The tremendous development in technology and the aggressive blend of
information technology have brought about a phenomenal shift in banking
operations the world over. For the banks, technology has not only emerged
as a strategic resource for achieving higher efficiency, control of operations,
productivity and profitability, but a means for survival. From customers’
perspective, it is the realization of their anywhere, anytime, anyway banking
dream (Balwinder et al., 2004). Consequently, the banks have been
compelled to embrace technology, recognizing that this will enable them to
meet the increasing customer expectation, and also equip them to gain a firm
stand in the highly competitive banking environment.
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Ndation EUROPEAN UNIVERSITY OF LEFKE
Cyprus Science Foundation
DEPARTMENT OF BUSINESS ADMINISTRATION
MASTER’S THESIS
TITLE OF THESIS
The Internet Banking Adoption: An Empirical Investigation of Ghana’s
Banking Sector
STUDENT NAME: ERIC YEBOAH-ASIAMAH (26-1063)
SUPERVISED BY: ASSOC. PROF. DR K.M GEORGE
georgeccbmtrvl@yahoo.co.uk
+91- 9446501595
Eric Yeboah-Asiamah holds a Master of Business Administration (MBA Management) Degree from
European University of Lefke during 2007/2008 academic year. His research interest includes
measurement and metrics for marketing, e-commerce, e-marketing and, general management issues.
E-mail: ericyeboah8@yahoo.com or nyamebaeric@yahoo.com
Postal Address: Box CT 3450, Cantonments-Accra. Ghana West Africa
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ABSTRACT
Recent years have witnessed phenomenal transformations in the operations
of many businesses due to the immense advances in information
communication technology (ICT). Banks have accordingly introduced web-
based services, appropriately called internet banking. Many studies have
looked at different aspects of this phenomenon, and their impacts on the
banking industry. However, these studies generally focused on the adoption
of the technologies in developed countries.
This study, therefore, sought to help fill the literature and knowledge gaps by
investigating and establishing the level of internet banking adoption in Ghana
(a developing country) through critical evaluation of the functionality and
interactivity of websites of selected banks in the country. The study also
identified the major factors inhabiting internet banking adoption in Ghana.
A descriptive research design was used. Twenty-one (21) banks indicating
adoption of internet banking were randomly selected for the study. A ranking
model (on ranks of 1 – 6) was used to ascertain the level of internet banking
adoption by the sample banks by evaluation of the website contents of these
banks. Self-administered questionnaires were used to collect, compare, and
validate the data obtained from the websites. Data were analysed using
SPSS version 16.0.
Most of the 21 banks assessed operated a basic level of interactivity (only
information provision on website). Approximately 24% were providing of
transactional services. This was done to a limited extent. Cost was identified
as the major inhibiting factor to the successful adoption of internet banking.
This included the cost of obtaining proper security measures on the websites
as well as the acquisition of other operational facilities. Lack of high speed
internet connection followed as a major inhibiting factor to internet banking
adoption, with government interference having no impact on the adoption of
internet banking services in Ghana. The implications of the study are that,
most of the market is still untapped in Ghana since the level of adoption of
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The generally high reported figures of global internet use, as shown in Figs. 1
to 4, clearly reflect the scope of this electronic network. Therefore, it can be
said, arguably, that there is no other channel or platform that brings people
closer to people, or people closer to business, or businesses closer to
business like the Internet.
.
Figure 2: Growth in numbers of Internet
users between 2000 and 2007
Figure 1: Global distribution of internet
users, December 2007
Figure 3: World Internet penetration rates Figure 4: World Population by Regions
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Overview of Global Internet Banking
The advent of e-Business, technological innovations and globalisation is
increasingly driving businesses to change their traditional modes of
operation. The Internet offers many opportunities to financial services
providers in terms of modified value chains and disintermediation, which are,
in turn, redefining the financial services marketplace. Diniz (1998), for
example, observes that financial institutions are using the Internet for
information presentation, two-way communication, interaction with users, and
transaction banking.
Globally, the financial sector is thus metamorphosing under the impact of
competitive, regulatory and technological forces (Jeevan, 2000). The banking
sector is currently in a transition phase (Cronin, 1998) and the re-alignment
of banking and financial services on the World Wide Web is accelerating the
pace of change. The famous quote by Bill Gates that “banking is vital to a
healthy economy, but banks themselves are not” (Serwer, 1995), highlights
the crucial nature of the electronic forces that are affecting banks above all
other financial service providers.
Difference Between Online and Internet Banking
Akhtar and Dong (2004) have explained the differences between online
banking and internet banking. They indicated that online banking involves the
provision of special application software programs which, when installed on
customers’ PCs, grants them access to their personal information through a
modem. This service was first introduced in the early 1980s (Kalakota and
Whinston, 1997). Internet banking, on the other hand, was defined as the
conducting of banking transactions through the internet. The difference
between internet banking and online banking lies in the fact that, in internet
banking, no proprietary software has been installed for accessing the banks
services over the internet. (Elliott and Loebbecke, 2000)
Earlier in the 1960s, computer-based programmes were primarily employed
to automate the back offices (core process and support) of banks (Liao,
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1999). This situation has been changed by a move of information technology
(IT) into the front office, marking the advent of management information
systems, which has moved the activities of banks beyond branch-level
services (Llewellyn, 1995).
The adoption of IT applications throughout the banking sector has therefore
made the division between front and back office less relevant, as integrated
systems increasingly blur the line (Liao, et al., 1999).
Ghana- Convergence, Broadband and Internet Market
Ghana was among the first countries in Africa to be connected to the Internet
and to introduce asymmetric digital subscriber line (ADSL) broadband
services. The rapid growth in this sector in recent years is set to continue.
The sector is highly competitive with more than 140 Internet Service
Providers (ISPs). In 2007, the government indicated its commitment to
continue the privatisation of the national carrier, Ghana Telecom, as well as
the fibre network of Voltacom, the country’s electricity company. The recent
introduction of wireless broadband services such as WiMAX, in combination
with the expected full liberalisation of VoIP telephony are other key
developments that are expected to drive the market in 2008 and beyond
(Paul Budde Communication Pty Ltd., Nov 2007)
With these developments, e-Commerce has caught the attention of many
forward-lookers who seize on its friction-reducing role in an economy – it’s
potential to reduce transaction costs and open up new distribution and
marketing channels among economic stakeholders including businesses,
consumers and even governments. Consistent with numerous other
developing economies, the Ghana banking sector makes a significant
contribution to the Ghanaian GDP (George M. & Gloria K.Bob-Milliar, 2007)
The ability of banks to capitalize on the World Wide Web will not only
enhance their contribution to country growth but will also help in making
financial services cost effective and competitive and more accessible for
customers. Additionally, internet banking better allows banks to satisfy their
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customers through provision of mobility, flexibility, and independence of place
and time. Unfortunately, Africa, with an internet penetration rate of 4.7%
(Miniwatts Marketing Group, 2008) has lagged behind most of the world’s
economies in tapping into these possibilities and is now playing catch-up.
Problem Statement
Despite the fact that literature on internet banking is abounding with studies
carried out mostly in the developed countries, in the Ghanaian milieu where
banks can no longer ignore the internet as a strategic weapon and
distribution channel for their products in the face of intense competition from
both home and abroad, this area is underrepresented as no studies to the
best knowledge of the authors have been conducted.
Objectives and Significance of the study
The study sought to establish the extent of adoption and use of internet
banking in Ghana, and to identify the major factors inhibiting the adoption of
internet banking in Ghana. The need for consistent and reliable data on the
current level of internet banking adoption by banks in Ghana and the
subsequent adoption of forensic approach to create the enabling
environment for effective internet banking activities in Ghana indicates the
need for the study. The Internet and similar technologies provide huge
opportunities to banks and other corporations. This is a fact acknowledged all
over the world, and not the least in Ghana where internet usage and online
banking in general are becoming very popular.
RESEARCH METHODOLOGY
Research Design and Data Collection Methods
A descriptive research design was used for the study. Non-probability
sampling was employed to select twenty one (21) banks having and
operating functional websites for the study, out of a total of 151 banks
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reported by Bank of Ghana at the time of the study. The banks excluded from
the study (mostly rural banks) are those without websites, or whose websites
were not functioning well, at the time of the study.
Prior to the actual data collection, two pilot studies, each with a sample of 3
respondents, consisting of individuals with and without knowledge within the
subject area, were conducted. According to Allison et al. (1996) and Fink
(1995), for a pilot study, a sample size of 100 would require a minimum of 5
respondents. The number of respondents used for the pilot study in this
research was therefore sufficient.
Feedback from the first pilot study provided useful concerns regarding the
wording and structure of the questionnaire. Based on the feedback, the first
questionnaire was updated and was used in a second pilot .This helped to
ascertain the suitability of the questions for individuals with and without
knowledge of the subject of this research. Data from the pilot studies was
not included in the final report of the research.
In the actual data collection, a two-stage collection strategy was used. At the
first stage, the Diniz (1998) model was used to collect primary information
from the websites of the sample banks by dividing the functionality of
websites into three (3) different categories.
At the second stage, open-ended questionnaires were administered to the
sample banks to collect information on the extent of internet banking they
employed, and the factors they considered to be inhibitory to the adoption of
the service.
The Diniz Model
Diniz (1998) proposed a model to evaluate the websites of banks in the
United States of America (USA) in a study undertaken to learn about web
banking models that used in the USA. The model provided a tool to classify
and make comparisons between different kinds of banks from different
groups and sizes. It divides the functionality of websites into three (3)
categories (Table 1), namely:
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(i) Information Delivery (Since banks often work as information
disseminators)
(ii)Transactions channels (as avenues for conducting loans actions in
same way as bank branch offices or ATMs function)
(iii) Customer Relationship (as a tool to improve customer
relationships)
Each of these categories of activities was further divided into three levels of
interactivity namely: BASIC, INTERMEDIARY and ADVANCED. The different
levels of activities and their corresponding interactivity are shown in Table 1.
Table 1: Modified Model Used for This Study
Source: http://www.arraydev.com/commerce/jibc/ (Accessed: 8 Mar 2008)
Due to the nature of the market in which the study was conducted, an
additional component, security measures (Chimeke et al (2006), was added to
the elements of the Diniz model. This was done to ascertain the level to
which the online customers as the banks were protected from possible
internet-based fraud.
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Data Presentation and Analysis
The data collected from the websites of sample banks were evaluated using
a binary score of zero (0) and one (1) for each feature in each of the
functionality interactivity cells. A score of one (1) indicated the presence of a
feature while zero (0) indicated an absence of the feature. If the requirements
in a feature were partially fulfilled, ½ a point was given. The websites of the
sample banks were evaluated by assigning each bank a ‘Grand Score’
obtained by addition of the scores of the model items. The maximum score a
bank could get was 36 points. The banks were then ranked from 1 – 6 based
on their scores to give an indication of their adoption of Internet Banking.
The relationships between Information Delivery and Transaction Channel,
Information Delivery and Customer Relationship, Transaction Functionality
and Security Measures, and Customer Relationship and Security Measures
were assessed by correlational analyses using SPSS version 16.0.
RESULTS
Evaluation of Scores from websites of sample banks
The results (Table 3) indicate that Internet Banking in Ghana is being offered
at the BASIC level of interactivity. Banks had scores between 2 and 9.5 out
of the maximum score of 12 points. The banks were found to operate mainly
information websites. The scores per bank for the information level activity
functionality were accordingly higher than the scores for any other level
(Table 3). The scores for the transactional level of activity functionality were
at the lowest. Banks had scores between 0 and 5, indicating low Internet
transactional services provision. Relative to information level functionality,
scores for Security measures functionality scores were not high. It had a
frequency of 53(19.96%). For instance, not all the banks had adopted the
128 bit SSL encryption security measures (6 out of 21 banks have not yet
adopted 128 bit SSL encryption).
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Figure 5: Levels of Functionality of Websites of Sample Banks
Table 2: Evaluation Scores of Websites of Sample Bank
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Ranking of evaluation scores showed that almost all the banks (15 banks had
scores ranging from 3.5 to 16.5), had scores which were less than 50% of the
total score (Table 3).
Table 3: Ranking of Evaluation Scores
Table 4: Factors Inhibiting Internet Banking Adoption
The figures in Table 4 clearly indicates that cost and lack of high speed
internet facilities rank high among the major inhibiting factors affecting
internet banking adoption in Ghana. Of the banks assessed, 45.45% of the
respondent banks regarded the cost of interconnectivity and general ICT
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costs as the reason why they had not adopted full internet banking services,
and 36.36% considered the lack of high speed internet facilities as a major
factor that inhibited their adoption of internet banking.
Correlation Analysis
Correlation analysis was used for identifying the relationship between various
functionality features on websites of sample banks.
Relationship between Information Delivery and Transaction
Channel
From Table 5, the value of correlation coefficient ‘r’ for information delivery
and transaction channel was 0.279. It implies that there is a slight weak direct
correlation between these two factors. The slight weak relationship is
suggests that most Ghanaian banks were using their well-developed
information sites to cover for their non-transactional activities.
Figure 6: Relation between information delivery and Transactional Channel
Correlation between Information Delivery and Customer
Relationship
The scatter for these two factors (Fig. 6) indicates a positive relationship
between the extent of information delivery through websites and customer
relationship. Here the correlation coefficient ‘r’ was found to be 0.851,
indicating a strong positive relationship between information delivery and
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customer relationship these two factors. This is true since the quality of
customer relationship is dependent to a large extent on the nature of
information delivered. This suggests that the information delivery via the
banks websites provided a good foundation for building strong customer
relationships.
Figure 7: Relation between information delivery and customer relationship
Relationship between Transaction Functionality and Security
Measures
No relationship was identified to exist between transaction functionality (an
indication of the extent to which customers conduct web-based transactions)
and security measures provided on the websites (Fig. 8). This was also true
for security measures and customer relationship (Fig. 9).
Figure 8: Correlation between security and transactional
functionality of websites of banks
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Figure 9: Correlation between security and Customer Relationship
Comparison of Website Evaluation Data and Questionnaire
Respondents
The results of data gathered from sample banks websites, buttress the
respondent answer that, almost all the banks are the basic level of
information delivery functionality. However, there is significant difference
regarding certain answers given and the evidence gathered from the
websites of the sample banks. For instance, all the banks responded that
they had search engines, which is a function of intermediate-level information
delivery, on their website. However, the data gathered through the
exploration of the websites of the sample banks revealed that only 48% were
functional.
There are other observed discrepancies between the two data. All the
sample banks answered that they advertised on their websites. However,
evaluation of their websites indicated that only 31% of the banks did effective
advertising on their websites. The data from the banks websites indicated
that 65% of the banks provided contact information (a feature of basic
information delivery), contrary to a 24% affirmative response from the
respondents. These discrepancies notwithstanding, about 80% of the data
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collected from sample banks websites are supported by evidence from
respondents. This supports the validity and reliability of the research findings.
DISCUSSION
The findings of this study did not differ appreciably from those of previous
studies. Relative to developed international markets and the empirical results
of other studies, it can be inferred that Internet banking in Ghana is greatly
embryonic. Clearly, only 6 banks out of 21 universal and commercial banks
operating in Ghana offered (a limited number of) transactional, information
delivery and customer relationship services through their websites, scoring
above 3 in a rank of 6.
The findings that indicates that the major challenge facing further
development of internet banking in Ghana is the high cost of
telecommunication services. Additionally, lack of high speed internet services
and human resources, which facilitates optimum use of technology, was
identified as another key challenge.
An indication that internet banking is still in its early stages of adoption and
development in Ghanaian banks is shown by the fact that the application
most mentioned by respondents was the provision of information about
products and services. Ghanaian banks are required to make a conscious
effort to move towards effective and efficient internet banking usage with a
view to conducting real financial transactions and consequently, improving
electronic customer relations.
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SUMMARY AND CONCLUSION
The main findings of the study can be summarized as follows:
1) Only 6 banks (28.57%) were ranked above a score of three (3). This is
the number that scored above half of the six (6) score mark require to
indicate that a bank had fully adopted internet banking services
2) Data from both the survey and the exploration and evaluation of
sample banks websites revealed that at least 80% of the sample
banks were operating at the basic level of interactivity, with the
websites of most of the sample banks providing information only
3) Cost was identified as the major inhibiting factor to the successful
adoption of internet banking in Ghana. The costs included the cost of
securing proper security measures on the websites, and the
acquisition of other operational facilities. Lack of high speed internet
services followed the second major inhibiting factor to internet banking
adoption. Government interference had no inhibitory influence on the
adoption of internet banking services in Ghana
4) There was a direct relationship between information delivery and
customer relationship. This suggests that the information websites
operated by most of the sample banks were effective in building
customer relations, given that the quality of customer relationship is,
to a large extent, dependent on the nature of information delivered
5) The nature of security measure available affected the extent of
transactional services customers were likely to demand. However,
customers were more likely to feel secure with internet banking
activities if the banks developed and maintained good relationships
with them
6) Private sector and foreign banks operating in Ghana were the drivers
of most of the recent growth in internet banking in Ghana
7) Most of the market is still untapped in Ghana since the level of
adoption of internet banking was very low. There is a lot of opportunity
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for banking institutions to expand their Internet banking services to
have a more sophisticated customer base
MANAGEMENT IMPLICATIONS AND
RECOMMENDATIONS
The expectations of customers in recent years have increased with internet
banking. Thus is it recommended, based on the findings of this study, that:
1) The websites of banks offering internet banking services should
transcend information delivery purposes. Banks should put in place
proper measures for maintaining and updating their websites,
including the various security features and key ingredients of Internet
banking (such as confidentiality, veracity, availability and effective
communication)
2) Banks offering internet services must offer most, if not all, of the
traditional banking services on the internet in order to attract more
customers
3) The Government of Ghana and the appropriate authorities should
endeavour to help in reducing the cost of internet connectivity, and
general Information and Communication Technology (ICT) access.
This will enable the general public to gain access to affordable and
fast telecommunication services
4) The Government of Ghana, in collaboration with the banks, should
embark on intensive public education on the workability, benefits,
security and effectiveness of Internet banking. This will instil more
confidence in the customers and hence guarantee their patronage of
Internet banking services
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