ADMAS UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF BUSINESS ADMINSTRATION

FACTORS AFFECTING CUSTOMERS SATISFACTION IN E -BANKING SERVICE

QUALITY IN THE CASE OF AWASH BANK S.C IN ADDIS ABABA, AKAKI KALITY
SUB CITY

Group Assignment

PREPARED BY Id No

1. Yared Demissie ………….…1060

2. Temesgen Tsehay ……....…1115
3. Yordanos Tesfaye…………. 1142
4. Wegayehu T/aregay ………. 1258

Submitted to:

Addis Ababa

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Table of Contents

CHAPTER ONE..........................................................................................................................................1
INTRODUCTION...............................................................................................................................1
1.1 Background of the Study...................................................................................................................1
1.2. Statement of the Problem..................................................................................................................2
1.3 Research question..............................................................................................................................4
1.4. Objective of the study.......................................................................................................................4
1.5. Scope of the Study............................................................................................................................5
1.6 Limitation of the Study......................................................................................................................5
1.7. Significance of the study...................................................................................................................5
CHAPTER TWO.........................................................................................................................................6
REVIEW OF RELATED LITERATURE...................................................................................................6
2.1 Theoretical Literature........................................................................................................................6
2.1.1 Definition of E-banking..................................................................................................................6
2.1.2 Forms of E-banking........................................................................................................................6
2.1.3. Service quality...............................................................................................................................8
2.2 Customer Satisfaction........................................................................................................................8
2.2.1 Customer satisfaction in banking....................................................................................................9
2.2.2 The Relationship between Service and Customer Satisfaction......................................................10
2.2.3 Measuring customer satisfaction...................................................................................................11
2.3 Empirical Evidences........................................................................................................................13
2.3.1 Empirical study-worldwide...........................................................................................................13
2.3.2 Empirical Studies in Ethiopia.......................................................................................................15
CHAPTER THREE...................................................................................................................................17
METHODOLOGY....................................................................................................................................17
3.1. Study designs..................................................................................................................................17
3.2. Research approach..........................................................................................................................17
3.3. Research instrument (data collection instrument)...........................................................................17
3.4. Data source and collection procedures............................................................................................18
3.5. Population of the Study...................................................................................................................18
3.6. Methods of Data Collection............................................................................................................19
3.7. Methods of data analysis.................................................................................................................19
3.8. The variables..................................................................................................................................20

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 3.9. Validity of research instrument.......................................................................................................20
3.10. Ethical consideration....................................................................................................................21
References.................................................................................................................................................22
Budget...................................................................................................................................................24

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 CHAPTER ONE
INTRODUCTION

1.1 Background of the Study

E-banking can mean the provision of information about a bank and its services via home
page on the World Wide Web (WWW). More sophisticated e-banking services provide
customer access to their accounts, the ability to move their money between different
accounts, and making payments or applying for loans via e-Channels (Shah and Clarke,
2009). E-banking forces most financial institutions to re-examine their systems and practices
and to look for new ways to deliver their services over the web. To do that effectively they
seek to improve work flow, reduce paper work, provide online document imaging for users
and create industry wide standards in order to improve cost efficiencies and profitability. E-
banking related technical issues may include developing an infrastructure to ensure 24-hours
availability, integrating back end, front end and other supporting tools to create a seamless
experience for the customer, and collection/analysis of data which enables the provision of
timely information to the management for effective decision making (Gerrard& Cunningham
2003). E-banking is defined as the automated delivery of new and traditional banking
products and services directly to customers through electronic, interactive communication
channels (Shahriari, 2014).
Services are an important segment of all economies and have become an important part of
our daily lives. In the service sector, technology has been used to standardize service by
reducing the employee/ customer interface (Quinn, 1996). “Financial services” particularly
banks are competing in similar products therefore services quality grows to be a main
competitive weapon (Stafford; 1996). Due to pervasive and steady growth of information and
communication technology, the world banking form of competition supported by modern
information and communication infrastructure. Most consumers now prefer technology based
service delivery such as ATM, mobile banking, internet banking and SMS that offered by
employees. Automated teller machine is a self-service technology device that is used by
banks for financial service delivery. It can also be describe as an electronic computerized
Telecommunications device that provides the clients of a financial institution with access to
Financial transactions in a public space without the need for a cashier, human clerk or bank
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 teller customers can access their bank accounts in order to make cash withdrawals, check
their account balances as well as purchase prepaid cell phone credit whiles using an E-
Banking. (http://en.wikipedia.org/wiki/Automated_teller_machine)

Customer satisfaction is the major issue for the business that is operating in technology based
services and related services. Good customer service quality is the main factor that will
determine; in the future whether the business will survive or fail (Thompson &Bokma 2000).
Due to rapid technology change and market competition service quality becomes an increasingly
important issue .Therefore understanding a service quality issue becomes very important to
satisfy the customer (Broderick& Vachirapornpuk 2002) Information and communication
applications are paramount concerns to the banks in today’s business environment and internet
has become a major platform for all financial, banking and commercial service to their customers
with advanced software technology but they are suffering with security issues. An automated
teller machine allows a bank customer to conduct their banking transactions from almost every
other e-banking in the world. The developments of technologies have enabled organizations to
provide superior services for customers’ satisfaction (Surjadjaja et al., 2003). The availability of
several e-banking countries wide has greatly improved the quality and convenience of service
delivery. However, researchers have stated that users’ satisfaction is an essential determinant of
of success of the technology-based delivery channels (Tong, 2009; Wu & Wang, 2007). Today,
Ethiopian banks are facing challenges with stiff competition. Hence, delivering quality service
with in new technology and creating customer satisfaction will be expected of them to win this
competition.

Therefore, this research will assess the factors affect customer satisfaction and effectiveness of e-
banking service quality in the cases of Awash Bank S.C in Addis Ababa Akaki kality sub city
particularly in Tullu dimtu and Melkasheno branch.

1.2. Statement of the Problem

Since we live in a caustic and globalization world most customers want to technology based
service this essential specially for banking industries. Today, information systems provide the
communication and analytic power that firms need to conduct trade and manage businesses on a
global scale. Controlling the far-away global corporation communicating with distributors and
suppliers, operating 24 hours a day in different national environments, coordinating global work

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teams, and servicing local and international reporting needs is a major business challenge that
requires powerful information system response (Loudon, 1974; Davis and Olson, 1985).
Globalization and information technology also bring new threats to domestic business firms:
Because of global communication and management systems, customers now can shop in a
worldwide marketplace, obtaining price and quality information reliably 24 hours a day. To
become competitive participants in international markets, firms will need powerful information
and communication systems. ICT has provided new products and value added services to be
delivered using the same electronic infrastructure (Abor,2004).In order to remain competitive
edge most companies invest a lot of money in modern ICT infrastructure. A number of studies
conclude that ICT has applicable positive effects on banks productivity, banking hall transaction,
bank service delivery (Balachander et al, 2001, Yasuhru, 2003)

E-Banking is a computerized telecommunication device that provides the customer of a financial

institution with access to 24 hours a day 7days a week financial transactions in a public space
without the need of a human clerk or bank teller. Today, banks are face with stiff competition,
hence giving technology based service with delivering quality service and creating customer
satisfaction will expected to win the competition. Satisfaction has an intimate link with service
quality. It is essential for the online banks to become more concern about customer’s perception
of the online banking services’ quality as it is fairly easier for the customers to assess the
advantages of competing services (Santos, 2003).

We tried to assess what other researchers investigated in E-Banking they tried to fill the gap in
the effect of E- Banking service on financial performance, e-banking service security and
awareness also most of the researchers tries to investigate in government banks like CBE
Commercial Bank of Ethiopia according to this we tried to fill the gap in factors affecting
customers’ satisfaction in E-banking service quality in the case of Awash Banks.

1.3 Research question

1. What influence does the e-banking service quality have on customer’s satisfaction in Awash
Bank S C?

2. What is the customers’ level of satisfaction with e-banking service quality in Awash Bank
S.C?

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3. What are the major challenges in e-banking activities to satisfy customers in Awash Bank
S.C?

4. Which E-banking service quality dominantly and significantly affects customer satisfaction in
Awash Bank S.C?

1.4. Objective of the study

1.4.1. General objective:

The general objective of the study is to assess factors affecting customers’ satisfaction in E-
banking service quality in the case of Awash Banks.

1.4.2. Specific objectives

To identify how the major e-banking service quality dimensions affect customer satisfaction in
Awash bank S.C.

1) To assess the influence of e-banking service quality on customer satisfaction in Awash bank
S.C.

2) To verify the level of customer satisfaction with e-banking service quality dimension in
Awash bank S.C.

3) To identify the types of customer using e-banking services offered by Awash bank S.C.

4) To examine Which E-banking service quality dominantly and significantly affects customer
satisfaction in Awash Bank S.C

1.5. Scope of the Study

The study will delimit conceptually, geographically and in terms of participants. Conceptually, it
will focus on the factors affecting customers’ satisfaction in e-banking service quality in terms of
SERVQUAL models. There are above 19 banks in Ethiopia but some of are offering electronic
banking to its customers in Ethiopia; hence the study will limited to only one selected bank in
Ethiopia which is Awash Bank S.C. Again, the geographical scope of the study is situating
within the Addis Ababa city. Awash Bank branches in the Addis Ababa city are many and as
such it is practically impossible for the researcher to asses all the customers in these branches.

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For this reason the scope encompasses two selected branches of Awash Bank S.C. These will
included Melkasheno and Tulu dimtu branches form the geographical scope of this study.

1.6 Limitation of the Study

Customers who having account and waiting for e-banking service at the time of data collection
will be not taken as respondents. Other limitation of the study is customer perspectives of e-
banking and will not take into consideration the perspective of employees and other
stakeholder’s on the technology.

1.7. Significance of the study

In Ethiopia at present banking industry is expanding rapidly. The overall effect of electronic
banking is not limited to Awash bank, but also it affects the overall economy of the country.
Therefore, the outcomes and results of this research will have potential value to financial
institutions, particularly banks to understand the impacts of E-banking on customers satisfactions
and the advantages of providing quality E-banking service to their customers. In addition, this
study will expected to help other researchers who will be interested to conduct further study
regarding the issue under investigated by providing use full information. Finally, based on the
factors found to be influencing user decision on E-banking, the study will provide
recommendations for banks about changes needed in order to increase service quality in E-
banking industry in Ethiopia.

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 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Theoretical Literature

2.1.1 Definition of E-banking

E-banking has a variety of definitions all of which explains similar concept. The following
section shows some of these definitions.

E-banking is a form of banking service where funds are transferred through an exchange of
electronic signal between financial institutions, rather than exchange of cash, checks, or other
negotiable instruments (Kamrul, 2009). E-banking also known as electronic funds transfer
(EFT). It is simply the use of electronic means to transfer funds directly from one account to
another rather than by check or cash (Malak, 2007).The term e-banking often refers to
online/internet banking which is the use of the internet as a remote delivery channel for banking
services (Furst&Nolle, 2002, p.5). E-banking is the use of a computer to retrieve and process
banking data (statements, transaction details, etc.) and to initiate transactions (payments,
transfers, requests for services, etc.) directly with a bank or with other financial service provider
remotely via a telecommunications network (Yang, 1997). It should be noted that electronic
banking is a bigger platform than just banking via the internet.

E-banking can be also defined as a variety of platforms such as internet banking or (online
banking), TV-based banking, mobile phone banking, and PC (personal computer) banking
whereby customers access these services using an intelligent electronic device, like PC, personal
digital assistant (PDA), automated teller machine (ATM), point of sale (POS), kiosk, or touch
tone telephone (Alagheband, 2006).

2.1.2 Forms of E-banking

There are many electronic banking delivery channels to provide banking service to customers.
Among them ATM, POS, Mobile banking and internet banking are the most widely used and
discussed below.

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ATM

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

Internet banking

Internet banking is conducted by completing bank transactions by directly accessing the bank
through the internet. Nowadays, internet banking customers can access many different services
online, which makes physical banks open even after office hours. Internet banking allows
customers of a financial institution to conduct financial transactions on a secure website operated
by the institution. Internet banking can be conducted either by accessing the internet with a
computer or by using a phone that has internet features (Alabar& Timothy, 2012).

POS

Point of Sale (POS) also sometimes referred to as Point of Purchase (POP) checkout is the
location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to
the hardware and software used for checkouts, the equivalent of an electronic cash register. A
POS terminal manages the selling process by a sales person accessible interface. The same
system allows the creation and printing of the receipt (Shittu, 2010).

Mobile banking

Mobile banking (also known as M-Banking) is a term used for performing balance checks,
account transactions, payments, credit applications and other banking transactions through a
Mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile
banking services were offered over SMS, a service known as SMS banking. Mobile banking is
used in many parts of the world with little or no infrastructure, especially remote and rural areas.

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This aspect of mobile commerce is also popular in countries where banks can only be found in
big cities, and customers have to travel several miles to the nearest bank. The scope of offered
services may include facilities to conduct bank and stock market transactions, to administer
accounts and to access customized information (Tiwari&Buse, 2007).

2.1.3. Service quality

The present business era is now named as “Quality Era” because perceived quality of the product
is becoming the most important competition factor in business world (Bedi, 2010). It is now the
most powerful competition weapon and organization’s life giving blood. Perceived service
quality refers to the consumer’s global attitude or judgment of the overall excellence or
superiority of the service. It is a result from comparisons by consumers of expectations with their
perceptions of service (Caruana& Malta, 2002). That means it can be termed as the extent of
matching or the degree of discrepancy to which the service delivered matches customer
expectations (Parasuraman, Zeithmal, & Berry, 1988). Delivering quality service means
conforming to customer expectations on a consistent basis (Thakur, 2011). Today one of the
most dominant topics of research in services is service quality. It is necessary for service
providers to understand how customers evaluate the quality of service. When customers consume
a product, they compare the quality of experience with their prior expectations, which leads to
their satisfaction or dissatisfaction (Thakur, 2011). Therefore services marketing researchers
based their work on developing a service quality concept focused on consumer behavior instead
of using manufacturing quality concepts (Dhandabani, 2010). Thus it had been recognized that
customers evaluate service quality by comparing the actual performance with service
expectations that they held (Thakur, 2011).

2.2 Customer Satisfaction

Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectation. Customer satisfaction is also defined as the number of customers
whose reported experience with a firm exceeds specified satisfaction goals (Farris, Paul et al.,
2010). Another definition of customer satisfaction refers to the extent to which customers are 9
happy with the products and/or services provided by a business. Further definition of customer
satisfaction states that it is a term generally used to measure a customer's perception of a
company's products and/or services (Ahmed, 2005). It's not a straight forward science. Customer
satisfaction will vary from person to person, depending on a whole host of variables which may
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be both psychological and physical. According to Saha& 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. In a competitive market place where businesses
compete for customers, customer satisfaction is seen as a key differentiator and increasingly has
become a key element of business strategy (Carl & McDaniel, 2005). It is seen as a key
performance indicator within business and is often part of a Balanced Scorecard. Therefore, it is
essential for organizations to effectively manage customer satisfaction. To be able do this,
organizations need reliable and representative measures of satisfaction.

In researching satisfaction, firms generally ask customers whether their product or service has
met or exceeded expectations. Thus, expectations are a key factor behind satisfaction. When
customers have high expectations and the reality falls short, they will be disappointed and will
likely rate their experience as less than satisfying (John &Joby, 2003).

2.2.1 Customer satisfaction in banking

Customer satisfaction is a key determining factor why customers leave or stay with a bank.
Fornell (1992) cited in Thakur (2011) noted that although customer satisfaction and quality

Appear to be important for all firms’ satisfaction is more important for loyalty in service
industries like bank. Because even if the customers appear to be satisfied, they may look for
other bankers if they believe they might receive better service elsewhere (Reichheld, 1996) cited
in Thakur (2011). Thus the banking organizations need to know how to keep their customers.
However, keeping customers is also dependent on a number of other factors. These include a
wider range of service choices, greater convenience, better prices, and enhanced income (Thakur,
2011).

Ioanna (2002) cited in Thakur (2011) further proposed that differentiation is nearly impossible in
a competitive environment like the banking industry. Banks everywhere are delivering nearly
same services. Thus, bank management tends to differentiate their firm from competitors through

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service quality. Service quality is a crucial element which impact customers‟ satisfaction level in
the banking industry. Generally in banking, quality is a multivariable concept, which includes
differing types of convenience, reliability, services portfolio, and critically, the staff delivering
the service (Storbacka et al., 1994) cited in Thakur (2011).

Minimum price with maximum usage and profit always breeds higher level of satisfaction (Jamal
& Kamal, 2004) cited in Afsar (2010). When pricing is not suited to the needs of the customers,
dissatisfaction usually occurs. In banking industry also, the interest rates on loans and charges on
the usage of online services such as ATM machines and the processing fee is a major source of
conflict between the bank and its customers. If customers think that the charges are more than it
should become paring to their needs, they switch. Competition is now fierce in banking industry
as it has become too easy to open an account in any other bank that results switching cost to be
very minimal. But if a customer is satisfied, the loyalty injects automatically and the customer
remains with the current banker for a longer and longer period of time (Fox &Poje, 2002) cited
in Afsar (2010).

2.2.2 The Relationship between Service and Customer Satisfaction

The status or prestige of an organization is determined by the quality of the provided services.
Organization of high quality level of its services has a high competitive position. Achieving a
high level of services meet needs of customers. Studies confirmed that service quality and
Customer satisfaction has strong relationship (Alagheband, 2006; Bedi, 2010; Keiningham,
2005). When the customer receives high quality service his behavior and attitude towards the
organization will be positive and that would strengthen the relationship with the organization and
vice versa. Customer satisfaction is the most important criteria that enable organizations to
ensure the quality of their goods or services (Parasuraman et al., 1985). In case of the banking
sector, recognized standard scales to measure the perceived quality of a bank service is not
available. Thus providing high quality service is being taken as an important weapon to survive
and to gain and maintain competitive advantage (Bateson, 1985) cited in Thakur (2011). For
commodity like products, quality can be measured easily by its features. But quality of service
depends heavily on the quality of the personnel of service provider or the provider himself.
Studies on customers‟ switching from banks have found that they do so because they considered
to be poorly serviced. Quality service improved customer satisfaction and reduced customer

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erosion (Thakur, 2011).service quality is the key to measure e-banking user satisfaction.
Researchers have paid much attention to the close relationship between service quality and
customer satisfaction (Parasuraman et al., 1985).

2.2.3 Measuring customer satisfaction

Customer satisfaction is measured at the individual level, but it is almost always reported at an
aggregate level. Customer satisfaction is an ambiguous and abstract concept and the actual
manifestation of the state of satisfaction will vary from person to person and product/service to
product/service. The state of satisfaction depends on a number of both psychological and
physical variables which correlate with satisfaction behaviors such as return and recommend
rate. The level of satisfaction can also vary depending on other options the customer may have
and other products against which the customer can compare the organization's products (David,
2010).

Most researchers found that service quality is the antecedent of customer satisfaction (Bedi,
2010; Kumar et al., 2010; Kumar et al., 2009; Naeem and Saif, 2009; Parasuraman et al., 1988).
Quality customer service and satisfaction are recognized as the most important factors for bank
customer acquisition and retention (Jamal, 2004; Armstrong and Seng, 2000; Lassar et al., 2000).

Service quality is considered as one of the critical success factors that influence the
competitiveness of an organization. A bank can differentiate itself from competitors by providing
high quality service. Service quality is one of the most attractive areas for researchers over the
last decade in the retail banking sector (Avkiran, 1994; Stafford, 1996; Johnston, 1997; Angur et
al., 1999; Lassar et al., 2000).

According to Tse& Wilton (1988) customer satisfaction is the consumer’s response to the
evaluation of the perceived discrepancy between prior expectations and the actual performance
of the product. The service quality variables identified by (Parasuraman et al., 1994) are
reliability, responsiveness, competence, accessibility, courtesy, communication, credibility,
security, understanding and tangibility. Service quality leads to overall customer satisfaction. It
is one of the service factors contributing to customers‟ satisfaction judgments and can be
considered in multi- level and multi-dimensional (Caruana& Malta, 2002).

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Yang, Jun, & Peterson (2004) identified five online service quality dimensions (responsiveness,
reliability, competence, access and security) and their relationships with the customer
satisfaction. Wolfinbarger&Gilly (2002) observed that reliability and fulfillment are the strongest
predictors for customer satisfaction. Lui& Arnett (2000) identified five critical dimensions of
online service quality in relations to customer satisfaction in the website. Among these, the
quality of information that is relevant, accurate, timely, customized and complete are given
priority for the customer satisfaction in the online service. Johnston (1997) identified
attentiveness, responsiveness care and friendliness as the main sources of satisfactions (satisfiers)
in banking services, and integrity, reliability, availability and functionality as the main sources of
dissatisfaction. Khalil & Pearson (2007) have found that trust significantly affects attitude
towards internet banking acceptance. To encourage internet banking adoption, banks need to
develop strategies that improve the customer’s trust in the underlying technology. The other
factors include quick response, assurance, follow-up and empathy. Security, correct transaction,
customer control on transaction (personalization), order tracking facilities and privacy are other
important factors in the online service that affect the customer satisfaction. Joseph, McClure, &
Joseph (1999) investigated the influence of internet on the delivery of banking services. They
found six underlying dimensions of e-banking service quality as convenience and accuracy,
Feedback and complaint management, efficiency, queue management, accessibility and
customization. Jun &Cai (2001) identified service quality dimensions of Internet banking service
quality. These are reliability, responsiveness, competence, courtesy, credibility, access,
communication, understanding the customer, collaboration, continuous improvement, content,
accuracy, ease of use, timeliness, aesthetics, security and divers features. They also suggested
that some dimensions such as responsiveness, reliability and access are critical for both
traditional and internet banks.

Hua (2009) conducted an experiment to investigate how user’s perception about online banking
is affected by the perceived ease of use of website and the privacy policy provided by the online
banking website. In this study, it also investigates the relative importance of perceived ease of
use, privacy, and security. Perceived ease of use is of less importance than privacy and security.
Security is the most important factor influencing user’s adoption.

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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 & 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
were convenience/accuracy, feedback/complaint management, efficiency, queue management,
accessibility, and customization.

Zeithaml et al (2000) developed SERVQUAL for measuring e- service quality. They identified
11 dimensions: access, ease of navigation, efficiency, flexibility, reliability, personalization,
security/privacy, responsiveness, assurance/trust, site aesthetics, and price knowledge.
Eithaletal(2000) developed for ensuring service quality. He identified11dimensions: access, ease
of navigation, efficiency, flexibility, reliability, personalization, security/privacy, responsiveness,
assurance/trust, site aesthetics and price knowledge.

Extensive study on service quality conducted by researchers have proposed that service quality
can be measured using the SERVQUAL instrument (Parasuraman, Berry &Zeithaml 1985,
1988). The attributes of initial SERVQUAL model were tangibles, reliability, responsiveness,
competency, courtesy, assurance, credibility, security, access, and understanding. Later reduced
these ten dimensions into five by using a factor analysis (Parasuraman et al, 1988). These five
dimensions are tangibles, reliability, responsiveness, and Empathy. The SERVQUAL instrument
provides the computed disconfirmation approach whereby the difference between a customer’s
expectation and the actual performance is calculated (Dhandabani, 2010).

2.3 Empirical Evidences

2.3.1 Empirical study-worldwide

A study conducted by Masukujjaman, (2010) 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
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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 through its quality was not too bad. However, the study
was done in Bangladeshi.

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
method was used for primary research. Personal contact approach through questionnaire had The
research has been carried out through secondary research and primary research. Survey method
was 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

14
are the main determinants of customer satisfaction. With all the potential of the study, the study
failed to incorporate the concept of e-banking and customer’s satisfaction.

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 Ghananian banking
services and growth of the Ghananian 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 Ghanian. 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.

2.3.2 Empirical Studies in Ethiopia

(Gardachew, 2010) conducted a research on the opportunities and challenges of e- banking in
Ethiopia. The study was focused on analyzing the status of electronic banking in Ethiopia and
investigates the main challenges and opportunities of implementing e-banking system. The
author conducted a survey on the existing operating style of banks and identifies some challenges
of using e-banking system, such as, lack of suitable legal and regulatory frame works for
ecommerce and e- payments, political instability in neighboring countries, high rates of illiteracy
and absence of financial networks that links different banks.

Wondossen&Tsegai (2005) also studied the challenges and opportunities of e-payments in

Ethiopia; their objective was studying of e-payment practices in developing countries. The
authors employed interview and on site observation to investigate challenges to e-payment in
Ethiopia and found that, the main obstacles to the development of e-payments are, lack of
customers trust in the initiatives, unavailability of payment laws and regulations particularly for
e- payment, lack of skilled manpower and frequent power disruption. According to

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(Wondwossen&Tsegai, 2005), an adequate legal structure and security framework could foster
the use of e- payments, which is contradicting with the finding of the previous study.

Furthermore (Assefa, 2013) conducted a study on the impact of e-banking on customer

satisfaction in two privet banks in Gondar city. The researcher employed descriptive and
inferential statistics in analyzing this study and it was limited to customers of two privet banks
only. The results of the study implied that majority of users of e-banking are the young, the
educated, salaried and students, business men and women are not actively using the service of e-
banking, e-banking currently provided for saving and current accounts holders only, e- banking
reduced frequency of bank hall for banking service, reduced waiting time for customers, there
are customers who don’t know the fee charged for being e-banking users , the bank customers
satisfaction increased after being e-banking users, enabled customers to control their account
movements and there is high opportunity to expand e-banking service in the city.

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 CHAPTER THREE

METHODOLOGY

3.1. Study designs

Mouton (2001) defines research design as a plan or blueprint of someone intending to conduct
research. Research design involves how the researcher has planned to carry out the research.

In this study explanatory and descriptive research design will be used. Exploratory research
design refers to social research which explores a certain phenomenon with the primary aim of
understanding the phenomenon or situation and also to get clarity and define the problem at hand
clearly. As an exploratory study the researcher will aims at establishing the relationship between
electronic banking attributes and customer satisfaction. That means it will focus on the
dimensions of service quality (SERVQUAL Model), influencing customer satisfaction towards
electronic banking in Awash bank S.C will consists of reliability, responsiveness, assurance,
tangibles and empathy. Descriptive design will be used to describe the current state of e-banking
at Awash bank.

3.2. Research approach

In order to achieve the objective of this study and answer the research questions, the researcher
will adopted both qualitative and quantitative research approach to assess factors affecting
customer satisfaction in E-banking service quality, and to explore the basic factors which
affecting customers satisfaction in e-banking service quality on selected Awash bank branches to
converge across qualitative and quantitative methods (triangulating data sources). Employing
mixed approach will have the use to neutralize or cancel the biases of applying any of a single
approach and a means to offset the weaknesses inherent in a single method with the strengths of
the other method.

3.3. Research instrument (data collection instrument)

The main research instrument will be used for this study will the questionnaire method. The
questionnaire will used for this study is divided broadly into two sections. Those will be
demographic section and the characteristics of service quality section. Under the demographic
section variables such as age of the respondent, gender, marital status and highest educational
level will be asked. In the second section hypothetical statement on service quality will be given.

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The sections will also group into the various dimension of service quality outlined in the
conceptual framework. The sections contain reliability, responsiveness empathy, assurance, and
tangibles. The questionnaires will be structured in close-ended and opened ended type and
responses to the questions will measured on a five Likert rating scale where: Strongly Agree
(SA) = 1; Agree (A) = 2; Neutral (N) =3, Disagree (D) = 1; and Strongly Disagree (SD) = 5; will
be used. The use of Likert scale is to make it easier for respondents to answer question in a
simple way. In addition, this research instrument will have permission an efficient use of
statistics for the interpretation of data.

3.4. Data source and collection procedures

The study will mainly base on primary data and the secondary source. A self-administered,
structured questionnaire will be used to gather data from respondents to the study (Cooper and
Schindler 2006; Malhotra and Birks, 2007). The researcher will require first permission from the
Branch Manager of the two selected bank branches for the study. The permission will to allow
their premises to be used for this study. Each respondent to the study have to make fill a
questionnaire after a brief introduction and objective of the study will be explained. The research
questionnaires will be distributed in front of the 2 branches during business hours while
customers get in the bank hall. And then the questionnaire will be immediately returned after
they fill the appropriate choice of their respect.

3.5. Population of the Study

The population of this study describes the banking environment in Ethiopia with respect to the
policy and legal framework under which the banking industry operates. The banking industry in
Ethiopia is controlled by the National bank of Ethiopia (NBE) acting as the central bank of the
country. The target population for this research will be two branches of Awash bank S.C which
are located in Akaki kality sub city which are currently providing E-banking service. The
population sizes for this research are 300 active customers from Melkasheno and Tullu dimtu
branches of the bank with purposively selected among the whole customers of the population
universe. The two main reasons of the small sample size compared to the number of customers
are:

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1. Time and resource of the researcher.

2. E-banking service is related with machine and/or internet system and they are not biased
among the customers. In the determination of sample size, the three criteria are important to
gather the require data from sample of respondents. These included the level of precision, the
level of confidence or risk and the degree of variability in the attributes being measured that
enable the researchers to determine appropriate sample size. Therefore, by considering these
issues sample size to collect data through questionnaire for this research determined by using
(Yamane, (1967) formula.

N=the study population

e = the level of precision (0.05)

1 = designates the probability of the event occurring

Therefore: n = 𝑁/1+N (𝑒) 2 = 300/1+300(0.05)2 =171

Therefore, 171 respondents are selected by convenience sampling method.

3.6. Methods of Data Collection

Questionnaires will be designed based on different research articles to ensure that questions on
each service quality dimension fairly lead to the reliable results (Nupur, 2010). The respondents
will responded to a questionnaire consisting of some demographic questions and questions on
each dimension of service quality on five point Likert Scale.

3.7. Methods of data analysis

After the relevant information have be collected, the statistical package for social science (SPSS)
version will be used and the data analyzed using two statistical techniques. These techniques are

19
descriptive and inferential statistics. The general questions will analyzed by using descriptive
statistics. The descriptive statistical results will be presented by tables, frequency distributions
and percentages to give a condensed picture of the data. This will be achieved through summary
statistics, which includes the means, standard deviations values which will computed for each
variable in this study. And the e-banking concerned questions shall be analyzed using inferential
statistics; such as multiple linear regression analysis, ANOVA and analysis of variance and the
hypothesis will test using t-test. The questionnaires survey data have be analyzed by multiple
linear regression analysis, ANOVA and the value of. In analyzing the data which will gathered
from the survey (questionnaire) and reliability will primarily calculated using SPSS by
Cronbach’s Alpha, and content validity of the questionnaire will also established by reviewing
existing literature.

3.8. The variables

Two types of variables are identified for the investigation: dependent and independent variables.
The dependent variable is Satisfaction and the independent variables are Reliability,
Responsiveness, Assurance, Tangibles and Empathy (service quality).

3.9. Validity of research instrument

The validity of the research will be examined through checking of the objectivity of the
questionnaires and by taking the appropriate corrective measurements if there is any error. The
checking process includes the application of the sampling techniques. This helps to ascertain the
feasibility of the study techniques and questionnaires concepts and wording.

3.10. Ethical consideration

The researcher will follow logical procedures in every stage of data collection processes.
Accordingly, the respondents will be introduced about the purpose of the study, then informed
consent from the respondents and responsible officials of the banks covered by the study have to
obtain to discuss with them about the subject under study. Therefore, on the basis of these ethical
principles, efforts have to make and confidentiality will have assured and keep throughout the
process of this research work.

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Agehai(2013). The impact of e-banking on customer satisfaction

Balachandher, (2001),’ Electronic Banking in Malaysia: A Note on evolution of Services and

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Cooper, Lee G. 1988. “Market share analysis evaluating competitive marketing effective”
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Malak, J 2007, Readiness of the Palestinian banking sector in adopting the electronic banking

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Budget

No Expense Item Amount(birr)

1 Travel 1500

2 Telephone card 1,000

3 Flash 700

4 Photo copy 200

5 Print and CD 700

6 Stationary materials 600

7 Miscellaneous 2000

8 Total cost 6,700

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