1.

Introduction

To understand e-banking, it is critical to understand how developments in the information

systems, internet and telecommunication industry have transformed the way business is
conducted from the traditional manual system to the electronic or digital system. Refer to
diagram 1.
These developments are explained sequentially below:

 Digitization is the conversion of data from analog to digital form that can be processed by
electronic devices. It enables the automation of manual and paper-based processes.
 The advantages of digitization include:
 No physical limits for storage
 Data can be accessed via the internet
 24/7 availability of access
 Great saving of space
 Easy retrieval of information using keywords
 Integrated online resource sharing
 It is cheaper to maintain digital data than analog data
 Linking and networking possibilities
 Any number of times digital files can be duplicated with exactness.
 Many users can access a digital file at the same time

 The digitization led to digitalization, which involves use of digital technologies and digital
data to create revenue, improve business, replace or transform business processes and create
an environment for digital business.
 The digitalization drive in collaboration with the advancement of information infrastructure -
including information technology and computer networks such as the Internet and tele-
communications systems - enabled the development of electronic commerce. E-commerce -
the buying and selling of goods and services via electronic means - has grown exponentially
and today businesses can connect with consumers in foreign markets in ways that were not
previously possible.
 The nearly universal connectivity which the internet and telecommunication network systems
offer has made e-commerce an invaluable business tool. These developments have created a
new type of economy called the digital economy.

 As a direct consequence of the emergence of the ‘digital economy’, the balance of power has
shifted to the customers. Customers are increasingly demanding value for money and goods
and services customized to their exact needs, at less cost, and as quickly as possible.

 In view of the above, several digital platforms of e-commerce and e-business have been
developed including E-Finance; E- Money; E-Marketing; E-Government, E-Development
etc.

2. Definition of Key Terms

2.1 E-Finance

 E-Finance is a branch of e-ecommerce that provides financial services through the internet or
any network, public or private. Alternatively, it can be defined as the provision of financial
services and markets using electronic communication and computation (Allen, McAndrews,
and Strahan, 2002).

 A large number of organizations from within and outside the financial sector are currently
offering E-financial services; these include fintechs, telecom services providers and banks.

 Financial technology (FinTech or fintech) is the new technology and innovation that aims

to compete with traditional financial methods in the delivery of financial services. The use
of smartphones for mobile banking, investing services and cryptocurrency are examples of
technologies aiming to make financial services more accessible to the general public.
Financial technology companies consist of both startups and established financial and
technology companies trying to replace or enhance the usage of financial services provided
by existing financial companies.
 2.2 E-Banking

According to Basel Committee on Banking Supervision (BCBS) (2001), electronic banking, or

e-banking, includes the provision of retail and small value banking products and services through
electronic banking channels as well as large value electronic payments and other wholesale
banking services delivered electronically.

Electronic banking can also be defined as the use of electronic delivery channels for banking
products and services, and is a subset of electronic finance. The most important electronic
delivery modes are the internet/online banking, mobile banking, telephone banking and
automatic teller machines (ATMs).

The term transactional e- banking is used to distinguish the use of banking services from the
mere provision of information.

Electronic banking services are offered in two main ways.

i. Either traditional brick and mortar banks combining traditional and electronic delivery
channels (brick and click banks)
ii. Or virtual banks offering their products and services only or predominantly through
electronic distribution channels. Physical offices e.g. head offices are available only for
administration purposes and non- branch facilities ATMs are available for cash withdrawal
and depositing. Withdrawal and depositing of funds may also be done through remote
delivery channels owned by these virtual banks or other institutions.

Many people see the development of e-banking as a revolutionary development, but, broadly
speaking, e-banking could be seen as another step in banking evolution. Just like ATMs, it gives
consumers another medium for conducting their banking. The fears that this channel will
completely replace existing channels may not be realistic, and experience so far shows that the
future is a mixture of “clicks (e-banking) and mortar (branches)”.

Electronic delivery of services means a customer conducting transactions using online electronic
channels such as the Internet. Many banks and other organizations are eager to use this channel
to deliver their services because of its relatively lower delivery cost, higher sales and potential
for offering greater convenience for customers, etc.
2.2 E-Money
Digital currency/digital money/electronic money/electronic currency is a type
of currency available only in digital form, not in physical forms such as banknotes and coins.
Examples of digital currency include cryptocurrencies such as bitcoins, litecoin etc.

E-money differs from e-banking, in that e-money balances are not kept in financial accounts with
financial institutions (Bartholomew, Mason, and Shull, 1997)

2.3 E-marketing

It is concerned about the conducting marketing activities using electronic or digital media. E-
marketing in the financial services sector was made possible by the arrival of e-banking. E-
marketing builds on the e-banking’s ability to provide detailed data about customers’ financial
profiles and purchasing behavior. Detailed understanding of customers enables customized
advertising, customized products and enrichment of the relationship with customers through such
activities as cross selling.
Diagram 1. How changes in information technology has transformed business conduct

DIGITISATION

DIGITALISATION

E-COMMERCE

E-FINANCE E- MONEY OTHER E-

E-MARKETING
PLATFORMS

E - BANKING OTHER FINANCIAL

SERVICES AND PRODUCTS

MOBILE E INTERNET/ONLINE TELEPHONE OTHER ELECTRONIC

BANKING BANKING BANKING DELIVERY CHANNELS
Evolution of Banking

 Traditionally, banks delivered their products and services to their prospective customers only
through physical bank branches. However, financial services industry is rapidly changing
because of the advent of the internet, dynamic technological innovations, globalization and
financial deregulations, the impact of changing competitive and regulatory forces, and
consolidation of the financial markets (Jeevan, 2000; Mia et al., 2007).
 In order to cope with dynamic changes in the business environment, banks started to rely on
distribution channels as an alternative strategy for differentiating service offerings, gaining
competitive advantage, and cutting costs (Daniel, 1999). Many businesses were forced to
change their traditional modes of operation and banks are no exception. As a result, the
financial services industry became much more competitive (Thornton & White, 2001).
 The largest bank expense is that relating to the maintenance of physical branch network and
mostly include employment costs.
 Rapid technological advancements as well as rapid expansion of the global economy in the
past decades transformed of the role of the banking system role from that of financing trade
to that of effectively mobilizing and channeling financial resources in the financial market.
As the business environment became more competitive, superior distribution strategies
involving effectively communicating with and delivering products to customers provided a
competitive advantage to banking institutions (Kerem et al., 2005).
 Also customers are demanding greater convenience and service accessibility as reflected by
longer branch opening hours and demand for greater service delivery channels. Therefore,
many banks globally took the initiatives and started establishing more cost-effective
alternative service delivery systems (Shih & Fang, 2004).
 This led to the proliferation of service delivery channels through which consumers are now
interacting with banks. As a result, in addition to the traditional branch banking, modern
banks now provide and reach out to customers through various channels such as ATMs,
telephone, internet and wireless channels. Banks cannot go back in the past by reducing the
number of service delivery channels as consumers have become somewhat accustomed to
and indeed are utilizing and enjoying a broad range of options (Durkin, 2004).
 Resultantly, the electronic banking system has developed over the past years. In developed
countries e-banking is driving economies closer to cashless societies by eliminating the need
 for tangible currency (cash) and physical payment systems and replacing them with cards
(plastic money) and internet (digital money).

3. Adoption of E-Banking in Zimbabwe

 According to Dube, Chitura, and Runyowa (2009) the first visible form of electronic
innovation in Zimbabwe was in the early 1990s when Standard Chartered Bank and Central
Africa Building Society (CABS) installed Automated Teller Machines (ATMs).
 Other forms of electronic innovations that have found their way into Zimbabwean financial
system include Electronic Funds Transfer Systems (EFT), Telephone banking, internet
banking, mobile banking, credit cards, debit cards, EFTPOS, SWIFT, RTGS, etc. These
developments have released banks from the constraints of time and geographical location
(Kass,1994) and have allowed banks to cut costs on transactions, improve their service
delivery, and respond better to the demands of the market (Chang, 2003 and Sullivan and
Wang, 2005).

 Prior research on adoption of e-banking in Zimbabwe document some resistance by clients to

embrace the new technology. However, the owing to recent cash shortages in the country the
usage of plastic money have increased (RBZ, 2018). The Central Bank noted that the usage
of electronic and mobile banking systems registered quantum leap in 2017 and highlighted
that the resounding success was exhibited by the unprecedented increases in values, volumes,
devices and access points. The increase in plastic money was attributed to collaborative
efforts, commitment, action and market innovation which have continued to drive the plastic
money revolution.

4. Benefits of E-Banking

Understanding e-banking is important for several stakeholders, not least of which is management
of banking related organizations, since it helps them to derive benefits from it. The Internet as a
channel for services delivery is fundamentally different from other channels such as branch
networks, telephone banking or Automated Teller Machines (ATMs). Therefore, it brings up
unique types of challenges and requires innovative solutions. Many banks and other
organizations have already implemented or are planning to implement e-banking because of the
numerous potential benefits associated with it. Some of these major benefits are briefly described
below.

 Choice and convenience for customers

In the fierce battle over customers, providing a unique experience is the compelling element that
will retain customers. A ‘customer first’ approach is critical for success in e-banking. Customers
hold the key to success and companies must find out what different customers want and provide
it using the best available technology, ensuring that they are acting on the latest, most up-to-date
information. In modern business environments, customers want greater choice. They want the
traditional range of banking services, augmented by the convenience of online capabilities and a
stronger focus by banks on developing personal relationships with customers. Avkiran (1999)
stressed the importance of the human touch in the customer services. Politeness and neatness,
recognition in terms of greeting, willingness to provide prompt service, ability to apologise and
express concern for a mistake are all important for bank customer. Most of these aspects of
customer service cannot be automated. The adequacy of staff members serving customers can be
expected to directly influence the customers’ satisfaction. However, e-banking backed up by data
mining technologies can help in better understanding customers’ needs and customizing
products/services according to those needs. Offering extra service delivery channels means wider
choice and convenience for customers, which itself is an improvement in customer service. E-
banking can be made available 24 hours a day throughout the year, and a widespread availability
of the Internet, even on mobile phones, means that customers can conduct many of their financial
tasks virtually anywhere and anytime. This is especially true of developed countries, but
increasingly in developing countries, the spread of wireless communications means that services
such as e-banking are becoming accessible.

 Attracting high value customers

E-banking often attracts high profit customers with higher than average income and education
levels, which helps to increase the size of revenue streams. For a retail bank, e-banking
customers are therefore of particular interest, and such customers are likely to have a higher
demand for banking products. Most of them are using online channels regularly for a variety of
purposes, and for some there is no need for regular personal contacts with the bank’s branch
network, which is an expensive channel for banks to run (Berger & Gensler, 2007).
  Enhanced Image

E-banking helps to enhance the image of the organization as a customer focused innovative
organization. This was especially true in early days when only the most innovative organizations
were implementing this channel. Despite its common availability today, an attractive banking
website with a large portfolio of innovative products still enhances a bank’s image. This image
also helps in becoming effective at e-marketing and attracting young/professional customer base.

 Increased revenues
Increased revenues as a result of offering e-channels are often reported, because of possible
increases in the number of customers, retention of existing customers, and cross selling
opportunities. Whether these revenues are enough for reasonable return on investment (ROI)
from these channels is an ongoing debate. It has also allowed banks to diversify their value
creation activities. E-banking has changed the traditional retail banking business model in many
ways, for example by making it possible for banks to allow the production and delivery of
financial services to be separated into different businesses. This means that banks can sell and
manage services offered by other banks (often foreign banks) to increase their revenues. This is
an especially attractive possibility for smaller banks with a limited product range. E-banking has
also resulted in increased credit card lending as it is a sort of transactional loan that is most easily
deliverable over the Internet. Electronic bill payment is also on rapid rise (Young, 2007) which
suggests that electronic bill payment and other related capabilities of e-banking have a real
impact on retail banking practices and rapidly expanded revenue streams.

 Easier Expansion
Traditionally, when a bank wanted to expand geographically it had to open new branches,
thereby incurring high start-up and maintenance costs. E-channels, such as the Internet, have
made this unnecessary in many circumstances. Now banks with a traditional customer base in
one part of the country or world can attract customers from other parts, as most of the financial
transaction do not require a physical presence near customers living/working place.
  load reduction on other channels
E-Channels are largely automatic, and most of the routine activity such as account checking or
bill payment may be carried out using these channels. This usually results in load reduction on
other delivery channels, such as branches or call centres. This trend is likely to continue as more
sophisticated services such as mortgages or asset finance are offered using e-Banking channels.
In some countries, routine branch transactions such as cash/cheque deposit related activities are
also being automated, further reducing the workload of branch staff, and enabling the time to be
used for providing better quality customer services.

 cost reduction
The main economic argument of e-banking so far has been reduction of overhead costs of other
channels such as branches, which require expensive buildings and a staff presence. It also seems
that the cost per transaction of e-banking often falls more rapidly than that of traditional banks
once a critical mass of customers is achieved. The research in this area is still inconclusive, and
often contradicting reports appear in different parts the world. The general consensus is that
fixed costs of e-banking are much greater than variable costs, so the larger the customer base of a
bank, the lower the cost per transaction would be. Whilst this implies that cost per transaction for
smaller banks would in most cases be greater than those of larger banks, even in small banks it is
seen as likely that the cost per transaction will be below that of other banking channels. Having
said that some sources of research in this area suggest that banks so far have made little savings
from introducing e-banking (Young, 2007). It implies that, any efficiency related savings are
offset by above average wages and benefits per worker due to the need for a more skilled labor
force to run the more sophisticated delivery system. Other costs such as systems integration and
extra security measures also take their toll.

 Organizational Efficiency
To implement e-banking, organizations often have to re-engineer their business processes,
integrate systems and promote agile working practices. These steps, which are often pushed to
the top of the agenda by the desire to achieve e-banking, often result in greater efficiency and
agility in organizations. However, radical organizational changes are also often linked to risks
such as low employee morale, or the collapse of traditional services or the customer base.