1

ABSTRACT

This study investigates the effect of e-banking on the financial performance of listed
commercial banks in Nigeria, focusing on various e-banking services such as mobile
banking, agency banking, and ATM banking. The analysis utilized secondary data from
commercial banks listed on the Nigerian Stock Exchange (NSE) over a five-year period, from
2020 to 2024. The data were analyzed using STATA, and both descriptive and inferential
statistics were employed to discuss the findings.

Descriptive statistics revealed a mean financial performance of approximately ₦7,272,495

million among the sampled banks, with mobile banking showing a mean value of ₦83,623.62,
agency banking at 97.42, and ATM banking averaging 81.6 units. A normality test conducted
via the Shapiro-Wilk test confirmed that all variables were normally distributed, which is a
crucial assumption for regression analysis. The Spearman correlation analysis indicated
strong positive correlations between financial performance and e-banking variables, with
ATM banking (0.7217), mobile banking (0.6902), and agency banking (0.6696)
demonstrating significant relationships, while online banking showed a negligible correlation
(0.0233).

Further analysis involved model specification tests, including autocorrelation,

heteroscedasticity, and multicollinearity checks, ensuring the validity of the regression
analysis. The Hausman test results indicated the preference for a fixed-effects model due to
the significant correlation of unique errors with regressors. The panel regression analysis
revealed that mobile banking significantly affects financial performance (p < 0.0000),
accounting for 48.22% of the variance in financial performance. Similarly, agency banking
and ATM banking were also found to have significant positive effects on financial
performance, with agency banking explaining 44.84% of the variance and ATM banking
52.08%.

Overall, the findings suggest that e-banking services, particularly mobile, agency, and ATM
banking, play a crucial role in enhancing the financial performance of listed commercial
banks in Nigeria. This study underscores the importance of adopting and expanding e-
banking services to improve the financial standing of these banks, thereby contributing to the
broader goal of financial inclusivity in the region.

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The kind of revolution in IT that has affected all facets of life has been in so
characterized by adjustments globally especially players in the banking industry. The
invention of e-banking has changed and redesigned the practice of banking. Technology
now is considered as one the major contributor to the success of firms as well as other
core competencies. Study by Yaklef (2001) discovered cost minimization as a critical
benefit that banking institutions derive from use of technology in banking. The need to
minimise cost of operation and administrative costs of banking has pushed commercial
banks to adopt the electronic banking world over. However, cost minimization can only
be realised with improved adoption of technology inform of mobile banking by
customers of the bank (Bradley & Stewart, 2003).

E-banking is the adoption of telecommunication networks and internet to offer a wide

variety of products that are value laddered to commercial bank clients. Internet banking
may also involve importation of data to personal accounting software. Some of the e-
banking makes it possible for bank clients to monitor their own accounts from the bank
or from other places. Banking using the internet is regarded as a complementary channel
used in service delivery. Based on ATMs being introduced, phone banking, PC banking
that is the building blocks of initial electronic finance, the improved usage and diffusion
of online banking has introduced a new channel of distribution to retail banking. Online
banking has increased acceptance in the entire world as a new channel of delivery to
perform a number of banking transactions. Additionally, online banking provides an
avenue for banks clients to carry out bank’s transactions within their comfort (Yaklef,
2001).

There exist two approaches of offering Internet banking worldwide. Firstly, a bank that is
existing can come up with a website and then goes ahead to give online banking in
addition to its traditional channels of delivery. Secondly, a bank may decide to come up
with an inter net only or "branchless or "virtual" bank (Steven, 2002). The Internet
banking also aids commercial banks in penetrating and expanding their services into
other financial markets without the need for brick and mortar. Due to the availability of

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e-banking worldwide, there is an expectation of mixtures on the products that the bank
offers, ways of delivering services to clients and how the banks perform. Internet
banking have made is possible for Banks to better serve their vast clients by making sure
that the services they are given are fast, of good quality, efficient and are convenient to
them. Online banking is also argued for creating and improving banks revenue and hence
profitability. Additionally, industry players and analysis also state the possible effect of
online banking on cost savings efforts. Internet banking has also affected risk profile of
the commercial banks (Berger, 2003).

The first time e-banking was invented was in mid-70s. Despite its invention, there were
no users of internet services because of the high cost of internet services and therefore,
ebanking experienced stunted growth. By late 90s more people started embracing the use
of internet to make transaction; this is when e-banking experienced a boom. As internet
usage grew so did e-banking. There was tremendous growth in the use of internet but
still the number of people willing to make money transfers using the internet remained
low; people were still hesitant. E-commerce was greatly adopted because of the
innovativeness of businesses like AOL, Amazon and eBay who made online buying
common thing. By the year 2000, more than 80% of banks located in America were
offering online bank services but still the growth was slow. For example, it took about 10
years for the Bank of America, to acquire 2 million clients using e-banking.

Recently, banks in Nigeria are experiencing great success in terms of them delivering
variety of value-added products and services via e-banking; this has led to increased
acceptance of embanking (Agboola, 2006; Ayo, 2010). Idowu, Alu and Adagunodo
(2002) indicated that Nigerian banks have established that by using technology, they are
able to gain competitive advantage and overdo their competitors. Therefore, there is
tremendous rate of adoption of technology in the banking sector in Nigeria (Salawu &
Salawu, 2007). Despite the high adoption rate of e-banking, it does not mean that it
improves the performance of the banks or that of the country’s economy. There is need
to have parameters that can measure the performance of the banks over a specified
period after he adoption of e-banking.

In Nigeria the use of ATMs was among the first and widely embraced e-banking services
(Nyangosi, 2009). The annual reports provided by CBN indicated that, in the recent past,
the use of ATM has been overtaken by the use of m-banking services (CBN, 2012).

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Currently, it is estimates that 133 million people with penetration rate 123% use M-
banking services. There has been an overwhelming increase in the number of m-banking
users; this is because of the increasing number of mobile users and the fact that it is easy
to use the services. The partnership between financial institutions and non-financial
institutions has been on the increase; customers are able to pay their bills in e-commerce
platforms using e-banking services via a shared bank platform.

1.1.1 Electronic Banking

A number of definitions exist on electronic banking. Generally, Electronic banking is the
adoption of electronic devices to offer services of the bank primarily via the Internet.
Electronic banking also refers to telephone banking, plastic money, ATMs, Electronic
Funds Transfer (EFT) and mobile phone banking (Simpson, 2002). E- Banking makes
available a variety of online services including request for chequebooks, balance enquiry,
balance transfer instructions, and opening of an account. Using online banking, bank
customers can confirm their balance and make payments electronically without the
assistance of physical bank staff. Electronic banking is slowly creating a cashless society
where people do not have to carry cash. For instance, bank clients can make payment for
tickets and purchase financial assets by simply transferring the money directly from their
accounts via electronic transfers of credit to the sellers (CBN, 2017).

Electronic banking has a number of embodiments include the following: Electronic

funds transfers, Self Service (PC) Banking, Telephone Banking, Mobile/SMS Banking,
Branchless Banking, POS Banking, ATMs and Interactive TV, for example Nigeria has
which is a product offered by CBN together with mobile phone company. which is a
game changer in the banking service, offered to Opay users that enable customers to
borrow and save money via the mobile phone and earn interest on money saved. Opay is
a paperless banking product offered via that makes it possible for a client to open and
operate an account via a cell phone without necessarily going to the bank to fill the
forms required in opening an account. The Opay account gives the operator the ability to
transfer money free from and out of the saving account in their Opay to their normal
account (CBN, 2012).

1.1.2 Financial Performance

It is part of management of finance that’s very important and therefore it can’t
overemphasize. An organization cannot discard comprehensive financial performance;

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otherwise, the firms will close/fall. The capability of a firm to be successful in financial
matters is depends on the capability of the organization to manage its financial matters
effectively and efficiently. Research has given the evidence of a direct association
between activities including planning, maintaining of proper financial records,
procurement and financial performance that is a success (Ismaila, 2011). To determine if
the firm is capable of achieving its financial aims, it is crucial for it to check how it’s
performing financially.

There are a number of indicators that a firm can adopt to enable it to measure their
financial performance. One of the methods a firm can employ to measures its financial
performance is the liquidity measures that establishes the capability a firm to achieve its
financial requirements affecting negatively any of its normal duties. Liquidity measures
rely on the association of assets and liabilities of a firm (Nyangosi, 2009). The next kind
of measure of financial performance is solvency measures. Solvency describes the
amount of funds or capital borrowed that is used by the business firm relative to the
amount of owner’s net worth invested in the business firm. Solvency measures are an
indicator of the ability of the business to pay back all its debts with its assets (Ismaila,
2011). Another measure of financial performance is profitability measures including
ROA and ROE. Profitability indicators are very useful in measuring the capability of a
business firm to come up with enough profits from the assets invested in the business.

The banking industry in Nigeria has undergone significant growth in terms of deposits,
assets, profitability and product offerings mainly due to automation of services and
branch networks expansion both locally and regionally. This growth has attracted new
entrants into the sector as well as increased competition among existing players (Muiruri
& Ngari, 2014). CBN report of 2015 (CBN, 2015) indicate that “the banking sector is
made up of 43 commercial banks, 1 mortgage finance company, 12 microfinance banks,
8 representative offices of foreign banks, 86 foreign exchange bureaus, 14 money
remittance providers and 3 credit reference bureaus, 11 of the 43 banking institutions are
listed on the Nigeria Securities Exchange
Exchange” (Appendix IV). The 2017 report indicated that “Performance of the banking
industry has improved in 2017, evident from the size of total assets at Naira 3.64 trillion,
gross loans of Naira 2.20 trillion and a deposit base of Naira. 2.61 trillion” (CBN, 2017).

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1.2 Statement of the Problem
With the rising cost of doing business in general, and banking business in particular,
most banks find themselves grappling with high costs and wastages or inefficient use of
resources. The problem is even made worse with increased competition in banking
industry as banks scramble for customers. Additionally, banks in Nigeria must find ways
to cut down costs due to reduced revenue expected with the interest rate capping law
among other challenges. One way of cutting, down on costs is embracing electronic
banking.

Studies show that electronic banking has a number of benefits to commercial banks
especially on cost efficiency. Ugwueze & Nwezeaku (2016) studied the association of
embanking and how commercial banks in Nigeria performed. The findings showed that
Point of Sale is not related to both time deposits and the savings but are related with
demand deposits. The findings in Nigeria cannot be generalised to other country. Maiyo
(2013) studied on how embanking influenced how Nigerian commercial banks
performed financially, establishing that embracing e-banking banking has improved how
Nigerian commercial banks performed from a rise in effectiveness, efficiency and
productivity. Kiragu (2017) also studied the how electronic banking effected how
Nigerian commercial banks performed financially finding that the profits of the
commercial banks have increased exponentially on embracing embanking by the
respective commercial banks. This study was conducted on all commercial banks in
Nigeria; the current study will focus on listed commercial banks. Another study by Asia
(2015) analysed what E-banking contributed on financial performance of Institutions
carrying out banking activities in Rwanda. The study found out that e-banking systems
had a major effect on how banking industries performed. This study focused on all
financial institutions including the micro finance firms.

According to the CBN report in 2016, Nigeria Electronic Payment and Settlement
System (NEPSS) and West African Payment System (WAPS) recorded 2.855 million
dealings worth Naira 27,002 billion in 2016, compared to 2.240 million transactions
worth Naira 24,311 billion in 2015. This was 30% and 12% growth in volume and value
respectively. The report further revealed a 12% reduction in the average amount
transacted Naira 10.9 million to Naira 9.56 million. There was an increment of 27% in

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the average number of transactions moved each day from 8,954 to 11,413 dealings. The
increase was attributed to the integration of NEPSS and WAPS.

From the previous empirical studies done locally and internationally, there still exist gaps
in literature. The previous studies omitted a number of important dimensions of
electronic banking that affect performance of commercial banks with most studies
choosing to focus on only a few dimensions of electronic banking. Additionally most
studies did have been either case studies of specific banks or survey of all commercial
banks. There is no known study in Nigeria that has considered the dimensions of
electronic banking of interest in the current study among the listed commercial banks in
Nigeria. The current study therefore sought to bridge this gap by examining the effect of
electronic banking on financial performance of listed commercial banks in Nigeria.

1.3 Objectives of the study

1.3.1 General Objective

To examine the effect of electronic banking on financial performance of listed
commercial banks in Nigeria.

1.3.2 Specific Objectives

1. To establish the effect of mobile banking on financial performance of listed
commercial banks in Nigeria.

2. To assess the effect of agency banking on financial performance of listed

commercial banks in Nigeria.

3. To determine the effect of automatic teller machine banking on financial

performance of listed commercial banks in Nigeria.

4. To examine effect of online banking on financial performance of listed

commercial banks in Nigeria.

1.4 Hypotheses of the Study

H01: Mobile banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

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 H02: Agency banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

H03: ATM banking has no significant effect on financial performance of listed

commercial banks in Nigeria.

H04: Online banking has no significant effect on financial performance of listed

commercial banks in Nigeria.

1.5 Justification of the study

Even though the rapid development of IT has enabled banks to achieve efficiency and
effectiveness in their tasks and carry out technological investments, investment in IT is
taking the lion’s share of commercial bank’s resources hence risks associated. Now than
never, other than personnel costs, investment in technology is the largest element in the
commercial bank budgets and is growing so fast compared to other costs of the banks.
Another evident and contemporary problem associated with electronic banking is
electronic banking fraud especially on stolen and lost electronic cards as well as
counterfeit card fraud. Commercial Banks must control the costs and risks that are
related with e-banking. Its therefore necessary and paramount that investment in e-
banking banking are made only after a thorough sound risk analysis and costs associated
with the financial innovation in a bid eliminate any negative effect of such risks on the
financial performance of the commercial bank (Davenport 2003). Commercial banks
find themselves face with two opposing results of technology adoption in banking. On
one hand, is the efficiency and effectiveness associated with e-banking while on the
other hand are losses and risks associated with e-banking. The banks must find a way of
balancing these two options to improve it overall prosperity.

1.6 Significance of the Study

The study is timely and generates information that is useful to several groups of
stakeholders in the banking industry, including the management, regulatory authorities
and researchers in the banking sector. The management of listed commercial banks
might find the report useful in identifying how they can use electronic banking to
increase how their respective banks perform the financially. The CBN, which is a
regulator of commercial banks in Nigeria, might find the study useful in developing
regulations to improve electronic banking, banking adoption so as to have a rise in how

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listed commercial banks perform financially. Additionally, the Communication Council
of Nigeria (CCN) might find the study useful in coming up with policies of ensuring
electronic banking penetration. Lastly, the ministry of information technology (ICT)
might find the study insightful in developing ICT platform that will encourage e-
banking.

1.7 Scope of the Study

The study was interested in identifying the impact of e-banking on how listed
commercial banks in Nigeria performed. The study was a census study. The target
population for this study was 11 listed commercial banks licenced by CBN and Nigeria
Securities Exchange (NSE) that operated between 2013-2017. Data was mainly collected
from the CBN annual bank supervisory reports and audited financial statements of
respective banks in the study.

1.8 Limitation of the Study

In attaining its objective, the study was limited to all listed commercial, banks listed in
the NSE. Secondary data was collected from all the CBN and bank financial reports
available. The study was limited to the precision of the data gathered using secondary
sources. Verification of the data was done since it came from the company publications;
it nonetheless could still be prone to these shortcomings. The research study was limited
to examine the effect of embanking on financial performance of listed commercial banks
in Nigeria. The study period was 5 years; from 2013 to 2017. The period was short,
longer periods would have captured various periods with different economic
significances. This would have provided a broad dimension of problems.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction
This chapter elaborates on theoretical review, empirical review, research gaps,
conceptual framework, and operationalizing of the study operationalization of variables.

2.2 Conceptual Framework

The conceptual framework shows the interplay of the primary variables of the study. The
conceptual framework exemplifies the association of dependent and explanatory variable of
the study. In this study, the independent variable was electronic banking (m-banking, card
banking, agency banking, ATM banking and online banking), the dependent variable was the
financial performance of listed commercial banks in Nigeria.

2.2.1 Transaction Cost

The basic idea that transactions are part of economic thinking was first introduced by
Commons (1931) who argued that that individual activities are essentially transactions in
nature instead of being personal character or even exchanging of items in the economic
system. the shift from thinking that is commodity in nature to thinking that is
transactions in nature and the working rules that are collective action forming the
foundation for change from the classical and hedonic schools to the institutional schools
of economic thinking. However, the term "transaction cost" was initially introduced by
Coase (1960), who employed it to come up with theoretical framework for estimating
when some specific economic roles would be done by organizations and point in time
when the economic tasks would be done on the market. The cost of transacting kind of
thinking was populated in the works of (Oliver, 2009). The Transaction cost economics
is used. Oliver (2009) to examine some of distinctive behaviours in the economic
system. Transactions cost economics essentially includes putting into consideration
transactions not only the usual cases of buying and selling, but also includes day-to-day
emotional involvements, exchanging of gifts informally, etc.

As put forward by Khan and Hildreth (2004), transaction cost theory is a crucial
theoretical view in use in management theory of finances for two major reasons that is
the widely accepted value of efficiency in this area and the ambiguity of transactions. In
theory, economic revenues can be gathered using three main types of contracts of
revenue collector and revenue gathering authorities. The contracts include wage, share

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and fixed-rent contracts. Wage contracts implies that the government of the day involves
revenue collection agents in revenue collection for a fixed wage, and the revenue
collection agents accepts to bring over to the government all the revenues collected by
them. The Share kind of contract is a kind of contract in which in lieu of a wage
payment, the agents who are responsible for collecting wages holds a share that has been
specified before of the revenues gathered to save as their wages for the services offered
to the government in revenue collection. Fixed rent contracts is a kind of contract where
revenue collection agents accepts to pay a pre specified sum of money out of revenue
collected to the government; interns for right to the rest of the revenue (Kahneman &
Tversky,2013). In advent of 19th century, the fixed-rent kind of contract was the most
common type of revenue gathering contract while the wage kind of contract is the most
common kind of contract in use in revenue gathering by the government of the day in the
modern systems such that other techniques of gathering revenue are seen as anomalous.

Most issues in management of expenditure contrast in nature. Expenditure management

is 3-pronged processes including administrating procedure that helps is making policy,
objectives and resources required, allocation of resources required for the elements and
absurdity that specific roles are performed in an economic manner, efficiently and
effectively. Cost of transacting are applied in determining policies since such policies are
mainly an expenditure contract of elected officials and spending agencies that occurs in
creating expenditure (Rabin, 1998). Transactional cost theory is relevant for the current
research on the impact of embanking on financial performance of listed commercial
banks in Nigeria in that one of the objects of adoption of technology in banking is to
lower the prices involved in transacting for the benefit of the customers and the banking
institutions. Reduced transactional cost is expected to improve revenues of the banking
institution.

2.2.2 Technology Acceptance

TAT was first proposed by Davis, Bagozzi and Warshaw (1989) to examine the
conceptual model of the intention of user or the degree to which information system or
new technology has been done. TAT is designed based on perceived usefulness and ease
of use of the new technology. Perceived usefulness of technology suggests the personal
conviction to better the degree of work performed by a specific new technology or
information system. Perceived ease of use of new technology implies how easy a person

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can learn the way to use or run a new technology or information system (Scott & Davis,
2015). The TAT model has stressed on the way perceived ease of use of new technology
directly influences perceived usefulness of the technology. External variables such as
environment factors surrounding an individual intervene in influencing perceived ease of
use and usefulness. Hence, Technology Acceptance Theory has a basis in both crucial
perceptive factors that is perceived usefulness and perceived ease of use. Technology
Acceptance Theory is applied vastly on the research involving IT. Liu and Arnett (2000)
analysed the important variables to come up with a successful website which has its
basis on TAT theory.

Study by Luarn and Lin (2003) combined Technology Acceptance Theory to come up
with a new integrated model that explains the behaviour of consumer while interacting
with technology online. Pavlou (2003) proposed an e-commerce acceptance model for
online consumers by segregating and applying experimental designs and survey. Later,
Follow-up research were carried out by (Horst, Kuttschreuter & Guttering, 2007). The
researchers deliberated on whether or not the government of Netherlands ought to
provide the citizens with electronic platform to access government services like other
countries do. The study adopted TAT factors including perceived risk, faith and the
experiences of the public. The results of the empirical study revealed the principle of e-
government based on peoples’ full trust on the government firms and that citizens highly
associate with IT. As a result of the empirical study, researchers found out that
Technology Acceptance Theory does not merely explain how users of new technology
accepts and adopts the technology but also ensures that.
Technology Acceptance Theory is suitable for the explaining the behaviour of online
user’ of technology (Pavlou, 2003; Horst et al., 2007).

Technology Acceptance theory is a key theory that underpins the current study on how
embanking affects the way listed banks in Nigeria perform. It’s not just enough for banks
to come up with innovative technologies for banking. The technologies must be accepted
and adopted by the clients of the bank. TAT is designed based on perceived usefulness
and ease of use of the new technology. Perceived usefulness of technology implies the
peoples’ belief to enhance the level of work performance via a specific new technology
or information system. Perceived ease of use of new technology implies how easy a
person can learn how to use or operate new technology or information system (Scott &

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Davis, 2015). Evidence points at the importance of perceived usefulness on adoption
intention. The likelihood of the adoption of e-banking is dependent on its perceived
usefulness. When a technology is easy to use then it can easily be implemented in the
organization.

2.2.3 Unified Theory of Acceptance and Use of Technology (UTAUT)

UTAUT was first proposed and theorised by Venkatesh et al., 2003). Several researchers
including Venkatesh et al. (2003) reviewed 8 models regarding the usage of ICT, they
are; “the social cognitive theory a model, TAM and TPB, Diffusion of Innovations
(DOI), Technology Acceptance Model (TAM), the model of PC utilization, DOI, the
motivational model, Theory of Reasoned Actions (TRA) and Theory of Planned
Behaviour (TPB).” UTAUT was created mainly to help researchers in the field of IT/IS
in the process of adoption and diffusion. In the theory, it is argued that there are 4
majors: “Effort expectancy, performance expectancy, facilitating conditions and social
influence.” The four constructs have positive effect on IS/IT behaviour intents and
ultimately behaviour (Venkatesh et al., 2003).

The UTAUT model focuses on examining the intention of the users to adopt ICT and the
preceding behaviour of users. The theory gives the manager tools that can be adopted to
determine the success of the introduction of new technology, prediction, and explanation
of the behaviour of user who accepts information technology. There are four main
variables that moderate the relationship including: Age, experience, gender and
voluntariness of use (Venkatesh et al., 2003). Researchers have identified that UTAUT
makes it possible for the manager to examine the probability of getting success out of
new technology introduced in the organization and the ability of the manager to
comprehend the factors that drive the process of acceptance of new technology in a bid
order to design probable interventions for instance training or marketing. UTAUT
focuses on technology users who may not be willing to use new systems. A number of
researchers have commented on the model citing its weaknesses while proponents of the
model have embraced its propositions (Venkatesh et al., 2003).

Study by Bagozzi (2007) criticised the UTAUT together with its extensions, stating that
it puts across a model with forty-one explanatory variables for estimating the intentions
of users technology and about eight explanatory variables for explaining behaviour of

14
users of new technology, and that it contributed to the study of technology adoption
“reaching a stage of chaos. On the contrary, Bagozzi (2007) came up with a theory that
combines the various segments of information to discuss process of coming up with
decisions. On the contrary, Van Raaij (2008) critiqued the UTAUT of having high
explanatory power over previous Technology Acceptance Model and TAM2 due to the
high coefficient of determination of level of technology adoption that is only achieved
with the key moderating variables that regulates the relationships with up to four
variables. The scholars also referred to the grouping and labelling of items in the
constructs to be problematic due to varieties of disparate items that were joined together
to establish a single psychometric construct.

UTAUT also provides a foundation for the current study. It discusses in detail on how
innovative technologies in banking sector is adopted and used by the employees of the
bank as well as the clients of the bank. The model sought to discuss the intension of the
user to adopt ICT and the succeeding behaviour of user. UTAUT offers the managers
with decision-making tools that they can adopt to comprehend the introduction of new
technology for prediction and elaboration of the behaviour of users in accepting IT.

2.3 Theoretical Review

This section explores the different theories and models that can explain the effect of
technological innovation on the financial, performance of commercial banks. Several theories
have been advanced: these include diffusion of the theory of innovation, innovation of
rupture theory of creatives destruction.

Diffusion of Innovation Theory

Roger theory (2020) on the diffusion of innovation (DOI) is a model commonly used in
information systems research to explain the adoption of new technology by users. Rogers
defines diffusion as the process by which an innovation is communicated over time by a
member of a social society (Rogers, 2020). An innovation is an idea or object that is
perceived as new (Rogers, 2020). Roger theory (2020) on the diffusion of innovation (DOI) is
a model commonly used in information systems research to explain the adoption of new
technologies by users. Rogers defines diffusion as the process by which an innovation is
communicated overtime by a member of a social society; (Rogers, 2020). An innovation is an

15
idea or object that is perceived as new (Rogers, 2020). Diffusion theory is relevant because it
explains why banks are adopting technical innovations. One of the reasons why banks adopt
technical innovations are relevant benefits. This means that banks that adopt technical
innovation have a relatively better financial advantage than those that do not.

Disruption Innovation Theory

Disruption innovation theory is probably one of the most important theories of innovation of
the last decades. The basis underlying concepts circulation so well that as early as 1998, a
year after the publication of the theory, people used the term without referring to clayton
Christensen, Harvard professor, or his book, Dilemma de (Harvard Business School Press).
The term disruptive innovation as we know it today appeared for the first time in the best-
seller of 1997. The Dilemma of the innovator. In the book, Harvard Business School
Professor Clayton Christensen explained why some radical innovations reinforced the
incumbent position in a given sector, as predicted by previous models (for a example, the
Henderson-Clark model). Specifically, he thoroughly analyzed the record industry that could
be found in our economic. Just consider 35% per year, from 50 kilobytes in 1967 to 1.7
megabytes in 1972, 12 megabytes in 1981 and 1100 megabytes in 1995. The upsetting theory
is relevant to explain the type of technology that banks are adopting. Banking technology is
disruptive because it removes the traditional banking system.

Schumpeterian Theory of Creative Destruction

Schumpeter (2021), who saw innovation as a perpetual trait of creative destruction, the
essential engine of growth rate in a capitalist system. Schumpeter/u0027s thinking as evolved
over the cost of his life to the extent that some scholars have disseminated his original ideas
when innovation relies heavily on exceptional individuals willing to assume exceptional risks
as an act of will, that is, to say entrepreneurs, to his last taught: recognized road of larger
companies in organizing and supporting innovation. This led him to focus on the role of
oligopolies in innovation, which was later considered the main contribution of his work.
(Freeman, 1994).

Schumpeter (2021) emphasized the discontinuous and disruptive nature of technological

change in capitalism, which brings the inseparable combination of insatiable growth in the
short run and the long run. He was not a technological determinist, but recognized the social
and organizational strength that played a key role in his cyclical process of industrial change.

16
Schumpeter argued that entrepreneurs, who could be independent investors or R&D
engineers in larger companies. Offered the opportunity to make a new profit through their
innovations. In turn, the demogroups attracted by the super-profit would launch a wave of
investment that would erode the profit margin of innovation.

2.4 Empirical Review

A study by King (2012) while conducting interview with Lori Ann LoRocco concurred
with Siegel when he held that commercial banks do not comprehend the behaviour of
customers hence in most cases, they are caught unawares by the unexpected rise in the
adoption of mobile smart phones including mobile applications that has greatly dented
their profits.

Additionally, the organization structure of most banks is still extremely biased in a few
cases favouring the brick and mortar as the primary channel for bank customers.

Study by Al-Jabri (2012) examined m-banking usage by examining how diffusion of

innovation theory is applied. This research examined a set of technical qualities of
electronic banking and the way they impact m-banking acceptance in non-developed
countries. Koivu (2012) stated that the use of phones in Nigeria has been unmanned. M-
banking in Nigeria impacts financial performance, character and decisions of the entire
economy. The trend of continuous reliance on m-banking to the execution of money
transactions is picking up the pace in a steady manner in the financial sector. M-banking
is one of the innovations that have increasingly offered itself a way of cutting across
several firms of economy and industry.

Research by Tchouassi (2012) examined whether mobile phones extended banking

services to the unbanked using a sample drawn from countries in Sub-Saharan Africa.
The research focused on establishing the way phones can be uses in expanding
commercial banking to those individuals from poor backgrounds, unbanked and
vulnerable population. The research did note that vulnerable, poor and low-income
individuals in African countries usually lack ability to access bank accounts and are
often faced with a very high costs of carrying out basic transactions. Through mobile
phone banks could provide banking services widely to those who are not banked.
Additionally, economic innovation and technological, were required for the services to
become a reality.

17
According to Siegel, Kagan and Lingam (2011) since customers are getting accustomed
to m-banking, then it will be important for banks to follow suit. Because of that gap,
Siegel thinks there is reduced revenue among commercial banks. However, he says they
have to face some complex challenges both internal and external most of which are
internal and systemic challenges. The systemic challenges are out of the control of the
individual banks. He however says that commercial banks will be important partners in
development of standards, rollout of technologies and adoption of services. He also says
that they will have to work with new value chain partners and endorse new revenue
sharing models that properly acknowledge each players role in delivering mobile
services.

Study by Chinget al. (2011) examined elements that affect m-banking acceptance in
Malaysian firms. The research sought to employ TAM to examine the impact of m-
banking adoption in Malaysia. Specifically, the study aimed at determining the
association of “perceived ease of use, perceived innovativeness, perceived usefulness,
perceived risks, social norms and perceived relative advantages” on the intends of
adopting m-banking. The results of the study were that “perceived ease of use, perceived
innovativeness, perceived usefulness, perceived risks and perceived relative advantages”
were the elements impacting on the intent behaviour of mobile customers to embrace m-
banking services in Malaysia. However, the social standards were established not to be a
significant element in this the research. Study by Kingoo (2011) examined the
association of e-banking and how commercial banks in Nigeria performed financially.
The study’s attention was on MFIs in Naira. The research examined the vast e-banking
system.

Mbiti and Weil (2011) in their research about the impacts of MPESA in Nigeria cited
Gikuju (2009) as a practitioner who researched about the impact of mobile banking
under which his emphasis was on MPESA and its effect on the financial statements of
postal corporation Nigeria. According to Mbiti and Weil, Gikuju found out that the
profits and revenue of Postal Corporation Nigeria reduced rapidly after the introduction
of MPESA. He continues to say that western Union and money gram continued to cut
prices though they could not meet MPESA’s superior convenience.

A Study by McCown and Zimmerman (2010) established that m-banking in countries

that are developing was full of scepticisms among financiers and insiders in the financial

18
sector while the proponents of mobile banking argued that mobile phones could be used
to transform personal finance in poor countries. The financial regulators gave a warning
of possible money laundering and majority banks were concerned that lower clients
balance would be unworthy of the charge on transactions. It was recommended that m-
banking provide support in delivering its services to the economy. Kigen (2010) did a
study on the effect of m-banking on the charges of transacting of microfinance banking
sectors. The study established that m-banking had low charges of transacting greatly
although they weren’t positively felt by commercial banks since they had small mobile
banking customer base.
The study examined the effect of mobile banking on microfinance institutions
transactional costs.

Research by Malhotra and Singh (2009) studied the effects of online banking on how
commercial banks performed and risk established that on average online banks are
bigger, more operationally efficient, and profitable. It also established that online banks
have high quality asset and are managed better to minimize the expenditure and that
online banks operating in India depend more on customer deposits. It further established
that small banks that embrace online banking experience negative effects on profits.

A study by Wambari (2009) examined mobile banking in countries that are developing;
the study focused on Nigeria. The focus of the study wad to investigate the benefits of
m-banking in the daily operation of small businesses in Nigeria and to establish the
obstacles faced in the use of m-banking as a tool of business and to have appreciation on
the merits and demerits thereof. The research elaborated on adopting and usage of
mobile phones as product of a social process that is linked to social practices of SMEs
that leads to some economic benefits. Research by Munaye (2009) examined how m-
banking is applied by equity bank as a strategic response tool to environmental
challenges. The study did not examine the effects of m-banking on how the bank
performed financially.

The term Mobile banking is used to refer for a plat form that allows banks customers to
perform banking transactions through mobile device (Anyasi & Otubu, 2009). Mobile
banking service is provided by commercial banking institutions in tandem with mobile
phone operators. Donner and Tellez (2008) however did not examine m-banking and
development of the economy where they intended to relate adoption, use and impact.

19
The research results revealed that via offering avenues for reducing the price of
transferring cash from one to another physical place and providing an avenue to link up
other customers within the formal financial systems. M-banking systems have proved
crucial for innovation benefiting the countries that are developing. Nevertheless, the real
measure of the value of mobile banking platform required many research using multiple
research methodologies involving multiple theoretical perspectives prior to giving
answers to questions on acceptance and effect.

Tiwari, Buse and Herstatt (2006) examined m-banking as a business strategy, and how
the m-banking technology affects clients’ behaviour as well as its implications for
commercial banking institutions. The research analyses the available opportunities for
commercial banks to produce enough earnings by giving value added innovative m-
banking financial offers while at the same time retaining and extending their technology
base to understanding customers. A study by Shirley and Sushanta (2006) on the effects
of IT on the banking sector while analysing both empirically and theoretically, how IT
associated commercial banking spending can influence the profits of the bank through
competition in offering financial services. The study used a panel of sixty United States
commercial banks covering 20-year period to forecast the effects of IT on the level of
profitability of commercial banks. The researchers established that by adopting
Information Technology, they could lead to saving of cost. Additionally, higher IT
expenditure in creating network affects its performance by lowering bank profits.

Tiwari, Buse and Herstatt (2006) defined m-banking as any kind of transaction that
involves the change of ownership or rights to the usage goods and service. Mobile
banking is usually started and ended by adopting access to mobile via computer
networks with the aid of electronic device. The terms M-payments, M-finance, M-
banking, M-transfer describes a number of applications that enable users of new
technology to utilize their mobile telephones to store value in an account linked to their
handsets, manipulate their bank accounts and transfer funds from their accounts to other
users or even access credit and insurance products online. Mobile banking has therefore
improved access to financial services in the most developed and developing countries.
The initial targeted population was initially clients in the most developed countries.
Mobile banking enables banks to offer complementing services such as ATMs, cheque
books, point of sale networks and internet resources, smart cash, Voice mail/landline

20
interfaces and other techniques of money management with no cash handling
(Karjaluoto, 2002). The M-Pesa platform has put pressure on money transfer firms to
reduce their prices. M-Pesa has also forced these money transfer institutions and other
financial institutions to better their offerings and service in the market. In most cases, the
financial firms have entered partnership with M-Pesa to give to their clients an integrated
band of service (Njiraini & Anyanzwa, 2008).
2.4.2 Agency Banking and Financial Performance

According to research by Salome Mwongeli (2013), Agency banking has been able
provide commercial banking customers with access to banking services within the
comfort of their own neighbourhood. Agency banking has made it possible to
dramatically lower the price of offering services dealing with finance to the unbanked
and unreached individuals. Agency banking has aided in dealing with the 2 main
challenges of accessing to finances and the cost of roll-out and the cost of the banks
dealing with low value transactions that is not profitable. This lowering of cost of
transactions is achieved through leveraging on the existing networks of 3 rd party
independent businesses for money transactions and account opening and by conducting
all transactions online.

Study by Aduda and Kingoo (2013) on the association of agency banking and how
commercial banks in Nigeria performed financially established that of the listed
commercial banks in Nigeria banks, eight had already rolled out the agency banking
service. The results further established that annual performance rose positively and
significantly between 2008 to 2011. It concludes that agency banking has progressively
improved how commercial banks that have adopted the agency banking services because
of to its convenience and efficiency in operation performed financially. Furthermore, the
research concluded that accessibility of services related to finances by clients via agency
banking had a direct positive impact on how commercial banks and the SMEs in Nigeria
performed financially (Aduda et al., 2013).

According to study by Alexander and Hall (2013), Agency banking is has been expected
to take a leading role in improving financial performance of Small and Medium
Enterprises. Agency banking is as an ultimate finding of bettered finance accessibility to
business firms and results to improved financial performance of SMEs because of
lowered transacting prices and liquidity advantage. Inadequate access to finances freezes

21
firm’s size, and also its development rate, profits levels, activations and their operational
scope. A good Understanding of the effects of being excluded financially on the
performance of businesses is very crucial to how the economy performs a whole
specifically in the developing economy. Additionally, imperfections of capital market
can erode the capital stock accumulation, the rate of ROI, innovations, and accumulation
(Alexander & Hall, 2013).

Study by Veniard and Melinda (2010) examined the way agency banking alters with
those individuals holding small accounts; the study used data from service providers in
Latin America, Africa and Asia. The study established that agency banking systems are
triple time cheaper to operate compared to physical branches of the commercial banks.
They study further showed that even though agents banking acquires high variable cost
obtained from commissions, the fixed charge for any transacting done is still high. The
study concluded agency transactions platforms may also be beneficial from extra income
related with transactions performed by agent.

Literature has defined agency banking as a form of branchless banking involving

contracting services of postal and retail outlet by commercial banks to deal with
processing of its client’s transactions (Morawczynski & Mark, 2009). Agency banking
differs from a branch teller in that those operators of retail outlets receive benefits from
the government or receive deposits direct from employers. The institutions that work as
banking agents include supermarkets, pharmacies, lottery outlets, convenience stores and
post offices (Consultative Group to Assist the Poor, 2006). Agency banking is observed
to be a kind of partnership between a banking institution and a non-banking institution
ranging from lottery kiosks, post offices, pharmacies, etc. in providing outlets to offer
financial services (Kumar, Nair, Parsons & Urdapilleta, 2006).

Agency banking financial model is supposed to better accessibility of financial services

by permitting SMEs to operate satellite branches for the benefits of banks. As shown by
early experiences, the agency banking has largely contributed to financial inclusiveness
in those countries that are developing like Nigeria. This has led to penetration of agency
banking in the developing countries as evidenced by penetration of agency banking in
countries such as in Australia, France, Brazil, Kenya, South Africa and the Philippines

22
(Siedek, 2008). In the contemporary financial sector, regulators and Policy makers are
showing keen interest in agency banking topic, even though in most countries the
regulation has continued to constrict the emergence of agency banking (Morawczynski
& Mark, 2009).

According to study Lyman, Pickens, and Porteous, (2008), Agency banking has
essentially lowered the cost of delivery of financial services to the unbanked and
unreached people. The reduction in cost creates an opportunity to seriously improve the
size of the population that is accessible to formal banking and finance especially in the
remote parts of the country where most of the population of the developing countries
reside and live. According to study by Ivantury (2006), agency banking has the potential
of benefiting the users of the service by minimizing transaction cost, short queues than in
branches, longer opening hours, highly accessible for the benefit of illiterates and the
low-income earners. Agency has improved reputation from affiliation with well-known
financial institutions, sales from additional foot traffic, and market share by banks,
increased covered area with low-prices solutions in regions with minimal transactions,
differentiation from other businesses, additional revenue from commissions and
incentives (Ivantury, 2006).

Research by Lyman et al. (2006) showed that that clients funds protection is priority for
many financial regulators and financial institutions under agency banking as loss of
money transacted over the platform could be disadvantageous to the clients and also the
trust of the public in financial systems. Hence, agency banking deserves to be regulated
and commercial banking institutions ought to comply with regulations created by
regulators to help in ensuring systematic stability as well as depositor protection.
Countries with higher adoption of branchless banking models have adopted a variety of
approaches in handling and protecting the funds of their client. Even though agency
banking is a bank-based model, it has a different regulatory treatment from the normal
branch banking (Collins, 2010). Research by Ivantury and Timothy (2006) showed that
that agency banking could be beneficial to the clients in a number of ways including
lowering of transaction cost, short queues, longer opening hours, highly accessible for
illiterates and the poor.

23
2.4.3 ATM Banking and Financial Performance
Another facet of electronic banking is ATM. ATM is a form of computerized
telecommunications tool that makes it possible for commercial banking customers to
access financial transactions in a public space without the use of a human clerk or a
cashier or bank teller. A paper by Ogbuji et al. (2012) noted that ATM is one of the few
existing replacements for the labour-intensive transaction system that is usually affected
via the paper-based payment instruments. An ATM enables commercial bank clients to
carry out bank transactions from any other ATM machine all over the world. The
adoption of ATM essentially performs the traditional tasks of the cashiers in a
commercial bank and other bank counter staff. The ATM is electronically operated
therefore any request by bank client is made at an instant electronically. The combined
effect of human tellers and ATM imply that the bank will have more productivity during
banking hours. Additionally, the bank saves clients time in delivery of services as it is an
alternative to queuing in banking halls. The bank clients can therefore spend the time
saved on other productive things. Furthermore, as the ATMs continue to provide services
when human tellers halt provision of services, there is continuous service provision
leading to sustained productivity of the banks.

A study by Mahdi and Mehrdad (2010) concludes that ATMs banking will causes a
reduction in cash circulation, the improvement in how efficient banking institutions is, a
decrease in client banking transactional costs, bank costs decrease. Study further
explains that if ATMs are generally available over geographically dispersed areas, the
benefit of adopting ATMs will essentially improve since bank customers would be in a
position to access their money in the bank accounts from any geographically dispersed
location, they want further away from their bank branches (Milne, 2006).

This means that ATM network value increase with the increase in available ATM
locations and the value of a network of a bank to a client will be explained partly by the
final network size of the bank. The study further finds via the usage of ATMs, bank
customers can access the money in their bank accounts by making credit card cash
advances, cash withdrawals and viewing their balance and buying phone credit. The
access to ATMs therefore improves convenience to customers since customers can
withdrawal their money in their bank accounts from their point of reach without having

24
to visit the bank. The adoption of ATMs increases the efficiency of commercial banks
and mitigates the costs of transactions thereby leading to financial performance. The
result of the study is in congruence with report by Fannie Mae Foundation of that
showed that ATMs serve approximately 420 million transactions every year for a total of
3.3 billion in gross yearly income.
2.4.4 Effect of Electronic Banking on Financial Performance
Siam (2006) stated that, the use of internet acts as a weapon for the bank, since they can
use it as a mode of distribution, offering quality products at cheaper costs and to many
clients without limits; the products being similar as to the ones offered in the branch
offices. Through the use of internet, banks are able to offer value added services at
lowered costs, and also, they are baled to benefit from selling credit cards and loans.
Clients also benefit from online services offered by the bank since they are time saving
and cheap. Additionally, online banking provides banks with information regarding the
habits of its customers and what they prefer; this information is important since they can
use it to market and improve their services. The bank greatly benefits by expanding its
customer base and costs of transactions (Siam, 2006). According to Malhotra and Singh
(2004), banking using the internet is a strategy that can be used to achieve high
efficiency, controlled operations and lowers the cost by discarding the use of old ways of
using paper and labour-intensive techniques and replacing them with automated
procedures resulting to high levels of production and profitability.

Meuter (2010), classified Internet banking adoption into two categories which includes
access technology and infrastructure related factors and sector specific retail banking
factors. The first class include internet penetration rates, skill of consumers in using
internet and related technologies, attitude towards technology, security, and privacy
concerns. The second class involves trust in banking institution, banking culture, e-
banking culture and Internet banking push. The study by Iacono and Orlikowski (2014)
found that trust significantly affects attitude towards e-banking acceptance. To encourage
e-banking adoption, banks need to develop strategies that improve the customer’s trust in
the underlying technology. The other factors include quick response, assurance, follow-
up and empathy. Security, correct transaction, customer control on transaction
(personalization), order tracking facilities and privacy are other important factors in the
online service that affect the customer satisfaction. Akerlof and Girardone (2011), show

25
that E- banking results in cost and efficiency gains for banks yet very few banks are
using it.

Vila (2013) provides evidence respectively for cost reduction and productivity gains as a
result of technological change for European Union banks. Carlson and Lang (2011)
showed that E-banking lowers operational costs while increasing customer satisfaction
and retention in the Turkish retail banking sector. Meuter (2010) suggests that e-banking
is driven largely by the prospects of operating costs minimization and operating revenues
maximization. According to Ombati (2011), Technology (IT) offers banks the potential
to dramatically reduce operating costs and improves the quality of management
information hence making banking more profitable.

2.5 Critique of Literature and Research Gap

Al-Jabri (2012) examined m-banking usage by examining how diffusion of innovation
theory is applied. This study focused on m-banking only which is a form of e-banking.
Tchouassi (2012) examined whether mobile phones extended banking services to the
unbanked using a sample drawn from countries in Sub-Saharan Africa. This study
focused on one form of e-banking that is mobile banking. Ching et al. (2011) examined
elements that affect m-banking acceptance in Malaysian firms. The study was conducted
in Malaysia; the findings cannot be generalized to Nigeria since the banking regulations
may differ. Malhotra and Singh (2009) studied the effects of online banking on how
commercial banks performed and risk established that on average online banks are
bigger, more operationally efficient, and profitable. The study focused on only one form
of e-banking that is online banking, the current study will focus on the various types of
e-banking and how they are related. Veniard and Melinda (2010) examined the way
agency banking alters with those individuals holding small accounts; the study used data
from service providers in Latin America, Africa and Asia. The study focused on only one
form of e-banking that is agency banking. Malhotra and Singh (2009) analysed the
influence of e-banking on how commercial banks in India perform financially. The study
was conducted in India; the findings cannot be generalized to Nigeria since the banking
regulations may differ.

Njuguna et al. (2009) did a study on the factors that affect embracing of e-banking
among those clients who own commercial bank accounts in Naira County; Naira. The
study focused on what influences clients to use e-banking. The current study will focus

26
on the relationship between e-banking and financial performance of banks. Onay (2008)
examined the impacts of online banking on profitability of commercial in Turkey.
DeYoung (2005) examined the performance of banks that had adopted internet banking
versus the non-internet banks in United States market. The studies were conducted in
Turkey and US; the findings cannot be generalized to Nigeria since the banking
regulations may differ.

From the empirical literature it is evident that their limited literature on electronic
banking in Nigeria. Most of the literature is from global from developed nations like
US. Further, most of the studies focus on mobile banking. Mobile banking is just a form
of electronic banking; therefore, electronic banking incorporates numerous types of
banking. To fill the gap the study was conducted in a developing country that is Nigeria.
The study sought to examine the effect of electronic banking on financial performance of
listed commercial banks in Nigeria.

27
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

The chapter presents the research design, the target population, the sample frame, sample and
sample procedure, data collection instruments, data collection procedure, data processing and
analysis and presentation methods.

3.2 Research design

This research used quantitative descriptive research design while employing panel data
analysis technique. Quantitative designs stresses on the objective measurements and the
statistical or mathematical data analysis collected via research instruments including polls,
questionnaires, and surveys and the statistical manipulation of existing quantitative data using
a specified computational technique (Kothari, 2004). The study examined the effect of e-
banking on financial performance of listed commercial banks in Nigeria. Panel data analysis
was employed. The study had both cross sectional and longitudinal aspects since the study
covered years and covering all listed commercial banks in Nigeria.

3.3 Target Population

According to Kothari (2006), population of a research is the entire set of individuals or items
that are explained in the research as being the study’s area and which the researcher having
an observation of their behaviours. The population of a study consisted of the entire items
that fit the area of study. The targeted population for the current study involved all the all
listed commercial banks in Nigeria that operated between 2020 & 2024. According to Nigeria
Security Exchange website, the body charged with the registration of public limited
companies to allow them offer shares to the public in Nigeria, Nigeria has some listed
commercial banks shown iv. The current study was a survey of all the listed commercial
banks in Nigeria meaning that all the listed commercial banks in Nigeria were subject of the
study. The sample size of the current study was therefore all the listed commercial banks in
Nigeria.

28
3.4 Data Collection Instruments

The study relied entirely on secondary data hence data collection sheets was used for
recording information extracted from the annual banking supervisory reports of CBN and
audited financial reports of the listed commercial banks in Nigeria for the study period.

3.5 Data Collection Procedure

As determined by the nature of financial studies, the study employed secondary data sources
in the current study. Secondary data was sourced from statistics maintained by the CBN that
is the regulatory body which supervises the banking sector in Nigeria. Key financial data that
was extracted from annual banking supervisory reports published by CBN and Audited
financial statements of individual listed commercial in Nigeria. The extracted data was
recorded on data collection sheets are shown above.

3.6 Data Analysis

The data to be gathered from the report was examined for completeness and accuracy before
start of the analysis. Data was entered in Excel 2016 and then exported to STATA software
version 14. The panel data was analysed with the aid of STATA. The panel data was analysed
by use of descriptive statistics, correlation analysis, and multiple regression analysis.
Descriptive statistics were used to summarize and explain the study variables as observed in
the banks. Descriptive statistics added measures of central tendencies and dispersion.
Inferential statistics included bivariate Pearson correlation, multiple regressions, ANOVA and
coefficient of determination. This analysis enabled testing the effect of e-banking on financial
performance of listed commercial banks in Nigeria. The representations of the results were in
well explained tables.

3.6.1 Empirical Model

The empirical model used in this study is as shown in the regression equation (1). To ensure
the Classical linear regression model was robust, the model assumptions tested in this study
included Linearity; Normality; Homoscedasticity; Multicollinearity and Auto-correlation just
as in study by (Ongore & Kusa, 2013).

Yij = β0+ β1X1ij +β2X2ij+ β3X3ij +β4X4 ij+β5X5ij + ɛi………………………….…...

29
Equation (1) Where Y= Performance of listed commercial banks

X1: Mobile banking

X2: agency banking

X3: ATM banking

X4: Online banking β0 =intercept term β1, β2, β3 and β4 = were the coefficients of the
independent variables respectively i = 1, 2……., 11: Number of banks j =
2020,2021,2022,2023 and 2024.

3.6.2 Model Specification Test

Test for Normality

Statistically, normality tests are performed to establish whether the data set is modelled in a
good way by a normal distribution and to determine the likelihood that it’s for a random
variable underlying the data set to be normal distribution. To test for normality, Shapiro Wilk
test was adopted by the current study. To test for linearity data set from each variable of the
study, the researcher used measure of goodness of fit. If all the data points fall on the same
straight line, then the set of data is said to be linear. Coefficient of determination that is
almost zero suggests a poor fit of OLS line and hence low or no linearity.

Test for Multicollinearity

In financial econometrics, multicollinearity is a phenomenon whereby two or more

independent variables in a multiple regression model have a highly correlation with each
other. In such an instance, the estimated coefficient of the independent variables fitted in the
multiple regression models can transform erratically due to a small change in the model or
the data (Goldberger, 1991). The study employed Variance Inflation Factor (VIF) to check for
multicollinearity where a VIF of 5 or 10 and above shows presence of multicollinearity
problem (Verbeek & Marno, 2012)

In financial econometrics, a sequence of random variables is homoscedastic if all random

variables in the sequence have the same finite variance; also referred to as homogeneity of
variance. The complementary problematic notion is referred to as heteroscedasticity.
Heteroscedasticity may lead to overestimating the goodness of fit as measured by the Pearson
correlation (McCulloch, 1985). The current study adopted Breusch-pagan test for presence of
Heteroscedasticity by ensuring that the residuals of the model are not auto correlated.

30
 CHAPTER FOUR

DATA ANALYSIS, RESULTS AND FINDINGS

4.1 Introduction

This section of the study presents the analyses data and findings based on the research
objectives. The main objective of the study was to establish the effect of e-banking on
how listed commercial banks in Nigeria performed financially. Secondary data was
collected from commercial banks listed in the NSE over a 5-year period from year 2020
to 2024 and analysed using STATA and presented in frequency tables. Descriptive and
inferential statistics have been used to discuss the findings of the study.

4.2 Descriptive Statistics

In section 4.2 the study presented the research finding on the descriptive statistic in the
data collected.
Table 4.1: Descriptive Statistics

Variable Obs Mean Std. Dev. Min Max

Performance 55 7272495 5235016 55298 1.98e+07

ATM 55 81.6 75.08479 8 236
Mobile 55 83623.62 72976.57 19462 328448
Agency 55 97.41818 117.8365 1 412
Online 55 1633.749 1245.726 651.81 9985.6

From the findings, the study found that there was mean of Naira 7,272,495 Million on
performance of commercial banks listed in the NSE, there was a mean of 81.6 ATM
banking among commercial banks listed in the NSE. The mean of mobile banking was
found to be 83623.62, the mean for agency banking was found to be 97.41818, and
finally the mean for online banking was found to be 1633.749.

4.2.1 Normality test

Table 4.2: Normality Test
Variabl Obs W V z
e Prob>z

Performanc 55 0.92929 3.586 2.739

31
e 0.00308
AT 55 0.78313 10.998 5.142
M 0.00000
Mobil 55 0.77992 11.161 5.174
e 0.00000
Agenc 55 0.75928 12.207 5.366
y 0.00000
Onlin 55 0.45238 27.771 7.129
e 0.00000
Multiple regression analysis assumes that variables have normal distributions. Variable
that are not normally distributed can affect their association and significance tests. This
study used Shapiro Wilk Test to test for normality of the data. Shapiro Wilk Test assumes
that the population is normally distributed; this is the null hypothesis. Therefore is the
selected alpha level is greater than the p-value, then, we reject the null hypothesis since
it will be evident that the population does not belong to a normally distributed
population. On the other hand, if selected alpha is less than the p-value then we accept
the null hypothesis that the data was obtained from a normally distributed population.
From the finding’s financial performance (p-value=0.00308), ATM banking (p-
value=0.000), agency banking (p-value=0.000), online banking (p-value=0.000) and
mobile banking (p-value=0.000) was normally distributed. This shows that all the
variable was normally distributed and hence the data meets the regression analysis
assumption of normality of data.
4.2.2 Correlation Analysis
Table 4. 3: Correlation Analysis

Perfor~e ATM Mobile Agency Online

Performance 1.0000

ATM
0.7217 1.0000
0.0000

0.6902 0.8781 1.0000

Mobile
0.0000 0.0000

Agency 0.6696 0.9808 0.9025 1.0000

0.0000 0.0000 0.0000

Online 0.0233 0.0375 0.1004 0.0408 1.0000

0.8659 0.7858 0.4660 0.7676

32
The study carried out spearman correlation analysis. From the findings, it was
established that financial performance of individual commercial banks and various
variables, were strongly and positively correlated ATM banking and financial
performance as shown by correlation factor of 0.7217. Financial performance of
commercial banks and mobile banking were found to be positively correlated as shown
by correlation coefficient of 0.6902. The study also established that financial
performance of individual commercial bank and agency banking were strongly and
positively correlated as shown by correlation coefficient of 0.6696. Finally, it was
established that there was a weak positive correlation between financial performance of
individual commercial bank and online banking as shown by correlation coefficient of
0.0233.

4.3 Model Specification Test

4.3.1 Autocorrelation Test

Durbin-Watson d test was used to check for autocorrelation where the value of d lies
between 0 and 4. If the value is 2 then we will conclude that no autocorrelation, when its
4 or close to 4 then there is negative autocorrelation while it’s close to 1 and 0 then the is
positive autocorrelation. Breusch-Godfrey Langrage Multiplier test was also used to test
for autocorrelation.

Table 4.4: Breusch-Godfrey Langrage Multiplier test

From the findings, the p-value (0.1640), which is less than the significance level (0.05),
and hence we accept the null hypothesis that there is no serial correlation among the
variables.

33
4.3.2 Heteroscedasticity Test

The study used Breusch-Pagan/Cook-Weisberg test for heteroscedasticity.

Homoscedasticity explain the situation whereby all the error terms of the predictor
variables are similar while heteroscedasticity which is the opposite of homoscedasticity
refers to the situation whereby the error terms of the predictor variables differ. The
effect of overlooking the assumption of homoscedasticity id the increase of degree as the
heteroscedasticity increases.

Table 4.5: Breusch-Pagan/Cook-Weisberg test for heteroscedasticity

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of FDI

chi2(1) = 16.82
Prob > chi2 = 0.0000

From the finding it was revealed that the p- value of 0.000 was less than 0.05 significant
levels implying that the study rejects the null hypothesis of homoscedasticity.

4.3.3 Test for Multicollinearity

Table 4.6: Test for Multicollinearity

. vif
Variable VIF 1/VIF

X2 2.38 0.420323
X3 2.32 0.431817
X4 1.13 0.884733
X1 1.06 0.939568

Mean VIF 1.72

If the independent variables are perfectly related linearly, then the estimation of
regression model cannot be uniquely calculated. Collinearity refers to the situation
whereby two variables are almost attaining perfect linear combination with each other.
When the variables involved are more than two then it is referred to as multicollinearity,
although the two terms are often used interchangeably. If the value of R Squared is high

34
but none of the independent variables are significant or very few independent variables
are significant, we can suspect that probably, a model is suffering from multicollinearity.
If the value of VIF is more than 10 or tolerance is more than 0.2, we can say that the
model is suffering from multicollinearity. Tolerance level formula is calculated as 1
divided by VIF while the t statistic formula is calculated as coefficient divided by
standard error. t statistic and p values have opposite values all the time.

Multicollinearity was tested for the data used in the research. This was done using the
variance inflation factor (VIF) which quantifies how much the variance is inflated. The
findings indicate that the VIF values were close to 1 (1.72) indicating that the variance of
the variables was inflated at a very low level. The analysis exhibits signs of
multicollinearity though low levels. The results indicate that the overall VIF is 1.72
which is less than 10 implying that the study data did not exhibit multicollinearity
problem as recommended by (Field, 2009). Thus, all the variables based on the VIF
indicators have no severe multicollinearity problem. After removing the problem of
multicollinearity from a regression model, some of the variables can become significant.
Ways of removing multicollinearity include increasing sample size and transformation of
Variables.

4.3.4 Testing for Fixed or Random Effects

Table 4.7: Testing for Fixed or Random Effects

. hausman fixed random

Coefficients
(b) (B) (b-B) sqrt(diag(V_b-V_B)) fixed
random Difference S.E.

ATM 125520.9 36236.82 89284.07 9003.349

Mobile 38.91936 2.560293 36.35906 12.1219
Agency -70382.46 7135.047 -77517.51 7671.008
Online -143.1731 37.33041 -180.5035 318.9883

b = consistent under Ho and Ha; obtained from regress B = inconsistent under

Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients
not systematic

chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 103.24
Prob>chi2 = 0.0000
(V_b-V_B is not positive definite)

35
To decide between fixed or random effects a Hausman test was conducted where the null
hypothesis was that the preferred model is random effects, that is if the Prob>chi2 value
was greater than 0.05. The alternative the fixed effects if the Prob>chi2 value was less
than 0.05. It basically tested whether the unique errors (ui) are correlated with the
regressors. Since the Prob>chi2 value (0.0000) was less than 0.05 a fixed effect was
preferred and conducted.

4.4 Panel Regression Analysis

4.4.1 Hypothesis One

H01: Mobile banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

Table 4. 8: Performance and Mobile Banking

. regress Performance Mobile

Source SS df MS Number of obs = 55

F( 1, 53) = 48.22
Prob > F = 0.0000
Model 7.0504e+14 1 7.0504e+14
Residual 7.7485e+14 53 1.4620e+13 R-squared = 0.4764
Adj R-squared = 0.4665
Root MSE = 3.8e+06
Total 1.4799e+15 54 2.7405e+13

Performance Coef. Std. Err. t P>|t| [95% Conf. Interval]

Mobile 49.5138 7.130028 6.94 0.000 35.21277 63.81482

_cons 3131972 788236.1 3.97 0.000 1550971 4712973

From the ANOVA

statistics it is evident that-banking and financial performance of the bank are significantly
associated s shown by a significance value of 0.000. Also, mobile banking and financial
performance of the bank were significantly associated since the F critical value was found
to be less than F calculated (2.434<48.22). since the p value was less than 0.05 it indicates
that financial performance of individual banks is significantly influenced by mobile
banking significantly (Critical value = 2.434). From the findings it was seen that R 2 was
0.4822, which is an indication that at 95% confidence interval, there was 52% variation in
the way commercial banks performed due to changes in mobile banking. This shows that
changes in m-banking could account for 48.22% in variation of the way commercial banks
perform. Therefore it was concluded on the null hypothesis that m-banking does not
significantly affect performance of listed commercial banks in Nigeria.

36
From the finding of the study the established equation was between financial
performance and mobile banking was;

Y = 33131972 + 49.5138 X1

The regression equation established that by holding m-banking constant it leads to

change in the performance of commercial banks by 33131972. By increasing m-banking
by a single unit it leads to the increase of financial performance of commercial banks by
49.5138 units.

4.4.2 Hypothesis Two

H02: Agency banking has no significant effect on financial performance of listed
commercial banks in Nigeria

Table 4. 9: Performance and Agency Banking

. regress Performance Agency

Source SS df MS Number of obs = 55

F( 1, 53) = 43.09
Model 6.6362e+14 1 6.6362e+14 Prob > F = 0.0000
Residual 8.1627e+14 53 1.5401e+13 R-squared = 0.4484
Adj R-squared = 0.4380
Root MSE = 3.9e+06
Total 1.4799e+15 54 2.7405e+13

Performance Coef. Std. Err. t P>|t| [95% Conf. Interval]

Agency 29749.79 4532.128 6.56 0.000 20659.49 38840.08

_cons 4374325 689170.6 6.35 0.000 2992024 5756626

ANOVA statistics revealed that the regression model had a significance level of 0.000,
indicating significant association between agency banking and financial performance of
the bank. F critical value was found to be less than F calculated (2.434<43.09), this is an
indication that agency banking and financial performance of commercial banks listed in
the NSE are significantly associated. The p value which was less than 0.05 an indication
that agency banking significantly influences financial performance of individual banks
(Critical value = 2.434). R2 was 0.4484, which indicates that at 95% confidence interval
changes in agency banking leads to 52% variation on how commercial banks perform.
This means that changes in agency banking can only explain 44.84% variation in
financial performance of commercial banks. Therefore the null hypothesis is rejected
that agency banking does not significantly affect financial performance of listed
commercial banks in Nigeria.

37
From the finding of the study the established equation was between financial
performance and Agency banking was;

Y = 4374325 + 29749.79 X1

As shown in the regression equation, financial performance of commercial banks would

be at 4374325 if agency banking is held to a constant of zero. Increasing agency banking
by a single unit will lead to increase in how commercial banks perform by 29749.79
units. Agency banking financial model is supposed to better accessibility of financial
services by permitting SMEs to operate satellite branches for the benefits of banks. As
shown by early experiences, the agency banking has largely contributed to financial
inclusiveness in developing countries like Nigeria.

4.4.3 Hypothesis Three

H03: ATM banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

Table 4. 10: Performance and ATM banking

. regress Performance ATM

Source SS df MS Number of obs = 55

F( 1, 53) = 57.61
Model 7.7077e+14 1 7.7077e+14 Prob > F = 0.0000
Residual 7.0912e+14 53 1.3380e+13 R-squared = 0.5208
Adj R-squared = 0.5118
Root MSE = 3.7e+06
Total 1.4799e+15 54 2.7405e+13

Performance Coef. Std. Err. t P>|t| [95% Conf. Interval]

ATM 50316.87 6629.386 7.59 0.000 37020.01 63613.74

_cons 3166638 732053 4.33 0.000 1698326 4634951

From the findings of ANOVA statistics ATM banking and financial performance of the
bank are significantly associated since their level of significance is 0.000. F critical
value was found to be less than F calculated (2.434<57.61), this is an indication that
ATM banking and financial performance of commercial banks listed in the NSE were
significantly associated.

The p value which was less than 0.05 an indication that ATM banking significantly
influence financial performance of individual banks (Critical value = 2.434). The value
of R square was 0.5208, this is an indication that at 95% confidence interval, changes in
ATM banking leads to variation of 52% on how commercial banks perform financially.

38
This shows that only 52% of the changes on financial performance of commercial banks
could be accounted for by changes in ATM banking. This led to rejection of the null
hypothesis that ATM banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

From the finding of the study the established equation was between financial
performance and ATM banking was;

Y = 3166638 + 50316.87 X1

The regression equation shows that financial performance of commercial banks will be at
3166638 if ATM banking is held to a constant zero. Increasing ATM banking by a single
unit will lead to change in how commercial bans perform financially by 50316.87 units.

4.4.4 Hypothesis Four

H04: Online banking has no significant effect on financial performance of listed
commercial banks in Nigeria.

Table 4.11: Performance and Online banking

. regress Performance Online

Source SS df MS Number of obs = 55

F( 1, 53) = 0.03
Model 8.0380e+11 1 8.0380e+11 Prob > F = 0.8659
Residual 1.4791e+15 53 2.7907e+13 R-squared = 0.0005
Adj R-squared = -0.0183
Root MSE = 5.3e+06
Total 1.4799e+15 54 2.7405e+13

Performance Coef. Std. Err. t P>|t| [95% Conf. Interval]

Online 97.9387 577.0849 0.17 0.866 -1059.547 1255.424

_cons 7112488 1181651 6.02 0.000 4742395 9482580

ANOVA statistics revealed that online banking and financial performance of the bank
were not significantly associated since it had a significance value of 0.8659. the F critical
value was greater than the F calculated (0.03 < 2.434), indicating that there is no
significant association between online banking and how commercial banks listed in the
NSE performed financially. The p value which was greater than 0.05 an indication that
online banking does not significantly influence financial performance of individual
banks (Critical value = 2.434). The value of R2 was 0.0005; this indicates that at 95%
confidence interval, there were 0.005% changes in financial performance of commercial

39
banks due to changes in online banking. This implies that online banking can explain
0.05% changes in how commercial banks perform. Therefore, the null hypothesis is
accepted that online banking does not significantly affect financial performance of listed
commercial banks in Nigeria.

From the finding of the study the established equation was between financial
performance and Agency banking was.

Y = 7112488 + 97.9387 X1

From the above regression equation, if online banking is held to a constant of zero,
financial performance of commercial banks would be at 7112488. Increasing online
banking by a single unit result to an increase in how commercial banks perform
financially by 97.9387.

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents and discusses the key data findings from the study, draws
conclusion findings, and makes appropriate recommendations. The conclusions and
recommendations drawn focused on addressing the major objective of the study. The
researcher intended to examine the effect of electronic banking on financial performance
of listed commercial banks in Nigeria.

40
5.2 Summary of Findings

In Nigeria ATMs, Debit cards and Credit cards can generate some income for some
commercial bank due to the convenience they offer to bank customers. Bank in Nigeria have
been marketing themselves by showcasing their ATMs network across the country with an
objective to attract more customers and eventually contribute to bank profit. Agboola (2020)
in a study in Nigeria found that the increase adoption of ATMs, Debit cards and Credit cards
had a positive impact on a bank image and its profitability. These cards are also affordable to
both the banks and the customers, and they don’t require a lot of maintenance costs both at
acquisition and when in operation. These makes cards quite attractive as an instrument for
conducting transaction for customers and the banks. This high usage of cards attracts
commission income for the bank which adds to the bank profit. In Nigeria, Ndung`u (2011)
concurs that mobile banking has revolutionized the money transfer business and has created
further innovations and have lowered transaction costs for both the banks and customers.
This transformation of money transfer business has translated to more income and profits to
the banks.

Many retail transactions in Nigeria have moved to the mobile phone. Bank customers can
move money from their bank accounts to their e-money accounts or from their e-money to
their bank accounts. This improvement of the mobile money services has increased the pace
and circulation of money in the country and has resulted to more profit for the banks through
commission incomes. In Nigeria internet banking is mainly used by corporate clients who
would be given the service at highly subsidies rates due to the fact that corporate customers
have several ways of contributing to the banks ‘profitability like through loans, overdrafts.

5.3 Conclusion
The study established that m-banking has a positive effect on how listed commercial
banks in Nigeria perform financially. The study further established that mobile banking
and financial performance of listed commercial banks in Nigeria were strongly and
positively related.

Based on the study’s findings, the study concludes that m-banking strongly and
positively affect financial performance of listed commercial banks in Nigeria.

41
From the findings the study concludes that agency banking has a positive effect on
financial performance of listed commercial banks in Kenya, as the study established that
agency banking and financial performance of listed commercial banks in Kenya were
strongly and positively related. The study also established that a unit increase in agency
banking would lead to increase in financial performance of listed commercial banks in
Nigeria.

The study established that a unit increase in ATM banking would lead to increase in
financial performance of commercial banks listed in the NSE. The study further
established that financials performance of individual commercial bank and agency
banking were strongly andk positively correlated. Based on the findings, the study
concludes that ATM banking strongly and positively affects financial performance of
listed commercial banks in Nigeria.

The study found that financial performance of individual commercial bank and online
banking was weakly but positively correlated. The study further established that online
banking and financial performance of commercial banks listed in the NSE were
positively related. From the findings, the study concludes that online banking has a
positive effect on financial performance of listed commercial banks in Nigeria.

5.4 Recommendations

I. The study recommends commercial banks to expand their electronic services in a

planned and well-articulated strategy for the long run; this will increase clients’
satisfaction and increase the institutions profits. The banks are also requested to carry out
awareness and promotional campaigns to ensure that their customers are aware of the
benefits of using embanking.

II. The study revealed that the use of e-banking leads to an increase in performance of
the bank. The study recommends that the banks must be focused in terms of their needs
and using the right technology to achieve goals, rather, than acquiring technology of
internet banking because other banks have it; this will help the bank to steer its vision in
the right direction which is growing the trends of ICT.

42
III. The study recommends banks management which aren’t fast when it comes to
adopting new innovations, to step up and embrace the different kinds of innovation in
their banking operations this will boost their profitability. In Kenya, the highly profitable
banks are the ones that are fast in terms of adopting new technologies, therefore this
recommendation is worth.

IV. The study recommends for policy makers to review those policies that are related
with promoting the adoption of innovation and transferring of technology. The
government needs to encourage the adoption of innovations this will boost profits of
organizations and the government will convert to better tax revenues.

5.5 Areas for Further Study

The study sought to examine the effect of e-banking on financial performance of listed
commercial banks in Nigeria. The study recommends replication of the study should on
commercial banks not listed in the NSE. The study also recommends a study to be done
on challenges faced by commercial banks in Nigeria in adopting e-banking.

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Appendix

Population List

S/N NAMES
1. ACCESS BANK PLC
2. FIDELITY BANK PLC
3. CITIBANK NIGERIA LIMITED
4. ECOBANK NIGERIA PLC
5. FIRST BANK OF NIGERIA LIMITED
6. FIRST CITY MONUMENT BANK LIMITED
7. GUARANTY TRUST BANK PLC
8. GLOBUS BANK LIMITED
9. KEYSTONE BANK LIMITED
10. POLARIS BANK LIMITED

45
11. STANBIC IBTC BANK PLC

46