E-BANKING AND PROFITABILITY OF COMMERCIAL BANKS IN UGANDA. A CASE STUDY OF FINANCE TRUST BANK, KAPCHORWA BRANCH.
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Date
2025-07-16
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Uganda Christian University
Abstract
This study investigated the effect of e-banking on the profitability of commercial banks in Uganda, focusing on Finance Trust Bank, Kapchorwa Branch. The research specifically examined the impact of three key e-banking services: mobile banking, internet banking, and ATM services, on the branch’s financial performance. Employing a cross-sectional research design with both quantitative and qualitative methods, data were collected from 328 respondents, including active customers, employees, branch managers, and IT officers. The analysis revealed that all three e-banking channels significantly and positively influence profitability. Mobile banking demonstrated a moderate positive effect on profitability, explaining 27.6% of the variability. It was found to enhance transaction efficiency, reduce operational costs, and expand the customer base. These findings corroborate previous studies in Uganda and Kenya that emphasize mobile banking’s role in improving financial outcomes by reducing reliance on physical banking infrastructure. Internet banking showed a strong positive effect, accounting for 34.5% of the variation in profitability. This service was found to boost customer engagement and operational efficiency, even in a rural context, despite challenges related to connectivity and digital literacy. The results are consistent with studies from Kenya and Uganda, which underscore internet banking’s importance in enhancing profitability through increased market reach and cost reductions. ATM services had the most substantial impact, explaining 51.6% of profitability variance. The convenience, extended availability, and high transaction capacity of ATMs were identified as key profitability drivers. These findings align with studies highlighting ATM services as significant contributors to bank financial performance, especially through cost savings and increased transaction volumes. However, contextual differences were noted, as some research indicated potential profitability limitations due to infrastructure costs.
The study concludes that e-banking is a vital strategic tool for profitability enhancement at the branch level. Recommendations include investing in technological upgrades, customer training, infrastructure expansion, and maintenance to maximize financial gains. Future research should explore integrated digital banking impacts and customer satisfaction in rural settings to optimize service delivery.
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Postgraduate Research