The impact of e-commerce on banking sector profitability: The case of FBC Holdings Limited

Abstract

The purpose of the study was to analyse and investigate the impact of e-commerce on the banking sector profitability. The advancements in ICT have brought about changes in business processes from manual methods of processing banking transactions to electronic ways of transacting. The banking sector has experienced many changes in the way in which business is being done, from the traditional brick and mortar model to the click and mortar ICT model. Given the massive investment in technology, not much has been done to evaluate the impact that this investment has had on profitability.

FBC Holdings Limited adopted an e-commerce driven strategy since dollarisation to tap into the opportunities existing in the market for the banked and unbaked population. A case study approach was adopted wherein how the adoption of e-commerce has contributed to the profitability of FBC was explored; the level of competitiveness of FBC in light of developments in ICT products was assessed; impact of e-commerce on the cost structure of FBC was measured. The study predominantly adopted a quantitative methodology. Questionnaires were administered to 90 FBC employees. Few interviews were conducted with FBC senior management. The response rate was 73%. Major findings were that e-commerce has a positive impact on profitability of FBC. Adoption of e-commerce on products and channels like ATMs, Internet Banking, SMS banking and Point of Sale is moderate while adoption of mobile moola and FBC Blue is low and needs improvement. Level of contribution of e-commerce products towards profit is lower compared to other sources of income like mortgages, business and personal loans, and asbestos.

Overall, FBC should increase the marketing of its products offering to increase market share, transactional income and ultimately profitability. FBC should invest in robust ICT systems to encourage adoption and use of e-commerce. FBC should invest in R & D to keep abreast with trends in the ICT sector. FBC Holdings Limited should continuously introduce new lines of e-commerce products, services and channels to remain competitive.