ELECTRONIC BANKING AND CUSTOMER SATISFACTION IN COMMERCIAL

BANKS

A CASE RESEARCH OF CENTENARY BANK, JINJA BRANCH

BY

WAKUNGU DENIS

17/U/20630/EVE

A RESEARCH REPORT SUBMITTED TO THE DEPARTMENT OF BUSINESS AND

MANAGEMENT IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
AWARD OFA DEGREE IN BUSINESS MANAGEMENT OF MAKERERE
UNIVERSITY BUSINESS SCHOOL

APRIL, 2018
DECLARATION
I, Wakungu Denis, Reg. No 17/U/20630/Eve. Declare that this research report is my original
work and has never been submitted to any institution of higher learning for any award.

Sign ………………………… Date ………………………………

WAKUNGU DENIS

(STUDENT)

i
APPROVAL
This is to certify that this research report was compiled under my supervision and is now ready
for submission with my approval.

Signed ………………………… Date …………………………

…………………………………..
(SUPERVISOR)

ii
DEDICATION

I dedicate my work to my parents for their support, love and inspiration. May God bless them.

iii
ACKNOWLEDGEMENT

I would like to appreciate the efforts of my Supervisor Mr. Kalyango Mwanje Godfrey who has
guided me during my proposal writing and report compilation. His efforts were inspirational.

Appreciation also goes to my respondents for who gave me the necessary information needed for
this research

Finally, appreciation goes to my fellow undergraduate students and friends for their courage and
company which has contributed to the success of my research and academic struggles. May God
bless them all.

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TABLE OF CONTENTS
DECLARATION ........................................................................................................................................... i

APPROVAL ................................................................................................................................................. ii

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

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

LIST OF TABLES ......................................................................................... Error! Bookmark not defined.

ABSTRACT................................................................................................................................................ vii

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

1.1 Introduction ............................................................................................................................................. 1

1.2 Background of the research..................................................................................................................... 1

1.3 Statement of the problem ........................................................................................................................ 3

1.4 Purpose of the research ........................................................................................................................... 3

1.5 Objectives of the research ....................................................................................................................... 3

1.6 Research questions .................................................................................................................................. 4

1.7 Scope of the research .............................................................................................................................. 4

1.8 Significances of the research................................................................................................................... 5

1.9 Encountered Limitations ........................................................................................................................ 5

1.10 Solutions to the encountered problems ................................................................................................. 5

CHAPTER TWO .......................................................................................................................................... 6

LITERATURE REVIEW ............................................................................................................................. 6

2.1 Introduction ............................................................................................................................................. 6

2.2 The effect of electronic banking on customer satisfaction within commercial banks ............................ 6

2.3 The different products and services offered by banks through electronic banking................................. 9

2.4 The challenges associated with the use of electronic banking within commercial banks. .................... 11

CHAPTER THREE .................................................................................................................................... 15

RESEARCH METHODOLOGY ................................................................................................................ 15

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3.0 Introduction ........................................................................................................................................... 15

3.1 Research design .................................................................................................................................... 15

3.2 Area of Research ................................................................................................................................... 15

3.3 Target population .................................................................................................................................. 15

3.4 Sample size ........................................................................................................................................... 16

3.5 Sampling technique ............................................................................................................................... 16

3.6 Sources of data ...................................................................................................................................... 16

3.6.1 Primary sources .................................................................................................................................. 16

3.6.2 Secondary sources .............................................................................................................................. 16

3.7 Data collection Methods ....................................................................................................................... 17

3.7.1 Questionnaire method ........................................................................................................................ 17

3.7.2 Interviews........................................................................................................................................... 17

3.8 Data collection tools ............................................................................................................................. 17

3.8.1 Interview guide .................................................................................................................................. 17

3.8.2 Structured questionnaires ................................................................................................................... 17

3.9 Research procedure .................................................................................. Error! Bookmark not defined.

3.10 Data processing, presentation and analysis ......................................................................................... 18

3.10.1 Data processing ................................................................................................................................ 18

3.10.2 Data presentation ............................................................................................................................. 18

3.10.3 Data analysis .................................................................................................................................... 18

3.10.3.1 Qualitative data analysis ............................................................................................................... 18

3.10.3.2 Quantitative data analysis ............................................................................................................. 18

References ................................................................................................................................................... 19

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ABSTRACT

The research was about electronic banking and customer satisfaction using Centenary bank, Jinja
branch as a case research. It was guided by three research objectives which were; to find out the
effect of electronic banking on customer satisfaction using Centenary bank, Jinja branch as a
case research, to identify the different products and services offered by banks through electronic
banking and to find out the challenges associated with the use of electronic banking within
commercial banks.
The researcher used a case research design to find out the necessary information on electronic
banking and customer satisfaction. The research was carried out in Centenary bank, Jinja branch
in Jinja Municipality in Jinja district in Eastern Uganda. The research population mainly
consisted of Management staff, other employees and Customers of Centenary bank, Jinja branch.
A sample size of 40 respondents was used in the research. The researcher used simple random
sampling and purposive sampling method to arrive at the respondents who participated.

The research found out the effect of electronic banking on customer satisfaction. It was found out
that E-banking constitutes an electronic alternative network of payments and benefit of services,
the banks that are activated in the Internet are susceptible mainly to the systematic, law part and
to the reputation risk, electronic banking has helped in satisfying and fulfilling customers’ needs,
electronic banking offers more convenience and flexibility to customers, e-banking is the most
cost-efficient technological means of yielding higher productivity among others.

The research found out the different products and services offered by banks through electronic
banking. These were mobile banking, SMS Banking, Phone banking, electronic (E) statements,
bill pay services, cash management services among others.

The research finally found out the challenges associated with the use of electronic banking
within commercial banks. It was found out that E-banking poses different risks as compared to
the traditional banking, there are security issues, necessity of the internet, technical difficulties,
lack of culture and knowledge of banks about Electronic banking among others. The research
was successful since it achieved all its objectives.

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 CHAPTER ONE

1.0 Introduction
This chapter consists of the background, statement of the problem, objectives, research
questions, scope and the significance.

1.1 Background of the research

Centenary Bank is a commercial bank in Uganda. It is one of the commercial banks licensed by
the Bank of Uganda, the central bank and national banking regulator. The bank is a large
financial services provider in Uganda. It is primarily involved in the promotion of development
through loans to rural farmers, processors of agricultural produce, small traders, small
manufacturers, importers, and exporters (Adengo & Jonathan, 2014). While engaged in all areas
of commercial banking, the bank has a significant portion of its portfolio in
the microfinance arena in an attempt to meet the needs of the many individuals and business
entities with limited means. As of December 2014, the bank's assets were valued at UGX:1.63
trillion. The bank was founded in 1983 as a credit trust, Centenary Rural Development Trust
(CRDT), by Simeon Lutaakome, Hugh Francis Pulle, Paul Kateregga, Vincent Kirabo kya
Maria, Emmanuel Mpande, and John Ogutu. In 1985, CRDT began to provide financial services
to the public. The bank became a fully licensed commercial bank in 1993, after receiving a
license from the Bank of Uganda. Centenary Bank is the second-largest indigenous Ugandan
bank, behind Crane Bank (Adengo & Jonathan, 2014).

The concept of electronic banking has been defined in many ways. Daniel (1999) defines
electronic banking as the delivery of banks' information and services by banks to customers via
different delivery platforms that can be used with different terminal devices such as a personal
computer and a mobile phone with browser or desktop software, telephone or digital television.
Centenary Bank, Jinja branch was created as a finance institution to serve the economically
disadvantaged people especially in rural areas and contribute to the overall economic
development of the country. Bank has activities to include lending to small and medium
enterprises and large corporations to reach the middle and higher-end markets

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Customer satisfaction is defined as "the number of customers, or percentage of total customers,
whose reported experience with a firm, its products, or its services (ratings) exceeds specified
satisfaction goals (Kotler, 1998). Customer satisfaction is an ambiguous and abstract concept.
Actual manifestation of the state of satisfaction will vary from person to person, product to
product and service to service. The state of satisfaction depends on a number of factors which
consolidate as psychological, economic and physical factors. The quality of service is one of the
major determinants of the customer. Many researchers and experts mentioned that, service
quality can be enhanced by using advanced information and communication technology (ICT).

Today, almost all banks in the industry have adopted ICT as a mean to enhance service quality of
banking services. They are providing ICT based e-services to their customers which is called as
e-banking, internet banking or online banking etc. It brings support, customer centricity, enhance
service quality and cost effectiveness in the banking services and increasing customers’
satisfaction in banking services. However, author felt that, there are may be some possibilities of
gaps between customers’ expectations and actual perception of service quality, brand perception
and perceived value in e-banking. Therefore, author has conducted this research to identify the
major factors affecting on customers’ satisfaction in e-banking in Ugandan context.

Banking through internet has emerged as a strategic resource for achieving higher efficiency,
control of operations and reduction of cost by replacing paper based and labor intensive methods
with automated processes thus leading to higher productivity and profitability. However, to date
researchers have produced little evidence regarding these potential changes.

In Uganda, technological developments particularly in the area of telecommunications and

information technology are revolutionizing the banking industry. With the development of this
technology, electronic commerce is now holding a promise of new revolution. A number of
studies have examined the development of electronic banking and its operations. It is widely
believed that the impact of e-commerce enables banks to provide an inexpensive and direct way
of exchanging information and to sell or buy products and services (Flavian & Gurrea, 2006).

Today, financial sector firms are competing to increase their profit share in the market. Among
these firms, banks have radically shifted from traditional banking to branchless mode of banking.
Adoption of latest technology has enabled banks to extend their customer base, where electronic

2
banking has proved to be the chief advancement. Therefore with globalization, Ugandan banks
have no choice but to adopt electronic banking services to enhance effective service delivery that
transcends to customer satisfaction, if they really want to stay in the business race, to be
profitable (Madureme, 2009).

In Centenary bank, Jinja branch, electronic banking has been a very important tool in ensuring
that customers conveniently access different bank products and services via the internet. With
electronic banking, there is convenience to customers as they are not required to go to the bank's
premises, there is very low incidence of errors, the customer can obtain funds at any time from
ATM machines, the credit cards and debit cards enables the Customers to obtain discounts from
retail outlets and the customer can easily transfer the funds from one place to another place
electronically. On the other hand however, the number of customers using e-banking services
still remains low in Uganda because of its complexity and its nature.

1.2 Statement of the problem

Internet banking is developed to help banks deliver services and products better, faster, and
cheaper. It allows consumers to perform banking transactions over the Internet anywhere and
anytime (Polatoglu & Ekin, 2001). In Centenary bank, Jinja branch, it is hoped that internet
banking would set all the grounds for ensuring that customers are satisfied through easily
accessing the bank products and services. However, a few customer use electronic banking
despite being available in Centenary Bank, Jinja branch. This can be evidenced by high customer
turn up on the bank premises to access the bank products and services. The researcher is inspired
by such a scenario to conduct a research on electronic banking and customer satisfaction within
banks using Centenary bank, Jinja branch as a case research.

1.3 Purpose of the research

The purpose of the research was to find out the contribution of electronic banking towards
customer satisfaction within commercial banks

1.4 Research Objectives

The research was guided by the following objectives:

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 (i) To find out the effect of electronic banking on customer satisfaction at Centenary Bank
, Jinja Branch.
(ii). To identify the different products and services offered by Centenary Bank, Jinja branch
through electronic banking.
(iii). To find out the challenges associated with the use of electronic banking offered by
Centenary Bank , Jinja branch .

1.5 Research questions

The research sought to answer the following questions:

(i) What is the effect of electronic banking on customer satisfaction at Centenary Bank, Jinja
branch ?
(ii) What are the different products and services offered by Centenary Bank through electronic
banking?
(iii) What are the challenges associated with the use of electronic banking Centenary Bank,
Jinja branch ?

1.6 Scope of the research

1.6.1 Content scope

The research found out the effect of electronic banking on customer satisfaction in commercial
banks, identified the different products and services offered by banks through electronic banking
and found out the challenges associated with the use of electronic banking within commercial
banks.

1.6.2 Geographical scope

The research was carried out in Centenary bank, Jinja branch located in Jinja Municipality ,
Jinja district in Eastern Uganda. The bank offers several electronic banking services thus the
researcher hoped to collect the most reliable information.

1.6.3 Time scope

The research was done in a period of six months that is from November 2017 to April 2018. In
this period, the researcher prepared a research proposal, collected data and prepared a full

4
research report and the respondents were able to give coherent information by making
observations over this period.

1.7 Significances of the research

 The research sets ground for policy makers in the banking industry to realize the effect of
electronic banking on customer satisfaction. This enables banks to dedicate resources
towards improving electronic banking among customers hence achieving the twin
benefits of enhanced service delivery and profitability.
 The research is further intended to help the customers within commercial banks to realize
the services offered by electronic banking system. This will help them to conveniently
access the services without going to the bank promises.

 The research findings form the basis for banks to know the challenges associated with
electronic banking thus will try to address the challenges as a way to improve the bank
performance.

1.8 Encountered Limitations

Relatively a lot of money was required in this research. This involved photocopying of articles,
making phone calls, word processing, binding, transport. These increased the cost of the
research.

Some respondents were busy and others suspicious of the research thereby not willing to fully
cooperate.

There was a threat of time limit and deadlines that needed attention considering the fact that the
research was carried out alongside other activities like course works, lectures and tests as well.

1.9 Solutions to the encountered problems

The researcher mobilized for money early enough and only used the money on only critical
areas. Researcher did the typing and editing of the proposal and final research report using skills
acquired from Computerized Accounting class.

The researcher started the process of data collection early to finish the process of data analysis
and final report preparation in time.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter consists of secondary data that was put forward by other researchers in relation to
the research problem. This was done in relation to the research objectives as literature was
reviewed basing on the following themes; the effect of electronic banking on customer
satisfaction within commercial banks, the different products and services offered by banks
through electronic banking and the challenges associated with the use of electronic banking
within commercial banks.

2.2 The effect of electronic banking on customer satisfaction within commercial banks

According to Deutsche (2006) e-banking constitutes an electronic alternative network of

payments and benefit of services. The need of creation of electronic alternative channels has
been distinguished well in advance by the foreign banking organizations, which relied mainly on
the outburst that was observed in the use of internet. The benefits are many, both for the
customers and for the banks. The banks that are activated in the Internet are susceptible mainly
to the systematic, law part and to the reputational risk and the customers of the electronic
banking channel are puzzled concerning to the subject of safety of their transactions and personal
data.

One of the benefits banks derive from electronic banking products and services delivery is
improved efficiency and effectiveness of their operations so that more transactions can be
processed faster and most conveniently, which will undoubtedly impact significantly on the
overall performance of the banks. The customers on the other hand, stand to enjoy the benefit of
quick service delivery, reduced frequency of going to banks physically and reduced cash
handling, which will give rise to higher volume of turnover. However, these developments in the
Ugandan banking industry seem not to have achieved their aims. Queues are still seen in the
banking halls, bank customers still handle too much cash, and hardly people talk about the
electronic banking products that are available in Uganda.

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Majority of banks in the developed world and some in the developing world are now offering e-
banking services with various degrees of complexities. This gives the indication that e-banking is
gradually taking the place of traditional banking services even in developing countries like
Jordan, India, Malaysia, Nigeria, Ghana and Uganda. In developing countries, for example, some
banks have adopted e-banking as a way of communicating to customers with regards to issues
concerning bank statements whiles other banks use internet banking services to allow customers
to access their bank accounts and perform other banking transactions. In Uganda, the phase of
the entire banking industry is rapidly changing and the focus is now on new delivery channels in
order to improve customer service delivery and to provide customers with 24 hours a day access
to banking services. E-Banking gives customers the opportunity to access banking services from
the comfort of their homes and offices and also be able to do most of the transactions which
would have been done in the banking halls (Flavian & Gurrea, 2006).

Electronic banking by its nature offers more convenience and flexibility to customers coupled
with a virtually absolute control over their banking. Service delivery is informational (informing
customers on bank’s products, etc) and transactional (conducting retail banking services). As an
alternative delivery conduit for retail banking, it has all the impact on productivity imputed to
Tele banking and PC-Banking. Aside that it is the most cost-efficient technological means of
yielding higher productivity. Furthermore, it eliminates the barriers of distance / time and
provides continual productivity for the bank to unimaginable distant customers since it is
accessible on a 24 hour basis (Claessens & Klingebiel, 2002).

Banks customers’ taste and desire have begun to raise the stakes of expectation of exceptional
services. Customers want to transact their banking transactions at any time and location
convenient for their life-style. They want to pay their regular household bills, buy and sell stocks
and shares (Carse, 1999).

The success of electronic banking, as agued by many researchers, depends probably on bank
service quality, customer preferences and satisfaction. Recent studies found that consumer
behavior is changing partly because of more spare time. The way of use of financial services is
characterized by individuality, mobility, independence of place and time, and flexibility (Seitz
and Stickel, 2004).

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The rapid development of the technology infrastructure, in particular the growth in the number of
personal computers, the increased quality of Internet connections, the more widespread use of
the Internet in both homes and businesses, and the significant reduction in both the fixed and
variable costs of the Internet connections in Kenya, have made it possible for the Internet to play
a more central role in banks´ business strategy (Gerard etal, 2005). Kenyan banks benefited
particularly from the adoption of the Internet because of their universal character. As with many
European banks –unlike US banks prior to enactment of the Gramm-Leach-Bliley Act of 1999,
Kenyan banks have enjoyed the advantages of "broad banking" Barth, Brumbaug (2000).

Bander and Charles (2006) pronounce that the benefit of electronic Banking for banks is cost
savings, for customers is practicality. Pros of Online banking involve: less time consuming,
faster action and the ability to make banking operation for 24/7. In Finland, for instance, the
customers had to face long distances and spend time and energy to reach the bank offices.
Instead of these past being present personally at the bank offices, online banking turned out to be
a benefit for the customers. Moreover, faster actions are reflected in making payment, checking
balances, book flying tickets or order online shopping.

Banks have to provide an excellent service to customers with varied backgrounds and greater
expectations who will also not accept any mean service. Therefore, service marketing in general,
and particularly banking service has become one of the most significant and modern areas which
has seen a substantial growth during the last years globally especially in the area of e-banking.
The considerable growth in banking service may accrue to the widening and variety that banking
services are associated with (Centeno, 2004).

With the use of personal computer (PC) or even mobile phone with an internet connection,
customers are able to carry out transactions such as cash withdrawals, payments of utility bills,
transfers from one account to the other, viewing and printing of statements as well as request for
cheque books on their traditional accounts . For example, banks such as United Bank for Africa,
Merchant Bank Ghana, Eco bank Ghana, Centenary Bank Ghana, among others, provide their
customers with a broad range of electronic services and some of these services allow customers
to receive their monthly bank statements via e-mail, online checking of accounts balances, the
use of electronic cash systems as well as online transfer of funds (Birch & Young, 2007).

8
2.3 The different products and services offered by banks through electronic banking

According to Accenture (2005) electronic banking is the conduct of banking business

electronically which involves the use of information communication technology to drive banking
business for immediate and future goals.
Accenture (2005) mentions the following services offered by electronic banking to include;

Mobile Banking: Mobile Banking which can be accessed on one’s mobile phone and comes
with a bouquet of services. Mobile Banking ensures that customers are able to enjoy banking
anytime, anywhere, 7 days a week, 24 hours a day. Customers are able to bank at their
convenience and access services like; make account inquiries, request for cheque books, request
for full statements, pay utility bills, make forex rates requests, transfer funds from one account to
another and top up airtime across any network. It has made access to services more immediate
and reduced customer reliance on branch infrastructure or access to the Internet (Molyneux, P.,
2009).
SMS Banking (B-SMS): SMS Banking is an information service in the form of tiny messages
transmitted by the bank through which any registered user holding an account at the Bank of
Africa can monitor their account and obtain banking and financial information on their mobile
phones (Banks, E. 2001).
Phone Banking (B-Phone): Telephone Banking is a service provided by a financial institution
that enables customers to perform financial transactions over the phone, without the need to visit
a bank branch or ATM. This involves clients calling into financial institutions and request for
account Balances, Foreign Exchange (FX) rates and make general account inquiries (Birch, D.
and Young, M.A. 2007).
Electronic (E) statements: According to Molyneux, P, (2004) E-statements are now offered by
most financial institutions and are accessible electronically. E-statements eliminate the need to
print statements on paper and negate the need to deliver hard copy statements through the post
office, which reduces costs and makes them more convenient.
Online Banking/Internet Banking: This is a fully integrated end-to-end electronic platform,
which gives clients a single point of access for their transactions and information, allowing them
to streamline their workflow processes (Gerard e al. 2005). Some of the services offered on the
online/Internet Banking platform include; Intra Bank Transfers, Real Time Gross Settlement

9
(RTGS), Balance Enquiry, Statement request, Mobile banking Registration, Print Statements,
view Statements, Transaction Summary, Airtime Top-up, Bill Pay, Telegraphic transfers,
Standing orders, FX Rates, and Cheque book request (Gerard et…al. 2005).
Bill Pay Services: Girardone, C. and Molyneux, P., (2004) state that an additional feature of
electronic banking is electronic bill pay services. Bill pay services allow customers to initiate
payments electronically, thus avoiding writing a paper check and mailing it off. Customers may
pay anyone through bill pay services, from the local paper carrier to utility and credit card
companies. Customers set up vendors on their bill pay account with proper account numbers and
identification information. From that point, all a customer needs to do is insert a payment amount
and initiate the payment process. If the entity being paid has an electronic clearing account
(credit card companies, utility companies, etc.), they receive the payment electronically. If the
entity being paid does not have an electronic clearing account (local newspaper carrier), a paper
check will be mailed through Edgewater’s bill pay provider. Bill pay services provide
convenience and clear record keeping. Customers are able to view bill pay history by date,
vendor, or amount (Casu, B. 2004).
Cash Management services: Centeno (2004) mentioned that as a business owner, you
understand the effect that complex transactions can have on your cash flow. With cash
management Service from the bank, you can consolidate and integrate every aspect of payment
management from beginning to end. Electronic banking provides services inform of;1)Flexible
Transactions which involves; Payroll processing/direct deposit, ach credit and debit, wire
transmissions, internet banking/bill pay, and inter-account fund transfer. 2) Reporting/Tracking
which involve; account statements, check imaging, multi-level user access. 3) Confidential
multi-user accountability which involves; password-protected real-time information
Electronic banking services: This is a type of e-banking service where customers’ instructions
are taken and attended to through the internet. Electronic banking offers customers the possibility
of enjoying banking services from the comfort of their homes and offices. What this means is
that customers can buy goods by placing orders from the net, instruct their banks to pay the
vendor the invoice amount involved, and the products are delivered to the destination where the
buyer wants (Centeno, 2004).
Smartcard banking services: Girardone, C (2004) argues that it is the conduct of banking
transactions through the use of electronic cards (Value Card, ATM Card, Debit Card, Credit

10
Card etc.). The smart card system makes it easy for bank customers to have access to cash, carry
out transfers and make enquiries about their accounts without visiting the banking hall. Smart
card facility is usually mounted at strategic places in the cities such as supermarkets, Hotels,
Transport terminals, shopping malls etc.
Mobile/telephone banking services: This involves the conduct of banking business through the
use of mobile phones or fixed wireless phones. It takes the following steps: Instructions are
passed via voice or short messages (SMS) to the computer; the computer decrypts the message
and executes the instructions through a highly coded device. Then, the response is given back to
the customer electronically (Demirguc-Kunt& Harry Huizinga, 1999).

2.4 The challenges associated with the use of electronic banking within commercial banks.

Risks: Author P. Strahan (2002) states that E-banking poses different risks as compared to the
traditional banking. These risks are more pronounced in the case of Internet banking. Firstly, the
risk of technological changes has to be carefully watched. This is essential to update
technologies and remain cost effective and customer friendly. The technologies are generally
obtained from outside parties. The banks have to be careful about risks involved in such
agreements. The security is an important area of risk. In fact it will be very crucial for the
expansion of Net Banking. Another important area will emerge out of cross-border implications
as ‘Net Banking’ breaks the geographical boundaries. Imposing regularity conditions on such
transactions will be a difficult task.

Security issues: Molyneux (2009) stressed that while making online payments or transferring
money from one account to another, the online bankers are always concerned about the hackers
and anti-social elements. Hacking enables the unethical hackers to penetrate the accounts of
online bankers, and spend their money. Availability of confidential information which is just
secured by a user name and password makes it vulnerable to such threats. Most of the banks try
to make their sites secured by implementing latest network security software. However, there
have been plenty of cases in which web surfers were accidentally exposed to the financial details
of online bankers.. Internet security had a setback when in 2004; Morgan Stanley admitted a
serious security flaw in the system of the latest online banking operation. This flaw allowed
customers to access account details of other clients.

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Necessity of the Internet: For availing the benefits of online banking one should have access to
the Internet. For this purpose, he should own a desktop, laptop or PDA device, and an Internet
connection. This reason limits the usage of online banking, as sometimes it's almost impossible
to have an Internet connection, to serve the purpose. One might also face problems if the Internet
connectivity breaks down during an ongoing transaction, or if someone eavesdrop his user name
and password, while accessing it in a cyber café (Birch, D. and Young, M.A. 1997).

Customer care services: While carrying out online transactions there are many instances when
the banker might need help of a representative, from the bank. The brick and mortar banks have
customer care representatives who are easier to talk to, but in case of online banking, in which
the banks provide customer care numbers, the bankers find it difficult to get their problems
solved (Allen &Strahan, 2002),. Sometimes there is congestion in the network and they have to
wait for some time, in order to talk to the bank's representative at the other end. Once the line is
put through, one may either get somebody helpful and knowledge able or May not, leaving him
in a baffled and confused situation. Although online banking involves risk and imposes certain
problems, there are many facilities provided by it. To avail these benefits, it is important for one
to educate him about the risks, and the steps he can take to protect his financial information. It is
also necessary to understand the rights and responsibilities as an online banking consumer, in
order to make a difference to one's own financial well-being (Mcandrews, 2002).

Technical difficulties: Sometimes electronic banking Websites go down. When this happens,
there's no backup branch that you can go to and the phone lines will be clogged. To protect
yourself, always keep a local bank or credit union account open with some emergency cash so
you won't be penniless while they fix the problem (Accenture, 2005).

Security precautions: Customers should never share personal information like PIN numbers,
passwords etc with anyone, including employees of the bank. It is important that documents that
contain confidential information are safeguarded. PIN or password mailers should not be stored,
the PIN and/or passwords should be changed immediately and memorized before destroying the
mailers. Customers are advised not to provide sensitive account-related information over
unsecured e-mails or over the phone. Take simple precautions like changing the ATM PIN and

12
online login and transaction passwords on a regular basis. Also ensure that the logged in session
is properly signed out (Altunbas, 1999).

According to Centeno (2004), the e-banking adoption factors are divided into two categories:
1). Factors relating to the infrastructure and accessing technology,
2). Factors that are related to retail banking factors. The prior factors include skills on the part of
consumers in using internet and other related technologies, attitudes towards technologies,
internet penetration rate, privacy and security concerns. Later involves factors like banking
culture, e-banking culture, trust in banking institutions and internet banking push. However, lack
of PC and internet penetrations serves as barriers for development of e-banking.

Casu & Molyneux (2004) further cite other impediments as: lack of skill that how perform
technology with the highest efficiency, lack of culture and knowledge of banks about Electronic
banking; lack of engagement of banks management in the system; lack of management to use
experts in IT section; a traditional attitude toward data reengineering; lack of economical
justification and risk to use Electronic banking systems

Cost and fees: Customer service delivery attributes in the electronic banking industry are
important, in view of the fact that online banking, mobile banking and ATM interaction are the
main sources of service delivery. Therefore, offering high quality services to satisfy consumers‟
needs, at lower cost and fees, will be the potential competitive advantage of electronic banking
sustainability and growth in the future. At present, studies show that electronic banking has
successfully reduced operating and administrative cost and fees while at the same time research
has proven that, cost and fees savings have helped e-based banks offer lower or no service
cost/fees. Cost was once considered as the major competitive priority and a key aspect for the
future development in every organization. Prior research has empirically found a positive
relationship between cost/fees and customer service delivery as a critical factor with the use of
electronic banking (Young, M.A. 2007).

Based on best practices in developed countries, United Nations Conference on Trade and
Development (UNCTAD) report has identified four challenges that developing countries, in
general, are expected to overcome to achieve the advantages that e-banking initiatives can bring
about (UNCTAD 2002): (1) The ability to adopt global technology to local requirements :An

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adequate level of infrastructure and human capacity building are required before developing
countries can adopt the global technology for their local requirements.(2) The ability to
strengthen public support for e-finance: Historically, most e-finance initiatives in developing
countries have been the result of cooperative efforts between the private and public sectors.(3)
The ability to create a necessary level of regulatory and institutional frameworks: The lack of
regulatory frameworks, trust, security and privacy standards, high trade barriers, customer and
investor protections impede progress in implementing e-banking initiatives on a larger scale in
many developing countries.(4) The ability to mainstream small and medium scale
enterprises(SMEs) towards e-banking: The availability of and access to quality data and banking
information is required for SMEs in developing countries to move towards e-banking. Similarly,
on-line credit information will enhance SME‟s ability to secure financing.

Financial obstacles: Every alteration requires foundation, support and expertise. The possibility
to have suitable foundations, updated equipments and support groups requires a considerable
amount of money. In fundamental changes of the field of telecommunication, expenses regarding
web connection, satellite expenses, the expenses for up grading webs are some examples in this
regard. The average speed of Internet is 128 Kb per second and it costs 20000 to man monthly.
About using ATM and POS machines it should be said that the banks keep receiving
commissions. Telecommunication center is not faced with serious financial problems in this
regard (Mcandrews, J. and P. Strahan, 2002).

The basic cons of electronic banking are secure, mail malware, attack of the PC, or mobile phone
stealing. According to Girardone & Molyneux (2004) their research was based on adopter and
non adopters of internet banking. Both categories of adopters and non adopters resulted
concerned about the security and privacy of their bank information. The adopters were likely to
take the risks of hacked pin and knowing that the money may be hacked out from their account.
Mail malware represents the most frustrating situation for the customer, since they may appear as
offer for any bank product, with lower rates, or loans offer or other non-banking product and
require the personal data like name and card number. Precautions are not opening doubtful
emails and protecting the mobiles from persons who may get into the customer’s account.

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 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction
This chapter consists of the research design, research population, area of research, sample size,
sampling technique, data collection methods and instruments, research procedure, data
processing and analysis.

3.1 Research design

The researcher used a case research design to find out the necessary information on electronic
banking and customer satisfaction within commercial banks. Both qualitative and quantitative
data was collected as descriptions were got from the field. The researcher used a case research
design because it helped him to concentrate on a single locality that enabled him to deeply
investigate the variables under research thus collected the most up-to-date in a relatively short
period of time.

3.2 Area of Research or the sampling area

The research was carried out in Centenary bank, Jinja branch in Jinja Municipality in Jinja
district in Eastern Uganda. The bank offers several electronic banking services thus the
researcher hoped to collect the most reliable information.

3.3 Study population

The research population mainly consisted of Management staff, other employees and Customers
of Centenary bank, Jinja branch that totaled to 450. It is from this that the researcher got the
sample size of 50 respondents.

Table showing the sampling procedure

Category Population Sample size Sampling procedure
Management staff 10 4 Purposive sampling
Other employees 90 16 Simple random sampling
Customers 350 30 Simple random sampling
Total 450 50

Source: primary data

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3.4 Sample size
The research considered 50 respondents. The categories were management staff members, other
employees and bank Customers. These provided the necessary data as such respondents were
conversant with electronic banking and customer satisfaction within commercial banks.

3.5 Sampling technique

The researcher used simple random sampling for the employees and customers of Centenary
bank, Jinja branch. This was because simple random sampling gave the respondents equal
chances of participating in the research.

Purposive sampling method was also employed to arrive at management staff. This was to access
specific category of respondents who could give specific information (management information)
relevant to the variables under the research.

3.6 Sources of data

3.6.1 Primary sources

These are sources of original information that have not published before. The primary data was
collected from the area of research that is from management staff, employees and customers of
Centenary bank, Jinja branch by use of questionnaire and interview guide.

Primary data were used because they provide first hand information from experienced
respondents which could be relied upon in interpreting data.

3.6.2 Secondary sources

These are sources of data from the published and documented sources that aided in providing
answers to the research problem and they included journals, magazines, Internet, books, and
news papers. The fact that secondary data sources are easily accessed with already refined data
,they also provide variety of data that made interpretation of current research easier.

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3.7 Data collection Methods

3.7.1 Questionnaire method

A questionnaire is a written form of questions that are systematically arranged to enable the researcher
come up with clear findings that can answer the research questions. Under this, the researcher set
questions about the research problem which was in line with research objectives which was taken to
respondents to read, interpret and respond by filling in. This method was used to collect data from
customers and other employees of Centenary bank, Jinja branch as they were believed to be having the
capacity to read, interpret and answer the questions. This was used because it gave respondents a chance
to fully express their views about the research without being intervened by the presence of the researcher.

3.7.2 Interviews
Interview is a method where the researcher asks questions directly to the respondents. With this method,
the researcher was capable of asking the respondents questions directly in order to get first hand
information and also the researcher was able to catch non-verbal communication of the respondent like
tune of voice. This method was applied to collect data from managers since they had no time to fill
questionnaires and some customers who were incapable of filling questions.

3.8 Data collection tools

3.8.1 Interview guide

This refers to an instrument containing questions that the researcher asks directly to the
respondents. This was employed mostly to collect data from managers since they had no time to fill
questionnaires and some customers who were incapable of filling questions.

3.8.2 Structured questionnaires

A questionnaire is a predetermined written set of questions used to obtain data from the
respondents by having the responses in writing. The researcher used questionnaires in order to
gather quantitative data from all the categories of respondents. Questionnaires were preferred in
the research because they were a convenient method since respondents gave their views without
being intimidated by the researcher’s presence. This tool was used to collect data from customers
and other employees of Centenary bank, Jinja branch as they were believed to be having the capacity to
read, interpret and answer the questions.

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3.9 Data processing, presentation and analysis

3.9.1 Data processing

After the researcher had carried out the research, she collected questionnaires and data from
interviews and arranged them properly according to the objectives. The processing of data
involved editing, re-writing, summarizing and data coding to ensure that better quality report was
made. The data was coded on sheets and was then arranged in accordance with the data items,
their categories and was matched accordingly for easy data analysis.

3.9.2 Data presentation

The responses were categorized under sub headings and respondents’ views were analyzed under
them by tallying the responses from the questionnaires. Simple descriptive statistics like
frequencies and percentages were generated thus tables were used in data presentation. The
information from the respondents’ reactions answered the research questions

3.9.3 Data analysis

Data was analyzed using the two principal methods which were qualitative and quantitative data
analysis methods.

3.9.3.1 Qualitative data analysis

The qualitative data was collected through the use of questionnaires, interviews, and observation
and recording was done and conclusions made in the field. Data was analyzed after responses
were coded. After the field, responses were arranged under themes. This was basically to search
for the relationship between various codes. To avoid value judgment and bias, the researcher
carefully analyzed the information by consciously cross checking and was in position to interpret
objectively.

3.9.3.2 Quantitative data analysis

Responses were categorized under sub headings and respondents’ views were also analyzed
under them by tallying the responses from the questionnaires. Simple descriptive statistics like
frequencies and percentages were generated hence the tabulation method. The information
sought from the respondents’ reactions reflected the objectives and research questions.

18
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