THE CHALLENGES AND PROSPECTS OF ADOPTING ELECTRONIC BANKING IN SELECTED PRIVATE BANKS OF ETHIOPIA

Abstract

This paper aims to examine adoption of E-banking in the Ethiopian banking industry with respect to the challenges and prospects. The study was conducted based on the data gathered from four private banks in Ethiopia; Dashen bank, Nib bank, United bank and Wegagen bank. A mixed research approach was utilized. The study statistically analyse data obtained from the survey questionnaire. The result of the study indicated that, the major barriers Ethiopian banking industry faces in the adoption of Electronic banking are poor interconnectivity among banks, lack of technical and managerial skills to use and implement the system, lack of trust from customer side, lack of sufficient legal framework national level, lack of competition among local and foreign banks and the absence of government support to enhance and encourage e-banking adoption. Low level of internet penetration and poorly developed telecommunication infrastructure, high cost of internet, frequent power interruptions and network failures were also other key challenges. The study also identified basic benefits a firm could attain from the adoption of E-banking system. The observed convenience for the banks and clients were found to be that e-banking saves time, minimizes inconveniences, provides up to date information, increases operational efficiency, minimizes the cost of transaction, and reduces human resource requirements. Further general prospects identified in this study were late adopter opportunities, commitment of the government to facilitate the expansion of ICT infrastructure. The study recommends that NBE needs to establish a clear set of legal frame work, the government should also support the banking industry by investing on ICT infrastructure and setting up a system where banks could get an incentive while adopting new technology. Banks need to be more focused on technological innovation competition rather than traditional bases of retail bank competition.