THE IMPACT OF ONLINE BANKING IN THE BANKING SECTOR.

CASE STUDY, SIERRA

LEONE COMMERCIAL BANK.

CHAPTER 1

INTRODUCTION

Online banking, also known as internet banking, e-banking or virtual banking, is an electronic

payment system that enables customers of a bank or other financial institution to conduct a range

of financial transactions through the financial institution's website. The online banking system will

typically connect to or be part of the core banking system operated by a bank and is in contrast

to branch banking which was the traditional way customers accessed banking services. To access a

financial institution's online banking facility, a customer with internet access will need to register

with the institution for the service, and set up a password and other credentials for customer

verification. The credentials for online banking is normally not the same as for telephone or mobile

banking. Financial institutions now routinely allocate customers numbers, whether or not customers

have indicated an intention to access their online banking facility. Customer numbers are normally

not the same as account numbers, because a number of customer accounts can be linked to the one

customer number. Technically, the customer number can be linked to any account with the financial

institution that the customer controls, though the financial institution may limit the range of

accounts that may be accessed to, say, cheque, savings, loan, credit card and similar accounts.

The state of online banking varies significantly between developed and developing countries.
In developed nations like the United States and Canada, online banking is characterized by
advanced digital services, High Security Standards such as Banks investing heavily in
cybersecurity measures such as multi-factor authentication, encryption, and biometric
verification to protect customers' financial information, providing customer convenience like
24/7 access to financial services, allowing customers to conduct transactions at their
convenience without visiting physical branches through ATM-Automated Teller Machine,
Personal Computer Banking, Phone Banking and Mobile Banking, Email Banking, etc. And
widespread adoption. Conversely, in developing countries such as Guinea, Liberia, and Sierra
Leone, online banking is emerging. Online banking in Guinea is still in its nascent stages,
facing several challenges such as: Limited Internet Access. That is, Internet penetration is
relatively low, limiting the reach of online banking services to urban areas where internet
connectivity is more reliable;

Infrastructure Challenges. That is, the banking infrastructure is still developing, with many banks

lacking the technological resources to offer comprehensive online services.

Liberia's online banking landscape also shares similar challenges and opportunities such as:

Emerging Online Services. While traditional banking services dominate, there is a growing interest

in online banking as banks begin to invest in digital infrastructure;

Mobile Banking Growth. Mobile banking and mobile money services are expanding, driven by the

increasing use of mobile phones and efforts to enhance financial inclusion.

However, Sierra Leone is making strides in embracing online banking and providing technical

banking facilities, though it faces several hurdles:

 Digital Transformation: Leading banks like Sierra Leone Commercial Bank are pioneering

online banking services, offering customers the ability to manage accounts, transfer and

withdraw funds, and pay bills online. This can be through the use of Automated Teller

Machine (ATM), mobile money, etc.

 Internet and Mobile Penetration: With improving internet and mobile phone penetration,

more people are gaining access to online banking services, particularly in urban areas

through which they can make payments online with the use of Mastercard, Credit card and

Paypal.

 Financial Inclusion Efforts: Banks are focusing on financial inclusion by developing

mobile banking solutions that cater to the needs of the unbanked and underbanked

populations.

 Challenges and Opportunities: While there are challenges related to internet connectivity,

digital literacy, and cybersecurity, the ongoing efforts to modernize the banking sector are

paving the way for broader adoption of online banking services.

1.1 Background to the study

The rapid advancement of information and communication technology (ICT) has significantly

transformed the global banking industry, ushering in the era of online banking. This transformation

has altered the traditional banking landscape, offering customers unprecedented convenience,

accessibility, and efficiency in managing their financial transactions. The shift from conventional

banking methods to digital platforms has not only enhanced customer experiences but also posed

new challenges and opportunities for financial institutions. This study explores the impact of online

banking on the banking sector, focusing on its implications for operational efficiency, customer

satisfaction, and overall financial performance. The advent of the internet and digital technologies

has significantly transformed various sectors, with the banking industry being no exception.

The concept of online banking emerged in the late 20th century, driven by advancements in

information technology and the growing need for more accessible banking services. Initially, banks

introduced basic online services such as account balance inquiries and fund transfers. Over time,

these services expanded to include comprehensive financial management tools, loan applications,

and investment services. The transition from traditional to online banking has been gradual yet

profound, reshaping the landscape of the banking industry globally.

Online Banking in Sierra Leone

In Sierra Leone, the adoption of online banking has been relatively recent compared to more

developed economies. The late 1990s and early 2000s saw the introduction of basic internet

services in the country, which laid the foundation for digital banking. Sierra Leone Commercial

Bank, as one of the leading financial institutions in the country, has played a pivotal role in

pioneering online banking services. The bank's efforts to modernize its operations through digital

transformation have aimed to enhance customer convenience, increase operational efficiency, and

stay competitive in an increasingly digital world.

1.1.1 Background of Sierra Leone Commercial Bank

The transition to online banking represents a significant shift in the banking sector, driven by the

need for greater accessibility and efficiency. This study, by focusing on Sierra Leone Commercial

Bank, aims to provide a detailed examination of how online banking has impacted one of Sierra

Leone's most prominent financial institutions, The Sierra Leone Commercial Bank. The Sierra

Leone Commercial Bank has a rich history of contributing to the economic growth and

development of Sierra Leone. With a commitment to excellence, innovation, and community

service, SLCB continues to be a pivotal institution in the country's financial landscape. Its ongoing

efforts to modernize and expand its services ensure that it remains relevant and competitive in the

ever-changing banking sector. The findings of this research will contribute to a deeper

understanding of the benefits and challenges associated with online banking, offering valuable

insights for policymakers, banking professionals, and academic researchers.

1.1.2 Establishment and Early Years

The Sierra Leone Commercial Bank (SLCB) was established in February 1973 by the Government

of Sierra Leone. It was founded to provide commercial banking services to both individuals and

businesses within the country. The bank's creation was part of a broader initiative to strengthen the

financial sector and promote economic development in Sierra Leone.

1.1.3 Mission and Vision

Mission: The mission of SLCB is to provide high-quality financial services that support the

economic growth and development of Sierra Leone. The bank aims to achieve this through

innovation, customer-centric services, and a commitment to corporate social responsibility.

Vision: The vision of SLCB is to be the leading commercial bank in Sierra Leone, known for its

excellence in service delivery, financial stability, and contribution to the nation's prosperity.
1.1.4 Services and Products

SLCB offers a wide range of banking services and products tailored to meet the needs of its diverse

clientele. These include:

 Retail Banking: Savings accounts, current accounts, fixed deposits, and personal loans.

 Corporate Banking: Business loans, overdraft facilities, trade finance, and cash

management services.

 E-Banking: Internet banking, mobile banking, and ATM services.

 Foreign Exchange Services: Foreign currency accounts, remittances, and international

trade services.

1.1.5 Expansion and Modernization

Over the years, SLCB has expanded its network to cover all major cities and towns in Sierra Leone.

The bank has continually modernized its operations, adopting new technologies to improve service

delivery. The introduction of digital banking platforms has significantly enhanced customer

experience, allowing for convenient and secure banking transactions.

1.1.6 Governance and Leadership

SLCB is governed by a Board of Directors appointed by the government. The Board provides

strategic direction and oversight, ensuring that the bank operates in accordance with best practices

and regulatory requirements. The management team, led by the Managing Director, is responsible

for the day-to-day operations of the bank.

1.1.7 Corporate Social Responsibility (CSR)

SLCB is committed to making a positive impact on the community. The bank's CSR initiatives

focus on education, health, and community development. These initiatives include scholarships for

students, support for healthcare facilities, and funding for community projects aimed at improving

living standards.
1.1.8 Challenges and Achievements

Like many financial institutions in developing countries, SLCB has faced numerous challenges,

including economic instability, political changes, and competition from other banks. Despite these

challenges, SLCB has maintained a strong position in the market. The bank has been recognized for

its resilience and adaptability, and it continues to play a crucial role in the economic development

of Sierra Leone.

1.1.9 Recent Developments

In recent years, SLCB has embarked on several strategic initiatives to strengthen its market

position. These include the expansion of its digital banking services, partnerships with international

financial institutions, and the introduction of new products to meet the evolving needs of its

customers. The bank is also focused on enhancing its risk management framework to ensure

financial stability and sustainability.

1.2 Statement of the Problem

The banking sector globally has undergone significant transformation with the advent of online

banking, which has revolutionized how financial services are delivered and consumed. Online

banking offers numerous advantages, including convenience, speed, reduced operational costs, and

enhanced customer satisfaction. However, the transition to digital platforms also presents

challenges, particularly in developing countries like Sierra Leone, where infrastructural limitations,

digital literacy, and cybersecurity concerns can impede the adoption and effectiveness of online

banking services.

Despite the global trend towards digital banking, the extent to which online banking has impacted

the banking sector in Sierra Leone, specifically at Sierra Leone Commercial Bank (SLCB), remains

under-researched. The introduction of online banking at SLCB was aimed at improving operational

efficiency, increasing customer satisfaction, and enhancing the bank’s overall financial

performance. However, the actual impact of these digital initiatives on the bank’s operations and its

customers' experiences is not well-documented.

1.3 Aim of the Study

The primary aim of this study is to investigate the impact of online banking on the banking sector,

with a specific focus on Sierra Leone Commercial Bank (SLCB). The research seeks to

comprehensively evaluate how the implementation of online banking services has influenced

various dimensions of the bank's operations, customer satisfaction, and overall financial

performance. By examining these aspects, the study aims to provide a detailed understanding of the

benefits, challenges, and outcomes associated with the adoption of online banking at SLCB, and to

offer insights that can inform future digital banking strategies within the banking sector in Sierra

Leone and other developing countries.

1.4 Objectives of the Research

The research aims to investigate the impact of online banking on the banking sector, focusing

specifically on Sierra Leone Commercial Bank (SLCB). To achieve this aim, the study is guided by

the following specific objectives:

i. To evaluate operational efficiency of Sierra Leone Commercial Bank.

ii. To assess customer satisfaction and adoption with the online banking services provided by

SLCB.

iii. To analyze financial performance in relation to the adoption of online banking by Sierra

Leone Commercial Bank.

iv. To identify challenges and constraints faced by Sierra Leone Commercial Bank in the

implementation and operation of online banking services.

v. To develop strategic recommendations aimed at enhancing the effectiveness and efficiency

of online banking services at Sierra Leone Commercial Bank.

1.5 Research Questions

To achieve the research objectives, the study will seek answers to the following research

questions:
 i. How has online banking affected the operational efficiency of Sierra Leone Commercial

Bank?

ii. What is the level of customer satisfaction and adoption of online banking services at SLCB?

iii. In what ways has online banking influenced the financial performance of SLCB?

iv. What challenges and Research Questions constraints has SLCB encountered in

implementing online banking, and how can they be addressed?

By exploring these questions, this research aims to provide a comprehensive understanding of

the impact of online banking on Sierra Leone Commercial Bank, offering insights that can

inform future strategies for digital transformation within the banking sector in Sierra Leone and

similar developing economies.

1.6 Research Hypothesis

Based on the objectives and research questions of this study on the impact of online banking in

the banking sector, with a case study of Sierra Leone Commercial Bank, the following research

hypotheses have been formulated:

I. Hypothesis on Operational Efficiency:

a. H1: Online banking has significantly improved the operational efficiency of Sierra

Leone Commercial Bank by reducing transaction processing times and error rates.

II. Hypothesis on Customer Satisfaction and Adoption:

a. H2: Customers of Sierra Leone Commercial Bank are highly satisfied with the

online banking services provided, leading to increased adoption and usage.

b. H3: Various factors such as ease of use, security, and accessibility significantly

influence the adoption and usage of online banking services by the bank's

customers.

III. Hypothesis on Financial Performance:

a. H4: The implementation of online banking has positively impacted the financial

performance of Sierra Leone Commercial Bank, resulting in higher profitability,

revenue growth, and cost efficiency.

IV. Hypothesis on Challenges and Constraints:

a. H5: Sierra Leone Commercial Bank faces significant challenges and constraints in

implementing online banking services, including infrastructural deficiencies and

cybersecurity concerns.

V. Hypothesis on Strategic Recommendations:

a. H6: Developing and implementing strategic recommendations based on the

identified challenges and opportunities will enhance the effectiveness of online

banking at Sierra Leone Commercial Bank, improving both operational performance

and customer satisfaction.

These hypotheses are designed to guide the research process, focusing on evaluating the impact of

online banking on operational efficiency, customer satisfaction, financial performance, and the

challenges faced by Sierra Leone Commercial Bank.

1.7 Significance of the Study

The significance of this study lies in its potential to provide a comprehensive understanding of the

impact of online banking on the banking sector, with a specific focus on Sierra Leone Commercial

Bank (SLCB). By investigating this topic, the study aims to contribute to the existing body of

knowledge in several important ways:

1) Enhanced Understanding of Online Banking:

 This study will offer valuable insights into how online banking services have

transformed the operational dynamics of a major bank in a developing country

context. It will help elucidate the specific ways in which digital banking can

improve operational efficiency, customer satisfaction, and financial performance.

2) Strategic Insights for Banks:

 The findings of this research will provide strategic insights for SLCB and other

financial institutions in Sierra Leone and similar developing economies. By

identifying the benefits and challenges associated with online banking, banks can
 develop more effective strategies to enhance their digital offerings and improve

overall performance.

3) Policy Implications:

 The study will inform policymakers and regulatory bodies about the current state

and potential of online banking in Sierra Leone. The insights gained can help shape

policies that support digital transformation in the banking sector, promoting

financial inclusion and economic development.

4) Contribution to Academic Literature:

 This research will contribute to the academic literature on online banking,

particularly in the context of developing countries. It will fill a gap in the existing

research by providing empirical data and analysis on the impact of online banking in

Sierra Leone, thereby serving as a valuable reference for future studies.

5) Customer-Centric Improvements:

 By evaluating customer satisfaction and the factors influencing the adoption of

online banking, the study will help SLCB and other banks understand their

customers' needs and preferences better. This can lead to the development of more

user-friendly and accessible online banking services, enhancing customer

experiences and loyalty.

6) Addressing Challenges and Constraints:

 The study will identify the specific challenges and constraints faced by SLCB in

implementing online banking services. Understanding these obstacles will enable

the bank to devise targeted solutions, improving the effectiveness and security of its

digital platforms.

7) Economic and Social Impact:

 By promoting a more efficient and inclusive banking system, the insights from this

study can contribute to broader economic and social benefits. Enhanced online
 banking services can facilitate greater financial inclusion, empowering individuals

and businesses with better access to financial resources and services.

1.8 Scope and Delimitation of the Study

The scope of this study is designed to provide a detailed examination of the impact of online

banking at Sierra Leone Commercial Bank, while its delimitations outline the boundaries within

which the research will be conducted. By clearly defining the scope and delimitations, this study

aims to maintain a focused and manageable research process, ensuring the reliability and relevance

of its findings.

1.8.1 Scope of the Study

The scope of this study encompasses the following aspects:

i. Geographical Scope:

The study focuses on Sierra Leone, with a specific case study of Sierra Leone Commercial Bank

(SLCB). The findings and recommendations will be particularly relevant to the banking sector

within this geographical context.

ii. Subject Matter:

The study investigates the impact of online banking on various dimensions of the banking sector,

including operational efficiency, customer satisfaction, financial performance, and the challenges

faced in implementing online banking services.

iii. Time Frame:

The study will analyze data from a defined period to provide a comprehensive understanding of the

trends and impacts of online banking at SLCB. This period will cover the time from the

introduction of online banking services at SLCB to the present day.

iv. Participants:
The study will involve participants including SLCB management, staff, and customers. Data will be

collected through surveys, interviews, and analysis of financial and operational records.

v. Areas of Impact:

Specific areas of impact that will be examined include transaction processing times, error rates,

customer adoption rates, satisfaction levels, profitability, revenue growth, market share, and cost

efficiency.

1.8.2 Delimitation of the Study

The delimitation of the study includes the following boundaries and constraints:

i. Focus on One Bank:

The study is limited to Sierra Leone Commercial Bank and does not include other banks in Sierra

Leone. While this provides an in-depth analysis of one institution, the findings may not be directly

generalizable to other banks without further comparative research.

ii. Exclusion of Certain Banking Services:

The study will primarily focus on core online banking services such as balance inquiries, fund

transfers, bill payments, and loan applications. It will not extensively cover other digital services

like mobile wallets, fintech partnerships, or blockchain-based banking solutions.

iii. Technological Aspects:

While the study will touch upon technological challenges and cybersecurity concerns, it will not

delve deeply into the technical specifications or IT infrastructure details of SLCB’s online banking

system.

vi. Time Constraints:

The analysis will be confined to data available within the specified time frame. Any recent

developments or future trends beyond this period will not be covered in the study.
vii. Geographical Limitation:

The study is geographically limited to Sierra Leone, and while it may offer insights applicable to

other developing countries, the unique socio-economic context of Sierra Leone means findings

should be applied to other contexts with caution.

viii. Resource Constraints:

The study will be conducted within the constraints of available resources, including time, financial

support, and access to data. These limitations may affect the breadth and depth of data collection

and analysis.

1.9 Limitations of the Study

While this study aims to provide a comprehensive analysis of the impact of online banking on the

banking sector, with a specific focus on Sierra Leone Commercial Bank (SLCB), there are several

limitations that may affect the scope, depth, and generalizability of the findings:

i. Limited Generalizability:

The study focuses solely on Sierra Leone Commercial Bank. Therefore, the findings may not be

directly applicable to other banks in Sierra Leone or in other developing countries without further

comparative research. Each bank may have different operational contexts, customer demographics,

and technological infrastructures.

ii. Data Availability and Quality:

The accuracy and comprehensiveness of the study are dependent on the availability and quality of

data from SLCB. Incomplete or inaccurate records may affect the reliability of the findings.

Additionally, obtaining sensitive financial and operational data may be challenging, potentially

limiting the scope of analysis.

iii. Time Frame:

The study examines data from a specific period, and while it aims to capture the impact of online

banking over this time, it may not account for longer-term trends and impacts. Recent

developments or future changes in online banking services beyond the study period will not be

included.

iv. Technological Constraints:

The study does not delve deeply into the technical specifications or IT infrastructure details of

SLCB’s online banking system. Therefore, it may not fully address specific technological

challenges or innovations that impact online banking performance and security.

v. Customer Perspective:

While the study aims to gauge customer satisfaction and adoption of online banking, it may face

limitations in reaching a representative sample of SLCB’s customer base. Differences in digital

literacy, access to technology, and willingness to participate in surveys or interviews could affect

the comprehensiveness of customer feedback.

vi. External Factors:

The study may not fully account for external factors such as economic conditions, regulatory

changes, and competitive pressures that could influence the impact of online banking on SLCB.

These factors can play a significant role in shaping the banking environment and customer

behavior.

vii. Cultural and Social Factors:

The unique cultural and social context of Sierra Leone may influence customer attitudes towards

online banking, which might not be fully captured or may differ significantly from other regions.

These factors can affect the adoption and effectiveness of online banking services.

viii. Resource Constraints:

The study is conducted within the constraints of available resources, including time, financial

support, and access to data. These limitations may impact the breadth and depth of data collection

and analysis, potentially affecting the overall comprehensiveness of the research.

1.10 Definition of Terms

To ensure clarity and a common understanding of key concepts used throughout this dissertation,

the following terms are defined:

i. Online Banking:

Definition: Online banking, also known as internet banking or e-banking, refers to the use of

internet-based platforms and services provided by banks that allow customers to conduct financial

transactions remotely.

ii. Banking Sector:

Definition: The banking sector encompasses all financial institutions that accept deposits from the

public, create credit, and provide a range of financial services, including commercial banks, savings

and loan associations, and credit unions.

iii. Operational Efficiency:

Definition: Operational efficiency in the context of banking refers to the ability of a bank to deliver

services in a cost-effective manner while maintaining high standards of service quality. It involves

optimizing processes to minimize waste and reduce transaction times and error rates.

iv. Customer Satisfaction:

Definition: Customer satisfaction in banking refers to the degree to which customers are pleased

with the products, services, and overall experience provided by their bank. It is typically measured

through surveys and feedback mechanisms and can influence customer loyalty and retention.

v. Financial Performance:
Definition: Financial performance refers to the financial health and profitability of a bank,

measured by key metrics such as net profit, revenue growth, return on assets (ROA), return on

equity (ROE), and cost efficiency.

vi. Adoption Rate:

Definition: The adoption rate in online banking refers to the percentage of a bank’s customers who

have started using online banking services. This metric helps to gauge the acceptance and

penetration of digital banking solutions among the customer base.

vii. Cybersecurity:

Definition: Cybersecurity involves the practices and technologies used to protect internet-

connected systems, including hardware, software, and data, from cyberattacks, unauthorized

access, and other digital threats. In banking, it is crucial for safeguarding customer information and

ensuring secure transactions.

viii. Digital Literacy:

Definition: Digital literacy is the ability to effectively and critically navigate, evaluate, and create

information using a range of digital technologies. In the context of online banking, it includes the

skills and knowledge required to use internet banking services safely and efficiently.

Organization of the Study

The study is divided into five main chapters; Chapter 1 includes background information, a

problem statement, objectives, research questions, scope, study limits, and the study's importance.

The theoretical and literary review of the impact of online banking is covered in Chapter 2 and has

received over the years, a certain amount of focus. The research approach described in Chapter

Three was employed to carry out the study's goals. Chapter four provides the findings and analysis

of the data obtained from both primary and secondary sources. Chapter five of the study looked at

the recommendations and conclusions.