Abstract:
Dramatic improvements in information technology have led to new means of delivering financial services electronically. The wonder of modern computer technology have also enabled banks to lower the cost of bank transactions by having the customer interact with an e-banking facility. Little is known regarding the impact of electronic banking on Ethiopian banks' financial performance. As a result, the purpose of this research is to determine if the usage of e-banking has resulted in an increase or decrease in the profitability of commercial banks in Ethiopia. An explanatory research design was used to attain the study's goal. Based on data availability, a total of six banks were examined for the period 2013 to 2019, and the study used the Pooled Ordinary Least Square estimate approach and descriptive analysis as the analytical tool.The explanatory variables were Automated Teller Machines, Point-of-Sale terminals, Mobile banking, Agency banking, and issuing Debit cards, whereas the dependent variable was Return on Assets. The secondary data on dependent and explanatory factors were collected from the National Bank of Ethiopia. According to the descriptive research, Ethiopian e-banking adoption is still in its infancy and lags significantly behind other Sub-Saharan African nations. Similarly, Ethiopian commercial banks' profitability was extremely poor. The regression results indicated that automated teller machines, point-of-sale terminals, and mobile banking had a substantial effect on commercial bank profitability in Ethiopia. A unit increase in automated teller machine banking would result in a 0.03 percent increase in returns on bank assets, whereas deploying one more point-of-sale and increasing mobile banking by one percent would result in a 0.01 percent and 8.04 percent decrease in returns on assets for commercial banks in Ethiopia, respectively.On the other hand, a bank agency and issuance of debt card have an irrelevant influence on the profitability of commercial banks in Ethiopia. In order to improve the financial performance of commercial banks in Ethiopia, automatic teller machine banking must be increased, the coverage’s and quality of infrastructure such as ICTs, telecommunications and power related to automatic teller machine must be enhanced, and users of points for sales increased.
