Electronic Banking Services and Their Role in Enhancing Financial Performance of Commercial Banks in Ethiopia

Electronic banking has become an important component of financial-sector transformation, providing alternative channels for service delivery, reducing transaction costs, and expanding customer access. This study examines the effect of electronic banking services on the financial performance of commercial banks in Ethiopia. Specifically, it assesses the effects of automated teller machines (ATMs), debit cards, mobile banking, internet banking, and point-of-sale (POS) terminals on profit after tax (PAT) and return on equity (ROE), while considering inflation as a control variable. The study employed an explanatory quantitative research design using panel data from fifteen Ethiopian commercial banks covering the period 2017–2023. Secondary data were obtained from the National Bank of Ethiopia and audited annual reports of the selected Banks. Fixed-effect and random-effect panel-data models were estimated using STATA 17 supported by diagnostic tests for Multicollinearity, Heteroscedasticity, autocorrelation, and model specification. The findings indicate that debit cards, ATMs, and mobile banking have statistically significant positive effects on PAT, while ATMs and mobile banking have significant positive effects on ROE. In contrast, POS terminals have a significant negative effect on ROE, whereas internet banking has statistically insignificant effects on both PAT and ROE. Inflation is also found to undermine profitability and weaken the benefits associated with electronic banking adoption. The findings suggest that the financial performance effects of electronic banking vary across service types and depend on adoption, infrastructure, cost efficiency, and customer trust. The study highlights the importance of strengthening mobile banking and ATM services, improving the reliability and security of internet banking, and restructuring POS operations to enhance the contribution of electronic banking to the financial performance of Ethiopian commercial banks.