Effect of E-Banking Service on Financial Performance of Commercial Banks: A Case of Selected Private Commercial Banks in Ethiopia

This study examines the impact of e-banking services on the financial performance of selected private commercial banks in Ethiopia. It focuses on the roles of ATM, POS, Internet Banking (IB), Debit Card (DC), and Mobile Banking (MB) services. Financial performance is evaluated using Return on Assets (ROA) and Return on Equity (ROE) as key indicators. A panel dataset was collected from six purposely selected private commercial banks: Awash Bank S.C., Bank of Abyssinia, Dashen Bank, Cooperative Bank of Oromia, United Bank, and Zemen Bank S.C., covering the period from 2018 to 2023. Utilizing a quantitative approach and employing both descriptive and explanatory research designs, the study applies fixed and random effects regression models estimated with E-Views 13. The findings indicate that POS terminals have a significant negative effect on both ROA and ROE, suggesting that investments in POS infrastructure may not be generating the expected financial returns. In contrast, ATMs, debit cards, and internet banking services exhibit a significant positive impact on both profitability measures, highlighting their effectiveness in enhancing bank performance. Interestingly, mobile banking shows a mixed effect; it positively influences ROA but negatively and significantly affects ROE, indicating potential inefficiencies or cost challenges in mobile banking deployment. This study contributes original insights to the existing literature by providing context-specific findings from Ethiopia, particularly regarding the differing effects of mobile and POS banking services compared to previous research. It enriches the discussion on the strategic role of digital banking technologies in shaping the financial outcomes of banks operating in emerging markets.