THE ROLE OF ELECTRONIC BANKING ON THE GROWTH OF FINANCIAL INSTITUTIONS: CASE STUDY: RURAL INVESTMENT CREDIT BAFOUSSAM

CHAPTER ONE

INTRODUCTION

Introduction

Advancement in technology created many opportunities as well as threat for various businesses and service sectors organizations are either willingly or unwillingly embracing the internet as a distribution channel e-banking is a term use for all types of electronic banking. It is also known as online banking or internet banking. It uses the internet as the delivery channel to conduct banking activities such as transferring of funds, paying bills, viewing accounts balances, paying mortgages and purchasing financial instruments and certificate of deposits (Mohammed et al,2009:141) with e-banking people can withdraw money from automatic teller machine or pay using debit/credit cards at any time. This technological advancement was conceptualized in the mid-1970s in which some banks offered customers electronic banking in 1985. Despite of the numerous disadvantages that accompanied this advancement in technology like cost associated in using the system, lack of internet users, the internet explosion in 1990 made people more comfortable with the system, as such many banks started implementing these services. That is why the intern was interested in knowing the role e-banking has played on the growth of financial institutions with case study being RURAL INVESTMENT CREDIT, BAFOUSSAM.

1.1 Background Of The Study

The rapid changes in the business operations in contemporary times in the form of technological improvement require financial institutions in Cameroon to serve their customers electronically. Electronic banking is an electronic payment system that enables customers of a bank to conduct a range of financial transaction through the financial institutions website. It can also be describing as all transactions that take place among companies, organizations and individuals and their banking institutions. It was first conceptualized in the mid-1970s in which some banks offered customers electronic banking in 1985.despit the hull marks that first accompanied this new technological development like access to the internet, lack of computer literacy, high cost of hardware and call charges as well as social and economic factors (shah and Clarke 2009:10), the internet explosion in 1990 made many people become comfortable with the system.

While financial institutions took steps to implement e-banking services in the mid-1990s many customers were reluctant to carryout monetary transactions over the web. It was due to some renounce companies like America online, amazon.com and eBay that made the paying of items online wide spread. By 2000, 80% of U.S banks offered e-banking. Customers use grew slowly. A case to point here is the Bank of America where it took 10 years to acquire 20millon e-banking customers. There was however an improvement in the use of this system after the New York scare ended so much so that in 2001 he first Bank of America become the first bank to top 3million online banking customers. Meanwhile larger national institution like Citigroup claimed 2.2 million online relationships globally and J.P Morgon chase estimated of had more than 750.000 online banking customers. Wells Fargo had 2.5million online banking customers including small businesses. In 2009 a report by Gartner group estimated that 47% of U.S adults and 30% in the United Kingdom carryout online banking. These advancements in technology also took place in Cameroon though it was at a low rate it was however noted that e-banking was carryout by some financial institutions in Cameroon.in1997 the first e-banking product was introducing but today the country offers electronic services like automated teller machine, SMS banking, internet banking, point of sales machines and telephone banking. Djoumessi (2009:74-75) notes that there were 45 ATMs throughout Cameroon. This alone shows that e-banking has a role to play in the development of financial institutions.

1.3 Problem Statement

E-banking which was seen as a means that has come to ease the delivery of bank services to its customers at the basis of 24×7 and cash withdrawal, help pay invoices finish and foreign recipient easily and securely, withdraw a loan granted to the customers, free from charges and fees in accordance with the service tariff will be levied on orders and other transactions carried out through e-banking, reduce queues in front of banks. Despite all the advantages that accompanied e-banking, banks still receive complaints from customers as regard malfunctioning of ATM, online theft and fraud, network downtime, payment of hidden cost of electronic banking like short messages services for sending alert, non-acceptance for Cameroon cards for international transactions. This however prompted the researcher to find out the role electronic banking has on the growth of financial institutions despite of all the difficulties sited above and to also make recommendations based on the outcome of the study to ensure growth in financial institutions. As such it was important for the researcher to look at how e-banking can be integrated in financial institutions in such a way that it can lead to growth.

1.5 Research Questions

1. Has the introduction of electronic banking lead to the growth of financial institutions?
2. How can electronic banking contribute to the growth of financial institutions?
3. What are the benefits of electronic banking?
4. What means can be put in place for electronic banking to be generally accepted by customers so that it can lead to the growth of financial institutions

.

 1.5 Objective study

1.5.1 General objective

To find out the role of electronic banking on the growth of financial institutions.

1.5.2 Specific Objective

1. To find out the benefit of electronic banking.
2. To understand the impact of electronic banking
3. To contribute to existing knowledge that can serve as reference for other researchers.
4. Most specially to blend theory with practical.

1.6 Research hypothesis

 A hypothesis is a conjectural proposition, an informed, intelligent and educated guess about the solution of an identified problem. It is an assumption whose veracity and validity is to be established. We have two main types of hypotheses that is the H1 which is the alternative hypotheses and the Ho which is the null hypotheses. A null hypothesis (H0) is a hypothesis which states that no differences or relationship exist between the two variables or more variables. It is a hypothesis of no effect or no difference while the alternative is a hypothesis which specifies the condition which will hold if the null hypothesis does not hold.

H0= electronic banking has no role on the growth of financial institutions.

H1= electronic banking has a role on the growth of financial institutions.

  1.7 Scope Of Study

It will look abnormal for a project of this magnitude to be carried out without delimitation and scope of study. due to some hindering factors like limited time for the researcher to embark for this project, lack of finance to move from one financial institution to another to find out how electronic banking has developed these institutions the researcher was forced to limit herself at RURAL INVESTMENT CREDIT BAFOUSSAM branch office at Marché

THE ROLE OF ELECTRONIC BANKING ON THE GROWTH OF FINANCIAL INSTITUTIONS: CASE STUDY: RURAL INVESTMENT CREDIT BAFOUSSAM