THE IMPACT OF ELECTRONIC BANKING ON CUSTOMER SATISFACTION ...

THE IMPACT OF ELECTRONIC BANKING ON CUSTOMER

SATISFACTION TOWARDS THE FINANCIAL INSTITUTIONS IN

UGANDA

CASE STUDY: CUSTOMERS OF CENTENARY BANK AND BACLAYS

BANK AT VICTORIA MALL, ENTEBBE

BY

KAYANJA NICHOLAS

213012018

13/U/6367/EVE

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF

THE REQUIREMENTS FOR THE DEGREE OF BACHELOR OF

SCIENCE IN BUSINESS STATISTICS AT MAKERERE UNIVERSITY

September 2019

iii

DEDICATION

The research project is dedicated to my family for their constant support and encouragement

throughout my studies.

I cannot forget my parents for their wisdom and inspiration which is the pillar in search of

knowledge.

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ACKNOWLEDGEMENT

I thank the Almighty God for his unconditional love and blessing upon reaching this stage of my

academic life.

My special acknowledgement goes to my supervisor Mr. Musoke for his sacrifice and guidance

towards the making of this dissertation a reality. May the Almighty God richly bless you.

I also thank my family for the motivation and financial support they give me continually.

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ABSTRACT

This study presents what impact electronic banking has on customers’ satisfaction in comparing

with traditional visits and mortar banking service. A case study of centenary and Barclays bank

the relationship it has with that of age consumption and education, its impact on branch visits,

the level of customer understanding about the banking and the opportunities and challenges of

the e- banking.

The study looked at the whether customers have adequate knowledge about electronic banking

services, their awareness about the charges, its availability and where to access it from. And also

determine their attitude towards the new technological advances provided by the financial

institutions in terms of trying to satisfy them .

The study used a cross-sectional research design where data was collected from 200 respondents

who were willing to participate using a structured questionnaire .data collected was analyzed

using SPSS

The study involved 55% of male and 45 % female who were all using internet banking at some

point .social demographic characteristics were found to significantly influence the usage of e

banking .it was found out the more education one acquired the more frequently they used

different internet banking options .the study reveled different impacts affecting the bank

customers using e banking services and products. Such impacts were accessibility, user friendly

and security.

They were different challenges associated with e banking such as network failure, limited

withdraw amount, no help in case of transaction failure and

The findings of this study revealed that employed people with high level of education engaged in

e banking more than others who were unemployed and the illiterate .it was recommended banks

should issue out information on the e banking services offered to the customers in order to

eradicate them more , encourage and attract more bank customers to using the different services

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TABLE OF CONTENTS

Contents page

DECLARATION ........................................................................................... Error! Bookmark not defined.

DEDICATION ............................................................................................................................................. iii

ACKNOWLEDGEMENT ........................................................................................................................... iv

APPROVAL ...................................................................................................... Error! Bookmark not defined.

ABSTRACT ..................................................................................................................................................... vi

TABLE OF CONTENTS ................................................................................................................................... vii

CHAPTER ONE ............................................................................................................................................... 1

1.1 Background study ......................................................................................................................... 1

1.2 Problem Statement ....................................................................................................................... 7

1.3 General objective .......................................................................................................................... 7

1.3.1 Specific objectives ................................................................................................................. 7

1.4 Research hypothesis ...................................................................................................................... 8

1.5 Scope of the study ........................................................................................................................ 8

1.6 Significance of the Study ............................................................................................................... 8

1.7 Conceptual Frame work ................................................................................................................ 9

2 CHAPTER TWO .................................................................................................................................... 10

2.1 Theoretical Review ..................................................................................................................... 10

2.1.1 Factors of Adopting e-Banking ............................................................................................ 10

2.2 E-Banking and Customer Satisfaction ......................................................................................... 12

2.2.1 Electronic Banking .............................................................................................................. 15

2.2.2 CUSTOMER SATISFACTION .................................................................................................. 15

2.3 Customer Satisfaction and its Consequences ............................................................................. 16

2.4 Models of Customer Satisfaction .............................................................................................. 17

2.4.2 The Kano Model .................................................................................................................. 18

2.4.3 Theory of Planned Behavior (TPB) .................................................................................... 19

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2.5 Empirical Studies ......................................................................................................................... 20

2.5.1 Research Gap of the Study .................................................................................................. 24

3 CHAPTER THREE .................................................................................................................................. 25

3.1 Methodology ............................................................................................................................... 25

3.2 Research design .......................................................................................................................... 25

3.3 Survey Population ....................................................................................................................... 25

3.4 Sampling Design .......................................................................................................................... 25

3.5 Sample size .................................................................................................................................. 26

3.6 Data Collection Methods ............................................................................................................ 26

3.7 Data Collection Tools .................................................................................................................. 26

3.7.1 Interviews Questions .......................................................................................................... 26

3.7.2 Questionnaires .................................................................................................................... 27

3.7.3 Documentary Review .......................................................................................................... 27

3.8 Reliability and Validity of Data .................................................................................................... 27

3.9 Data Analysis ............................................................................................................................... 27

3.10 Analytical Model ......................................................................................................................... 28

3.11 Ethical Consideration .................................................................................................................. 29

4 CHAPTER FOUR ................................................................................................................................... 30

4.1 PRSENTATION, INTERPRETATION AND DISCUSSION OF THE FINDINGS ................. 30

4.2 Introduction ................................................................................................................................ 30

4.3 Univariate analysis ...................................................................................................................... 30

4.4 Bivariate analysis ......................................................................................................................... 35

5 CHAPTER FIVE...................................................................................................................................... 40

5.1 Summary of the results ............................................................................................................... 40

5.2 CONCLUSIONS ......................................................................................................................... 41

5.2.1 RECOMMENDATIONS .................................................................................................... 42

5.3 Limitation of the Study and Suggested Areas for Further Studies .............................................. 44

5.3.1 Limitations ........................................................................................................................... 44

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5.3.2 Suggested Areas for Further Studies................................................................................... 44

References .................................................................................................................................................. 46

6 APPENDIX ............................................................................................................................................ 49

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LIST OF TABLES

Page

Table1. 1 showing ownership of centenary bank in percentage………………………………….2

Table4. 1. Demographic characteristics for the study ................................................................... 30

Table 4. 2 Spearman’s rank order correlation coefficients for determinants of customer

satisfaction using e banking services ............................................................................................ 36

Table4. 3 showing the adjusted R sqaured.................................................................................... 36

Table 4. 4 Summary of ONE WAY ANOVA results ................................................................... 37

Table 4. 5 coefficients of the regression equation ........................................................................ 38

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LIST OF FIGURES

Page

Figure1. 1 The relationship between independent variables and independent variables……………..…….8

Figure4. 1 A bar graph showing the marital status in percentages ............................................... 33

Figure4. 2A bar graph showing age brackets of e banking users ................................................. 34

Figure4. 3 A pie chart showing the level of education of e bank users ........................................ 35

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CHAPTER ONE

Introduction

Chapter one covers the background study, the problem statement, objectives of the study,

hypothesis, and scope of the study and research questions.

1.1 Background study

Internet banking refers to the banking of products and services offered by institutions on the

internet through their access services including personal computers and other intelligent devices

like the automated teller machines (ATMs), Point of Sale (POS), Mobile Banking, Real Time

Gross Settlement (RTGS) and many more. (Kulabako, Faridah ,2012).According to (Haruna

Chalan and Sivasu Bramarian,2007), Internet Banking is where a customer can access his or her

bank account via the internet using his or her bank account.

Recently banks have converted from the traditional use of banking halls to the branchless

positions of banking. The use of technology has increased the customer base through the use of

electronic banking which includes the use of AUTOMATED TELLER MACHINE (ATMs,

Point of Sale , Mobile Banking and many more which means customers can access their

balances, request for mini statements, make deposits and withdrawals minus reaching the branch

(Saleem and Rashid, 2011).

According to (Daniel Nsibambi, 2011), communication manager of one of the banks in Uganda

(Stanbic Bank) said “Internet Banking is convenient as it allows one to perform transactions 24/7

hours and seven days a week anytime including public holidays”.

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 percentage of total

customers whose reported experience will affirm its products or services exceeds the specified

satisfaction goals. Furthermore, customer satisfaction can be defined as the extent to which

customers are happy with the products and services provided by the business.(Julian 2016).

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In today’s busy world where people don’t have much time even for personal work online,

banking appears as the boost. Electronic banking was introduced in the early 80s and from the

time it was introduced many people have started availing its facilities since it’s easier to pay

bills, check account balances, mini statements minus reaching the bank but there still a quite

number of people still reaching the banking halls to process the services that can be accessed

online.Julian (2016).

Centenary bank is one of the banks promoting electronic banking among its customers in

Uganda. The bank launched internet banking in 2007 and it has since been growing

tremendously .the customers can use this service to access latest balance financial statements

account details, download statements and obtain a recent history statement on all their accounts

(John Ddumba 2017)

Centenary bank was founded in 1983 as a credit trust, centenary rural development trust

(CRDT). In 1985 centenary rural development trust began to provide financial services to

the public. Centenary bank became fully licensed commercial bank in 1993, after receiving

a banking license from the central bank of Uganda. On 26-03-2007 centenary rural development

rebranded and trimmed its name to just centenary bank. Centenary bank is now Uganda’s largest

indigenous bank with over 37 branches.(www.centenary bank.co.ug). as of April 2010 centenary

bank was 5th largest commercial bank in Uganda with an asset of base of US 306.7million

representing approximately 7.4% of the all banks assets in the country (John Ddumba 2017)

Centenary bank has got five different partners that ensure its operations are up to notch and keep

it a competitive business amongst all the banks and these partners include; Roman catholic

dioceses of Uganda, Uganda roman catholic secretariat, Stitching Hivos Triodos Fonds ,

Solidarité Internationale pour le Développement et l'Investissement, a French investment bank

and Ugandan individuals

http://www.centenary/

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Table 1. 1 showing ownership of centenary bank in percentage

Rank name of the owner percentage of

ownership

1 Roman catholic dioceses of Uganda 39.5

2 Uganda roman catholic secretariat 31.3

3 Stitching Hivos Triodos Fonds 18.3

4 Solidarité Internationale pour le Développement et

l'Investissement, a French investment bank

11.6

5 Ugandan individual 0.3

TOTAL 100

Source https://en.wikipedia.org/wiki/Centenary_Bank

In the 1960s Barclays Uganda DCO became the first in Africa to be locally incorporated as

Barclays Bank of Uganda. The government acquired 49% of the new company while DCO

retained a 51% holding, with A G Woodcock as the first chairman and general manager of the

bank. At the same time Barclays acquired the Ugandan business of a subsidiary of the French

bank SFOM, the Commercial Bank of Africa. Barclays had nine branches and 33 other outlets

and was actively engaged in the financing of agricultural exports of coffee and sugar. By 1970

the business was significantly impacted by political instability and civil wars. Highway robberies

began to affect cash movements between the branches and it worsened during 1979 following the

overthrow of President Idi Amin, branches were looted and employees attacked whilst London

lost contact with Uganda altogether. This lead to the formation of team colleagues who

https://en.wikipedia.org/wiki/Centenary_Bank

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volunteered to restore order to the branches. Mr. Yekowasi K. Oteba - now deceased - managed

the bank during that period. (Ssepuya Mikaili 2008)

Barclays Uganda was the first bank in East Africa to computerize its accounting, using NCR

9300 machines, and the first in Uganda to have same-day accounting and clearing for all

branches. This was achieved in 1987 .The remote Jinja branch was linked to the computer centre

in Kampala. In 2010 during the Period of consolidation leading to branch and premises

rationalization, Barclays Uganda launched the Premier customer's service centre, and an Internet

banking service which included personal and commercial banking options. By 2013 the bank had

launched the platinum debit card for its Premier account holders giving them access to online

purchases beyond normal debit card services and also the bank launched the usage of Master

Card and also launched the World Miles program on the platinum debit card. (Mian Nazim,2018)

Barclays Bank of Uganda Limited received an innovation award at the Corporate Entrepreneur

awards in New York for our innovative approach in extending financial services to Villages

savings groups in Uganda in 2014. They continued with the annual Business club and customer

loyalty programmes, and launched the Women’s Network Forum for Barclay’s female

colleagues. Opened a new branch at Acacia mall and set up intelligent ATMs (iATMs) in Naalya

and Acacia malls. They also launched free credit life insurance, free retrenchment cover, life

insurance cover and funeral cover. (Mian Nazim,2018)

The bank re-launched Prestige banking launched Risk management products, direct debits, USD

debit card, mobile bulk payments, the mobile banking app, cash send, SMS alerts and the

Uganda shillings credit card. they also set up a 24 hour call centre. In 2016 The bank refurbished

the Ntinda branch, set up 29 iATMs, launched cardless deposits on the intelligent ATMs,

launched paperless banking, eStatements, Pamoja Bonus savings account, Ready to work,

Business debit card and business daily interest account. (Swithin Munyantwali 2018)

1.1.1.1 Owner ship of Barclays bank

In 1969, the bank's stock was 51 percent held by Barclays and 49 percent held by the

government of Uganda. By 2001, the bank had become a wholly owned subsidiary of Barclays

Since March 2016, the bank has been wholly owned by the Barclays Africa Group With the re-

https://en.wikipedia.org/wiki/Government_of_Uganda

https://en.wikipedia.org/wiki/Barclays_Africa_Group

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branding of Barclays Africa Group, in 2018, Barclays Uganda is a 100 percent subsidiary of

Absa Group Limited (Mian Nazim 2018)

Electronic banking services available in both centenary and Barclay’s bank

i. Point of sale (POS) of agent banking

When the parliament of the Republic of Uganda passed the financial institution amendment act

of 2016 which made provision for agent banking governed by agent banking regulations 2017

enabled financial institutions to enter into the digital financing space to drive the financial

inclusion and increase access to financial services to arrange of the under- served and un banked

population segments. Through a shared platform brought by the agent banking company POS

System, it has made it easier for the customers to access their accounts from relatively different

locations at any point avoiding the hectic movement from one bank to another hence saving time.

The POS system has almost all the services a bank can offer. Customers can check balances,

make deposits on accounts, pay bills and can even open up new accounts making it flexible for

the customers and profitable for banks since it’s easy to get an agent than opening up a new

branch as noted by Mr. Richard Yego in (2017) the Director of Agent Banking Company.

ii. AUTOMATED TELLER MACHINE (ATM)

This is an electronic terminal that lets you bank almost any time for customers to withdraw cash,

make deposits or transfer funds between accounts they generally need an ATM Card with a

personal PIN. ATMs have had a positive response since their introduction more than 30 years

ago. ATM technology has gradually become the electronic face of the banks. They are 24 hour

around clock electronic cashiers which provide access into customers’ accounts by use of the

ATM cards in the ATM machines which are situated at different locations all over the country.

(Sseppuya, Mikaili 21 May 2008)

According to (Wake Field 2010), ATMs have been extended to rural areas of the country making

it easy for customers to access their money and they have also made them visa electronic cards

implying that one can access his or her funds from a different bank in which he or she has no

account.

https://en.wikipedia.org/wiki/Barclays_Africa_Group

https://en.wikipedia.org/wiki/Absa_Group_Limited

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iii. MOBILE BANKING

Mobile Banking is a 24 / 7 banking service that allows customers to access their accounts

through the use of mobile applications that can be down loaded from any play store isos store.

With this kind of application, the customer can access his or her account balance, mini statement,

pay bills and transfer money from his account to his mobile money account or the other way

round.Ssonko, Kiganda (14 December 2008)

This is more convenient to customers since it’s at his or her fingertip. Some of the different

platforms of customer use are Cente Mobile for Centenary Bank, DTB app for Diamond Trust

Bank and many more.

iv. NSSF PAYMENT

The banks on behalf of the National Social Security Fund accept payments from organizations

that have registered to remit their employees’ social contribution. The cash for the contribution is

credited directly to the NSSF collection and there is no need for customers to the NSFF

premises. Kulabako, Faridah (29 February 2012).

v. TELEPHONE BANKING

Africa has experienced an incredible boom in mobile usage over the past decade. Today, Uganda

has more than 10 million mobile users and the number is growing rapidly every day. In respect to

this research, telephone banking technology means availability, accessibility and the use of

telephone to engage in deposits, withdrawals and account balance inquiry by the user in the

industry. Martin Luther Oketch (18 July 2019).

vi. Fees and Charges

Service quality attributes in the e- banking industry is important since human internet interaction

is the main service delivery and communication channel offering high quality services to

customers’ needs at lower costs is the potential competitive advantage of e-banking. Kulabako,

Faridah (29 February 2012).

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1.2 Problem Statement

The introduction of electronic banking into the banking sector is to bring customers’ satisfaction

thereby enhancing the banks’ profitability levels. But this has resulted into more burdens on the

financial institutions in trying to attract a large number of clients and enhancing the perception of

these clients and empowering loyalty.

Daniel and Mols (2010) described that compared to ordinary banking system; electronic banking

is providing the best customer satisfaction of customer needs. The old age is generally the shy of

use of the ATM because of the perceived risk of failure of complexity, security and lack of

personalized services.

Former Bank of Uganda Deputy Governor David Opio Okello (2009) said “one can access his

bank account and carry out a number of transactions even when she / he are out of the country.

Online banking is more convenient because you can transact business anytime of your

convenience”.

But with increased methodologies of transacting without reaching the banking hall has come

with a lot of more consequences like the increase of cybercrime, machine break down (ATMs),

poor internet connection and lack of enough information on the available online products.Julian

(2016).Therefore, identifying the impact internet banking has on customer satisfaction is still an

open subject and this prompts the researcher to carry out the study and ascertain the level of

satisfaction customers derive from internet banking

1.3 General objective

To access and examine the impact of electronic banking on customers’ satisfaction in Uganda’s

banking industry

1.3.1 Specific objectives

i. To find out whether customers have adequate knowledge about electronic banking

services.

ii. To find customers attitude towards electronic banking security

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iii. To describe the age, gender, marital status, occupation and the education status of the

banking users in the city.

iv. To assess the level of customer understanding of the e- banking and find out if it has

reduced the cycle time for the customers.

v. To suggest the necessary actions that should be considered by commercial banks in order

to increase the impact of e- banking on customer satisfaction.

1.4 Research hypothesis

The study tested the following hypothesis.

There is no relationship between customers’ satisfaction in e-banking than ordinary banking and

demographic characteristics

There is relationship between customers’ satisfaction in e-banking than ordinary banking and

demographic characteristics

There is no significant difference between branch visits after e-banking and before e-banking

There is significant difference between branch visits after e-banking and before e-banking

There is no relation between customers’ satisfaction in e-banking than ordinary banking with

customer knowledge about e-banking, availability and improvement of account control

movements

There is relation between customers’ satisfaction in e-banking than ordinary banking with

customer knowledge about e-banking, availability and improvement of account control

movements

1.5 Scope of the study

In assessing the impact of e- banking on customer satisfaction customers of the study was carried

out for two months from Victoria mall Entebbe and Centenary Bank and Barclays Bank were

chosen because they all have at least a transaction point at that place.

1.6 Significance of the Study

This study will help the researcher to apply the research methods & techniques taught in lecture

rooms and improve his research skills. And also this study will be useful for the financial

https://www.omicsonline.org/open-access/genetic-and-demographic-correlates-of-quality-of-life-after-ileal-pouch-analanastomosis-for-ulcerative-colitis-jibdd-1000107.php?aid=74365

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institutions in Uganda to see the impacts of internet banking on customer satisfaction in

comparison with the old ordinary mortar and brick banking system.

The study is hoped to make banks understand the attitude of customers towards internet banking

and what actions to be taken in order to benefit from the opportunities and how to overcome the

challenges.

The findings in the research will be used as a benchmark to future researchers who are interested

in exploring the subject under study

1.7 Conceptual Frame work

This shows how independent variables affect the dependent variable

Figure1. 1 The relationship between independent variables and independent variables

Independent Variables moderate variable Dependent Variable

Source: author’s construction

Figure 1.1 indicates how the independent variable e-banking services is influenced by time

security, availability user-friendly, charges and responsiveness yield customer satisfaction which

is the dependent variable

E-Banking Services Traditional Banking

Transfer Time

Security

Availability

User Friendly

Responsiveness

Charges

Customer

Satisfaction

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2 CHAPTER TWO

2.1 Theoretical Review

On this chapter I will discuss different scholars who have dealt with the theory of e banking

especially the factors of adopting e-banking. There accessibility, convenience, privacy and

security.

2.1.1 Factors of Adopting e-Banking

It has been argued that for any service or technology to succeed it must be adopted by the users

and accepted. Therefore on the following paragraphs I will discuss the factors leading to

adopting of E-banking.

a. Accessibility

Accessibility is defined as the ability of users to access information and services from the web,

this depends on many factors. Which include: the content format; the user's hardware, software

and settings; internet connections; the environmental conditions and the user's abilities and

disabilities (Godwin-Jones 2001; Hackett and Parmanto, 2009). The term "web accessibility"

generally relates to the implementation of website content in such a way as to maximize the

ability of users with disabilities to access it. For example, providing a text equivalent for image

content of a web page, allows users with some visual disabilities access to the information via a

screen reader. The techniques and approaches that create more accessible web pages for people

with disabilities also address many other access issues such as download speed and

discoverability (Hackett et al, 2004; Hackett and Parmanto, 2009).

Jun et al., (1999) revealed reliable/prompt responses, attentiveness, and ease of use had

considerable impacts on both customers perceived overall service quality and satisfaction. It also

indicated that there is a significant positive relationship between overall service quality and

satisfaction. Yang and Jun (2002) redefined the traditional service quality dimensions in the

context of online services, and suggested an instrument consisting of seven online service

dimensions (reliability, access, ease of use, personalization, security, credibility, and

responsiveness). Joseph et al (1999) considered banking service quality with respect to

technology use, such as ATMs, telephone, and the internet and identified six dimensions. They

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were convenience/accuracy; feedback/complaint management; efficiency; queue management;

accessibility; and customization. Therefore, accessibility has positive effect on customer

satisfaction.

b. Convenience

E-banking provides higher degree of convenience that enables customers to access internet bank

at all times and places. Apart from that, the ease of access of computers is perceived as a

measure of relative advantage (Polatoglu and Ekin 2001). Garrard and Cunningham (2003)

revealed that there are some service quality determinants that are predominantly satisfiers and

others that are predominantly dissatisfies with the main sources of satisfaction being

attentiveness, responsiveness, care and friendliness. The main sources of dissatisfaction are

integrity, reliability, responsiveness, availability and functionality.

According to Ainscough and Luckett (1996), the provision of customer interactivity is an

important criterion that attracts users in the delivery of e-banking. Gerrard and Cunningham

(2003) also identify other factors of paramount importance in ensuring the success of e-banking,

i.e. the ability of an innovation to meet users' needs using different feature availability on the

web site. For instance, the provision of Interactive loan calculators, exchange rate converters,

and mortgage calculators on the web sites draw the attention of both users and non-users into the

bank's web site.

c. Privacy

Customers have doubts about the trust ability of the e-bank's privacy policies (Garrard and

Cunningham, 2003). Trust has striking influence on user's willingness to engage in online

exchanges of money and personal sensitive information (Friedman et al, 2000). Privacy is an

important dimension that may affect users' intention to adopt e-based transaction systems.

Encryption technology is the most common feature at all bank sites to secure information

privacy, supplemented by a combination of different unique identifiers, for instance, a password

and Warren, (2003). Thus, a combination of smart card and biometric recognition using

fingerprints offers a more secure and easier access control for computers than the password

method. Zeithaml et al., (2000) developed e-SERVQUAL for measuring eservice quality,

identifying 11 dimensions: access; ease of navigation; efficiency; flexibility; reliability;

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personalization; security/privacy; responsiveness; assurance/ trust; site aesthetics; and price

knowledge.

d. Security

Assurance about security relates to the extent to which the web site guarantees the safety of

customers` financial and personal information, an area which has witnessed a proliferation of

research interest (Kimery and McCord, 2002). Security can be assured by providing a privacy

statement and information about the security of the shopping mechanisms and by displaying the

logos of trusted third parties. For example, displaying trusted third party logo guarantees a

certain level of security protection and has been shown to significantly influence how consumers

regard the trustworthiness of e vendors (Jiang et al, 2008).

Internet banking is made possible by the creation of Web browsers. In this mode of online

banking, consumers do not have to purchase additional software (all they need is the browser),

store any data on their computer, backup any data, or wait for software upgrades or new versions

(Dong-Her et al, 2004). All transactions occur on a secure server of a bank via the internet. The

bank has all of the required data and software to execute the transactions. Customers go the

bank's Web site, log in, and then take advantage of the bank's internet services. Typical bank

services are account access and review, transfers of funds between accounts, bill payment, and

then a widening variety of new services and products. Security plays an important role in internet

banking and so there are several protocols for internet security of encrypted data packets

(Kolsaker and Payne, 2002).

2.2 E-Banking and Customer Satisfaction

Arunachalam and Sivasubramanian (2007) contents that Internet banking is where customer can

access his or her bank account via the Internet using PC or mobile phone and web-browser; and

Ongkasuwan and Tantichattanon (2002) defined Internet banking service as banking service that

allows customers to access and perform financial transactions on their bank accounts from their

computers with Internet connection. Kim et al. (2006) predicted that 87% of community banks

would offer Internet banking in 2003 to meet consumers’ needs, and asserted that, Internet

banking has advantages for banks to maintain competition, to save costs, to enhance mass

customization, marketing and communication activities, and to maintain and attract consumers.

13

Katri (2003) stated that the Internet banks serve also as gateways offering identification and

authorization services to a number of third party service providers.

Rationale for ‘banks’ to provide Internet banking services, Ongkasuwan and Tantichattanon

(2002) indicate that internet banking helps banks in cost saving, increase customer base, enable

mass customization for e-Business services, extend marketing and communication channel,

search for new innovation services, and explore and development of non-core business.

However, customers’ ability to subscribe to the Internet-base banking services depend on several

factors such as user-friendly interface, level of Internet experience, types of services provided,

(for example e-mail, file transfer, news, online financial services, shopping and multimedia

services), attitude and perception, access and delivery time and experience with the Internet.

Gao and Owolabi (2008) contend that the currently relevant factors determining the adoption of

internet banking in Nigeria include the level of awareness or attention, the accessibility to

computers and the Internet, convenience, privacy, costs, and the availability of knowledge and

support concerning internet banking. The introduction of internet banking services is facilitated

by the bank’s reputation in terms of size, awareness and trust awareness of Service and its

benefits in form of the amount of information a customer has about Internet banking and its

benefit may have a critical impact on the adoption of Internet banking (Jaruwachirathanakul and

Fink, 2005; AlSomali et al., 2008).

On the other hand, Al-Somali et al. (2008) noted that low awareness of Internet banking is a

critical factor in causing customers not to adopt internet banking and Katri (2003) conquers that

most important factors discouraging the use of Internet banking are lack of Internet access and

not having a chance to try out Internet banking in a safe environment, thus not being in a position

to access account.

According to Gan et al. (2006), the previous studies have identified that user input factors are a

function of control, enjoyment and intention to use. Control could be described as the amount of

effort and involvement required by consumers in electronic banking. Enjoyment is the perceived

playfulness and intrinsic value that consumers experience from the utilization of electronic

banking and this would also influence the level of satisfaction; as Gan et al., (2006) indicate that

14

when consumers are aware of the availability of electronic banking, they will use adopt, though

some may not.

Lichtenstein and Williamson (2006) noted that several Musiime and Ramadhan converging

reference domains and theories suggest numerous potential influences on consumer adoption of

internet banking including theories of consumer behavior in mass media choice and use,

gratification theories, innovation diffusion, technology acceptance, online consumer behavior,

online service adoption, service switching costs and the adoption of internet banking. Davis

(2003) proposed that customers’ intentions to use internet banking can be affected by customers’

attitudes toward using internet banking. When customers have positive attitudes, they are more

likely to adopt internet banking and vice versa (Lichtenstein and Williamson, 2006).

Eriksson et al. (2005) found that customers’ attitude are significant factor affecting customer

behaviors in accepting or rejecting technology. It was found that the relationship between

attitude towards using and usage was significant. Customers' attitudes are a significant factor

affecting customer behaviors in accepting or rejecting technology (Davis et al., 1989).

According to Saha and Zhao (2005), customer satisfaction is defined as a collection of outcome

of perception, evaluation and psychological reactions to the consumption experience with a

product/service. In other words, Saha and Zhao further defined customer satisfaction as a result

of a cognitive and affective evaluation where some comparison standard is compared to the

actually perceived performance. If the performance perceived is less than expected, customers

will be dissatisfied. On the other hand, if the perceived performance exceeds expectations,

customer will be satisfied. Boateng and Molla (2006) contend that operational constraints related

to customer location, the need to maintain customer satisfaction and the capabilities of the Bank's

main software are influential factors in motivating the decision to enter electronic banking

services and consequently influencing the usage experience and thus affecting the level of

satisfaction.

Raman et al. (2008) said that service as an intangible good appeal differently to each customer

and certain extent of service should be achieved in order to satisfy the customer and that the

resulting commitment, loyalty and retention are critical indicators of customer satisfaction.

15

Customer commitment; Power and Associates (2009) note that on average, highly committed

customers use more products or services, give more referrals and are much less likely to switch

to another bank, compared with customers who have lower commitment levels. Indeed, this view

is supported by Casaló et al. (2008) who contends that higher levels of website usability might

lead to higher levels of consumer's affective commitment to the website as well a direct, positive

and significant relationship between.

2.2.1 Electronic Banking

This is where a customer can access his or her bank account via the internet using his or her

personal computer, mobile phone or transfer money system using the Point of Sale (POS),

mobile money wallets from one account to another without physically handling cash.

However, Mr. Daniel Nsibambi (2011) defined electronic banking as a 24-hour access to cash

through ATMs with just a Personal Identification Number (PIN).

While the former Bank of Uganda Governor David Opio Okello(2006) said one could access his

account and carry out a number of transactions even when she / he is out of the country and also

through RTGs, TTS one could transfer big sums of money in and out of the country.

Jamal, (2004), defines electronic banking as the delivery of banks' information and services by

banks to customers via different delivery platforms that can be used with different terminal

devices such as a personal computer and a mobile phone with browser or desktop software,

telephone or digital television. Pikkarainen et al. (2004) define internet banking as an "internet

portal, through which customers can use different kinds of banking services ranging from bill

payment to making investments". With the exception of cash withdrawals, internet banking gives

customers access to almost any type of banking transaction at the click of a mouse (De Young,

2001).

2.2.2 CUSTOMER SATISFACTION

2.2.2.1 Introduction

Business starts and closes with customers and hence customers must be treated as kings of the

market business enhancements, profit image etc of the organization depends on customers hence

16

it’s important for all organizations to meet customers’ expectations and identify that they are

satisfied.

Definition

Customer Satisfaction is the customer’s overall feeling of content in a business interaction

(Elaine, 2005). Customers’ satisfaction is defined as a measure of how products and services

supplied by an organization meet or surpass customers’ satisfaction. According to (Berry, 2000)

“Customer Satisfaction is defined by use of 10 dimensions of satisfaction which include quality,

value, timeless, efficiency, ease of access of the environment, inter departmental, team work,

frontline services behavior commitment to customers and innovation”.

Satisfaction may develop quickly or it may be cultivated over a period. It’s the overall pleasant

experience after the consuming of the product or services and therefore customers’ satisfaction is

the state of mind that customers have about the company when their expectations have been met

or exceeded over the life time of the product or a service.

2.3 Customer Satisfaction and its Consequences

Satisfaction has been considered as one of the most important theoretical as well as practical

issues for most marketers and customer researchers (Jamal, 2004). Satisfaction reflects a post-

purchase evaluation of product quality given pre-purchase expectations (Kotler, 1991). On one

hand, within literature on services marketing, satisfaction has traditionally been defined as a

cognitive-based phenomenon (Westbrook, 1987). Cognition has been studied mainly in terms of

the expectations/ disconfirmation paradigm; also known as the confirmation/ disconfirmation

paradigm, which states that expectations originate from the customer's beliefs about the level of

performance that a product/service would provide (Oliver, 1980).

Many marketing scholars (Tse and Wilton, 1988 Anderson and Sullivan, 1993; Patterson et al,

1997), indicate that customer satisfaction is related to the size and direction of disconfirmation,

which is defined as the difference between the post purchase and post-usage evaluation of the

performance of the product/service and the expectations held prior to the purchase (Sharma and

Ojha, 2004). On the other hand, other studies (Dube-Rioux, 1990; Homburg et al, 2006) have

recognized that the affect experienced during the acquisition and consumption of the product or

service can also have a significant influence on satisfaction judgments (Homburg et al, 2006).

17

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

(André, et al, 2000). 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.

Organizations of all types and sizes have come to realize that their main focus must be to satisfy

their customers (Heskett et al., 1994).

This applies to industrial firms, retail and wholesale businesses, government bodies, service

companies, nonprofit organizations and every subgroup within an organization. There is a

substantial body of empirical literature that establishes the benefits of customer satisfaction for

firms (Heskett et al., 1994). Organizations are increasingly interested in retaining existing

customers while targeting noncustomers; measuring customer satisfaction provides an indication

of how successful the organization is at providing products and/or services to the marketplace.

2.4 Models of Customer Satisfaction

2.4.1.1 SERVQUAL Model (Service Quality Gap Model)

SERVQUAL is a multi-item scale developed to assess customer perceptions of service quality in

service and retail businesses (Parasuraman, et al., 1988). The approach starts from the

assumption that the level of service quality experienced by customers is determined by the gap

between their expectations of the service and their perceptions of what they actually receive from

a specific service provider (Parasuraman, et al., 1988). Parasuraman, Zeithaml, and Berry (1985)

developed the "Gap Model" of perceived service quality. This model has five gaps:

Gap 1. Consumer expectation - Management perception gap Gap 2. Management perception -

Service quality specification gap Gap 3. Service quality specifications - Service delivery gap Gap

4. Service delivery - External communication gap Gap 5. Expected service - Experienced service

Gap One--Positioning Between customer's expectation and management's perceptions of those

expectations i.e. not knowing what customers expect The SERVQUAL model proposes five

dimensions upon which customers evaluate service quality. These are:

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Tangibles – the appearance of the physical facilities and materials related to the service

Reliability – the ability to perform the service accurately and dependably

Responsiveness – the willingness to help customers and provide prompt service

Assurance – the competence of the system and its security, credibility and courtesy

Empathy – the ease of access, approachability and effort taken to understand customers’

requirements

The use of perceived as opposed to actual service received makes the SERVQUAL measure an

attitude measure that is related to, but not the same as, satisfaction (Parasuraman, et al., 1988). It

is arguably that if the service offered to customers’ constituents and meets the five dimensions of

the service quality model, the customer perception towards the services offered will be positive.

SERVQUAL can measure attitude of the customers towards services. Various studies have

developed alternatives concepts for service quality, some state that services quality should

include three dimensions, like technical quality, functional quality and corporate quality

(Gronroos, 1982).

Others propose that services quality may be evaluated on the functional dimension, described by

five components: tangibility, responsibility, assurance, and empathy (Parsuraman, et al., 1985,

1988). Service quality is determined by the differences between customer’s expectations of the

services and their perceptions of the service experiences (Parasuraman, et al., 1982)

2.4.2 The Kano Model

The Kano model is a theory of product development and customer satisfaction developed in the

1980s by Professor Noriaki Kano that classifies customer preferences into five categories:

Attractive, One-Dimensional, Must-Be, Indifferent, Reverse. The Kano model offers some

insight into the product attributes which are perceived to be important to customers. Kano also

produced a methodology for mapping consumer responses to questionnaires onto his model. The

Kano model offers some insight into the product attributes which are perceived to be important

to customers. The purpose of the tool is to support product specification and discussion through

better development team understanding.

19

Quality Function Deployment (QFD) makes use of the Kano model in terms of the structuring of

the Comprehensive QFD matrices. Mixing Kano types in QFD

Matrices can lead to distortions in the customer weighting of product characteristics. For

instance, mixing must-Be product characteristics such as cost, reliability, workmanship, safety,

and technologies used in the product in the initial House of Quality will usually result in

completely filled rows and columns with high correlation values. Other Comprehensive QFD

techniques using additional matrices are used to avoid such issues. Kano's model provides the

insights into the dynamics of customer preferences to understand these methodology dynamics.

2.4.3 Theory of Planned Behavior (TPB)

Theory of planned behavior (TPB) has been successfully used to predict users' acceptance of IT

(Amjad and Wood 2009). The theory of planned behavior is a theory about the link between

attitudes and behavior. The concept was proposed by Icek Ajzen to improve on the predictive

power of the theory of reasoned action by including perceived behavioral control (Koger and

winter 2010). It is one of the most predictive persuasion theories. It has been applied to studies of

the relations among beliefs, attitudes, behavioral intentions and behaviors in various fields such

as advertising, public relations, advertising campaigns and healthcare. The theory states that

attitude toward behavior, subjective norms, and perceived behavioral control, together shape an

individual's behavioral intentions and behaviors (Sniehotta, 2009).

The Theory of Planned Behavior (TPB) helps to understand how the behavior of people can

change. The TPB is a theory which predicts deliberate behavior, because behavior can be

deliberative and planned. TPB is the successor of the similar Theory of Reasoned Action of

Ajzen and Fishbein (Koger and Winter 2010). The succession was the result of the discovery that

behavior appeared not to be 100% voluntary and under control, which resulted in the addition of

perceived behavioral control. With this addition the theory was called the Theory of Planned

Behavior. According to TPB, human action is guided by three kinds of considerations.

Toward the behavior, subjective norm, and perception of behavioral control lead to the formation

of a behavioral intention. As a general rule, the more favorable the attitude and subjective norm

and the greater the perceived control, the stronger should be the person’s intention to perform the

20

behavior in question. Recently Stern, (2005) investigated Residual Effects of Past on Later

Behavior. He came to the conclusion that this factor indeed exists.

(i) Behavioral Beliefs (beliefs about the likely consequences of the behavior)

(ii) Normative Beliefs (beliefs about the normative expectations of others)

(iii) Control Beliefs (beliefs about the presence of factors that may facilitate or impede

performance of the behavior).

Ajzen's three considerations are crucial in circumstances / projects / programs when changing

behavior of people. In their respective aggregates, behavioral beliefs produce a favorable or

unfavorable attitude toward the behavior, normative beliefs result in perceived social pressure or

subjective norm, and control beliefs give rise to perceived behavioral control (Koger and Winter

2010). In combination, attitude cannot be described to habituation as many people think. A

review of existing evidence suggests that the residual impact of past behavior is attenuated when

measures of intention and behavior are compatible and vanishes when intentions are strong and

well formed, expectations are realistic, and specific plans for intention implementation have been

developed.

2.5 Empirical Studies

The following is empirical study on different studies concerning the e-banking worldwide, in

Africa and in Uganda

Masukujjaman, (2010) conducted a study on quality of Categorized Service and Customer

Satisfaction in Banking Industry. The main objectives of the study were to evaluate the customer

satisfaction of the service quality and to assess whether bank services provided by the institutions

are satisfactory to Bangladeshi customers especially in term of service categories like general

banking, credit banking and foreign exchange banking services. The study also examined

empirically the determinants of service quality in Bangladesh. A questionnaire for such purpose

was designed and different statistical methods were applied to analyze the collected data. From

the study it was found that the overall service quality in private commercial bank in Bangladesh

is moderate, where service quality in general banking services was better than the credit banking

services and foreign exchange services though its quality was not too bad.

21

In addition, top ranked banks had high service quality in all categories of services and the lower

raked banks were struggling seriously with credit and foreign exchange services. It was

recommended that banks especially the lower ranked banks should give more emphasis on both

the credit and foreign exchange banking services. With all the potential of the study, the study

failed to incorporate the concept of e-banking and customer’s satisfaction. However, the study

was done in Bangladeshi. This study will be done in UGANDA, specifically to assess e-banking

and customer’s satisfaction.

Shamsuddoha and Alamgir (2010) conducted a study on Loyalty and Satisfaction Construct in

Retail Banking in India. This study investigates customer satisfaction as the most important

factor behind loyalty in retail banking. Various study showed that satisfaction plays an important

role to establish loyal customer base. Their study points out that satisfaction and loyalty

relationship was critical for retail banks. Understanding the factors behind loyalty as well as the

antecedents of customer satisfaction was an important issue for academic research as well as for

marketing in financial services. The major aim of this study was to identify satisfaction as the

major factor behind customer loyalty in retail banking.

The research has been carried out through secondary research and primary research. Survey

methods were used for primary research. Personal contact approach through questionnaire had

been introduced to conduct the survey. The findings reveal that satisfaction and loyalty were

related to each other. Moreover, satisfaction has a positive and direct impact on loyalty in

banking. The study was loyalty based. The study was good, but failed to study the effects of e-

banking on customer’s satisfaction. This study wants to fill a gap. Jaspal and Gagandeep (2011)

conducted a study on determinants of Customer Satisfaction. The study examines customer

satisfaction had been a common practice among banking and finance researchers over the years.

The main reason for continued interest in this area of research was the ever changing banking

business environment across the world. The objective of the present paper was to investigate the

determinants of customer satisfaction of Indian (Universal) banks. Data was collected from a

sample of 180 respondents using convenience sampling technique.

Factor analysis results revealed that responsiveness, tangibles, services innovation, reliability and

accessibility, assurance, pricing and other facilities, problem solving capability and convenient

working hours are the main determinants of customer satisfaction. With all the potential of the

22

study, the study failed to incorporate the concept of e-banking and customers’ satisfaction.

However, the study was done in Pakistan. This study will be done in UGNDA, specifically to

assess e-banking and customer’s satisfaction in UGANDAN retail banks, the case of BARCLYS

and CENTENARY BANK.

Pikkarainen et al., (2004) in India define internet banking as an "internet portal, through which

customers can use different kinds of banking services ranging from bill payment to making

investments". With the exception of cash withdrawals, internet banking gives customers access

to almost any type of banking transaction at the click of a mouse (De Young, 2001). Indeed the

use of the internet as a new alternative channel for the distribution of financial services has

become a competitive necessity instead of just a way to achieve competitive advantage with the

advent of globalization and fiercer competition (Flavián et al, 2004; Gann and Clemes, 2006).

Deemas (2002) studied the satisfaction levels of a sample of customers of the Sharjah Co-

operative Society (SCS). The primary part asked the respondents to provide universal

background information (e.g., gender, age category, nationality and so on). The next part listed

the 21 attributes and asked respondents to specify their satisfactions with each attribute using a

5-point Likert-type scale. The outcomes indicate that UAE nationals and Arabs are the most

predominant in their contributions to overall satisfaction whereas non-Arabs are the lowest.

Jiaqin, Mike and Katja (2007) conducted a study on new issues and challenges facing e-banking

in rural areas in Kenya. The study described an empirical study of investigation trend and

development of the application of e-banking (banking though internet) in rural areas and its

economic impact on local financial institutions. The data were collected through a web-based

questionnaire survey. The research objective was to investigate how those smaller and

community banks located in rural areas have attempted to catch up with their counterparts in

larger cities in terms of the application of e-banking, focusing on emerging issues and

challenges.

The results indicated that one of the challenges was unavailability of internet services and know

how. Dr. Jiaqin Yang, George College and State University, USA says that while the application

of e-banking has advanced significantly during recent years, especially in the developed nations,

in comparison, the development of e-banking application has lagged way behind in many

23

developing nations, especially in rural areas. Isaac Awuondo-MD Commercial bank of Africa

says that according to some analysts, customers still value personalized and responsive services

from their bankers. While the problem of computer illiteracy amongst the majority of the

population, it is still significantly high.

Wise and Ali (2009) argued that many banks in Tanzania want to invest in ATMs to reduce

branch cost since customers prefer to use them instead of a branch to transact business. The

financial impact of ATMs is a marginal increase in fee income substantially offset by the cost of

significant increases in the number of customer transactions. The value proposition however, is

a significant increase in the intangible item "customer satisfaction". The increase translates into

improved customer loyalty that in result in higher customer retention and growing organization

value. Internet banking is a lower-cost delivery channel and a way to increase sales. Internet

banking services has become one of the most important factors in the business economy today.

Amaoko (2012) in his research on the impact of ICT on banking operations in Ghana, ICT has

contributed positively to the provision of banking services and growth of the Ghanaian banking

services and growth of the Ghanaian banking industry. Internet banking and e-banking is not yet

developed in Ghana. The study recommended that banks should develop user friendly systems

and applications for general population Government and banks should play a key in enhancing

ICT infrastructure, put in place incentives like tax reduction, and make PC available and

affordable for every Ghanaian. Financial institutions should offer programs to reassure

customer’s safety with regards to ICT through sensitization, workshops and support the skills be

a central monitoring unit permanently mannered by personnel to the operations of all the bank’s

ATM’s so that shortage of funds, occasional shut downs, seizure of electronic cards etc are

handled with dispatch. Lastly the banking institutions should also come out with more electronic

products and services to reduce the turnaround time of customers, such products will give them

the opportunity to sit at the comfort of their homes, workplaces and transact business with the

banks.

Sonja (2010) did research on the effects of computerization on saving and credit cooperatives in

Uganda and found out that technology is likely to increase the efficiency outreach and

sustainability of financial institutions.

24

Bank of Uganda says that E-banking is revolution by charging the way poor people are spending

what they earn by providing them with secure banking. It is also profitable for the companies,

known as microfinance institutions, which run the banking systems. The most popular vehicle

through which customers can utilize banking services electronically is via mobile phone. The

technology allows customers to check and manage their accounts, pay utility bills such as gas

and electricity and transfer money between accounts either their own or someone else all on their

phone.

2.5.1 Research Gap of the Study

Despite the growing interest and importance of Internet banking in many financial institutions in

Uganda and the implementation of such innovations in some banks like Barclays bank , there has

remained low adoption rates among clients and its usage has not brought significant outputs in

the way clients become happy with the services offered, and indeed literature Indicates that

despite such growing interest, no significant studies that have focused on e-banking and more so,

customer satisfaction (Baraghani, 2007, Duggirala, Rajendran and Anantharaman 2008).

With technology implementation, a new phenomenon in Uganda’s banking sector and many

customers have not yet embraced it. This study will be conducted to investigate customer

satisfaction on E-banking in Ugandans banks the case of Barclays and Centenary bank

25

3 CHAPTER THREE

3.1 Methodology

Chapter three outlines the methodology used in the study. It presents the research design,

sampling procedures and collection method, limitation and data analysis procedures for the

interpretation of the results.

3.2 Research design

A research design is a plan or a strategy used to get the expected study results (Kothari, 2004). A

research design includes an outline of what the investigator will do in formulating or hypothesis

or a research question and their operational implications to the final analysis of data (Polit and

Beck, 2006). Research design is categorized into different types depending on the nature of the

study which includes the case study design survey and the experimental design.

A quantitative research was selected for this study because it was a formal objective systematic

process in which numerical data is utilized to obtain information (Burns and Grove, 2005). One

of the characteristics of quantitative research made it suitable for the study was that the

researcher used the structured interview instrument to collect the data on each participant.

However, the study made use of the qualitative approaches in the data analysis as well.

3.3 Survey Population

Population is a group of people / individuals who have one or more characteristics in common

(Kothari, 2000). The population in the study involved customers accessing banking services at

Victoria Mall, Entebbe since it has a bank and three ATM Machines plus a foreign exchange that

offers banking services through agency banking platform.

3.4 Sampling Design

A convenient sampling procedure was employed to access the bank customers.

Continence sampling involves drawing samples that were both easily accessible and willing to

participate in the study.

26

3.5 Sample size

A sample of 200 customers was selected through a convenience sampling technique (random

sampling). The sample was drawn from customers accessing the banking services either by the

tradition system of visiting the bank or by using the ATM machines and only customers above

18 years both male and female were considered.

3.6 Data Collection Methods

This study employed both secondary as well as primary data. Primary data was gathered by

means of questionnaires and semi structured interview questions

Semi structured interviews was conducted for customers accessing or using the banking services

around Victoria mall Entebbe.

Secondary data was obtained from document review. Also, the use of Internet was of great help

in obtaining some information. However, documentary analysis was used to collect data for the

study. A number of other sources were received including past research papers, published

reports, and journals, textbook, and internationals reports. This helped to see what others say

about the subject matter, what are their findings and recommendations.

A number of interview questions were used to collect data through oral or verbal communication

between researcher and respondents. These questions include structured and unstructured

questions. This instrument is quite flexible, adaptable and can be applied to many people and

information can be obtained in detail.

3.7 Data Collection Tools

3.7.1 Interviews Questions

Interview is a method of collecting information through oral or verbal communication between

the researcher and the respondents. Interviews were facilitated by interview research question

instruments. Interview method was chose because it is quite flexible, adaptable and can be

applied to many people and information can be obtained in detail and well explained. Data which

was collected from interviews was regarded as primary data for the study.

27

3.7.2 Questionnaires

A questionnaire is a research instrument and consists of a group of questions designated to elicit

information from an informant to a respondent. Questionnaires are inexpensive way of gathering

data from large number of respondents and are only feasible way to reach a number of reviewers

large enough to allow a statistically analysis of the results. A well-designed questionnaire can

gather information well from the organization and as well as specific information on specific

matter studied.

3.7.3 Documentary Review

Documentary review is a process of reading various extracts found in offices or places dealing

with or associated with the issue related to what the researcher is investigating (Botha 1989).

Documentary review schedule was designated in order to ensure that all important documents are

available for the exercise. Documentary analysis was taken as secondary data for the study.

3.8 Reliability and Validity of Data

Validation was done so as to ensure if instruments to be used in collecting data enabled to collect

the information needed. The validation was done by collecting list fisting and opinions from the

supervisor. The questionnaires which are drafted were piloted in metropolitan forex bureau.

Therefore the collected data was trustworthy because respondent involved was either from those

who directly working in respective departments of online banking , who supervises the

operations and customers who uses the services. Not only that, but also the OUT Supervisors

was involved to the field critique and corrects the tools to be used in the field.

3.9 Data Analysis

The study used both descriptive and inferential statistics in analyzing the data. Analysis was

done with the help of Statistical Package for Social Scientists (SPSS).

First, data collected was cleaned, sorted and collated. Then, data was entered into the computer,

after which analysis was done. Descriptive statistics such as mean score, frequencies and

percentages for each variable was calculated and tabulated using frequency distribution tables, or

pie charts and bar charts. In order to test the relationship between the variables the inferential

tests including the Pearson Product-. Moment Correlation Coefficient and regression analysis

was used.

28

3.10 Analytical Model

The regression model that was evaluated was represented as follows:

Yi = α0 + β2ATMi + β3 POSi + β4MIEi + ęt.....................................................equation (1)

Where:

Yi is customer satisfaction

ATMS is the number of visits to ATMS systems

POS is the number of point of sale terminals usage

MIE is the usage levels of Mobile banking, Internet banking and Electronic funds transfer.

α0 = Estimated value of Y when all the other variables are zero

β = Correlated volatility of estimated value of Y

ęt = Error term

The multivariate regression model was used to find the value of α0 and βi which explains the

relationship between the independent variables and dependent variable.

The reliability of the estimate of the individual beta was tested by p-value in the ANOVA table.

The data from the ANOVA table was tested the acceptability of the model from a statistical

perspective.

Adjusted R2 was used to measure the proportion of variance in the dependent variable that was

explained by the independent variables to a maximum of 1. The F test was used to test the

significance of R, which is the same as testing the significance of R2 and testing the significance

of the regression model as a whole while the T-test was used to test the significance of the

individual betas. .

29

3.11 Ethical Consideration

This study was conducted in a good manner while considering personal values. A researcher

only deals with the subject matter whereas it observed and keeps all issues outside the study at

the field. The responsibility of ensuring that a respondent is respected was the order of the day

and thus personal matters were avoided to the great extent.

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4 CHAPTER FOUR

4.1 PRSENTATION, INTERPRETATION AND DISCUSSION OF THE FINDINGS

4.2 Introduction

This chapter presents a detailed discussion of the study and interpretation of the findings in line

with the specific objectives which is to analyze the impacts of electronic banking on customer’s

satisfaction in Uganda’s banking industry. The section presents the description of the

respondent’s profile. It also presents the factors contributing to the satisfaction of the customers

towards the usage of electronic banking services in Uganda, the effects of e-banking

functionality on the satisfaction outcomes, benefits and challenges of using e-banking services to

bank customers in Uganda.

4.3 Univariate analysis

Demographic factors

This part of the analysis basically details the background characteristics of the respondents

Table4. 1. Demographic characteristics for the study

Frequency percentage

Gender

Male 110 55

Female 90 45

Marital status

Single 106 53

Married 80 40

Widowed 13 6.5

Divorced 1 0.5

Continuation for table 4.1 DEMOGRAPHIC CHARACTERISTICS FOR THE STUDY

31

frequency Percentage

Period with the bank

< 1year 50 25

1-5 years 74 37

6-10 years 45 22.5

10> years 31 15.5

Bank visits (monthly)

1 time 61 30.5

2-5 times 106 53

>5 times 33 16.5

Level of satisfaction

Disagree 4 2.0

Agree 82 41

Strongly agree 114 57

Security

Disagree 6 3.0

Agree 85 42.5

Strongly agree 109 54.5

Source primary data 2019

Continuation of table 4.1 DEMOGRAPHIC CHARACTERISTICS OF THE STUDY

32

Frequency Percentage

Expectations

Strongly disagree 11 5.5

Disagree 21 10

Agree 140 70


Awareness

Strongly disagree 14 7.0

Disagree 78 39

Agree 100 50

Strongly agree 0 0

Continue with bank


Agree 82 41


Table 4.1 indicates the biggest percentage was that of males (55%) and 45% was female.

It also indicates that most of the e banking service users are singles followed by the married then

widowed and lastly divorced with their percentages as 53%, 40%, 6.5%and 0.5% respectively.

33

Figure4. 1 A bar graph showing the marital status in percentages


Figure 4.1 shows the marital status of e-bank users represented on a bar graph in percentages

with the singles having a high percentage 53%, followed by the married ones with a percentage

of 40%, then widows with a percentage of 6.5% and lastly divorced with a percentage of 0.5%.

The period customers have been using their respective bank and e-services indicated more

customers were in between 1-5 years with a percentage of 37% followed by 25% who had used

the bank service less than a year then 22.5% of the customers had been using it between 6-10

years and lastly 15.5 percent had been with the bank for more than ten years as represented in

Taable4.1

Table 4.1 furthermore shows the period customers have been using their respective bank and it

indicated more customers were in between 1-5 years with a percentage of 37% followed by 25%

who had used the bank service less than a year then 22.5% of the customers had been using it

between 6-10 years and lastly 15.5 percent had been with the bank for more than ten years

34

Figure4. 2A bar graph showing age brackets of e banking users


The graph shows that 37.5% of the e-banking users were in between 26-30years followed by 18-

25 years with a percentage of 24.5% then 31-40 years with a percentage of 20.5%and lastly

17.5% were above 40years of age.

Table 4.1 illustrates the number of time the customers visit the bank in a month even when they

are using internet banking and its shows more customers visit the banking hall at least 2-5 times

in a month (53%) followed by once in a month (30.5%) and then the least is 5 times a month

with a percentage of 16.5%.

Table 4.1 stipulates more customers are satisfied with internet banking (57%) with the few

customers disagreeing at 4% and also indicated 14% of the customers strongly agreed that the

bank met their expectations and 70% agreed with expectations though a total of 15% disagreed

that the bank did not meet their expectations.

Table 4.1 furthermore indicates 97 % of the customers agreed that the security of internet

banking is good and safe where as only 3% disagreed. The study indicated that only 4% of the

customers strongly agreed to be aware of bank charges and 50% agreed while more than 39%

disagreed to be aware of the charges and the level of confidence to presume with the irrespective

bank was 100%

35

Figure4. 3 A pie chart showing the level of education of e bank users

Source primary dara 2019

The pie chart indicates that 1.5% never went to school, 3.5% were primary drop outs

27.5%stopped in secondary and still 27.5% are diploma and certificate holder’s .while the

biggest percentage of internet users was that of university degree holders

4.4 Bivariate analysis

Under this section the simultaneous analysis of two variables is determined using pairwise

correlations. (That is between the dependent variables of customer satisfaction). This is

introduced to determine whether there exists an association and strength of the association or

whether there is a difference between the variables and the significance of the these difference.

36

Table 4. 2 Spearman’s rank order correlation coefficients for determinants of customer

satisfaction using e banking services

INDEX

/INDICATORS

ATM usage Pos usage Internet

usage

Telephone

usage

Customer

satisfaction

ATM usage 1.0000

POS usage 0.0765* 1.0000

INTERNET usage 0.0828* 0.3780* 1.0000

Telephone usage 0.1234* 0.0152 -0.0446 1.0000

Customer

satisfaction

-0.0013 0.3343* 0.2812* 0.0398 1.0000

*P value of <0.05


Table 4.2 presents pairwise correlations between the dependent variables of customer

satisfaction. As can be seen from table three each of the coefficients for the pair of determinants

is positive and statistically significant (P < 0.05 ),with the expectation of the coefficients of (a)

ATM usage and customer satisfaction and (b) telephone usage and internet usage . With respect

to correlations between determinants and consequences, POS usage and internet usage are

positively and significantly associated with overall job satisfaction, and internet banking, ATM

usage and POS usage were positively and significantly associated with internet banking usage

Table4. 3 showing the adjusted R squared

Model Summary

Model R R Square

Adjusted R

Square Std. Error of the Estimate

1 .828a .686 .679 .152

a. Predictors: (Constant), ATM usage level, mobile banking usage, POS usage , telephone

usage , internet usage level


37

The adjusted R2 was used to establish the predictive power of the study model and it was found

to be 0.679 implying that 67.9% of the variations in customer satisfaction are explained by

internet banking, mobile banking, ATMs, telephone banking and point of sale system, leaving

32.1% unexplained. The study findings in the table above indicate that all the independent

variables are jointly positively correlated with customer satisfaction.

Table 4. 4 Summary of ONE WAY ANOVA results


The probability (P) value of 0.000 shown in table 5 indicates that the regression relationship was

highly significant in predicting how internet banking, mobile banking, ATMs, telephone banking

and point of sale system affected customer satisfaction. The F calculated at 5% level of

significance was 97.282 since F calculated is greater than the F critical (value = 2.14), this shows

that the overall model was significant.

ANOVAa

Model

Sum of

Squares Df Mean Square F Sig.

1

Regression 9.197 5 2.299 97.282 .000b

Residual 4.207 178 .024

Total 13.404 182

a. Dependent Variable: LEVEL OF SATISFACTION

b. Predictors: (Constant), ATM usage level, mobile banking usage, POS usage , telephone usage

, internet usage level.

38

Table 4. 5 regression equation coefficients and significance of independent variables


The results indicate that all other factors (internet banking, mobile banking, ATMs and point of

sale system) being constant at zero, the level of customer satisfaction will be 2.578.

Furthermore, the results indicate that taking all other independent variables at zero, a unit

increase in internet banking would lead to a 0.426 increase in customer satisfaction and a unit

increase in mobile banking would lead to a 0.782 increase in the customer satisfaction.

Further, the findings shows that a unit increase in automated teller machines would lead to a

0.612 increase in customer satisfaction while a unit increase in point of sale system would lead to

a 0.486 increase in the customer satisfaction and lastly a unit increase in telephone usage leads to

a 0.325 increase in customer satisfaction. In terms of magnitude, the findings indicated that

mobile banking have the highest effect on customer satisfaction followed by automated teller

machines, then point of sale system then internet banking and lastly telephone banking which

Coefficientsa

Model

Unstandardized

Coefficients

Standardized

Coefficients

T Sig. B Std. Error Beta

1 (Constant) 2.578 .078 3.498 .0005

POS usage 0.486 .033 .381 3.115 .0021

mobile banking usage 0.782 .031 .514 4.627 .0017

telephone usage .325 .127 .149 2.556 .0001

internet usage level 0.426 .042 .361 3.179 .0017

ATM usage level 0.612 .037 .426 4.896 .0000

a. Dependent Variable: LEVEL OF SATISFACTION

39

had the least effect on customer satisfaction. All the variables were significant as their P-values

were less than 0.05.

40

5 CHAPTER FIVE

SUMMARY CONCLUSION AND INTERPRETATION

5.1 Summary of the results

This study examined the effect of e-banking on the customer satisfaction in Uganda. Mobile

banking, internet banking, point of sale and ATMs form the biggest component of e-banking in

Uganda. To determine the associations between the variables under study, a multiple linear

regression model was put to use. The independent variables that were studied (ATM cards,

mobile banking, point of sale and internet banking) explained a substantial influence of 67.9% of

customer satisfaction among commercial banks in Uganda a as represented by R2 (0.679).

Consequently, this implies that 67.9% of the customers satisfaction from e-banking in Uganda is

contributed by the independent variables examined in this research while other factors and

arbitrary variations not studied in this research contribute a mere 32.1%.

The results indicated that taking all other independent variables at zero, a unit increase in internet

banking would lead to a 0.426 increase in customer satisfaction and a unit increase in mobile

banking would lead to a 0.782 increase in the customer satisfaction.

And also unit increase in automated teller machines would lead to a 0.612 increase in customer

satisfaction while a unit increase in point of sale system would lead to a 0.486 increase in the

customer satisfaction and lastly a unit increase in telephone usage leads to a 0.325 increase in

customer satisfaction.

In terms of magnitude, the findings indicated that mobile banking have the highest effect on

customer satisfaction followed by automated teller machines, then point of sale system then

internet banking and lastly telephone banking which had the least effect on customer satisfaction.

All the variables were significant as their P-values were less than 0.05.

41

5.2 CONCLUSIONS

Based on the result of the descriptive analysis study it can be concluded that the majority of

current e-banking users are youth between the age of 18 up to 35, gender wise the males are the

dominant users, occupationally salaried and students are the majority users and business

men/women are not active participant in using the service, educational level diploma and above

diploma holders are the majority users and the study concludes that commercial bank customers

are satisfied with most of the e-banking services. From the findings, the study concludes that

internet banking flexibility, speed influence customer satisfaction to a great extent. In addition,

many customers use internet banking because it is easy to use and the services are personalized.

The study further concludes that usefulness and friendliness of internet banking has relatively

low effect on customer satisfaction.

The study also concludes that, convenience of mobile banking affects customer satisfaction to a

great extent. It was clear that understandability and reversal of transactions in mobile banking

had a moderate effect on customer satisfaction while use of a mobile phone account, efficiency

of mobile banking and availability of mobile banking has little effect on customer satisfaction.

On the effect of ATMs on customer satisfaction among commercial banks, the study concluded

that user friendly ATMs, ease of access of ATMs and privacy of ATMs affects customer

satisfaction to a great extent. In addition, using ATM cards in supermarket, convenience of bank

ATMS and affordability of ATM charges has moderate effect on customer satisfaction. Further,

the study concludes that, the use of ATM to deposit cash in bank account has little effect on

customer satisfaction.

In relation to point of sale system, the study concludes that, effectiveness of point of sale system

affects customer satisfaction to a great extent. Usefulness of point of sale system, reliability of

point of sale system and speed of point of sale system had moderate effect on customer

satisfaction while purchase of good from supermarket using point from customers account has

little effect on customer satisfaction.

42

Finally, the study infers that mobile banking has the highest effect on customer satisfaction

followed by automated teller machines, then point of sale system then internet banking and

telephone banking had the least effect on customer satisfaction.

5.2.1 RECOMMENDATIONS

The study established that internet banking affects customer satisfaction to a great extent. This

study therefore recommends that banking intuitions should enhance their internet banking to

make it flexible, fast and easy to use. Usefulness, friendliness and personalized internet banking

had relatively low effect on customer satisfaction. This study therefore recommends that the

management of commercial banks should justify investment in internet banking as far as

Usefulness, friendliness and personalized internet banking are concerned. The study also

recommends that, the government and its agencies should formulate policies that enhance

application of internet banking across all financial institutions in Uganda. This may include

legislations on how to curb cyber-crime.

This study also established that, understandability of mobile banking and reversal of transactions

in mobile banking has moderate effect on customer satisfaction while use of a mobile phone

account, efficiency of mobile banking and availability of mobile banking has little effect on

customer satisfaction. In this regard, the study recommends that, management of banking

institutions should enhance application of mobile banking to increase satisfaction of their

customers. Mobile service providers in conjunction with banks should develop more friendly and

easy to use and efficient applications for bank customers.

The study established that user friendly ATMs, ease of access of ATMs and privacy of ATMs

affects customer satisfaction to a great extent. Using ATM cards in supermarket, convenience of

bank ATMS and affordability of ATM charges have moderate effect on customer satisfaction

while use of ATM to deposit cash in bank account has little effect on customer satisfaction. This

study therefore recommends that banks should invest in ATMs that are easy to use; guarantees

privacy, affordable charges and once that allow customers to make deposits.

43

In relation to point of sale system, the study concludes that, effectiveness of point of sale system

affects customer satisfaction to a great extent. Usefulness of point of sale system, reliability of

point of sale system and speed of point of sale system had moderate effect on customer

satisfaction while purchase of good from supermarket using point from customers account has

little effect on customer satisfaction. This study therefore recommends that banking institutions

should work hand in hand with major retail outlets and other organizations that use point of sale

systems so as to ensure the cards issued to customers and point of sale systems are useful,

reliable and can work with speed

The banks should work much in increasing the number of users from all aspects that is from

gender, age, educational status, occupationally and should do great job in making- business men/

women to be the users of e-banking and also should keep all rounded personal profile of

customers to retrieve easily whenever needed and bankers should determine which customers

with which demographic characteristics are more sensitive to e-banking service satisfaction.

E-banking service should expand as much as possible in order to reduce the visits of bank hall

for customers and to get investment cost advantage than opening bank hall as the current rent

price per year for opening bank hall is much greater than buying an ATM machine. All

Customers should be awakened to know the existence of e-banking service charge; official

trainings should be organized by the banks for customers in order to increase customers’

awareness about e-banking rather than providing the card only.

The banks should exceed the promise of providing 24/7 rather than under delivering 24/7

availability that is the banks should ensure that at no time should service cease as a result of

network problem, power failure and other technical problems.

Banks should increase the effort to keep customers satisfaction above the current level and

should conduct survey to measure customers’ satisfaction empirically. The types of service

provided by e-banking should be increased for instance to accept the deposits and the banks

should exploit the opportunities in expanding e-banking by mitigating the challenges.

44

Finally more emphasis should be given by the banks on those aspects which have more impacts

in determine customers’ satisfaction in e-banking. Future researchers try to determine customers’

satisfaction of in e-banking if it depends on banks including other geographic areas, other

variables, include customers who do not use e-banking and banks which do not provide e-

banking service currently

5.3 Limitation of the Study and Suggested Areas for Further Studies

5.3.1 Limitations

While undertaking this research, there were some limitations and challenges encountered, this

included time challenge. Because of time limits the focus of this study was on addressing the

effects of e-banking on customer satisfaction in centenary and Barclays . Other study could be

done examining the same variables comparing the effects among multiple commercial banks in

Uganda.

Despite the fact that there are abundant studies that have been done addressing customer

satisfaction and e-banking but the focus of those studies were on the effects of online banking

and profitability of the banks (Njogu 2014), the effects of ICT on e-banking Amaoko, (2012) and

Ishengoma, (2011) analyzed the effects of mobile banking for financial inclusion in Uganda

Another problem was the lack of cooperation from the bank customers as many respondents have

a little knowledge about the e-banking services offered by the Uganda banking industries. Last

but not least, the study considered only Victoria mall customers of Entebbe city neglecting the

bank customers from rural areas and other locations

5.3.2 Areas for Further Studies

The study sought to determine the effects of electronic banking on customer satisfactions of both

centenary and Barclays bank. Because of financial limitations and time limits the focus of this

study was on addressing the effects of e-banking on customer satisfaction in Centenary and

Barclays Victoria mall. Other study could be done examining the same variables comparing the

effects among multiple commercial banks in Uganda.

45

This limited the generalization of the study findings, therefore other researchers should focus on

addressing the relationship between customer satisfactions and e-banking in the remaining banks

and try to understand their satisfaction level on the basis of proxy determinants as level of

satisfaction in a cardinal approach because the generated findings could highlights different

picture regarding the subject matter.

Moreover, currently transition period is going on due to the change of the system from the

manual to the electronic banking system. At least every year if the level of satisfaction is

measured then it will be better to identify whether any structural breakthrough happened among

customers of the banks in case of using the electronic banking in the country.

46

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6 APPENDIX

Research Questionnaire

Section A

PERSONAL INFORAMTION

1 GENDER

a. MALE

b. FEMALE

2 EDUCATION LEVEL

a. No school

b. Primary

c. Secondary

d. Diploma

e. University degree and above

3 MARITAL STATUS

a. Single

b. Married

c. Widow

d. Divorced

4 Age category

a. 18-25

b. 26-30

c. 31-40

d. ABOVE 40YEARS

50

5 Employment status

a. Unemployed

b. Self employed

c. Organization worker

Section B (about banking services)

6 Do you have a bank account?

a. yes

b. no

7 how long have been using the bank services?

a. < 1 year

b. 1-5 years

c. 5-10years

d. 10 years

e. > 10 years

8 do your banks offer e-banking services?

a. Yes

b. No

9 how often do you go to the banking hall

a. <1 in a month

b. 1-5 in a month

c. > 5 in a month

10 In you opinion do you think there is a connection between e-banking services and customer

satisfaction?

a. Yes

b. No

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11 Which attribute of the bank do u value most?

a. Quality of the service

b. Location

c. Technology used trust

12 which factors do you consider when using the new techniques in banking

(can tick more than one)

a. Easy to use

b. Time factor

c. Cost effectiveness

d. Technology security

e. Availability

f. Accessibility

g.

13. How frequently do you use the following banking services per month?

Tick on the times

Nil 1-3times 3-5times over 5times

a. ATM

b. Internet banking

c. Telephone banking

d. Mobile banking

e. POS platform

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Section c

Customer satisfaction

14 please indicate the level to which you agree or disagree with the following statements

regarding to customer satisfaction on a 4 Likert scale. (Strongly disagree) to 4 (strongly agree)

tick for the appropriate box once

Statement strongly disagree disagree agree strongly agree

Are you satisfied with

The services offered

by the bank?

Are u satisfied

information about e-

banking services?

Does the bank ensure

that the customers’

needs and

expectations are met?

Are the services easy

to use?

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Are you able to access

online services any

time?

Are you satisfied with

the security of the

bank?

Are you aware of all

the bank charges?

Are you willing to

continue using e-

banking services?

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