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2.3THE ADOPTION OF ELECTRONIC BANKING

Wang et al. (2003) claim that in the 1990s, E-banking was under-utilized as business organizations used it only to market their products and services. Thornton and White (2001), who examined customer orientations and usage of financial distribution channels in the Australian financial industry, found that more recently most financial institutions, faced with competitive pressure after the introduction of deregulation in 1983, had rethought their strategies to take full advantage of Internet technology. Tan and Teo (2000) note that the challenge to expand and maintain banking market share has influenced many banks to invest more in making better use of the Internet. The emergence of E-banking had made many banks rethink their Information Technology (IT) strategies in competitive markets. They suggest that the banks that fail to respond to the emergence of E-banking in the market are likely to lose customers and that the cost of offering E-banking services is less than the cost of keeping branch banking. This notion was also confirmed in a study conducted by Jasimuddin (2004) who examined the role of E-banking in Saudi Arabia.Jasimuddin indicated that the majority of Saudi banks had taken advantage of Internet technology to establish web sites but few offered E-banking services. He suggested that if the Saudi Arabian banking industry wished to be successful in the global economy it would need to integrate Internet technology into its banking strategy. Despite the fact that Internet technology acceptance is growing worldwide, the Ghanaian banking industry is yet to adopt fully Internet technology.

Information Technology (IT) is defined as the modern handling of information by electronic means, which involves its access, storage, processing, transportation or transfer and delivery (Ige, 1995). According to Alu (2002), IT affects financial institutions by easing enquiry, saving time, and improving service delivery. In recent decades, investments in IT by commercial banks have served to streamline operations, improve competitiveness, and increase the variety and quality of services provided.

Over time, technology has increased in importance in Ghanaian banks. Traditionally, banks have always sought media through which they would serve their clients more cost-effectively as well as increase the utility to their clientele.Their main concern has been to serve clients more conveniently, and in the process increase profits and competitiveness. Internet, electronic and communications technologies have been used extensively in banking for many years to advance the agenda of banks.

In recent years, the adoption of E-banking began to occur quite extensively as a channel of distribution for financial services due to rapid advances in IT and intensive competitive banking markets.

Automated Teller Machines (ATMs) were the first well-known machines to provide electronic access to customers. With the advent of the ATM, banks are able to serve customers outside the banking hall. The ATM is designed to perform the most important function of the bank. It is operated by a plastic card with its special features. The plastic card is replacing the cheque personal attendance of the customer, banking hour's restrictions and paper based verification. ATMs have made hard cash just seconds away all throughout the day at every corner of the globe. ATMs allow the Bank's customers to number of banking functions - such as withdrawing cash from one's account, making balance inquiries and transferring money from one account to another, purchase prepaid mobile phone a credits using a plastic, chip or magnetic-stripe card and a Personal Identification Number (PIN) issued by the financial institution.

The adoption of electronic banking is often credited with helping fuel strong growth in the many economies (Coombs et al, 1987). It seems apparent then that, electronic banking affects not just banking and financial services, but also the direction of an economy and its capacity for continued growth.

The idea of Internet banking according to Essinger (1999) is: "to give customers access to their bank accounts via a web site and to enable them to enact certain transactions on their account, given compliance with stringent security checks". To the Federal Reserve Board of Chicago's Office of the Comptroller of the Currency (OCC) Internet Banking Handbook (2001), Internet Banking is described as "the provision of traditional (banking) services over the internet".

Internet banking by its nature offers more convenience and flexibility to customers coupled with a virtually absolute control over their banking. Service delivery is informational (informing customers on bank's products, etc) and transactional (conducting retail banking services).

As an alternative delivery conduit for retail banking, it has all the impact on productivity imputed to Tele-banking and PC-Banking. Aside that it is the most cost-efficient technological means of yielding higher productivity. Furthermore, it eliminates the barriers of distance / time and provides continual productivity for the bank to unimaginable distant customers.

2.4BANKING DEVELOPMENTS IN GHANA

Banking in Ghana has undergone many changes in service delivery with the aim of improving the quality of service being provided to the customers. Banks were serving their customers through the manual system, which resulted in long queues to transact the business. The other problem faced by many companies in Ghana is that, many people including companies do not accept cheque as a payment method. This is because of the time and the inconveniences involved in accepting and depositing cheques company accounts. For decades, the banking sector was dominated by Barclays and Standard Chartered banks. Barclays Bank (formerly known as the Colonial Bank) in February of 2006 celebrated ninety years of its operations in Ghana and Standard Chartered bank (formerly known as the Bank of British West Africa) has been operating in Ghana since 1896.

Commercial banks began to operate in Ghana in 1874. The first commercial bank to operate in Ghana was the Bank of British West Africa (BBWA) now the Standard Chartered Bank (Ghana) Limited. It was established in 1874 with only one branch in Accra. In 1917, Barclays Bank, D.C.O (now Barclays Bank of Ghana Limited) started operations mainly to finance the booming foreign trade, mainly between Ghana and Britain. These two banks were overseas branches of large international banks incorporated in Britain. They handled all the commercial banking business in the country until 1953 when the state-owned Bank of the Gold Coast (the parent bank of both the Bank of Ghana and the Ghana Commercial Bank was inaugurated.

After Ghana attained its independence in 1957, the enactment of a legislative instrument of Parliament separated the Bank of the Gold Coast into the Bank of Ghana (the Central Bank) and the Ghana Commercial Bank (GCB). The two expatriate banks mentioned above and the GCB therefore, constituted the primary commercial banks in the country and have since dominated the commercial banking system, handling over 70% of all banking business in Ghana (Andoh, 1988). These three banks also constituted the commercial banking system before the 1970s; their main business being to finance foreign trade, while domestic lending in other sectors was minimal. Today, however, the credit distribution system has changed dramatically. The proportion of bank credit directed to the import trade sector, which averaged about 80% until 1960 have now declined to less than 30%. As of the end of December 1984, the number of branches of these three banks was two hundred and ten (210). GCB had the greatest number, one hundred and forty-nine (149), followed by Barclays bank with thirty-three (33) and Standard Chartered Bank with twenty-eight (28) branches scattered over the country.

As of December 1984, there were twelve (12) banks in Ghana: Ghana Commercial

Bank, Barclays Bank of Ghana Limited, Standard Chartered Bank Ghana Limited,

Agricultural Development Bank, Social Security Bank , Merchant Bank of Ghana

Limited, National Investment Bank, Cal Merchant Bank, Ecobank Ghana Limited,

Bank for Housing and Construction, Bank of Credit and Commerce and Ghana Cooperative Bank.

From that period to May 2012, several other banks been incorporated into the

Ghanaian banking sector. These are: Guaranty Trust Bank Ghana Limited, Stanbic

Bank, Zenith Bank, United Bank for Africa, Bank of Africa, Bank of Baroda, Energy Bank, Fidelity Bank Ghana Limited, International Commercial Bank, Access Bank Ghana, UniBank and Unique Trust Bank.

There have been some other changes in the sector mainly in terms of ownership. A large number of these new banks are now owned and managed by Africans, and the sector boasts a number of highly skilled and experienced bankers. Bank branches in Ghana increased by 11.3% from 309 to 344 between 2002 and 2004 with 81 new branches springing, from 2004 and 2006 indicating an increase of 23.5%. The total banking system assets at the end of October 2006 were 48,353.0 billion, representing an annual growth of 35.5%, as against 16.6% as of the end of October 2005 (Daily Graphic, December 19, 2006).

2.5HISTORY OF ELECTRONIC BANKING IN GHANA

In Ghana, the earliest forms of internet, electronic and communications technologies used were mainly office automation devices. Telephones, telex and facsimile were employed to speed up and make more efficient, the process of servicing clients.For decades, they remained the main information and communication technologies used for transacting bank business.

Later in the 1980s, as competition intensified and the PC got proletarian, Ghanaian banks begun to use them in back-office operations and later tellers used them to service clients. Advancements in computer technology saw the banks networking their branches and operations thereby making the one-branch philosophy a reality.Barclays Bank Ghana Limited and Standard Chartered Bank Ghana Limited pioneered this very important electronic novelty, which changed the banking landscape in the country.

Probably, the most revolutionary electronic adoption in Ghana and the world over has been the ATM. In Ghana, banks with ATM offerings have them networked and this has increased their utility to customers.The Trust Bank, Ghana (now a member of the ECOBANK), in 1995 installed the first ATM. Not long after, most of the major banks began their ATM networks at competitive positions. Ghana Commercial Bank started its ATM offering in 2001 in collaboration with

Agricultural Development Bank. Currently, almost all banks in the country operate ATMs. The ATM has been the most successful delivery medium for consumer banking in this county. Customers consider it as important in their choice of banks, and banks that delayed the implementation of their ATM systems, have suffered irreparably. ATMs have been able to entrench the one-branch philosophy in this county, by being networked, so people do not necessarily have to go to their branch to do some banking.

Though ATMs have enjoyed great success because of their great utility, it has been recognized that it is possible for banks to improve their competitive stance and profitability by providing their clients with even more convenience.Once again Information Communication Technology (ICT) was what saved the day, making it possible for home and office banking services to become a reality. In Ghana, some banks started to offer Personal Computer PC banking services, mainly to corporate clients.The banks provide the customers with the proprietary software, which they use to access their bank accounts, sometimes the internet via the World Wide Web (www). This is however on a more limited scale though, as it has been targeted largely at corporate clients. Banks have recognised the internet as representing an opportunity to increase profits and their competitiveness. Currently, many banks are offering internet banking (i-banking) in Ghana.

Historically, businesses interested in obtaining high levels of customer satisfaction have focused on using knowledgeable, pleasant servers to deliver high quality products and services to their target markets. Today's consumer not only demands quality, but also demands that products and services be delivered quickly. Hence, firms must respond to these changes if they wish to remain competitive. As customers experience a greater squeeze on their time, short waits seem longer than ever before. If firms can improve customers' perceptions of time they spend waiting to be served, then customers will experience less frustration and may feel more satisfied with the service encountered. Furthermore, as the service sector of the national economy expands, the structure of the traditional forty hours work week is eroding. Today, weekends are workdays and 24 hour service operations are commonplace with the supplement of internet banking on customers.

Over the last decade, the Ghanaian Government has made a serious effort to pursue a 'knowledge-based economy' agenda to make Ghana a preferred ICT destination. The use of the Internet in Ghana has also seen significant increases since the liberalization of the telecommunication industry in 1990s. The country had 18.1 Internet users per 1,000 people in 2005 as compared to 1 Internet user in 1999 (ITU, 2007). The number of PC ownership doubled to 52 owners per 1,000 people between 1999 and 2005. A National ICT for Accelerated Development policy was introduced in 2003 with the objective of engineering an ICT-led socioeconomic development process. The impact of these initiatives is evident in the November 2005 edition of African Business. The article on the Ghana profile page, entitled "Cake is bigger but the slices are smaller", claimed interestingly "Ghana has the most developed IT sector in West Africa". For a country which hitherto could clearly be described as sitting at the disadvantaged end of the global digital divide, it becomes important to ascertain how ICT is affecting the Ghanaian banking business, which also tends to contribute substantially to Ghana's service sector revenues (ISSER, 2005).

2.6ELECTRONIC BANKING ADOPTIONS IN GHANAIAN BANKING SECTOR

In the Ghanaian banking industry, IT investments and adoption have become a very important component in achieving organizational goals due to competition. In recent past therefore, electronic and communications technologies have been used extensively in banking for many years to advance the agenda of banks.The earliest forms of electronic and communications technologies used by the banks were mainly office automation devices. Telephones, telex and facsimile were employed to speed up and make more efficient, the process of servicing clients.

However, with coming of new partners in banking industry, as competition intensified and the PC got proletarian, Ghanaian banks began to use them in backoffice operations and later tellers used them to service clients. The advancements in computer technology have led to application and adoption of new IT investments that have changed the banking landscape in the country.

Arguably, the most revolutionary electronic innovation in this country has been the ATM. In Ghana, banks with ATM offerings have them networked and this has increased their utility to customers.Other technological innovations in banking sector include internet banking, telephone banking, Electronic funds transfer, among others.

2.7FORMS OF E-BANKING SERVICE DELIVERY CHANNELS

The following are the different forms of IT in the banking sector:

2.7.1 Automated Teller Machines (ATMs)

Rose (1999) cited by Abor, describes ATMs as follows: "an ATM combines a computer terminal, database system and cash vault in one unit, permitting customers to enter the bank's book keeping system with a plastic card containing a PIN or by punching a special code number into the computer terminal linked to the bank's computerized records 24 hours a day". Once access is gained, it offers several retail banking services to customers.They are mostly located outside of banks, and are also found at airports, malls, and places far away from the home bank of customers. They were introduced first to function as cash dispensing machines. However, due to advancements in technology, ATMs are able to provide a wide range of services, such as making deposits, funds transfer between two or more accounts and bill payments. Banks tend to utilize this electronic banking device, as all others for competitive advantage.

The combined services of both the automated and human tellers imply more productivity for the bank during banking hours. Also, as it saves customers time in service delivery as alternative to queuing in banking halls, customers can invest such time saved into other productive activities. ATMs are a cost-efficient way of yielding higher productivity as they achieve higher productivity per period of time than human tellers (an average of about 6,400 transactions per month for ATMs compared to 4,300 for human tellers (Rose, 1999). Furthermore, as the ATMs continue when human tellers stop, there is continual productivity for the banks even after banking hours.