AN EXAMINATION OF THE IMPACT OF DIGITAL BANKING SERVICES ON PERFORMANCE OF COMMERCIAL BANKS IN BAFFOUSSAM, CAMEROON

CHAPTER ONE

INTRODUCTION

Background of the Study

In the modern era, digital banking services have become a significant trend in the banking sector. Chikoko and Munongo (2018) define digital banking as the use of the internet, mobile phones, and other electronic mediums to deliver banking services. These services encompass traditional functions such as balance inquiries, statement printing, fund transfers, and bill payments, as well as new services like electronic bill presentment and payment, all without the need to visit a bank (Ali & Ali, 2019). In addition, banks are in the business of rendering services, which include services such as savings, cheque and investment accounts. Due to technological advancements and innovation, electronic banking has gained importance as an alternative means of providing services to customers. According to Steven (2022), online banking—also known as vital banking, digital banking, or electronic banking—involves using telecommunication networks and the internet to offer a wide range of financial services and products through websites or systems operated by financial institutions. Beyond that, digital banking is described by Wadesango et al. (2016) as the provision of banking services and products directly to customers via electronic and communication networks. Similarly, Sibanda (2018) describes digital banking as the online digitization of traditional banking activities that historically required a physical presence in a bank branch, such as money deposit, withdrawals, and transfers, checking/savings account management, bill payment and account services.While digital banking offers numerous benefits, several scholars have found that its global adoption is still in its early stages (Desta, 2016; Wadesango et al., 2017). Drehmann and Nikolaou (2013) noted that the acceptance of digital banking has yet to meet banking industry expectations. Likewise, Sabi (2019) emphasized that the spread of electronic banking is driven more by customer acceptance than by the offerings from providers. Furthermore, there is still insufficient understanding of how performance is perceived and evaluated in banking industry. Stephen and Sandeep (2015) define performance as a comprehensive assessment of how well an organization performs across key parameters, typically including financial, market, and shareholder performance. On the other hand, banks as business organizations are expected to make some profits and grow the wealth of the shareholders. Profitability of a bank is the financial strength of the bank over a period of time on the basis of certain criteria like return on assets, returns on investments, earnings per share, etc. Additionally, bank customers can now send money to their family, friends, or customers from the comfort of their bed at any time. Also, payments for electricity bills and cable subscriptions can be made without visiting the bank or carrying cash to the energy company's office or the TV station. The streets are now filled with agents authorized by banks to conduct banking activities on their behalf, making it easy for people to obtain cash for small transactions right at their doorstep. Moreover, the surge in digital payments extends beyond POS banking to include mobile banking, ATM banking, internet banking, USSD banking, and QR code banking. USSD banking allows customers without internet-enabled devices to make and receive payments using simple codes on their phones (Abaenewe et al, 2018). QR code banking simplifies payments for smartphone users by enabling them to scan a merchant's QR code to complete transactions. Consequently, the absence of a bank branch in a particular area no longer hinders access to banking services. These and other emerging digital channels have made banking seamless and borderless, earning the approval of many financial institutions' management in Cameroon due to the comfort and convenience they offer to customers. Digital banking services now lead a significant portion of the payment system globally and in Cameroon. According to Taiwo & Agwu (2017), digital banking has expanded from basic money transfers and bill payments to include credit services, cross-border remittances, savings, bulk disbursements, and additional value-added services such as pay-as-you-go utility bills. Therefore, a survey will be conducted in order to examine the impact of digital banking services on performance of commercial banks in Baffoussam, Cameroon

1.2 Statement of the Problem

Over the past few years, the banking industry has experienced a substantial overhaul due to the swift progress of digital technologies. The worldwide financial services industry, especially developing locations like Cameroon, is undergoing a transformation as it increasingly adopts digital banking services. These services are designed to improve consumer convenience, streamline operations, and save costs for commercial banks. Although digital banking services provide significant advantages, their actual influence on the operation of commercial banks remains uncertain. An investigation conducted by Rono  (2020) revealed that commercial banks were compelled to engage in e-banking innovation in order to achieve a competitive edge. This was achieved by simplifying bank transactions, mitigating the issue of overcrowding caused by long queues, bringing services closer to customers to attract and retain them, and ultimately reducing the cost of service delivery while enhancing financial performance. Ngango et al (2019) found that prior to the implementation of digital banking, bank clients experienced significant time wastage due to long queues and delays in check payments. This was caused by bank representatives waiting at the clearing house for the settlement of their dues. The study conducted by Njogu (2018) revealed that bank managers are experiencing jubilation following the implementation of e-banking. This innovation has led to the emergence of fresh market prospects, heightened account sales, expanded market coverage, and improved operational efficiency. However, the utilization of information technology was anticipated to reduce time, distance, space, and costs, hence increasing the availability of cheap financial services. It has been discovered that electronic banking enables banks to transition from traditional channels that rely on human help to digital channels that function on a self-service basis. This shift reduces operational expenses and enhances efficiency and financial performance. DeYoung (2021) states that digital banking and other electronic banking services decrease operational costs for banks that incur physical overhead expenses.Several research have been undertaken to investigate the correlation between electronic banking and its impact on bank performance. Remarkably, research on this topic yielded inconclusive results. Nevertheless, certain studies (Aduda & Kingoo, 2022; Bagudu et al., 2017; Mehmood et al., 2015; Akhisa et al., 2015; Maduku, 2017; Mazana et al., 2016) have reported a favourable correlation. Research studies have shown that banks that provide comprehensive digital banking services likely to have superior performance compared to those that are less advanced in this area (Mazana et al., 2016).  Hence, it is in the light of these that the study seeks to examine the impact of digital banking services on performance of commercial banks in Baffoussam, Cameroon.

 1.3  Objectives of the Study

The main purpose of this study is to examine the impact of digital banking services on performance of commercial banks in Baffoussam, Cameroon. Specifically, the study will;

Assess the impact of mobile banking on performance of commercial banks in Baffoussam, Cameroon

2. To assess the impact of POS banking on performance of commercial banks in Baffoussam, Cameroon

3. To assess the impact of automatic teller machine(ATM) banking on performance of commercial banks in Baffoussam, Cameroon

4. To assess the impact of online(WEB) banking on performance of commercial banks in Baffoussam, Cameroon

1.4  Research Questions

The following questions have been prepared for the study:

What is the impact of mobile banking on the performance of commercial banks in Bafoussam, Cameroon?

What is the impact of POS banking on the performance of commercial banks in Bafoussam, Cameroon?

What is the impact of automatic teller machine (ATM) banking on the performance of commercial banks in Bafoussam, Cameroon?

What is the impact of online (WEB) banking on the performance of commercial banks in Bafoussam, Cameroon?

1.5 Research Hypotheses

H0: Digital banking services have no significant impact on the performance of commercial banks in Baffoussam, Cameroon.

Ha: Digital banking services have a significant impact on the performance of commercial banks in Baffoussam, Cameroon.

1.6 Significance of the Study

The findings of this research will provide valuable guidance for governing laws concerning digital banking, ensuring that they foster innovation while effectively mitigating risks such as cybersecurity threats and financial crime.Additionally,the  study will assist bank management in developing appropriate training programs and support systems to help employees adapt to the digital transformation. Ensuring that employees are well-equipped to manage and operate digital banking services for maintaining high performance and service quality.Moreover, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the impact of digital banking services on performance of commercial banks in Baffoussam, Cameroon

1.6 Scope of the study   

The scope of this study is boarded on the impact of digital banking services on performance of commercial banks in Baffoussam, Cameroon. Empirically, this study will assess the impact of mobile banking on performance of commercial banks, the impact of POS banking on performance of commercial banks, the impact of automatic teller machine(ATM) banking on performance of commercial banks in Baffoussam, Cameroon and assess the impact of online(WEB) banking on performance of commercial banks.

Geographically, the study will be delimited to commercial banks in Baffoussam, Cameroon.

1.7 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Digital banking services: encompass various electronic methods used by customers to conduct banking transactions. 

Mobile Banking: a mobile app to perform banking transactions.

ATM: automated teller machines for cash withdrawals, deposits, and other banking services.

Internet Banking: conducting banking transactions via a web-based platform.

USSD Banking: Unstructured Supplementary Service Data codes on mobile phones to make and receive payments without internet connectivity.

QR Code Banking: Making payments by scanning a merchant's QR code with a smartphone.

POS banking: the use of Point of Sale terminals by customers to conduct financial transactions.