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Technological Innovations and Banking in Ghana:
An Evaluation of Customers’ Perceptions
University of Ghana, Legon
In Sub-Saharan Africa, developments in information and communication technology are radically changing the way business is done. These developments in technology have resulted in new delivery channels for banking products and services such as Automated Teller Machines (ATMs), Telephone Banking, PC-Banking, and Electronic Funds Transfer at Point of Sale (EFTPoS). This study evaluates the perceptions of banking customers regarding the effect of technological innovations on banking services in Ghana. The study focused on customers with banks that have at least one form of technological innovation. The results of the study generally indicate that, technological innovation or electronic delivery channels have contributed positively to the provision banking services and the growth of the Ghanaian banking industry.
Keywords: Information Technology, Electronic Delivery Channels, Banking, Ghana
In Sub-Saharan Africa, developments in information and communication technology (ICT) are radically changing the way business is done. Electronic commerce is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to sell or buy products and services. This revolution in the market place has set in motion a revolution in the banking sector for the provision of a payment system that is compatible with the demands of the electronic marketplace (Balachandher et al, 2001).
Innovations in information processing, telecommunications, and related technologies – known collectively as “information technology” (IT) – are often credited with helping fuel strong growth in the many economies (Coombs et al, 1987). It seems apparent then that, technological innovation affects not just banking and financial services, but also the direction of an economy and its capacity for continued growth. IT is defined as the modern handling of information by electronic means, which involves its access, storage, processing, transportation or transfer and delivery (Ige, 1995). According to Alu (2002), IT affects financial institutions by easing enquiry, saving time, and improving service delivery. In recent decades, investment in IT by commercial banks has served to streamline operations, improve competitiveness, and increase the variety and quality of services provided. According to Yasuharu (2003), implementation of information technology and communication networking has brought revolution in the functioning of the banks and the financial institutions. It is argued that dramatic structural changes are in store for financial services industry as a result of the Internet revolution; others see a continuation of trends already under way.
Many banks are making what seem like huge investments in technology to maintain and upgrade their infrastructure, in order not only to provide new electronic information-based services, but also to manage their risk positions and pricing. At the same time, new off-the-shelf electronic services such as online retail banking are making it possible for very small institutions to take advantage of new technologies at quite reasonable costs. These developments may ultimately change the competitive landscape in the financial services.
2.0 Technological History of Ghanaian Banks
Over time, technology has increased in importance in Ghanaian banks. Traditionally, banks have always sought media through which they would serve their clients more cost-effectively as well as increase the utility to their clientele. Their main concern has been to serve clients more conveniently, and in the process increase profits and competitiveness. Electronic and communications technologies have been used extensively in banking for many years to advance agenda of banks
In Ghana, the earliest forms of electronic and communications technologies used were mainly office automation devices. Telephones, telex and facsimile were employed to speed up and make more efficient, the process of servicing clients. For decades, they remained the main information and communication technologies used for transacting bank business.
Later in the 1980s, as competition intensified and the personal computer (PC) got proletarian, Ghanaian banks begun to use them in back-office operations and later tellers used them to service clients. Advancements in computer technology saw the banks networking their branches and operations thereby making the one-branch philosophy a reality. Barclays Bank (Gh.) and Standard Chartered Bank (Gh.) pioneered this very important electronic novelty, which changed the banking landscape in the country.
Arguably, the most revolutionary electronic innovation in this country and the world over has been the ATM. In Ghana, banks with ATM offerings have them networked and this has increased their utility to customers. The Trust Bank Ghana, in 1995 installed the first ATM. Not long after, most of the major banks began their ATM networks at competitive positions. Ghana Commercial Bank started its ATM offering in 2001 in collaboration with Agricultural Development Bank. SIX (6) banks currently operate ATMs in Ghana. The ATM has been the most successful delivery medium for consumer banking in this county. Customers consider it as important in their choice of banks, and banks that delayed the implementation of their ATM systems, have suffered irreparably. ATMs have been able to entrench the one-branch philosophy in this county, by being networked, so people do not necessarily have to go to their branch to do some banking.
Another technological innovation in Ghanaian banking is the various electronic cards, which the banks have developed over the years. The first major cash card is a product of Social Security Bank, now Soceite Generale SSB, introduced in May 1997. Their card, ‘Sika Card’4 is a value card, onto which a cash amount is electronically loaded. In the earlier part of year 2001 Standard Chartered Bank launched the first ever debit card in this country. Its functions have recently been integrated with the customers’ ATM cards, which have increased its availability to the public since a separate application process is not needed to access it. A consortium of three (3) banks (Ecobank, Cal Merchant Bank and The Trust Bank) introduced a further development in electronic cards in November 2001, called ‘E-Card’. This card is online in real time, so anytime a client uses the card, or changes occur in their account balance, their card automatically reflects the change.
Though ATMs have enjoyed great success because of their great utility, it has been recognized that it is possible for banks to improve their competitive stance and profitability by providing their clients with even more convenience. Once again ICT was what saved the day, making it possible for home and office banking services to become a reality. In Ghana, some banks started to offer PC banking services, mainly to corporate clients. The banks provide the customers with the proprietary software, which they use to access their bank accounts, sometimes via the World Wide Web (WWW). This is on a more limited scale though, as it has been targeted largely at corporate clients. Ghana Commercial Bank, Ecobank (Gh.) Ltd, Standard Charted Bank (Gh.) Ltd. and Barclays Bank (Gh.) Ltd and Stanbic Bank (Gh.) are the main banks known to offer PC banking services.
Banks have recognized the internet as representing an opportunity to increase profits and their competitiveness. Currently, no bank is offering internet banking (i-banking) in Ghana, but some have well laid plans to start. Ecobank (Gh.) Ltd, Standard Charted Bank (Gh.) Ltd. and Barclays Bank (Gh.) Ltd, also have plans for doing so in the not-too-distant future.
Telephone banking, has also taken a big leap with its convenience and time. Barclays Bank (Gh.) launched its telephone banking services in August 28, 2002. SSB Bank also launched its “Sikatel” or “SSB Call Centre” (telephone banking) in September 19, 2002. The services available with this system are ascertaining credible information about the bank’s products, the customers’ complaints, bank statements and cheque book request and any other complaints and inquiry.
3.0 Forms of IT Innovations (Electronic Delivery Channels)
This section describes the various forms of technological innovations or electronic delivery channels adopted by banks. Technological innovations have been identified to contribute to the distribution channels of Banks. The electronic delivery channels are collectively referred to as Electronic Banking. Electronic Banking is really not one technology, but an attempt to merge several different technologies. Each of these evolved in different ways, but in recent years different groups and industries have recognized the importance of working together. Bankers now see a kind of evolution in their business, partly, because the world has taken a quantum leap in the use of technologies in the last several years. The various electronic delivery channels are discussed below:
Automated Teller Machines (ATMs)
Rose (1999), describes ATMs as follows: “an ATM combines a computer terminal, record-keeping system and cash vault in one unit, permitting customers to enter the bank’s book keeping system with a plastic card containing a Personal Identification Number (PIN) or by punching a special code number into the computer terminal linked to the bank’s computerized records 24 hours a day”. Once access is gained, it offers several retail banking services to customers. They are mostly located outside of banks, and are also found at airports, malls, and places far away from the home bank of customers. They were introduced first to function as cash dispensing machines. However, due to advancements in technology, ATMs are able to provide a wide range of services, such as making deposits, funds transfer between two or accounts and bill payments. Banks tend to utilize this electronic banking device, as all others for competitive advantage.
The combined services of both the Automated and human tellers imply more productivity for the bank during banking hours. Also, as it saves customers time in service delivery as alternative to queuing in bank halls, customers can invest such time saved into other productive activities. ATMs are a cost-efficient way of yielding higher productivity as they achieve higher productivity per period of time than human tellers (an average of about 6,400 transactions per month for ATMs compared to 4,300 for human tellers (Rose, 1999). Furthermore, as the ATMs continue when human tellers stop, there is continual productivity for the banks even after banking hours.
“Telebanking (telephone banking) can be considered as a form of remote or virtual banking, which is essentially the delivery of branch financial services via telecommunication devices where the bank customers can perform retail banking transactions by dialing a touch-tone telephone or mobile communication unit, which is connected to an automated system of the bank by utilizing Automated Voice Response (AVR) technology” (Balachandher et al, 2001).
According to Leow (1999), telebanking has numerous benefits for both customers and banks. As far as the customers are concerned, it provides increased convenience, expanded access and significant time saving. On the other hand, from the banks’ perspective, the costs of delivering telephone-based services are substantially lower than those of branch based services. It has almost all the impact on productivity of ATMs, except that it lacks the productivity generated from cash dispensing by the ATMs. For, as a delivery conduit that provides retail banking services even after banking hours (24 hours a day) it accrues continual productivity for the bank. It offers retail banking services to customers at their offices/homes as an alternative to going to the bank branch/ATM. This saves customers time, and gives more convenience for higher productivity.
Personal Computer Banking
“PC-Banking is a service which allows the bank’s customers to access information about their accounts via a proprietary network, usually with the help of proprietary software installed on their personal computer”. Once access is gained, the customer can perform a lot of retail banking functions. The increasing awareness of the importance of computer literacy has resulted in increasing the use of personal computers. This certainly supports the growth of PC banking which virtually establishes a branch in the customers’ home or office, and offers 24-hour service, seven days a week. It also has the benefits of Telephone Banking and ATMs.
The idea of Internet banking according to Essinger (1999) is: “to give customers access to their bank accounts via a web site and to enable them to enact certain transactions on their account, given compliance with stringent security checks”. To the Federal Reserve Board of Chicago’s Office of the Comptroller of the Currency (OCC) Internet Banking Handbook (2001), Internet Banking is described as “the provision of traditional (banking) services over the internet”.
Internet 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 Telebanking 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.
Networking of branches is the computerization and inter-connecting of geographically scattered stand-alone bank branches, into one unified system in the form of a Wide Area Network (WAN) or Enterprise Network (EN); for the creating and sharing of consolidated customer information/records.
It offers quicker rate of inter-branch transactions as the consequence of distance and time are eliminated. Hence, there is more productivity per time period. Also, with the several networked branches serving the customer populace as one system, there is simulated division of labour among bank branches with its associated positive impact on productivity among the branches. Furthermore, as it curtails customer travel distance to bank branches it offers more time for customers’ productive activities.
Electronic Funds Transfer at Point of Sale (EFTPoS)
An Electronic Funds Transfer at the Point of Sale is an on-line system that allows customers to transfer funds instantaneously from their bank accounts to merchant accounts when making purchases (at purchase points). A POS uses a debit card to activate an Electronic Fund Transfer Process (Chorafas, 1988).
Increased banking productivity results from the use of EFTPoS to service customers shopping payment requirements in stead of clerical duties in handling cheques and cash withdrawals for shopping. Furthermore, the system continues after banking hours, hence continual productivity for the bank even after banking hours. It also saves customers time and energy in getting to bank branches or ATMs for cash withdrawals which can be harnessed into other productive activities.
4.0 Research Methodology
The methodology adopted involved the conduct of interviews and/or interrogation; preparation of a number of questionnaires and their administration. The questionnaires were designed to ascertain customers’ perceptions on the effect of IT innovations or electronic delivery channels on the banking services in Ghana. The responses were measured with a five-point Likert-type rating scale, where Strongly Agree (SA) = 4; Agree (A) = 3; Strongly Disagree (SD) = 2; Disagree (D) = 1; and Neutral (N) = 0.
The sample size was drawn from Banks in Ghana. The banks in Ghana were sampled on the basis that they have at least one form of IT innovation channel. In all fourteen (14) out of a total of eighteen banks (18) in Ghana were identified. The researcher also interviewed banking IT executives in the sampled banks to ascertain the form of IT innovation introduced by their respective banks. A ‘grab sampling’ technique was used to select the customers from the banks. A total of 2,000 questionnaires were sent out. But 1,210 responses were received, representing a response rate of 60.5%. In order to ascertain perceptions of banking customers with respect to the effect of technological innovation on banking services, descriptive statistics were employed in the presentation and analysis of results.
Table 1: Electronic Delivery Channels Utilized by Banks in Ghana
does provide service
An analysis of the types of electronic delivery channels utilized by banks in Ghana is presented in Table 1. The focus of the analysis is on the six main delivey channels identified in literature namely ATMs, Telephone Banking, PC-Banking, Internet Banking, Branch Network and EFTPoS. The information was basically from personal interviews with Bank Executives and IT Executives in the respective banks. As indicated in Table 1, it was found that ATMs and Branch Networks are the most popular electronic banking delivery channels in Ghana. These are followed by PC banking, EFTPoS and Telephone banking. Internet banking is not yet developed in Ghana.
Table 2: Use of IT Innovations
The results, as indicated in table 2 show that, 72.1% representing 873 out of a total of 1210 respondents use one form of electronic delivery system or the other. This indicates that bank customers to a large extent patronize technological innovations introduced by banks in Ghana.
Table 3: Type of IT Innovations Used by Customers
With respect to the type of IT innovations used by customers, ATMs appear to be the most widely accepted and highly used electronic delivery tool indicating 56.7% of the total respondents. This is followed by telephone banking representing 20.8% and PC banking bank (15.2%). Electronic Funds Transfer Point of Sales, though, an earlier form of IT innovation, seems to be the least used electronic delivery channel by bank customers. Since ATMs are the widely accepted and highly utilized delivery channel, it is important at this point to ascertain the frequency of it usage among bank customers. This is shown in table 4.
Table 4: Frequency of ATM Usage
Table 4 shows results on the frequency of ATM usage among bank customers. The results show that customers frequently used the ATMs for bank transactions such as cash transfers, checking account balance and printing mini statements. 255, representing 51.4% of respondents who use ATMs indicated that, they visit ATM points about four or more times in a month. However, 13%, 14.2% and 21.4% of respondents pointed out that, they visit ATM points once, twice and thrice respectively every month.
Table 5: Frequency of Bank Visits
The frequency of customers’ bank visits is shown in table 5. Out of the total of 1210 respondents, 566 representing 46.8% mentioned that, they visit their banks three or more time every month. The results indicate that customers of banking services in Ghana still find it useful to visit their bank branches regularly every month to transact some banking business such as detailed bank statement requests, loan application, foreign funds transfer, deposits etc. for which the ATMs can not be used.
Table 6: Response to Customers’ Requirements
Table 6 shows the responses of customers’ requirements with respect to how fast enquiries about their accounts can be made. Out of a total of 1,210 responses, 89.4% agreed that IT Innovation makes enquiry about the state of their accounts faster whiles 2.8% representing 34 respondents disagreed. A mean of 3.19 confirms that IT Innovation makes enquiry about the state of accounts faster.
Table 7: Time involved in bank transactions
The responses of customers as shown in Table 7 confirm that Technological Innovation reduces the time involved in bank transactions. Out of 1210 respondents, 1071 representing 88.5% agreed that the time involved in transacting business with their banks can be reduced significantly with IT. A total of 39 respondents representing 3.2% however disagreed with this view. A mean of 3.16 confirms the perception of customers that IT reduces the time spent at the bank in order to transact business.
Table 8: Effect on service delivery
Table 8 above gives the responses of customers about the effect of Technological Innovation on service delivery. About 973 representing 80.4% of the customers who responded agreed that IT Innovations ensures efficient service delivery. The number of respondents who however disagreed were 49 representing only 4.1%. 15.5% of respondents out of 1210 held a neutral view. A mean of 2.79 shows that IT Innovation enables banks to deliver efficient services to their customers.
Table 9: Effect on quality of product and services
From the table 9 above, majority of the customers generally agreed that the quality of the products and services of banks have be improved with IT Innovation. Almost 1,022 signifying 84.5% of respondents agreed that IT Innovation improves the quality of bank products and services whiles 34 (2.7%) of those who responded disagreed with this position. The mean of 2.95 confirmed that IT Innovation improves the quality of products and services offered by banks.
Table 10: General customer satisfaction
From table 10, out of a total of 1210 respondents, 78.2% agreed that IT Innovation provides adequate responses to their inquiries of products/services information, as against 4.9% who disagreed. This is reflected by the mean of 2.71 which confirms that, IT Innovation provides adequate responses to customer’s inquiries.
Table 11: Customers’ patronage
The willingness of customers to continue saving with their banks is shown in the Table 11 above. 893 respondents representing 73.8% of the customers agreed that they will continue to save with their banks. They also believe that IT Innovation attracts customers to their banks. However, nearly 4.5% of the total respondents of 1210 disagreed. 21.7% neither agreed nor disagreed with this assertion. A mean of 2.57 shows that, most of the respondents, appear to be satisfied with the services and products offered by their respective banks and so will continue to save with the banks.
Table 12: Effect on transaction cost
The results as shown in table 12, confirm the fact that, the advent of IT Innovation has lead to increased bank charges. Even though 17.9% of the 1210 respondents disagreed with this assertion, 56.1% agreed that IT Innovation has resulted in increased bank charges. This fact is reflected by the mean of 2.23. The mean value of 2.23 shows that bank charges have increased as a result of increased investments in IT Innovations.
Table 13: Effect on bank productivity
Table 13, shows the responses of customers with respect to the impact of IT Innovation on bank productivity. A total of 949 respondents representing 78.4% agreed that IT Innovation increases bank productivity 4.6% respondents however did not agree that IT Innovation increases bank productivity. The mean value of 2.69 shows that bank productivity can be increased with the introduction new electronic channels.
Table 14: Effect on Bank growth
The response of customers with respect to the impact of IT Innovation on the growth of their banks is shown in the Table 14 above. About 1,066 customers representing 88.1% agreed that IT Innovation has made a positive impact on the growth of their banks as against 33 customers representing 2.7% of the valid responses who disagreed. A mean value of 3.15 shows that technological innovation has a positive impact on the growth of banking in Ghana.
Table 15: Importance of Human tellers to bank customers
Customers’ responses about the importance of human tellers to banking operations are shown in table 15. Out of the total sample respondents of 1210, 827 signifying 68.3% of customers disagreed with the assertion that human tellers are no longer important whiles 211 representing 17.4% of respondents held the view that, human tellers are important. The mean of 1.65 confirms the fact that human tellers are still considered important in banking, even in the face of increased investment in IT innovation and electronic delivery systems. This is an indication that bank customers in Ghana still highly value the importance of the personal touch in banking services.
In SSA, Technological developments particularly in the area of Telecommunications and Information Technology are revolutionizing the way business is done. Electronic commerce is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to sell or buy products and services. This revolution in the market place has set in motion a revolution in the banking sector for the provision of a payment system that is compatible with the demands of the electronic marketplace. The advances in IT have certainly introduced new delivery channels in the Ghanaian banking industry. This paper sought to evaluate the perceptions of banking customers regarding the effect of technological innovations on banking services in Ghana.
The study focused on customers with banks that have at least one form of IT innovation or electronic delivery system. The data for the study was mainly obtained from the field survey through questionnaire administration and interviews. Out of an initial sample of 2000, 1,210 questionnaires were received representing a response rate of 60.5%. Bank executives and IT executives in the respective banks were also interviewed to ascertain the type of electronic delivery channels utilized by the respective banks in Ghana. The new delivery channels include ATMs, Branch Networks, PC banking based on proprietary software, EFTPoS, Telephone banking and Internet banking. It was found that ATMs and Branch Networks are the most popular electronic delivery channel for banking in Ghana. These are followed by PC banking, EFTPoS and Telephone banking. Internet banking is not yet developed in Ghana.
With respect to the type of IT innovations used by customers, ATMs appear to be the most widely accepted and highly used electronic delivery tool indicating 56.7% of the total respondents. This is followed by telephone banking representing 20.8% and PC banking bank (15.2%). Electronic Funds Transfer Point of Sales, though, an earlier form of IT innovation, seems to be the least used electronic delivery channel by bank customers. It was found that most Ghanaian banking customers still visit their bank branches regularly and find interaction with human tellers very important. The results of the study generally indicate that, these new delivery channels have contributed positively to the provision of banking services and the growth of the Ghanaian banking industry.
Change, Macmillan: London.
 Lecturer in Finance, School of Administration, University of Ghana, email: email@example.com
AAFM, LC FINANCIAL
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