The effect of electronic banking on commercial banks' financial performance in Tanzania

Abstract

The paper investigated the effects of e-banking on the profitability of commercial banks as a measure of their financial performance. The  study is pertinent since e-banking is a significant innovation that hinders bank operations in both urban and rural areas. A case study  design and a quantitative approach were adopted. The study population consisted of 171 individuals, from whom 120 respondents were  drawn using the (Cochran, 1963) formula (n= N/(1+N e2)). The study used questionnaires to collect data that were analysed using  descriptive statistics and regression. Results showed that customers utilised all four electronic banking products and that they were  statistically significant: ATMs (P=0.0001, CI = 0.78-1.2), agency banking (P=0.0001, CI = -1.32 -0.52), mobile banking (P = 0.004, CI = 0.16  -0.8), and online banking (P=0.0001, CI= -1.33 -0.41). The relevance of EFT in explaining NMB profitability was determined to be 0.02 and  the p-value to be 0.05, thus concluding that EFT has a significant impact on NMB's profitability. There is positive correlation between e- banking and the profitability of the banks. The use of PINs instead of signatures was recommended, with expectation that it is easier to  manage cybercrime occurrences when PINS are used.