Effect Of Electronic Banking On Profitability Of Banks: In Case Of Oromia Banks In Operate Of Ambo Town

Abstract

The term “e-banking” refers to a method of banking through which customers are able to carry out their banking transactions electronically without visiting a bank branch. But, there is in adequate access of oromia banks to their customers. The purpose of this study was to examine effect of electronic banking on profitability of banks: in case of Oromia banks in operate of Ambo town. The annual financial audits or statements from the period 2019 to 2023 were analysed by the descriptive statistics, correlation analysis, test assumptions, and the result of regression analysis. Accordingly, the study revealed that the R-value of .978 indicates very strong correlation between profitability and the other electronic banking predictor variables. The R2 value of .957 indicates that 95.7% of the variation in the profitability of the study area can be explained by the independent variables included in the model. But, the remaining 4.3% variation is explained by stochastic error term (𝜀𝑖) meaning that 4.3% of profitability changes were explained by factors that are not explained in the model. However, the p- value was < 0.05 (.043) that it can be accepted as dependent variable to be affected by the independent variables. The ANOVA result is also showed that a significance level of 4.3% (p-value) is less than 5%. The calculated value was greater than the critical value (22.167) an indication that internet banking and automatic teller machine. Furthermore, the regression coefficient value has indicated that holding internet banking and automatic teller machine and size of the bank to a constant zero, the profitability of oromia banks would be -.619. A unit increase in internet baking would cause an increase in the profitability of oromia banks by a factor of 2.535E-005 and a unit increase in automatic teller machine would lead to an increase financial performance of the bank by a factor of 0.271. In addition, a unit increase in mobile banking would lead to an increase in the profitability of oromia banks by a factor of 1.450E-006. In general, absence of Point of Sale and Mobile banking might implies that the bank would have faced competitive problems of the other privates’ banks and CBE coupling all the Electronic banking to their operations. Hence, the bank need start Point of Sale and Mobile banking