An Evaluation of the effects of electronic banking on customer satisfaction in Cameroon

ABSTRACT    

In the light of the recent financial crisis and global economic recession, leaders of financial institutions are under additional pressure not only to maintain customer satisfaction but also to maintain market leadership.

Consequently, the objective of this study was to evaluate the effects of electronic banking on customer satisfaction in Cameroon.

Today’s banking situation demands continuous innovation in order to meet the yearnings and aspirations of the ever-demanding customers.

Hence, banks need to roll out new products and services quickly and effectively, using the latest cutting-edge technology.

One of the benefits banks derive from electronic banking products and service delivery is improved efficiency and effectiveness of their operations so that more transactions can be processed faster and more conveniently, which will undoubtedly impact significantly on the overall performance of the banks.

The customers, on the other hand, stand to enjoy the benefits of quick service delivery, reduced frequency of going to banks physically, and reduced cash handling.

However, these developments in the Cameroonian banking industry seem not to have achieved their aims.

Queues are still seen in the banking halls; bank customers still have many problems with the e-banking products that are available in Cameroon.

The problem here is: are customers really enjoying these services? The empirical analysis shows that the level of satisfaction of customers with the e-banking facilities of UBA is quite high and can be explained by factors such as the level of affordability, trust, security, convenience, confidence, time-efficiency, and flexibility in the management of finances.

This study looks at all the above among 400 properly filled and returned questionnaires of e-banking customers of UBA, Limbe.

The study employed descriptive statistical tools such as tables, pie charts, and frequency charts, and percentages as well as inferential tools, especially the chi-square test of association.

The results of the study implied that the majority of the customers are young, educated, salaried, and businessmen and women actively using the service of e-banking.

The findings reveal that majority of the customers of UBA have a generally good perception of the bank’s e-banking services, especially from the perspective of its being secure, convenient, effective, time-saving, making flexible and effective transactions and management of finances trustworthy.

Furthermore, the results of the study showed that most UBA customers make use of the bank’s e-banking products for three major reasons: ease of use, ability to reduce transaction time, and security and accessibility.

More so, it was found that the e-banking service with the highest level of customer satisfaction is SMS alert, followed by ATM machines, with the least being point of sale (POS) but also that there is a higher level of customer satisfaction when the e-banking products are combined than when used in isolation.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The revolution of information technology has influenced almost every facet of life, and the banking sector a lot more so.

The financial service industry has recently been open to historical transformation.

Electronic development (e-development) is emerging and advancing rapidly in all areas of financial intermediation and financial markets. Today we have quite a number of e-development models that include e-finance, e-money, e-banking, e-brokering, e-insurance, e-exchange and even e-supervision (Lustsik, 2003).

The rapid changes in business operations in contemporary times in the form of technological improvement require banks in Cameroon to serve their customers electronically.

Traditionally, banks have been in the forefront of harnessing technology to improve their products and service delivery.

The banking industry and its environment in the 21^stcentury are highly complex and competitive, hence the need for information and communication technology to take centre stage in the operations of banks (Steven, 2002).

The 21^st century has witnessed dramatic transformations in the financial sector as advances in information technology have created new ways of handling financial transactions through various e-banking platforms.

In recent times, electronic banking has spread rapidly all over the globe.

According to Onay(2008), the increased adoption and penetration of internet has recently redefined the playground for retail banks.

In Cameroon, all  banks  are  making  greater  use  of  e-banking  facilities  to  provide  better  services in order to excel in the competitive Cameroonian banking  industry. 

The  spread  of  e-banking has  also  greatly  benefited  the  ordinary customer  in  general  and the corporate  world  in particular.

Consequently, electronic banking (e-banking)  has  been  the  greatest  challenge to  the  banking  industry  going  by  the sophistication  and  volume  of  fraudulent practices  associated  with  this  form  of banking.

In  the  past  few  years,  banking  activities in  Cameroon  have  increasingly  depended  on the  deployment  of  information  and communications  technology.   Customers’ insatiable  appetite  for  efficient  services  has compelled financial institutions to fast-track to  a  more  radical  transformation  of  their business systems and models for embracing e-banking.

E-banking  appeal  as  well as its  product development  is  rapidly  growing,  and  the global  acceptance  has  strongly  encouraged its penetration.

The success of e-banking is contingent upon reliable and adequate data communication infrastructure.

Therefore, it is  efficient  for  banks  to  invest  in  online transactions  through  the  creation  of networks.  

However,  there  has  been  a  mix-up  between  electronic  banking  and  internet banking. The fact is that internet banking is subsumed in electronic banking.

Banking has come a long way from the time of ledger cards and other manual filing systems.

Most banks today have electronic systems  to  handle  their  daily  voluminous tasks  of  information  retrieval,  storage  and processing.

Irrespective of whether they are automated or not, banks by their nature  are continually  involved  in  all  forms  of information  management  on  a  continuous basis.

The computer is of course an established tool for achieving a competitive edge and optimal resource allocation. 

The  most obvious  application  of  computers  in  the banking  industry  is  in  the  area  of  customer services,  information  management  and control.

Computerized banks respond to requests from customers for statement of accounts, balance and account activity enquiries.

With signature and image verification systems, the time taken to offer typical  cashier  services  like  receiving  and paying  out  of  cash  is  minimized.

Also, with  the  advent  of  automated  teller machines  (ATM),  banks  are  able  to  serve customers outside the banking hall all round the clock.

All the banks considered observed that cost reduction and enhanced ability to deal with customers were drivers of extreme importance.

The desire to reduce both operational and administrative costs has driven banks to the electronic world.

However, cost reduction is only realizable with an increase in consumer adoption.

E-banking is the use of internet and telecommunication networks to deliver a wide range of value added products and services to bank customers.

Internet has changed the dimensions of competition in the retail banking sector.

Following the introduction of personal computer  banking, Automated  Teller  Machines and telephone banking which are the initial cornerstones of electronic finance, the increased adoption and penetration of Internet has added a new distribution channel to retail banking:

Internet/Online-banking. E-banking has gained worldwide acceptance as a new delivery channel for performing various banking transactions.

It provides the opportunity to the customers to conduct banking transactions at their convenience. 

Generally,  the  automation  of  banks makes  transaction  and  data  processing  very easily  accessible  for  quick  management decision making.

This has led to another level of benefit which has ushered in what is today referred to as electronic banking. Electronic banking  helps  the  banks  to  speed  up  their retail  and  wholesale  banking  services. 

The banking  industry  believes  that  by  adopting the  new  technology, e-banking,  the  banks will  be  able  to  improve  customer  service level  and  tie  their  customers  closer  to  the bank.

According to Chang,(2003) e-banking contributes significantly to the distribution channels of banks such as automated teller machine (ATM), Phone –banking, Tele-banking, PC-banking and now internet banking (Chang, 2003).

In addition, transfer of funds, viewing and checking account balances, paying mortgages, paying bills and purchasing financial instruments and certificates of deposits processes have improved significantly as a result of internet banking ( Mohammed, 2009).

This implies that e-banking has resulted in efficiency in service delivery in the banking sector because customers can transact business from one side of the country to another and from both long and short distances.

E-banking is critical in the transformation drive of banks in areas such as products and services and the level of satisfaction customers derive in using these product and services.

Thus, it is seen as a valuable and powerful tool in the development, growth, promotion of innovation and enhancing competitiveness of banks (Kamel, 2005).

Given the significant role of e-banking in the developmental drive of banks, information technology has been found to lead to improvement in business efficiency and service quality and hence to attract customers and retain them (Kannabira and Narayan, 2005).

This shows that the delivery of efficient and quality service is facilitated by information technology.

Similarly, Christopher(2006)indicated that e-banking provides an important channel to sell products and services of banks and is perceived to be a necessity for banks to be successful.

Therefore, service quality and efficiency in the banking industry has increased tremendously in Cameroon due to the integration of information technology into banking operation.

The present study seeks to investigate the extent to which the e-banking concept has influenced customer satisfaction in Cameroon.

1.2 Problem statement

Cameroon has experienced stable economic growth over much of the past decade. Before the independence of the country in 1960, the banking system in Cameroon was dominated by foreign banks.

After independence, foreign financial institutions were French banks, which were there to finance French investments in the country.

Subsequently, the government started to involve itself in foreign banks and acquired partial ownership of BICIC, BIAO, SGBC and Credit Lyonnais.

This continued until 1987 when a financial crisis occurred in the country.

The crisis resulted in rising prices in Cameroon, trade deficits, and loss of government revenue.

It changed the evolution and health of each bank, depending on whether it was a foreign or domestically owned institution.

Many financial institutions closed while others changed ownership.

Several other banks have been established in the country since then, thus an increase in the number of banks in Cameroon.

With the emergence of new technology, all sectors are introducing a variety of innovative services; this is also the case with the banking sector which is now offering customers a wide range of electronic services.

This has eventually increased the level of competition between banks.

In Cameroon, until 1997 banks were only offering services through the physical branch.

Now, with the changes in the banking environment, they are also offering electronic banking services.

The country now has electronic products and services such as Automated Teller Machines (ATMs), SMS banking, Internet banking, Point of Sales (POS) machines, and telephone banking.

In many banks throughout the world, e-banking is now the focal area of bankers because it reduces the cost of doing transactions, attracts new customers, makes transactions faster than before, creates new markets, and enhances service quality. 

In Cameroon, e-banking is a new industry and consumer acceptance and use of e-banking is still limited. There is only a vague understanding of the effect of electronic banking on customer satisfaction.

A study conducted by Philipos L about customer satisfaction and electronic banking service on some selected banks of Ethiopia listed that currently there are some factors which affect customer satisfaction in electronic banking services in selected banks (commercial banks of Ethiopia, Wegagen bank, and Zemen bank) of Ethiopia.

Those are machines out of order, machines out of cash, cards blocked, frequent breakdown of ATM services, unreliability of ATM services, lack of technicians to attend to breakdowns of ATM machines, lack of alternative systems to ATM services when problems occur, lack of mobile banking services, lack of reliable telebanking networks, lack of credit card services, under-development of technological infrastructure, low level of knowledge creation and innovation, interruption of networks, lack of suitable and regulatory frameworks for e-commerce, resistance to change in technology among customers and service providers as a result of fear of risk, and lack of fair distribution of E-banking services all over Ethiopia during his pretest of this study.

In his study result he found that customer satisfaction in e-banking has significant relationships with convenience, reasonable and fees (charges) during transaction, efficient service of e-banking, privacy, security, reliability and responsiveness of employees to solve e-banking service failure and these variables determined 84% of customer satisfaction in e-banking and he also recommended for future researcher to investigate the impact of e-banking on customer satisfaction, customer loyalty and customer retention.

As aforementioned, the research is therefore structured to provide answers to the following questions:

• To what extent does e-banking service affect customer satisfaction?

• To what extent is the level of awareness of e-banking services among customer?

• How has the introduction of internet banking, ATM, SMS- alert, E- statement and POS services affected customer satisfaction?

1.3 Research Objectives

The main objective of this study is to evaluate the effect of electronic banking on customer satisfaction in Cameroon. The specific objective of the study includes:

1. Assessing customers’ awareness of the e-banking services.
2. Examining the relationship between internet banking, point of sales (POS), SMS- alert E- statement and ATM services on customer satisfaction.
3. Identifying the problems associated with e-banking customer satisfaction.
4. Providing recommendations.