................................16
2.6 Customer Satisfaction in E-Banking..................................................................................................17
2.7 The Relationship between Service Quality and Customer Satisfaction.............................................18
2.8 Measuring Customer Satisfaction......................................................................................................19
2.9 Empirical Evidences..........................................................................................................................21
2.10. Definition and Features of Independent Variable...........................................................................23
Chapter Three...............................................................................................................................................26
Research Methodology................................................................................................................................26
3. Introduction..............................................................................................................................................26
3.1 Research approach.............................................................................................................................26
3.2 Research Design.................................................................................................................................26
3.3Target Population................................................................................................................................27
3.4 Sampling Procedure, Sampling techniques and Sample size.............................................................27
3.4.1 Sampling procedure....................................................................................................................27
3.4.2 Sampling Techniques..................................................................................................................27
3.4.3 Sample Size.................................................................................................................................28
3.5 Sources of Data and Data Collection Techniques..............................................................................28
3.6 Data Analysis Techniques..................................................................................................................28
3.7 Research Model.................................................................................................................................29
3.8 Reliability and Validity of the Research............................................................................................29
CHAPTER FOUR......................................................................................................................................31
4. DATA PRESENTION, ANALYSIS AND DISCUSION.......................................................................31
4.1. Demographic Characteristics............................................................................................................32
4.1.2. Mean and Standard Deviation....................................................................................................34
4.2. The relationship between customer satisfaction and demographic variable in e-banking................35
4.2.1. Regression Analysis...................................................................................................................37
Test for Multicollinearity.....................................................................................................................37
4.2.4 Regression Analysis between Customer Satisfaction on E-Banking and Explanatory Variables
..............................................................................................................................................................42
4.3 Interview Responses..........................................................................................................................46
Chapter five..................................................................................................................................................48
summary , Conclusion and Recommendation.............................................................................................48
5.1 Summery of finding...........................................................................................................................48
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 5.2. conclusion.........................................................................................................................................49
5.3. Recommendation..............................................................................................................................49
5.4 Research limitation and Future Research area..................................................................................49

LIST OF TABLES
Table
Page

Table 4. 1. Cronbach Alpha Coefficient for each Variable...........................................................31

Table 4. 2 Demographic Profile of E-banking Customers............................................................32
Table 4. 3 Mean & Standard Deviation.........................................................................................34
Table 4. 4 One way ANOVA for demographic factors.................................................................35
Table 4. 5 Correlation Coefficient Result ....................................................................................37
Table 4. 6 multicollinearity test.....................................................................................................40
Table 4. 7: Model Summery..........................................................................................................41
Table 4. 8: ANOVA.......................................................................................................................42
Table 4. 9: Regression Coefficient Analysis of the model............................................................43
Table 4. 10 Summary of the Overall Outcome of the Research Hypotheses................................45

LIST OF FIGURE
Figure Page

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Figure 2.1 Conceptual frame work of the study ……………………………………………..24
Figure 4.1: Normal Point Plot of Standardized Residual ………………………………………38

Table 4.2 Normality test……………………………………………………………………….……39

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ix
Abstract

The main purpose of this study was to investigate effect of e-banking services quality on
customer satisfaction, in relation with demographic characteristics, and major problems in e-
banking activities to satisfy the customers of commercial bank of Ethiopia in Debretabor city.
The study used quantitative research approach. ANOVA test were computed to examine the
relationship between demographic characteristics and satisfaction of e-banking users. The
sample populations of the study were the five branches of commercial bank of Ethiopia in
Debretabor city by using Non-probability sampling method (convenience sampling) had been
adopted in selecting a sample size of 394.Primary data were collected by using 5-point Likert -
Scale structured questionnaire and interview with marketing managers and customer service
supervisors of commercial bank of Ethiopia. A total of 375 questionnaires were properly filled
and returned. The quantitative aspects of the data were analyzed through SPSS version 20.
Customer’s satisfaction on E–Banking is above satisfactory level with a mean value of 3.8102 on
a 5 point Likert scale. Out of the e-banking service quality dimensions transaction efficiency
(mean of 4.0627), service security (mean of 3.8378) and reliability (mean of 3.8) are the majors
to improve e-banking service quality and in turn overall customer satisfaction. Thus,
management bodies of commercial banks should strive to scale up these service dimensions.
There was also a relationship between satisfaction in e-banking and age and educational level of
users of e-banking. The major problem faced by commercial bank of Ethiopia in relation to e-
banking is network failure due to poorly developed telecommunication infrastructure, lack of
reliable power supply. In order to sustain a reliable service for such technology, commercial
bank of Ethiopia should work with government bodies (Ethio-Telecom and Ethiopian Electric
Power). They also need to developed skills and knowledge of customers in using e-banking
service.
Key words: E-banking, Customer Satisfactio

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 CHAPTER ONE

1. INTRODUCTION
This chapter presents the background of the study, statement of the problem, objective of the
study, research questions, research hypothesis, significance of the study, scope, and limitations
of the study and finally it include organization of the paper.

1.1 Background of the Study

Electronic banking is considered as a new revolution of the traditional banking services which
offers customers the greatest expediency for performing banking transactions via electronic.
Electronic banking technology have created new ways of handling banking transactions and give
everybody the opportunity for easy access to their banking activities(tefere,2013)

E-banking is one of the most recent channels of distribution used by banks. This method was
established in the mid-1990s, there after becoming more important. It has been widely used in
developed countries. However, in developing country, the spread is much limited. As suggested
by Classens, Glaessner, &Klingebiet (2002), developing countries in general have an advantage
as they can learn from the experience of advanced country.

The rapid growth of information and communication technology (ICT) is knocking the front
door of every organization in the world; Where Ethiopian's financial sector cannot remain an
exception (Gardachew 2010,). In the face of rapid expansion of electronic payment (E-
payment) systems as a result of the growth of information communication technology (ICT)
throughout the developed and the developing world, Commercial bank of Ethiopia cannot
remain an exception in expanding the use of the system. Thus, E-banking plays a vital role in the
banking industry by creating value for banks and customers, that it enabled banking institutions
to compete more effectively in the global environment by extending their products and services
beyond the restriction of time and space (Turban, 2008).

After the Ethiopian victory over Fascist Italy, the new government established the State Bank of
Ethiopia a proclamation issued on 26 August 1942. State Bank of Ethiopia commenced full
operations on 15 April 1943 with two branches and 43 staff. It served both as Ethiopia's central
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bank with the power to issue banknotes and coins as the agent of the Ministry of Finance, and as
the principal commercial bank in the country. In 1963, the Ethiopian government split the State
Bank of Ethiopia into two banks, the National Bank of Ethiopia (the central bank), and the
Commercial Bank of Ethiopia (CBE). In 1958, the State Bank of Ethiopia established a branch in
Sudan that the Sudanese government nationalized in 1970. The government later merged Addis
Bank into the Commercial Bank of Ethiopia in 1980 to make CBE the sole commercial bank in
the country (Mauri, 2008). Pioneer to introduce modern banking to the country. It has more than
1900 branches stretched across the country. The leading Ethiopian commercial bank with assets
of 1.23 trillion Birr as on December 31 2022.Plays a catalytic role in the economic progress &
development of the country. The bank is pioneer to introduce modern banking to Ethiopia and
credited for playing a catalytic role in the economic progress and development of the
country.Theintroduction of e-banking technology was the first time started by commercial bank
of Ethiopia in 2001, introducing the first visa card service but it was not successful since 2005
due to infrastructural problem(worku, 2010) ) .Currently CBE has more than 37.9 million
account holders and the number of Mobile and Internet Banking users also reached more than 7.9
million and 37k respectively as of December 31 2022. Active ATM card holders reached more
than 8.7 million and 17 million CBE birr users. As of December 31 2022, 1708 ATM machine
and 11,796 POS machines were available. It has strong correspondent relationship with more
than 50 renowned foreign banks like Commerz Bank A.G., Royal Bank of Canada, City Bank,
HSBC Bank,....CBE has a SWIFT bilateral arrangement with more than 700 others banks across
the world (Commercial Bank of Ethiopia, 2014).CBE combines a wide capital base with around
70000 talented and committed employees. Pioneer to introduce Western Union Money Transfer
Services in Ethiopia early 1990s and currently working with other 20 money transfer agents like
Money Gram, Atlantic International (Bole), Xpress Money.CBE has opened two branches in
South Sudan. It is contemplating re-opening a branch in Djibouti, and opening branches in Dubai
and Washington DC, all to serve the Ethiopian Diaspora. CBE has reliable and long-standing
relationships with many internationally acclaimed banks throughout the world.

Now a days, people are so busy in their work lives, that they don't even have time to go to the
bank for conducting their transaction. thus, banks provide e-banking facility to their customer as
an added advantage. These service enable people to carry out their banking transaction such as -
see their account balance ,pay bill, view account records of transaction, transfer money to linked
account with in the same bank or other private banks, check interest in the accounts, send money
overseas etc

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This study including e-banking platforms such as ATM, POS, mobile , internet banking and CBE
Birr. Therefore, the study is designed to examine the effect of e-banking service on the
satisfaction of its users in the case of Commercial bank of Ethiopia in Debretabor city. It also
assesses whether e-banking customers are constrained by the technology, particularly on the
basis of different demographic characteristics, such as different age groups, educational level,
occupation and marital status etc.

1.2 Statement of the Problem

In today’s competitive and turbulent environment banks in Ethiopia are involved in stiff
competition to attract customers by delivering various services (Thakur, 2011). It is better for
customers to have wide choices to select best bank for them to satisfy their needs. For banks as
well, they have to find the ways to satisfy customers and keep competitive advantage above other
banks. In the face of rapid expansions of electronic payment (E-payment) systems, almost all
banks in Ethiopia are fast moving towards launching new technology based on products and
services such as internet banking, mobile banking, ATMs, CBE Birr, POS etc.
Commercial bank of Ethiopia have launching e-banking service as part of ensuring service
excellence by reducing waiting time, errors, costs, and improve customer satisfaction. In order to
encourage or discourage further e-banking expansion in the bank, a better understanding on its
effect on customer satisfaction is critical. However, there is a limited studies are available in
Ethiopia, specifically in case of commercial bank of Ethiopia in Debretabor city on the important
of e-banking service in bringing customer satisfaction. Therefore, more studies are still required
to understand the relevancy of e-banking in Debretabor city.
Assefa (2013) conducted a study on the effect of e-banking on customer satisfaction in two
branches of private banks in Gonder city. The researcher used qualitative approach in analyzing
his study and it was limited to the customer of two private banks only. In addition to this, only
ATM was considered as e-banking service. Ayana (2012) also conduct a research on factors
affecting the adoption of e-banking system in Ethiopia e-banking industry. (Gardachew, 2010)
conducted a research on the opportunities and challenges of e-banking in Ethiopia. Still this
study was entirely focused on factors that affect the adoption of e-banking. Satisfaction of
customers towards e-banking required to investigate to understand the relevance of e-banking on
commercial banking of Ethiopia in Debretabor city. Therefore, this study bridged the gap of
methodology by using quantitative approach which employs MLR model and by including other
e-banking platforms such as POS, mobile banking, internet banking and CBE Birr.

Therefore, this study is designed to examine the effect of e-banking service on the satisfaction of
its users. It also assesses whether e-banking customer are constrained by the technology,
3
particularly on the basis of different demographic characteristics, such as different age groups,
educational level, employment status ad etc.

1.3 Objectives of the Study

1.3.1 General Objective
The main objective of this study was to examine the effect of electronic banking service quality
on customer satisfaction in commercial bank of Ethiopia in Debretabor city.

1.3.2 Specific Objectives

Specifically, the study has the following specific objectives;

 To identify the major electronic banking service dimensions that have effect on
customer satisfaction.
 To examine the level of customer satisfaction in e-banking service.
 To examine the relationship of demographic variables (age, marital status, occupation
and education) and customers satisfaction in e-banking service.
 To identify problems in e-banking service activities to satisfy customers.

1.4 Research Questions

Based on the above stated objective the following research questions are formulated:

 What are the major electronic banking service dimensions that have the effect on
customer satisfaction commercial bank of Ethiopia?
 What is the level of customer satisfaction in e-banking service in commercial bank of
Ethiopia?
 Is customer satisfaction in e-banking service related to age, occupational, marital status
and educational status?
 What are the major problems in e-banking activities to satisfy the customer of
commercial bank of Ethiopia?

1.5 Research Hypothesis

H1o: Reliability has no positive significant effect on customer satisfaction

H1a: Reliability has positive significant effect on customer satisfaction

H2o: service content has no positive significant effect on customer satisfaction

4
 H2a: service content has positive significant effect on customer satisfaction

H3o: ease to use has no positive significant effect on customer satisfaction

H3a: ease to use has positive significant effect on customer satisfaction

H4o: transaction efficiency has no positive significant effect on customer satisfaction

H4a: transaction efficiency has positive significant effect on customer satisfaction

H5o: service security has no positive significant effect on customer satisfaction

H5a: service security has positive significant effect on customer satisfaction

H6o: customer support has no positive significant effect on customer satisfaction

H6a: customer support has positive significant effect on customer satisfaction

1.6 Significance of the Study

The outcomes and results of this research will have potential value to financial
institutions, particularly banks to understand the effect of variables of e-banking on
customer satisfaction and realize the existing limitations of e-banking service within the
sector. Studies also enable banks to formulate appropriate strategies in building customer
satisfaction. This thesis will also help other researchers to conduct further studies on e-
banking service and its effect on customer satisfaction by including other e-banking
service dimensions. In addition to this, this thesis will help readers to gain knowledge and
better understanding in the area of e-banking service and customer satisfaction.

1.7The Scope of the Study

The study on the effect of e- banking service were delimited to commercial bank of Ethiopia,
specifically the five branches customers (Debretabour, Gafat, begemider, Abatatek, and Guna
Branches) in Debretabor city.

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1.8 Limitations of the Study
The research limited by geographically in Debretabor city ,thus, the exclusion of customers
because of branches in the city are limited, all branches don’t have equal customer flow.

1.9 Organization of the Paper

This research report comprises five chapters. Chapter one consists of introduction that
including background of the study, statement of the problem, objectives, research questions,
hypothesis, significance of the study, scope and limitations of the study. Chapter two
consists of Review of Related Literature, Chapter Three deals with research methodology,
This chapter includes research approach, research design, Sampling techniques and procedure,
source of data and data collection techniques, method of data analysis and validity and reliability.
Chapter four will be shows data analysis and interpretation and Chapter five which is the last
chapter consisting of summary of the major findings, conclusions and recommendations

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CHAPTER TWO

Review of Related Literature

2. THEORETICAL REVIEW

2.1 Definition of service

A service is any activity or benefit that one party can offer to another which is essentially
intangible and does not result in the ownership of anything. The advance economies of the World
are now dominated by services and virtually all companies view services as critical to retaining
their customers today and in the future (Zeithaml&Bitner, 2003).
Kotler and Armstrong (2006) defined: Service is any act or benefit that one party can provide to
another that is fundamentally intangible or untouched and does not affect the ownership of
anything. Its production can or cannot be tied to a physical product. it also defined as any
activities and takes place in interaction between the client and services, products or systems of
the service provider which are offered as solutions to solve problems for customers.

2.1.2Characteristics of Services
Service marketing is distinct from goods marketing (Dibb et. al, 2001). To understand the nature
Of services marketing, it is necessary to appreciate the particular characteristics of services (Dibb
et.al.,2001).Service have four intrinsic characteristics that leads to different consumer
perceptions and behavior makes it more difficult to evaluate quality and in turn making it more
challenging and complicated to achieve customer satisfaction and establishing competitive
advantage. Thus, services managers must deeply understand them to survive in the complex
service environment. The four basic characteristics of service are: Intangibility, Inseparability,
Perish ability, and Heterogeneity.
Intangibility
Services differ from goods most strongly in their intangibility (Dibb, S., Simkin, L., Pride,
W.andFerrel, O.C, 2001). Intangibility stems from the fact that services are performances. They
cannot be seen, touched or smelled, nor can they be possessed. Intangibility also relates to the
difficulty that consumers may have in understanding service offerings (Dibb et. al., 2001).
Services have a few tangible attributes, called search qualities that can be viewed prior to
purchase, such as neatness of nurses and Doctors, cleanliness of the facilities such as waiting
stations, toilets and the like.

7
When consumers cannot view a service product in advance and examine its properties, they may
not understand exactly what is being offered (Dibb et. al., 2001). On the other hand, services are
high in experience and credence qualities.
Experience qualities are those qualities that can be assessed only after purchase and consumption
these include characteristics such as taste or duration of well-being. Credence qualities are those
qualities that cannot be assessed even after purchase and consumption for examples results of
medical procedures. Few customers possess medical skills sufficient to evaluate whether the
service is or was necessary and performed in a proper manner (Dibb et. al., 2001).

Inseparability
Inseparability refers to the notion that, in many service operations, production and consumption
cannot be separated; that is a service is to a greater extent consumed at the same time as it
produced. Unlike most goods that are produced first sold and consumed, most services are sold
first and then produced and consumed simultaneously (valarie.et.al.,2003) e.g. the doctor cannot
possibly perform the service without the patient’s presence, and the consumer is actually
involved in the production process (Dibb et. al., 2001).These characteristics of service makes it
difficult to achieve standardization and economies of scale through centralized production.
Perish ability
Perish ability refers to the fact that unlike physical goods, services cannot be saved, stored,
resold, or returned (Zeithaml and Bitner2003). Unused capacity on one occasion cannot be stock
pilled or inventoried for future occasions, because production and consumption are simultaneous.
Heterogeneity
Heterogeneity refers to the variability in the quality of service, since most services are labor
intensive, they are susceptible to heterogeneity. For the service to be provided and consumed the
client physically meets and deals directly with the service providers personnel. Direct contact
and interaction are distinguishing features of services. People typically perform services, and
people do not always perform consistently. It is also true that the characteristics of services
themselves make it possible for marketer to customize their offerings to consumers. In such
cases, services marketers often face a dilemma; how to provide efficient, standardized service at
some acceptable level of quality while simultaneously treating each customer as a unique person
(Dibb et. al., 2001).

2.1.3 E- service
E-services are services delivered over the Internet. The fact that the services are delivered over
the Internet pose some challenges to the service providers. First of all, the direct contact between

8
service employees and customers is missing and secondly the service delivery setting is
completely changed. In the case of e-services, websites become the “moment of truth” between
customers and the company (Iwwarden, Wiele, Ball & Millen, 2003). As a result the websites
(user-interface) determine to high extent how the service is delivered to the customers.
Customers evaluate both what the company offers and how it offers it. Because of the lack of
face-to-face interaction with service representatives, the user interface (site design) is what
customers of e-services interact with, and as such it can be expected to influence their evaluation
of the overall service quality.

2.2 Definition of E-Banking

E-banking has a variety of definitions all refer to the same meaning, the following section show
some of these definitions. E-banking is a form of banking service where funds are transferred
through an exchange of electronic signal between financial institutions, rather than exchange of
cash, checks, or other negotiable instruments (Kamrul 2009). E-banking, also known as
electronic funds transfer (EFT), is simply the use of electronic means to transfer funds directly
from one account to another, rather than by check or cash (Malak 2007). The term of E-banking
often refers to online banking/Internet banking which is the use of the Internet as a remote
delivery channel for banking services (Furst&Nolle 2002, p.5). With the help of the internet,
banking is no longer bound to time or geography. Consumers all over the world have relatively
easy access to their accounts 24 hours per day, seven days a week.

E-banking can be also defined as a variety of platform such as internet banking or (online
banking), TV-based banking, mobile phone banking, and PC (personal computer) banking (or
offline banking) whereby customers access these services using an intelligent electronic device,
like PC, personal digital assistant (PDA), automated teller machine (ATM), point of sale (POS),
kiosk, or touch tone telephone (Alagheband 2006, p.11).In general, E-banking is an umbrella
term for the process by which a customer may perform banking transactions electronically
without visiting a brick-and-mortar institution.

2.2.1 Forms of E-Banking

2.2.1.1 Automated Teller Machines (ATM)

According to Sultan and Komal (2009) Automated Teller Machines (ATMs) were the first
well-known machines to provide electronic access to customers. With advent of Automatic
Teller Machines (ATM), banks are able to serve customers outside the banking hall. ATM is
designed to perform the most important function of bank. It is operated by plastic card with its

9
Special features. The plastic card is replacing cheaque, personal attendance of the customer,
banking hour’s restrictions and paper based verification. ATMs have made hard cash just
Seconds away all throughout the day at every corner of the globe. ATMs allow customers to do a
number of banking functions – such as withdrawing cash from one’s account, making balance
inquiries and transferring money from one account to another – using a plastic, magnetic-stripe
card and personal identification number issued by the financial institution. ATM does not mean
the plastic card and PIN (Personal Identification Number) but the services for which customers
can use it the most important part.

ATM is an electronic machine in a public place, connected to a data system and related
equipment and activated by a bank in which customer to obtain banking services without going
in to the banking hall. It allows customers to access banking services such as withdrawals,
transfers, inquiries about account balances, requests for cheaque books, account statements,
direct deposits, foreign currency exchange etc. (Fenuga, 2010). Using an ATM requires an ATM
card and a pass code, often referred to as a PIN (Personal Identification Number).

2.2.1.2 Internet banking

It is an electronic home banking system using web technology in which Bank customers are able
to conduct their business transactions with the bank through personal computers. Internet
banking is conducted by completing bank transactions by directly accessing the bank through the
internet. Nowadays, internet banking customers can access many different services online, which
makes physical banks open even after office hours. Internet banking allows customers of a
financial institution to conduct financial transactions on a secure website operated by the
institution. Internet banking can be conducted either by accessing the internet with a computer or
by using a phone that has internet features (Alabar& Timothy, 2012).
Internet banking refers to systems that enable bank customers to access accounts and general
information on bank products and services through a personal computer or other intelligent
device. The biggest advantage of Internet banking is that people can expand the services sitting
at home, to transact business. Due to which, the account holder does not have to personally visit
the bank. At an advanced level, internet banking is called transactional online banking, because it
involves the provision of facilities such as accessing accounts, transfer of funds, and buying
financial products or services online .With the help of Internet banking, the account holder can
execute many transactions. When small transactions like balance inquiry, record of recent
transaction, etc. are to be processed, the Internet banking facility proves to be very handy. The

10
concept of Internet banking has thus become a revolution in the field of banking and finance
(Alabar& Timothy, 2012).
Internet banking refers to the use of the internet as a delivery channel for banking services,
which includes all traditional services such as balance enquiry, printing statement, fund transfer
to other accounts, bills payment and new banking services such as electronic bill presentment
and payment (Frust, Lang, &Nolle, 2000) without visiting a bank (Mukherjee & Nath,2003).
According to channel (Chau& Lai, 2003), the rapid growth and popularity of the internet has
created great opportunities as well as threats to companies in various business sectors, to endorse
and deliver their products and services using internet as a distribution channel.

2.2.1.3 Point-of-Sale Transfer Terminals (POS)

The system allows consumers to pay for retail purchase with a check card, a new name for debit
card. This card looks like a credit card but with a significant difference. The money for the
purchase is transferred immediately from account of debit card holder to the store's account
(Malak,2007). Point of Sale (POS) also sometimes referred to as Point of Purchase (POP)
checkout is the location where a transaction occurs. A "checkout" refers to a POS terminal or
more generally to the hardware and software used for checkouts, the equivalent of an electronic
cash register. A POS terminal manages the selling process by a sales person accessible interface.
The same system allows the creation and printing of the receipt (Shittu,2010).

2.2.1.4 Mobile banking

Mobile banking (also known as M-Banking) is a term used for performing balance checks,
account transactions, payments, credit applications and other banking transactions through a
mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile
banking services were offered over SMS, a service known as SMS banking. Mobile banking is
used in many parts of the world with little or no infrastructure, especially remote and rural areas.
This aspect of mobile commerce is also popular in countries where banks can only be found in
big cities, and customers have to travel several miles to the nearest bank. The scope of offered
services may include facilities to conduct bank and stock market transactions, to administer
accounts and to access customized information (Tiwari&Buse, 2007).

Mobile Banking refers to provision of bank-related financial services with the help of mobile
telecommunication devices. The scope of offered services may include facilities to conduct bank
transactions, to administer accounts and to access customized information Tiwari, R. and S.
Buse, 2007. Mobile Banking, the aliment of bank-related financial services via mobile devices

11
comprises of services in the field of accounting, brokerage and financial information. Mobile
Banking is increasingly being employed by many banks around the world to generate additional
revenues, reduce costs or to increase customer satisfaction, often with very promising results.
Rajnish et.al.2006.

2.2.1.5 CBE Birr

CBE Birr is a mobile based banking system, in which the bank selects, trains and authorizes
agents to provide banking services on behalf of CBE bank through a mobile phone. The system’s
main goal is to extend financial services to the unbanked segment of the Ethiopian population.
CBE birr enables its users to deposit, withdraw ,transfer money, buy mobile airtime,
paybills(utilities, electricity, water, telecom, DSTV,etc.) and make payments.

2.3 Benefits of E-banking

Banks just like other businesses are tuning to information technology to improve business
efficiency, service quality and attract new customers. Farshad et al.(2013) aver that the most
important factors encouraging consumers to use online banking are lower fees followed by
reducing paper work and human error. Subsequently electronic channels can lead to lower
transaction costs which are very competitive (Claessens and Kliengbiel,2000). Farshad et al.
(2013) is of the view that disputes can be minimized between the employees as there is a clear
flow of processes. Conducting business outside the normal branch working hours has also been a
factor that has been considered convenient for bankers, inexpensive access to the bank 7x24 and
seven days a week. Increased availability and accessibility of more self service distribution
channels help bank administration in reducing the expensive branch network and associated staff
overheads.
A reduction in the percentage of customers visiting the banks with an increase in alternative
channels of distribution will also minimize the queues in branches (Thorntonand White, 2001).
According to Thornton and White (2001) this ultimately leads to improved customer satisfaction.
According to Harrison (2012), companies can gain two fundamental types of benefits from E-
banking. These are generally described as: Value creation or value enhancement for one or more
of a company’s stakeholder’s groups, and lower cost of providing goods and services to the
market place. Value creation includes; improvement in internal and external communication
through effective e-marketing, increment of sales through an ecommerce website integrated with
a back office systems and improvement in supplier relations and productivity through
collaborative work spaces. Lower costs are: reduction in communication and travel cost using
online meeting tools; shared workspaces and; benefit from license free open source alternatives
to proprietary software.

Harrison (2012) suggested that the commercial benefits of E-banking lie in five areas;
12
Firstly, firms are able to expand their geographical reach. Secondly, important cost benefits lie in
improved efficiency in procurement, production and logistics processes. Thirdly, there is
enormous scope for gaining through improved customer communications and management.
Fourthly, the internet reduces barriers to entry for new market entrants and provides an
opportunity for small firms to reorient their supply chain relationships to forge new strategic
partnership. Finally, e-commerce technology facilitates the development of new types of
products and new business models for generating revenues in different ways as well as different
revenue streams.

Humphrey et al., (2001) stated that the introduction and use of E-payment instruments holds the
promise of broad benefit to both business and consumers in the form of reduced costs, greater
convenience and more secure, reliable means of payment and settlement for a potentially vast
range of goods and services offered worldwide over the internet or other electronic networks.
Electronic Payments as argued by (Cobb, 2005) have a significant number of economic benefits
apart from their convenience and safety. These benefits when maximized can go a long way in
contributing immensely to economic development of a nation.

2.3.1. Benefit of E-banking for Banks

According to Jayawardhena& Foley, 2000 the primary benefits of E- Banking are as follow:-
Price- In the long run a bank can save on money by not paying for tellers or for managing
branches. Plus, it's cheaper to make transactions over the Internet.

Customer Base- the Internet allows banks to reach a whole new market- and a well off one too,
because there are no geographic boundaries with the Internet. The Internet also provides a level
playing field for small banks who want to add to their customer base.
Efficiency- Banks can become more efficient than they already are by providing Internet access
for their customers. The Internet provides the bank with an almost paper less system.
Customer Service and Satisfaction- Banking on the Internet not only allow the customer to
have a full range of services available to them but it also allows them some services not offered
at any of the branches. The person does not have to go to a branch where that service may or
may not be offer. A person can print of information, forms, and applications via the Internet and
be able to search for information efficiently instead of waiting in line and asking a teller. With
more better and faster options a bank will surely be able to create better customer relations and
satisfaction.

13
Image- A bank seems more state of the art to a customer if they offer Internet access. A person
may not want to use Internet banking but having the service available gives a person the feeling
that their bank is on the cutting image.

2.3.2 Benefit of E-banking for Customers

The main benefit from the bank customers’ point of view is significant saving of time by the
automation of banking services processing and introduction of an easy maintenance tools for
managing customer’s money. The main advantages of E-banking for corporate customers as per
Gurău, 2002) are as follows:-
Reduced costs in accessing and using the banking services.
Increased comfort and timesaving — transactions can be made 7x24, without requiring the
physical interaction with the bank.
Quick and continuous access to information: Corporations will have easier access to information
as, they can check on multiple accounts at the click of a button.
Better cash management: E-banking facilities speed up cash cycle and increases efficiency of
business processes as large variety of cash management instruments are available on internet
sites. For example, it is possible to manage company’s short term cash via internet banks
(investments in over-night, short- and long term deposits, in commercial papers, in bonds and
equities, in money market funds).Private customers seek slightly different kind of benefits from
E-banking. The main benefits from E-banking for private customers are as follows:-
Reduced costs: This is in terms of the cost of availing and using the various banking products
and services.
Convenience: All the banking transactions can be performed from the comfort of the home or
office or from the place a customer wants to.
Speed: The response of the medium is very fast; therefore customers can actually wait till the last
minute before concluding a fund transfer.
Funds management: Customers can download their history of different accounts and do a “what-
if” analysis on their own PC before affecting any transaction on the web. This will lead to better
funds management.

2.4 E-banking Service Quality

The present business era is now named as “Quality Era” because perceived quality of the product
is becoming the most important competition factor in business world (Bedi, 2010). It is now the
most powerful competition weapon and organization’s life giving blood. Perceived service
quality refers to the consumer’s global attitude or judgment of the overall excellence or

14
superiority of the service. It is a result from comparisons by consumers of expectations with their
perceptions of service (Caruana& Malta, 2002). Delivering quality service means conforming to
customer expectations on a consistent basis (Thakur,2011). Today one of the most dominant
topics of research in services is service quality. It is necessary for service providers to understand
how customers evaluate the quality of service. When customers consume a product, they
compare the quality of experience with their prior expectations, which leads to their satisfaction
or dissatisfaction (Thakur, 2011).Therefore services marketing researchers based their work on
developing a service quality concept focused on consumer behavior instead of using
manufacturing quality concepts (Dhandabani, 2010). Thus it had been recognized that customers
evaluate service quality by comparing the actual performance with service expectations that they
held (Thakur, 2011).
Service quality has recognized as a key factor in keeping competitive advantage and sustaining
satisfying relationships with customers. Service quality leads to overall customer satisfaction.
Service quality is one of the service factors contributing to customers’ satisfaction judgments and
can be considered in multi-level and multi-dimensional. Service quality in e- banking may
enhance customer satisfaction because in e- banking can access to a variety of financial
transaction .
Yang, Jun, and Peterson (2001) identified five online service quality dimensions (responsiveness,
reliability, competence, access and security) and their relationships with the customer
satisfaction. Liu and Arnett (2000) identified five critical dimensions of online service quality in
relations to customer satisfaction in the website. Among these, the quality of information that is
relevant, accurate, timely, customized and complete are given priority for the customer
satisfaction in the online service. Johnston (1997) identified attentiveness, responsiveness care
and friendliness as the main sources of satisfactions (satisfiers) in banking services, and integrity,
reliability, availability and functionality as the main sources of dissatisfaction. Security, correct
transaction, customer control on transaction (personalization), order tracking facilities and
privacy are other important factors in the online service that affect the customer satisfaction. Jun
and Cai (2000) identified 17 service quality dimensions of E-banking service quality. These are
reliability, responsiveness, competence, courtesy, credibility ,access, communication,
understanding the customer, collaboration, continuous improvement, content, accuracy ,ease of
use, timeliness, aesthetics, security and divers features. They also suggested that some
dimensions such as responsiveness, reliability and access are critical for both traditional and
internet banks.

15
2.5 Customer Satisfaction
Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectation. Customer satisfaction is also defined as the number of customers
whose reported experience with a firm exceeds specified satisfaction goals (Farris, Paul et al.,
2010). Another definition of customer satisfaction refers to the extent to which customers are
happy with the products and/or services provided by a business. Further definition of customer
satisfaction states that it is a term generally used to measure a customer's perception of a
company's products and/or services (Ahmed, 2005). It's not a straight forward science. Customer
satisfaction will vary from person to person, depending on a whole host of variables which may
be both psychological and physical. Kotler and keller (2006) defines satisfaction as a person's
feelings of pleasure or disappointment resulting from comparing a product's or service’s
perceived performance (or outcome) in relation to his or her expectations. Customer satisfaction
is also defined as an "evaluation of the perceived discrepancy between prior expectations and the
actual performance of the product" (Samuel, 2006). These definitions of customer satisfaction
have in common that, if the performance falls short of expectations, the customer is dissatisfied.
If the performance matches the expectations, the customer is satisfied. If the performance
exceeds expectations, the customer is highly satisfied or delighted. In conclusion, customer
satisfaction is defined as a result of customer’s evaluation to the consumption experience with
the services. However, the customers have different levels of satisfaction as they have different
attitudes and perceived performance from the product/service. In researching satisfaction, firms
generally ask customers whether their product or service has met or exceeded expectations.
Thus, expectations are a key factor behind satisfaction. When customers have high expectations
and the reality falls short, they will be disappointed and will likely rate their experience as less
than satisfying (John &Joby, 2003).

2.6 Customer Satisfaction in E-Banking

Customer satisfaction is a key determining factor why customers leave or stay with a bank.
(Thakur (2011) noted that although customer satisfaction and quality appear to be important for
all firms, satisfaction is more important for loyalty in service industries like bank. Because even
if the customers appear to be satisfied, they may look for other bankers if they believe they might
receive better service elsewhere (Thakur (2011). Thus the banking organizations need to know
how to keep their customers. However, keeping customers is also dependent on a number of
other factors. These include a wider range of service choices, greater convenience, better prices,
and enhanced income (Thakur, 2011).

16
During the recent years, the development of e-channels has dramatically changed the rules and
operation in the banking industry (Gardachew 2010). Aladwani (2001) mentioned that while the
industry has moved instantly to deploy and offer new banking services via e-channels for
customers and in consequence the e-banking services have boomed promptly .Today, several
financial institutions are endeavoring to emphasize customer –oriented services. For this sake, it
is crucial to implement new banking services in order to develop and keep better relationships
with customers. Hence building up competitive predominance almost depends on customers‟
satisfaction with banking service. It is recognized that banks gaining higher customer satisfaction
will have a conspicuous marketing ascendancy because the higher customer satisfaction is
associated with greater revenues, increased cross-sell rations, higher customer retention and
bigger market share (Gonzalez et.al. 2004).

A study by Kumbhar (2011) on customer Satisfaction towards E-banking services of ICICI bank
in Chennai City, India which consider factors affecting on customers‟ satisfaction: an empirical
investigation of ATMs service and examined that the cost effectiveness of ATM service were
core service quality dimension and it was significantly affecting on overall customer satisfaction
in ATM service provided by commercial banks. However, result of factor analysis indicates that
cost effectiveness, easy to use and security & responsiveness were also influence customer
satisfaction. Therefore, banks should concentrate their efforts on these dimensions for cater
better ATM service to satisfy their customers.

Zeinthaml et.al.(2000) expressed their view customer satisfaction is an ambiguous and abstract
concept. Actual manifestation of the state of satisfaction will vary from person to person, product
to product and service to service. The state of satisfaction depends on a number of factors which
consolidate as psychological, economic and physical factors. The quality of the service is one of
the major determinants of customer satisfaction and many researchers and experts mentioned
that, service quality can be enhanced by using advanced information and communication
technology (ICT).

2.7 The Relationship between Service Quality and Customer Satisfaction

The status or prestige of an organization is determined by the quality of the provided services.
Organization of high quality level of its services has a high competitive position. Achieving a
high level of services meet the needs of customers. Studies confirmed that service quality and
customer satisfaction have strong relationship (Alagheband, 2006; Bedi, 2010; Keiningham,
2005). When the customer receives high quality service his behavior and attitude towards the
organization will be positive and that would strengthen the relationship with the organization and

17
vice versa. Customer satisfaction is the most important criteria that enable organizations to
ensure the quality of their goods or services (Parasuraman et al., 1985). In case of the banking
sector, recognized standard scales to measure the perceived quality of a bank service is not
available. Thus providing high quality service is being taken as an important weapon to survive
and to gain and maintain competitive advantage (Bateson, 1985) cited in Thakur (2011).
For commodity like products, quality can be measured easily by its features. But quality of
service depends heavily on the quality of the personnel of service provider or the provider
Service quality is an important tool to measure customer satisfaction and there is a close
relationship between service quality and customer satisfaction (Kadir, Rahmani&Masinaei,
2011). Although confusion still exists between the two concepts (service quality and
satisfaction), several authors have managed to highlight the distinction between them. Thus,
‘service quality is the managerial delivery of services while satisfaction is customers’
experiences with those services’ (Lenka, Suar et al., 2009, p. 50) And is considered a
consequence of service quality (Lassar, Manolis et al., 2000; Mohammed and Mohammad, 2003;
Reimann, Ulrich et al., 2008). Other authors consider that ‘service quality is a consumer’s
judgment about the service itself, while satisfaction is more a judgment of how the
service emotionally affects the consumer’ (Schneider and White, 2004, p. 51).

2.8 Measuring Customer Satisfaction

Customer satisfaction is measured at the individual level, but it is almost always reported at an
aggregate level. Customer satisfaction is an ambiguous and abstract concept and the actual
manifestation of the state of satisfaction will vary from person to person and product/service to
product/service. The state of satisfaction depends on a number of both psychological and
physical variables which correlate with satisfaction behaviors such as return and recommend
rate. The level of satisfaction can also vary depending on other options the customer may have
and other products against which the customer can compare the organization's products (David,
2010).
Most researchers found that service quality is the antecedent of customer satisfaction (Bedi,
2010; Kumar et al., 2010; Kumar et al., 2009; Naeem and Saif, 2009; Parasuraman et al., 1988).
Quality customer service and satisfaction are recognized as the most important factors for bank
customer acquisition and retention (Jamal, 2004; Armstrong and Seng, 2000; Lassar et al., 2000).
Service quality is considered as one of the critical success factors that influence the
competitiveness of an organization. A bank can differentiate itself from competitors by providing
high quality service.

18
Yang, Jun, & Peterson (2004) identified five online service quality dimensions (responsiveness
reliability, competence, access and security) and their relationships with the customer
satisfaction. Wolfinbarger&Gilly (2002) observed that reliability and fulfillment are the strongest
predictors for customer satisfaction. Lui& Arnett (2000) identified five critical dimensions of
online service quality in relations to customer satisfaction in the website. Among these, the
quality of information that is relevant, accurate, timely, customized and complete are given
priority for the customer satisfaction in the online service. Johnston (1997) identified
attentiveness, responsiveness care and friendliness as the main sources of satisfactions (satisfiers)
in e-banking services, and integrity, reliability, availability and functionality as the main sources
of dissatisfaction. Khalil & Pearson (2007) have found that trust significantly affects attitude
towards internet banking acceptance. To encourage internet banking adoption, banks need to
develop strategies that improve the customer’s trust in the underlying technology. The other
factors include quick response, assurance, follow-up and empathy. Security, correct transaction,
customer control on transaction (personalization), order tracking facilities and privacy are other
important factors in the online service that affect the customer satisfaction.

Jun &Cai (2001) identified 17 service quality dimensions of Internet banking service quality.
These are reliability, responsiveness, competence, courtesy, credibility, access, communication,
understanding the customer, collaboration, continuous improvement, content, accuracy, ease of
use, timeliness, aesthetics, security and divers features. They also suggested that some
dimensions such as responsiveness, reliability and access are critical for both traditional and
internet banks.
Hua (2009) conducted an experiment to investigate how user’s perception about online banking
is affected by the perceived ease of use of website and the privacy policy provided by the online
banking website. In this study, it also investigates the relative importance of perceived ease of
use, privacy, and security. Perceived ease of use is of less importance than privacy and security.
Security is the most important factor influencing user’s adoption.

2.9 Empirical Evidences

Some related studies are conducted by different researchers in different parts of the world.
However, there are limited numbers of studies conducted in Ethiopia on e-banking technology.
Specifically (Gardachew, 2010) conducted a research on the opportunities and challenges of e-
banking in Ethiopia. The study was focused on analyzing the status of electronic banking in
Ethiopia and investigates the main challenges and opportunities of implementing e-banking
system. The author conducted a survey on the existing operating style of banks and identifies

19
some challenges of using e-banking system, such as, lack of suitable legal and regulatory frame
works for e-commerce and e- payments, political instability in neighboring countries, high rates
of illiteracy and absence of financial networks that links different banks.
Ayana,(2012) also conducted research on factors affecting adoption of E-banking System in
Ethiopian Banking industry. The study was conducted based on the data gathered from four
banks in Ethiopia. The result of the study indicated that, the major barriers Ethiopian Banking
industry faces in the adoption of Electronic banking are: security risk, lack of Trust, lack of legal
and regulatory framework, Lack of ICT infrastructure and absence of Competition between local
and foreign banks. The study also identified perceived ease of use and perceived usefulness as a
driver of adopting E-banking system.
Wondossen&Tsegai (2005) also studied the challenges and opportunities of e-payments in
Ethiopia; their objective was studying of e-payment practices in developing countries. The
authors employed interview and on site observation to investigate challenges to e-payment in
Ethiopia and found that, the main obstacles to the development of e-payments are, lack of
customers trust in the initiatives, unavailability of payment laws and regulations particularly for
e-payment, lack of skilled manpower and frequent power disruption. According to
(Wondwossen&Tsegai, 2005), an adequate legal structure and security framework could foster
the use of e- payments, which is contradicting with the finding of the previous study.
The study of (Bultum, 2014) aims to identify factors that affect adoption of e-banking in the
Ethiopian banking industry. The study was conducted based on the data gathered from four
banks in Ethiopia; three private banks (Dashen bank, Zemen bank and Wegagen bank) and one
state owned bank (commercial bank of Ethiopia). A mixed research approach was used to answer
the research questions that emerge through the review of existing literature and the experiences
of the researcher in respect of the e-banking system in Ethiopia. The study statistically analyzes
data obtained from the survey questionnaire. A research framework developed based on
technology-organization environment model (TOE) developed by Tornatzky and Fleischer. The
result of the study indicated that, the major barriers Ethiopian banking industry faces in the
adoption of electronic banking are: security risk, lack of trust, lack of legal and regulatory frame
work, lack of ICT infrastructure and absence of competition between local and foreign banks.
The study suggests a series of measures which could be taken by the banking industry and by
government to address various challenges identified. These measures include establishing a clear
set of legal framework on the use of technology in banking industry, supporting banking industry
by investing on ICT infrastructure and banks needs to be focused on technological innovation
competition rather than traditional bases of retail bank competition.

20
Furthermore (Assegais, 2013) conducted a study on the impact of e-banking on customer
satisfaction in two privet banks in Gondar city. The researcher employed descriptive and
inferential statistics in analyzing this study and it was limited to customers of two privet banks
only. The results of the study implied that majority of users of e-banking are the young, the
educated, salaried and students, business men and women are not actively using the service of e-
banking, e-banking currently provided for saving and current accounts holders only, e- banking
reduced frequency of bank hall for banking service, reduced waiting time for customers, there
are customers who don’t know the fee charged for being e-banking users , the bank customers
satisfaction increased after being e-banking users, enabled customers to control their account
movements and there is high opportunity to expand e-banking service in the city.
The study of (AlaEddin&Hasan, 2011) on e-banking functionality and outcomes of customer
satisfaction in Jordanian commercial banks, it aims to explore the adoption of e-banking
functionality and investigates the impact of e-banking on the outcomes of customer satisfaction.
A purposive sampling technique was employed to recruit 179 customers representing the desired
range of demographic characteristics (e.g. gender, age, and computer use), previous internet
experience levels and product- related knowledge. The research showed that adoption of e-
banking (accessibility, convenience, security, privacy, content, design, speed, fees and charges)
had a positive effect on Jordanian Commercial Bank customers' satisfaction.
Jannatul (2009) in his study of e-banking & customer satisfaction which focus on understanding
the impact of variables of e-banking, on customer satisfaction in Bangladesh, five service quality
dimensions namely reliability, responsiveness, assurance, empathy, and tangibles are established
based on the SERVQUAL model and the literature review. These variables are tested in e-
banking to explore the relationship between service quality and the customer satisfaction. Data
were gathered through survey interview by a structured questionnaire with 250 customers. The
study shows that these factors are the core service quality dimensions for customer satisfaction in
e-banking. It also explores that reliability, responsiveness, and assurance have more contribution
to satisfy the customers of e-banking in Bangladesh.

In general, most of e-banking related studies are too remote for our cases and even the study of
Assefa (2013) which is found to be similar to the present topic were done in qualitative
approach. Thus to address the current gap in the literature, methodology and question of
representativeness this study is designed to examine the effect of e- banking service on customer
satisfaction in the case of Commercial bank of Ethiopia in Debretaborcity city.

21
2.10. Definition and Features of Independent Variable
Reliability
Reliability refers to the ability to perform the promised service accurately and consistently. It
involves accuracy in billing, keeping records correctly, and performing the service at the
designated time. Reliability consists of providing services as promised, dependability in handling
customers’ service problems, prompt reply to customer enquiries, provide services at the
promised time and maintaining error- free record. Reliability is the most important factor in
conventional service ((Parasuraman, Zeithaml, & Berry 1988).

Service content

Service content is all information that is provided to customers. For electronic banking service, it
means the content that banks provide to customers through their website, ATM & POS terminal
and Mobile. High value added content is essential.

Ease of use
Ease of use is important in using e-banking, which related to customer apprehension about the
efforts required to learn to use e-banking (David, 2010). It is considered as the factor influencing
the adoption of e-banking, and related to an easy- to- remember pin codes and URL address,
well- organized and usable software, easy of site navigability, concise and understandable
contents, terms and conditions (Alagheband, 2006).
Transactions Efficiency
Transaction efficiency is the ability of the customers to get any of e-banking service, find the
desire product and information associated with it, and check out with minimal of effort.
Transaction efficiency also can understand as performance of e-banking base on some elements:
up to date information, response time, download time, complete product information,
tutorial/demonstration, and help function (Leelapongprasut et al, 2005) .
Service Security
Security is defined as the freedom from danger, risk, or doubt. It involves physical safety,
financial security and confidentiality. It consists of employees who instill confidence in
customers, making customers feel safe in their transactions, employees who are consistently
courteous and employees who have the knowledge to answer customer question (Parasuraman,
Zeithaml& Berry, 1985). Moreover, security is defined as personal and possessions safety of the
customers. It also includes confidentiality maintained by service providers.
Customer support
Customer support includes before sell and after sell support. Before customer make decisions,
the company should give some support to attract them, let customers feel they are at home. The
relationship is like a good friend not like a business. After customers buy the services or

22
 products, company should solve the problem that customers met or respond to customers’
questions immediately and according to the problems, company can ameliorate them. In the e-
banking industries, support is also important. Not everyone is good at different technology so
they need guide on how to use the service. Sometimes, after services on the e-banking, customers
might have questions waiting to answer, so he or she also needs support. So support is very
important for customers (Rangsan&Titida, 2013)

Figure 2.1Conceptual frame work of the study

Reliability
Service content

Service content
E-banking service quality Customer satisfaction

Transaction efficiency

Service security

Customer support

Source: The researcher adopted for this study based on Zeithaml et al (2000)

23
Chapter Three
Research Methodology
3. Introduction
This chapter deals with the methodology of the study where the research approach, the research
design, sample and sampling techniques, source of data collection, data collection techniques,
method of data analysis and reliability & validity of the study were discussed.

3.1 Research approach

The research approach in this study was chosen based on the purpose (objective of the study) and
the research questions set out to be addressed. According to Creswell (2003, p.13-15), there are
three basic types of research approaches, quantitative, qualitative, and Mixed approach.
Quantitative research is the systematic and scientific investigation of quantitative properties and
phenomena and their relationships. The objective of quantitative research was to develop
and employ mathematical models, theories and hypotheses pertaining to natural phenomena. On
other hand Qualitative research involves studies that do not attempt to quantify their
results through statistical summary or analysis rather adopt interpretive multiple meaning
of experience and observation. Whereas, mixed research approach involves collecting and
analyzing both quantitative (numeric) and qualitative (descriptive) forms of primary data in a
single study (Creswell, 2003).Therefore, in order to attain the objective of the study and answer
the research questions, the researcher were used mixed research approach.
The study were adopted an explanatory research because it is suitable to explain the relationship
between variables as quoted in Mark, Philip & Adrian (2009). In addition to explanatory
research, descriptive studies were also used to describe the characteristics of the sample by using
means and percent.

3.2 Research Design

According to Robson (2002), the three purposes of conducting research are generally the
following: explorative, descriptive and explanative. Explorative research is characterized as the
seeking of new insights, the looking around, and the asking of questions or the bringing of some
phenomenon into new light. Explanative research aims at gaining an explanation of a specific
situation or problem, generally in the form of causal relationships. Finally, Descriptive research
is a type of research that is mainly concerned with describing the nature or condition and the

24
degree in detail of the present situation. Creswell (2003) stated that the descriptive method of
research is used to gathering formation about the present or existing condition.

3.3Target Population
The population of this study were active e-banking user of commercial bank of Ethiopia who
have been using the service above one year. Accordingly, the total population were 80727 and
the target population was 25321 as of annual report of the bank’s Branch Operation Department
Jun 30, 2022. Sampling units were the target population elements available for selection
during the sampling process. The target population of this study were five branches in
Debretabor city; (Debretabour, Gafat, begemider, Abatatek, and Guna Branches).The total target
population of the study was the active e-banking service users who have been use above one year
in the listed branch

3.4 Sampling Procedure, Sampling techniques and Sample size

3.4.1 Sampling procedure
It is typically not practical to include every member of the population in a research study. Time,
money, and resources are limiting factors that make this unlikely. Therefore, most researchers
are forced to study a representative subset—a sample—of the population of interest (Marczyk et
al. (2005) .The researcher used all 5 CBE branches in Debretabor city.

3.4.2 Sampling Techniques

The sampling selection technique for this study has been the non-probability sampling.
Non probability sampling may be defined as any sampling method where some elements of
the population have no chance of selection, or where the probability of selection cannot be
accurately determined. According to, Twumasi (2002) writes “as the name implies, the
researcher, adhering to the objectives of the study, selects respondents who can answer his
research questions.With good calculation and a relevant research strategy he picks the
respondents he wants to be included in his sample‟. Convenience sampling is a non probability
sampling technique where subjects are selected because of their convenient
accessibility and proximity to the researcher (Black et al, 1999). From which the types of
non-probability sampling the researcher was used convenience sampling
techniquefor selection of sample size of 394. Because of not all individuals present at the
banking halls at the same time.

3.4.3 Sample Size

Sample size refers to the number of items to be selected from the universe to constitute a sample.
Determining sample size is a very important issue because samples that are too large may waste

25
a lot of time, resource and money, while samples that are too small may lead to inaccurate
results (Kothari, 2004). By using Yamane’s (1967) formula of sample size with an error term
5% and confidence coefficient of 95% the sample is calculated as follows. The total population is
25321. Thus, at 5% error and 95% confidence coefficient

n= N/1+N (e ¿ ¿2 n= 25321/1+25321(0.05) ^2 =393.779~394

Where: n= sample size

N= total population

e= sampling error

Sample size of 394 respondents is taken from selected bank who has been using at least one of
the e-banking service types and who have been using e-banking service above one year's.
Questionnaires were distributed proportionally to each branch.

3.5 Sources of Data and Data Collection Techniques

The study were used both primary and secondary data as the source of information. Primary data
were collected based on structured questionnaire and semi-structured interview. The secondary
data were collected by reviewing books, previous research works, articles and journals and
annual report commercial bank of Ethiopia

3.6 Data Analysis Techniques

The quantitative data were based on five-point Likert- scale questionnaire, which were
quantitatively analyzed using the Statistical Package for Social Sciences (SPSS) version 20.
Multiple linear regression models were applied to analyze the quantitative data and semi-
structured interview, which were qualitatively analyzed and triangulated with the quantitative
result.

3.7 Research Model

The aim of this study was to examine the effect of seven e-banking service quality dimensions on
customer satisfaction by the banks. The researcher employed the MLR regression model to
determine the significance level of the variables for the customer satisfaction in e-banking.
Customer satisfaction in e-banking = f (electronic banking service quality).
Basically, CSEB = α + β1X1+ β2X2+ β3X3+ β4X4+ β5X5 + β6X6 + ε

Where, CSEB = Customer Satisfaction in E-Banking

X1=Reliability

26
X2=Service content

X3=Ease to use

X4=Transaction Efficiency

X5=Service security

X6=Customer support

Here α is constant and β is coefficient of estimate and ε is the error term. Customer satisfaction
in e-banking is dependent variable and X1 to X6 are independent variables

3.8 Reliability and Validity of the Research

Reliability is the consistency of a set of measurements or measuring instrument, often used to
Describe a test. Reliability is inversely related to a random error (Coakes& Steed, 2007).
According to Bryman and Bell (2003) Reliability is defined as fundamentally concerned with the
degree of consistency measures. According to Hair et al. (2003) described Cronbach’s Alpha is a
method used to measure the reliability of the questionnaire between each item and the mean of
the whole items of the questionnaire. The normal range of Cronbach’s coefficient alpha value is
between 0 and 1, and the higher value indicates that higher degree of internal consistency.
Different authors accept different values of Cronbach´s alpha so as to achieve internal reliability,
but the most frequently accepted value is 0.70 and above to reach internal reliability.
Cronbach’s alpha reliability analysis were conducted on the independent variables in order to
determine the reliability of the instrument used.
Validity -Validity defined as the extent to which data collection method or methods accurately
measure what they were intended to measure (Sounders et. al., 2003).
Numbers of different steps were taken to ensure the validity of the study:

• Data will be collected from the reliable sources, from respondent who have experiences in
Using the service of the bank.
• Survey question were made based on literature review and frame of reference to ensure
Result validity.

27
CHAPTER FOUR

4. DATA PRESENTION, ANALYSIS AND DISCUSION

This chapter presents analysis, interpretation and findings of information collected through self
Administered questionnaires with 394 randomly selected customers of commercial bank of
Ethiopia. The analysis was based on the information obtained from 389 customers and
incorporated information obtained through an interview with 5 branch marketing managers. In
order to get a representative data 394 questionnaires were prepared and distributed to customers
of the bank. Out of these 394 questionnaires distributed to customers, 375 questionnaires were
collected back.
Thus, the analysis was based on the valid 375 questionnaires (with 95.17% response rate)
response while the remaining 19(4.9%) questionnaires were not included due to incompleteness
of the questionnaires.

28
Several questions were asked related to the E-banking service and their satisfaction level to the
E-banking customers of commercial bank of Ethiopia in Debretabor city.The basic assumptions
were that e-banking service quality dimensions namely (reliability, transaction efficiency,
customer support, service security, ease of use, service content) influence customer satisfaction.
A multiple regression modeling approach was proposed as an effective method for studying the
relationships. The result of this multiple regression model were analyzed and discussed in this
chapter.
The statistical analysis of this study was done by SPSS software, version 20 and the results of the
study were shown in inference and descriptive section. In deceptive section, tables, and statistics
and in inference section, the result of multiple liner regression was analyzed.
To estimate the reliability of the questionnaire a pilot sample of 10 %( 75) which is 8 from each
bank, with a total of 40 (8*5=40), were selected and Cronbach Alpha was computed by SPSS
software. Table 4.1 shows both the total and the pilot sample test result of reliability in the
questionnaire.

Table 4.5. Cronbach Alpha Coefficient for each Variable

Item Cronbach Alpha
10%pilot sample Total sample
Reliability 0.796 0.707
Service content 0.914 0.773
Ease of use 0.725 0.745
Transaction 0.940 0.772
Efficiency
Service security 0.843 0.740
Customer support 0.922 0.771
Source: SPSS output
According to Hair et al. (2003) described Cronbach’s Alpha is a method used to measure the
reliability of the questionnaire between each item and the mean of the whole items of the
questionnaire. The normal range of Cronbach’s coefficient alpha value is between 0 and 1, and
the higher value indicates that higher degree of internal consistency. Different authors accept
different values of Cronbach´s alpha so as to achieve internal reliability, but the most frequently
accepted value is 0.70 and above to reach internal reliability.
All the items in the case of total sample had Cronbach Alpha values of greater than 85.7 % it
showed that the high reliability of the questionnaire.

29
4.1. Demographic Characteristics
Table 4.5 Demographic Profile of E-banking Customers

NO Demographics Frequen Percentage

cy
1 Sex Male 264 70.4

Female 111 29.6

2 Age(year)
18-24 110 29.3

25-35 230 61.3

36-50 28 7.5

51-60 7 1.9

3 Marital status Single 271 72.3

Married 104 27.7

4 Educational level
Primary 15 4
school
High school 56 14.9

TEVT 94 25.1

University 180 48
degree

Master 30 8
Degree
5 Occupation
student 18 4.8

salaried 292 77.8

Business 65 17.4
people

Total 375 100

Source: researcher’ survey finding, 2024

Table 4.2 shows that the distribution of respondents by gender. Accordingly, 264 (70.4) were
male respondents and the rest 111(29.6) were female respondents in Commercial Bank of
Ethiopia. As table 4.2 shows the largest respondent fall under the age group between 25-35 years

30
old which shows a percentage of 61.3%(230) respondents. The second largest respondents fall in
the age group between 18-24 years old having a percentage of 29.3% (85) respondents followed
by the age group of 36-50 years old with a percentage of 7.5% or frequency of 28 respondents.
The least number of respondent fall in the age group of 51-60 years old with the percentage of
1.9% or frequency of 7 respondent. There was no respondent above the age of 60. Out of 375 the
respondents were unmarried 271(72.3%), while 104(27.7%) were married. Based on Educational
Level shown in the Table above, the main respondent in this research were degree holders
consists of 180(48%), TVET 94(25.1%),) high school 56(14.9) and primary school completed
13(3.5%).There were no respondents who were less than primary education level.
As far as occupation is concerned,the respondents were a mix of salaried 292(77.8%), and
business people 65(17.4%) and students18 (4.8%) and there were no respondents from pensioner
and unemployed category in the sample respondents under consideration.

Out of the total respondent 222(59.2%),16(4.3%), 106(30.9%)and 21(5.6%) were ATM, POS,
Mobil banking and CBE birr and internet banking users respectively.

4.1.2. Mean and Standard Deviation

Descriptive statistics (mean and standard deviations) of the respondent scores were computed.
The reason for using descriptive statistics was to compare E-banking service quality dimensions
that affect the level of customer satisfaction of its users by using the means and standard
deviations values. Finally, the interpretation was made through using the grand mean of each
service quality dimension and with total grand mean of customer satisfaction for the aim of
achieving partial research objectives of the study. The interpretation was made based on the
following measurement scale intervals or range. Mean scores 4.51-5.00 excellent or very good,
3.51-4.50 good, 2.51-3.50 average or moderate, 1.51-2.50 fair and 1.00-1.50 is poor(Poonlar
Btawee:1987) mentioned by Hailu Demissie-2013.
Table 4.3 shows the mean value depicting the overall customer’s satisfaction. As far as this
descriptive statistics is concerned, customer’s satisfaction on e–banking is above
satisfactory(good level) level with a mean value of 3.8102 on a 5 point Likert scale.

Table 4.5Mean & Standard Deviation

Descriptive Statistics
N Minimu Maximu Mean Std.
m m Deviation
RE 375 1 5 3.80 .932

31
SC 375 1.00 5.00 3.6533 1.02239
EU 375 1.40 5.00 3.6373 .82714
TE 375 1.00 5.00 4.0627 .77092
SCU 375 1.67 5.00 3.8387 .63597
CS 375 1.00 5.00 3.5760 .89763
Overall
customer 375 2.17 5.00 3.8102 .57431
satisfaction
Valid N 375
Source: SPSS regression result
The standard deviation 0.57431 indicates that there was moderate variability in overall customer
satisfaction in the data, which shows that respondents were satisfied with e-banking services.
The table also suggests that all service quality dimensions rated as above satisfactory. As far as
the mean values are concerned, out of the e- banking service quality dimensions transaction
efficiency (mean of 4.06) with a standard deviation of 0.77092, and service security (mean of
3.83) with a standard deviation of 0.63597, reliability (mean of 3.8) with a standard deviation of
0.932 have relatively major roles on e-banking service quality and in turn overall e-banking
customer satisfaction. All explanatory variables play a vital role in customer satisfaction. As we
see from the table customer support producing the least role in satisfying customer in e-banking.
Empirical evidence in this research also suggests that e-banking factors have a significant degree
of influence on customer satisfaction. This empirical evidence has provided significant support
for the electronic banking literature, which substantively advocates that e-banking factors have
an impact on customer satisfaction (Hua, 2009;Wise, Victoria & Ali, & Mohammed, 2009.

4.2. The relationship between customer satisfaction and demographic variable in e-

banking
In order to examine the relationship between demographic characteristics and customer
satisfaction on e-banking ANOVA were computed. ANOVA was chosen because the variable
under study was categorical. The result of SPSS statistical package portrayed in table4.4.
Table 4.5One way ANOVA for demographic factors

ANOVA
Sum of df Mean F Sig.
Squares Square
Age Between 12.642 17 .744 1.882 .000
Groups

32
 Within Groups 141.028 357 .395
Total 153.669 374
Between
2.600 17 .153 .752 .748
Groups
marital status
Within Groups 72.558 357 .203
Total 75.157 374
Between
3.508 17 .206 .406 .984
Groups
occupation
Within Groups 181.490 357 .508
Total 184.997 374
Between
108.730 17 6.396 9.357 .000
Groups
education
Within Groups 244.028 357 .684
Total 352.757 374
Source SPSS 2024
It can be observed in table 4.4 that the relationship between customer satisfactions in e-banking
and the demographic variables educational level and age are statistically significant as their p-
value were lower than 0.05. This implies that except occupation and marital status customer
satisfaction in e-banking had a positive and significant relationship with age and educational
level.
In other words the P-value associated with the ANOVA statistic of educational level 0.000 is less
than 0.01 indicating that there is a strong relationship between customer satisfaction in e-banking
and educational level. Customers with higher education such as university graduates are more
comfortable in using technology, like the internet and other forms of e- banking. As educational
level increases individual's level of IT literacy increases so they tend to use e-banking and gets
more satisfaction. About age, p- value is 0.000 which is less than 0.01 level of precision
indicating age has a strong relationship with satisfaction in e-banking. To put it best, age and
customer satisfaction in e- banking are definitely dependent on one another and this is correct at
99% level of significant.

4.2.1. Regression Analysis

In this section regression analysis for e-banking service quality dimensions on customer
satisfaction have been undertaken to understand the relationship between customer satisfaction
and explanatory variables.
Table 4.5. Correlation Coefficient Result
33
Correlations
RE SC EU TE SCU CS CS
Pearson Correlation 1
RE Sig. (2-tailed)
N 375
Pearson Correlation .211** 1
SC Sig. (2-tailed) .000
N 375 375
Pearson Correlation .276** .080 1
EU Sig. (2-tailed) .000 .122
N 375 375 375
Pearson Correlation .134** .126* .240** 1
TE Sig. (2-tailed) .009 .015 .000
N 375 375 375 375
Pearson Correlation .195** .096 .406** .370** 1
SCU Sig. (2-tailed) .000 .064 .000 .000
N 375 375 375 375 375
Pearson Correlation .362** .063 .650** .181** .384** 1
CS Sig. (2-tailed) .000 .224 .000 .000 .000
N 375 375 375 375 375 375
Pearson Correlation .477** .256** .674** .550** .515** .498** 1
CS Sig. (2-tailed) .000 .000 .000 .000 .000 .000
N 375 375 375 375 375 375 375
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
Pearson correlation coefficient with falls between -1.0 and +1.0.

The Pearson´s correlation coefficient(r) is (r) is as follows: 0.1 – 0.29 is weak; 0.3 – 0.49 is
moderate; and > 0.5 is strong.

As we see from table 4.6 Ease to use and customer satisfaction has the highest correlation
coefficient which is (r = 0.674**, p=0.000, p<.05) at 0.01 level of significant. This result shows
that ease to use in service delivery have significant positive relationship with the level of
satisfaction in e-banking. In other words a change in ease to use strongly correlated with the
changes in the dependent variable (customer satisfaction). These results imply that when the
level of ease to use is high, customers will satisfied highly. This means that higher ease to use
perceptions of customers affect the level of customer satisfaction positively. Transaction
efficiency and customer satisfaction has the second highest correlation coefficient (r = 0.550**,
p=0.000, p<.05) next to ease to use at 0.01 level of significant. Service security and customer
satisfaction has the third correlation coefficient (r = 0.515**, p=0.000, p<.05) at 0.01 level of
significant next to transaction efficiency. This implies that gaining efficient transactions will
leads to use e-banking continuously and it tend to satisfy customers more. On other hand if

34
customers are more secure in using a various e-banking service, the will satisfy more and the
result shows that there is a positive relationship between service security and customer
satisfaction. Therefore ease to use, transaction efficiency and service security are tends to be a
better predictor of satisfaction level on e-banking. Customer support (r = 0.498**, p=0.000,
p<.05), reliability(r = 0.477** p=0.000, p<.05) is positive but moderately correlated with
customer satisfaction. Service content (r = 0.256**, p=0.000, p<.05) has positive but weak
relationship with customer satisfaction. Have also significant positive correlation with customer
satisfaction even though their coefficients are relatively smaller.

4.2.2.1. Diagnosis Test

Before applying regression analysis, some tests were conducted in order to ensure the
appropriateness of regression analysis data to assumptions.
Test for Multicollinearity
Multicollinearity refers to a situation when two or more independent variables are highly
correlated with each other. If there is a high degree of correlation between independent variables,
we have a problem of what is commonly described as the problem of multicollinearity causes
inflation in the standard error of regression coefficients resulting in a reduction of their
significance. There are a number of mechanisms to detect the existence of multicollinearity
problem. For this research Pearson correlation and Variance Inflation Factor (VIF) were used to
observe multicollinearity problems among independent variables. In order to test whether
multicollinearity problem present or not, a Variance Inflation Factor (VIF) were employed.
Mu’’GeArslan, F. and Altuna, O.K, (2010) cited that the VIF value above 10 and a tolerance
value below 0.1cause a multicollinearity problem.
Table 4.6. multicollinearity test
Coefficientsa
Model Collinearity Statistics
Tolerance VIF
(Constant)
RE .829 1.206
SC .943 1.060
EU .542 1.845
TE .845 1.184
SCU .733 1.365
CS .526 1.900

35
a. Dependent Variable: CS
Source: Analysis of Survey data 2024, using SPSS 20
The result showed that there were no significant multicollinearity problems among the variables
because the VIF result less than 10 and tolerance is above0.1(Mu’’geArslan, F. and Altuna, O.K,
2010).
Linearity Test
The mean values of the outcome variable for each increment of the predictor(s) lie along a
straight line. This means that it is assumes that the relationship we are modeling is a linear one. If
we model a non-linear relationship using a linear model then this obviously limits the
generalizability of the findings, The graph of standardize residuals and standardize predictors
should look like a random array of dots evenly ispersed around zero. If this graph funnels out,
then the chances are that there is teroscedasticity in the data, As shown in fig 4.1 the points are
randomly and evenly disperse throughout the plot. This pattern is indicative of a situation in
which the assumptions of linearity have been meet.

Figure 4.1: Normal Point Plot of Standardized Residual

36
 Source: Analysis of Survey data 2024, using SPSS20

The scatter plot of residuals shows no large difference in the spread of the residuals as you look
from left to right on figure 4.1. This result suggests the relationship predicting as is a linear.
Normality Test
In statistics normality tests are used to determine whether a data set is modeled for normal
distribution. Many statistical functions require that a distribution be normal or nearly normal.
There are both graphical and statistical methods for evaluating normality. Here the researcher
were computed the normality test graphically through histogram.

Table 4.2 Normality test

37
 Source: Analysis of Survey data 2024, using SPSS20
Figure 4.2 shows the frequency distribution of the standardized residuals compared to a normal
distribution. As you can see, many of the residuals are fairly close. Moreover the histogram is
bell shaped which lead to infer that the residual (disturbance or errors) are normally distributed.
Thus, no violations of the assumption normally distributed error term.

4.2.4 Regression Analysis between Customer Satisfaction on E-Banking and

Explanatory Variables
The overall regression model and its ANOVA are summarized as follows:
Table 4.5: Model Summery

Model Summary b
Model R R Adjusted Std. Error Change Statistics Durbin-
Square R Square of the R Square F df1 df2 Sig. F Watson
Estimate Change Change Change
155.61
1 .847a .717 .713 .30784 .717 6 368 .000 1.980
1
a. Predictors: (Constant), CS, SC, TE, RE,SCU, EU
b. Dependent Variable: CS

38
R-squared is measured the goodness of fit of the explanatory variables in explaining the
variations in customers satisfaction measures of explanatory variables (reliability,service content,
service security, transaction efficiency, customer support and ease of use). As clearly described
in Table 4.7 adjusted R- square value for the regression model was 0.713.This indicates the
explanatory variables; reliability, service content, service security, transaction efficiency,
customer support and ease of use in this study explain about 71.3% percent of the variation in the
level of customer satisfaction. The remaining 28.7 percent of the variation in the level of
customer satisfaction of Commercial bank of Ethiopia are explained by other variables which are
not included in the model. Therefore, e-banking service dimensions (reliability, service content,
service security, transaction efficiency, customer support and ease of use) are good explanatory
variables of the satisfaction level of Commercial bank of Ethiopia.
Table 4.5: ANOVA
ANOVAa
Model Sum of Df Mean F Sig.
Squares Square
Regression 88.481 6 14.747 155.611 .000b
1 Residual 34.874 368 .095
Total 123.355 374
a. Dependent Variable: CS
b. Predictors: (Constant), CS, SC, TE, RE, SCU, EU

From the ANOVA test in table 4.8 (F=155.611, DF=374, p<0.01) it shows the table Sig. value
0.01 is greater than the calculated Sig. value 0.000. It reflects there was a statistically significant
correlation between dependent variable and independent variables at 1% significant level. Which
means the explanatory variables; reliability, service content ,ease to use, transaction efficiency,
service security, customer supporthave great contribution to improve e-banking customer
satisfaction level in Commercial bank of Ethiopia . But it does not mean that all these factors of
e- banking service quality have equally significant correlation with customer satisfaction level.
The F calculated at 5% level of significance was 155.611. Since F calculated is greater than the F
critical (value = 2.14), this shows that the overall model was significant.

39
Table 4.5: Regression Coefficient Analysis of the model

Coefficients a
Standardize
Unstandardized d Collinearity
Coefficients Coefficients Statistics
Std.
Model B Error Beta T Sig. Tolerance VIF
1 (Constant) .316 .126 2.519 .012

RE .160 .019 .259 8.520 .000 .829 1.206

SC .061 .016 .108 3.800 .000 .943 1.060
EU .326 .026 .470 12.487 .000 .542 1.845
TE .252 .022 .339 11.240 .000 .845 1.184
SCU .134 .029 .148 4.573 .000 .733 1.365
CS -.017 .024 -.027 -.712 .477 .526 1.900

From the above finding we can develop the following regression

CSEB=0.16+0.259X1+0.108X2+0.47X3+0.339X4+0.148X5
Std.error (0.126) (0.019) (0.016) (0.026) (0.022) (0.029)
T values (2.519) (8.520) (3.800) (12.487) (11.240) (4.573)
R square(adj) = 0.713, F=155.611
*=at 95% level
Where, CSEB = customer satisfaction on E-Banking
X1=Reliability

X2=Service content

X3=Ease of use

X4=Transaction Efficiency

40
 X5=Service security

The strength of each predictor (independent variable) influencing the criterion (dependent
variable) can be investigated via standardized Beta coefficient. The regression coefficient
explains the average amount of change in the dependent variable that is cause by a unit change in
the independent variable. The larger value of Beta coefficient an independent variable has, brings
the more support to the independent variable as the more important determinant in predicting the
dependent variable. Standardized beta Coefficient analysis shows the relationship between
dependent variable and independent variables. According to Sig. value X1(Reliability)
X2(service content) X3(ease of use),X4(transaction efficiency) X5(service security) are
statistically significant at 5 percent significant level. Which means; reliability service content,
ease of use, Transaction efficiency, service security have great contribution to improve customer
satisfaction on e-banking in commercial bank of Ethiopia. Whereas the sig. value of X6
(customer support) is greater than 0.05 which is 0.477 and conclude that the variable has no
significant effect on customer satisfaction from using e-banking.

Here, X3=(ease to use) = 0.47 i.e., 100% change in ease to use leads to 47% change in customer
satisfaction level. X4(transaction efficiency)=0.339 i.e 100changes in transaction efficiency leads
to 33.9% change in customer satisfaction level. X1(reliability)=0.259 i.e 100% changes in
reliability leads to 25.9% changes in customer satisfaction. X5(service security)=0.148 i.e 100%
changes in service security leads to14.8% change in customers satisfaction level. X2(service
content)=0.108 i.e 100% changes in service content leads to 10.8%changes in customers
satisfaction. whereas X6(customer support), low coefficient of -0.027 shows that customer
support has weak effect on satisfaction of its user in e-banking in the case of commercial bank
of Ethiopia in Debretabor city.
Five of the explanatory variables namely ease to use, transaction efficiency, reliability,
transaction security, service content each had a significant effect on customer satisfaction. this
result shows that customer satisfaction in e-banking relies on ease to use, transaction efficiency,
reliability ,service security, service content respectively. Therefore, it can be infer that the Bank
should continue to scale up(improved) its ease to use, transaction efficiency, reliability, service
security, service content.
The finding consistent with other research findings for example Parasurman et al, 1988,(Yang,
Jun and Peterson, 2004), (Lui & Amett, 2000), (Storback et al, 1994) cited in (Thahkur, 2011)
found that ease of use provide a higher degree of satisfaction in e- e-banking.
Storback cited in (Thahkur, 2011) also empirically found that e-banking transaction efficiency
and customer satisfaction have positive relationship.
The findings are also consistent with other research finding for example (Jun et
al.1999;Jannatual,2009; Parsurman et al,1988;Yong, Jun and Peterson,2004, Lui& Amett,2000)
found that reliability provide better degree of contribution in satisfying e-banking users.

41
Table 4.5Summary of the Overall Outcome of the Research Hypotheses

Hypotheses Result Reason

H1o: Reliability has no positive a significant HO: Rejected β= 0.259,P<0.05

effect on customer satisfaction

H1a: Reliability has positive a significant effect H1: accepted

on customer satisfaction
H2o:service content has no positive a significant HO: Rejected β =0.098,P<0.05
effect on customer satisfaction

H2a: service content has positive a significant H1: Accepted

effect on customer satisfaction

H3o:ease of use has no positive a significant HO: Rejected β=0.333,P<0.05

effect on customer satisfaction

H3a:ease of use has positive a significant effect H1: Accepted

on customer satisfaction

H4o:tranaction efficiency has no positive a HO: Rejected β =0.344,P<0.05

significant effect on customer satisfaction

H4a:transaction efficiency has positive a H1: Accepted

significant effect on customer satisfaction
H5o:service security has no positive a significant HO: Rejected β=0.283,P<0.05
effect on customer satisfaction

H5a:service security has positive significant H1: Accepted

effect on customer satisfaction

H6o:customer support has no positive significant HO: Accepted β=-0.027p>0.05

effect on customer satisfaction
H6a: customer support has positive significant H1: Rejected
effect on customer satisfaction

4.3 Interview Responses

Interview was forwarded for the five banks Customer Service manager (for some branches
Business manager) had been participated in the interview instead of Customer Service manager)

42
concerning age, educational back ground, occupational, marital status and others were presented
here to triangulate with customers response.
Currently CBE offers Automated Teller Machine (ATM), Mobile Banking, Point of Sales (POS)
terminals, CBE birr , and Internet banking but most of the users of E-banking are E-card users
(ATM), says Business Managers in the five branches the CBE.
It started out e-banking service with eight ATM machines ( Debretabor=3, Gafat = 3, begemider=2
Abatatek=1 and Guna=2) and now has 11. With respect to age, gender, marital status, occupation
and educational status of the customers they responded, it was difficult to put in figure but from
observation one can conclude the youngster salaried and literate people were majority of the
users of e-banking. In relation to age, gender, occupational, marital status and others the bank
has no official statistics however it is estimated that younger's ranging from 18 to 35 are majority
of e-banking users and the bank guessed that 80% of e-banking customers are graduates. In
occupational category salaried are takes the lion share of e-banking customers.

The banks provide e-banking service both for saving account and checking account but loan
and educational saving account accounts had no such services yet. Customers will expect their
banks to be responsive to their needs over e-banking therefore we are seeking to address these
needs and increase their level of satisfaction.
So fare most of our customers were satisfied with the e-banking service. However, despite the
bank’s effort to improve access for its customers by delivering such services, there wassome
problems were encountered by clients which makes them dissatisfied such as network failure,
due to service breakdown from the country’s sole telecommunications service provider, Ethio-
telecom, and internal network problems, were the challenges faced by the CBE attributed to the
dissatisfaction of customers. While the majority of the complaints were laid at the feet of Ethio-
telecom,because of poor connection providing. Inappropriate use of ATMs and cards such as
inserting card upside down into the ATM’s card slot, forgetting password(pin) which leads to the
machine to capture card and transferring cards to a third party are the problems committed by
customers themselves.

Chapter five
summary, Conclusion and Recommendation

5.1 Summery of finding

The main objective of this study is to examine the effect of electronic banking service dimension on
customer satisfaction in commercial bank of Ethiopia in Debretabor cityby considering six e-banking
service quality dimension namely reliability, ease to use, service security, transaction efficiency,

43
service content and customer support in commercial bank of Ethiopia in Debretabor city. In order to
accomplish this objective the researcher distributed 394 questionnaires to sample respondents and
collected 375 completely filled questionnaires for data analysis. In addition, the researcher
attempted to identify which of the e-banking service quality dimension(s) have higher impact on
customer satisfactionof its user and which e-banking service quality dimensions have weaker impact on
customer satisfaction in commercial bank of Ethiopia. Accordingly, this part of the research summarizes
the major findings of the effect of e-banking on satisfaction of its user. Descriptive analysis results
shows that the majority of current e-banking users are youth between the age of 18-35,
occupationally salaried.Business men/women are not active participant in using the service,
educational wise respondents were predominantly by degree holders and TVET.

Customer’s satisfaction on E–Banking is above satisfactory level with a mean value of 3.8102 on
a 5 point Likert scale. Out of the e-banking service quality dimensions transaction efficiency
(mean of 4.0627), service security (mean of 3.8378) and reliability (mean of 3.8) are the majors
to improve e-banking service quality and in turn overall customer satisfaction.Out of the
demographic variables under investigation educational level and age have statistically significant
relationship with satisfaction in e-banking users. In other words customer satisfaction in e-
banking definitely dependent on one another with age and educational level at 0.01 level of
significant.Ease to use, transaction efficiency, reliability, service security, service content hasa
positive significant relationship with customer satisfaction.Any increase in ease to use,
transaction efficiency, reliability, service security, service content will increase satisfaction level
by 47%, 33.9% 25.9%, 14.8% 10.8% respectively.
Customer support has no produced a significant contribution in customer satisfaction in
commercial bank of Ethiopia in Debretabor city at 1% level of significant.
Commercial banks of Ethiopia E-banking customer suffer from frequent disruption of e-banking
services due to poorly developed telecommunication infrastructure, lack of reliable power supply
and no internet access because of current instability of the region.

5.2. conclusion
Based on the research done it can be concluded that Ease to use, transaction efficiency,
reliability, service security, service content has a positive relationship with customer satisfaction.
On other hand Customer support has no produced a significant contribution in customer
satisfaction in commercial bank of Ethiopia in Debretaborcity. It should be noted, however,
when the correlation among dimensions was specified in the structural model, the inter-
correlation between customer satisfaction were all positive. Thus, ease to use, transaction
efficiency, service security, customer support ,reliability and service content in service delivery
have significantpositive relationship with satisfaction of its users in e-banking.

44
5.3. Recommendation
Based on the results of the analysis and conclusion made the following recommendations are
forwarded which help Commercial bank of Ethiopia improve E-banking service delivery of the
organization and to boost customer satisfaction.
 Banks should work much to increase the number of users from all aspects of
demographical variables, that is from age, educational status, occupationally and business
men/women to be the users of e-banking.
 As ease to use, transaction efficiency, reliability, service security and service content
dimensions are highly significant effect on the level of satisfaction, Commercial bank of
Ethiopia should focus to scale up on this dimensions to bring higher level of satisfaction
to their customers.
 Commercial bank of Ethiopia should work with ethio telecom & Ethiopian electric power
to resolve service interruptions and minimize the consequences of unreliable service.
 E-banking service demands well developed ICT infrastructures, therefore the respected
government bodies should work to develop and expand ICT infrastructures.
 Banks need to increase the confidence of their customers as well as develop their skills
and knowledge in using e-banking service. They could also employ the use of video
presentations at bank branches and on television to showcase the user friendliness of such
services. This will help customers to be more familiar with the e-banking service.

5.4 Research limitation and Future Research area

At last, this study investigates the dimensions of e-banking service quality that has major
effects on customer satisfaction in Commercial bank of Ethiopia. But, the variables
included in the study were not exhaustive. Future researchers could study by including
other variables which are not included under this study.

45
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APPENDIX
54
APPENDIX
Appendix-A Questionnaire for Customers
Research questionnaire

Dear respondents;

This questionnaire is designed specifically to carry out a research on the effect of E-Banking
service on customer satisfaction in the case of commercial bank of Ethiopia in Debretabor city.
Its main purposes are: to find the electronic banking service quality dimensions that have the
effect on customer satisfaction and as partial fulfillment of the requirements for the degree in
Master of marketing management.

Here I kindly request you to attempt all the questions in the questionnaire to meet the aim of the
study. Whatever information is provided will be treated with utmost confidentiality and strictly
will be used for academic purpose only. There is no need to write your name.

Thank you very much in advance for you cooperation and valuable time.

Abebech wores
Tell: +251978538020
Email: [email protected]

55
If you have any question with regard to the questionnaire please contact me using the above mentioned
address.

Part I
Background Information
Please put right mark (√) in front of your choice box that express yourself

1. Gender: Male□ Female□

2. Age: 18-24□ 25-35□ 36-50□ 51-60□ Above 60□

3. Marital status: Single□ Married□ Separated□ Divorced□ Widowed□

4. Current education level: Illiterate□ Primary school□ High school□ TVET□ University
degree□ Master Degree□ Doctorate Degree□ above Doctorate Degree□

5. Occupation: Unemployed□ Student□ Salaried□ Business man/woman□

Pensioner□ Other □

6. If you are depositor, which type of account do you maintain with the bank?
Checking Account□ Saving Account□

7. Which type of electronic banking service delivery do you use?

ATM□ POS□ Mobile banking□ Internet banking□ CBE birr □All □

Part II
Customer Feelings about Electronic Banking

Please put right mark (√) for response of your feeling about the question provide.

Rating point: Strongly disagree (1) Disagree (2) Undecided (3) Agree (4) Strongly
agree (5)

NO Dimensions Rating point

1 2 3 4 5
Reliability

56
 1 E-banking completes a task accurately
2 E-banking deliver the service exactly as promise
3 E-banking perform the service right at the first time
Service content

4 E-banking provides information that exactly fits needs.

5 E-banking provides accurate information.
6 E-banking provides information that trust

Ease of use

7 Easy to find information in the E-banking system

8 E-banking is easy to use

9 The language in e-banking displays is easy to understand.

10 information and text are clear and ease to understand

11 E-banking system provides clear instruction

Transaction efficiency

12 E-banking provide complete help function

13 Transaction process is fast

Service security

14 E-banking keep accurate record of transaction

15 E-banking provide security for transaction data and privacy

16 No problem during using E-banking service

17 E-banking is secure

18 Feel safe when using E-banking

19 Can check validity and detail of past transaction every time

57
 Customer support

20 E-banking contains enough services

21 Case of problem happen, can contact staff immediately
22 E-banking contains responsible section to guide for common
problem
23 E-banking provide knowledgeable staff to solve problem
24 Staff can describe step to use and condition to use clearly

E-Banking refers to variety of platforms such as card banking, mobile phone banking, agency
banking, and internet banking whereby customers access banking services like transfer funds,
performing balance checks, pay bills, view record of transactions, check interest in accounts,
send money overseas, etc
Part III
Rating point:1=strongly dissatisfied 2=somewhat dissatisfied 3=neutral 4=some what satisfied

5=very satisfied

NO Rating point
Level of Customer satisfaction
1 2 3 4 5
1 Reliability: how satisfied are you with e-banking in terms of
performing the promised service accurately and consistently?
2 service content: are you satisfied with the information provided by e-
banking
3 ease of use: are you satisfied with effort required to learn how to use e-
banking

4 Transaction efficiency: are e-banking able to you get any of e-banking

service, find the desire product and information associated with it, and
check out with minimal of effort?
5 Service security: are you feel safe in conducting transaction through e-
banking?
6 Customer support: are you satisfied with the bank staff support?

58
 Appendix B-Interview questions for Customer Service Managers
1. Q1. When we see the current users of e-banking what can one say about age, gender, marital
status, occupation and educational status of the customers?

Q2. For which types of account holders the bank is providing e-banking service?

Q3. What are the types of e-banking service delivery channels your bank is providing?

Q4. Do you think that your bank give satisfaction to the users of e-banking?

Q5. Do you think e-banking is providing the service as expected and available 24/7for
customers?

Q6. What can you say about the service quality of e-banking offered by the bank?

Q7. What are the major problems in e-banking activities to satisfy your customers?

APPENDEX C

Reliability /variables

RELIABILITY /VARIABLES=

Reliability1 Reliability2 Reliability3 Service content1 Service content2Service content3 Ease to

use1 Ease to use2 Ease to use 3 Ease to use4Ease to use5transaction efficiency1 transaction
efficiency2 Service security1Service security 2 Service security3Service security4Service
security5 Service security 6 Customer support1 Customer support1 2 Customer support3
Customer support 4 Customer support1 5 /SCALE (95%)('ALL VARIABLES') ALL

59
Reliability scale: 95%
Case Processing Summary
N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.

Reliability Statistics
Cronbach's N of Items
Alpha
.857 24
RELIABILITY
/VARIABLES=Reliabilty1 Relability2 Relability3
/SCALE (95%)('ALL VARIABLES') ALL
/MODEL=ALPHA

Case Processing Summary

N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.

Reliability Statistics
Cronbach's N of Items
Alpha
.707 3

60
RELIABILITY
/VARIABLES=Service content1 Service content2 Service content3
/SCALE (95%)('ALL VARIABLES') ALL
/MODEL=ALPHA.
Case Processing Summary
N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.
Reliability Statistics
Cronbach's N of Items
Alpha
.773 3
RELIABILITY
/VARIABLES=Ease to use1 Ease to use2 Ease to use3 Ease to use4 Ease to use5
/SCALE (95%)('ALL VARIABLES') ALL
/MODEL=ALPHA.
Case Processing Summary
N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.
Reliability Statistics
Cronbach's N of Items
Alpha
.745 5
RELIABILITY
/VARIABLES=Transaction efficency1 Transaction efficnec2
/SCALE (95%)('ALL VARIABLES') ALL
/MODEL=ALPHA.
61
Case Processing Summary
N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.
Reliability Statistics
Cronbach's N of Items
Alpha
.772 2

RELIABILITY
/VARIABLES=Service security1 Service security2 Service security3 Service security4 Service
security5 Service security6
/SCALE(95%)('ALL VARIABLES') ALL
/MODEL=ALPHA.
Case Processing Summary
N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.
Reliability Statistics
Cronbach's N of Items
Alpha
.740 6
RELIABILITY
/VARIABLES=Customer support1 Customer support2 Customer support3 Customer suport4
Customer support5
/SCALE (95%)('ALL VARIABLES') ALL
/MODEL=ALPHA.
Case Processing Summary

62
 N %
Valid 375 100.0
Cases Excludeda 0 .0
Total 375 100.0
a. Listwise deletion based on all
variables in the procedure.

Reliability Statistics
Cronbach's N of Items
Alpha
.771 5

63