An exploratory study on adoption of online banking in Lebanon

Abstract

Purpose: This thesis attempts to explore the impact of adoption of online banking, through its various media and communication channels, on branch expansion and overall banks profitability. We use a sample of 17 Lebanese commercial banks constituting 90% of the Lebanese commercial banks sector, from 2004 till 2013. Design/ Methodology/ Approach: this study is based on a quantitative model with a deductive approach. Secondary data was collected from BILANBANQUES to feed into a multiple regression models. The independent variables are the following variables: year adoption of mobile banking, phone banking and transactional website. Control variables are customers’ deposits over total assets, loan to customers over total assets, average staff per branch, the number of branches and the crisis. Dependent variables are the return on assets and the return on equity and other performance measures. Findings: after testing each hypothesis and based on a selected sample, results revealed that online banking channels have had minor effect on overall bank profitability, but in retrospect it affected the branch profitability bringing to bear the fundamental strategies of Lebanese banks, which use branch expansion as a marketing tool for the masses. Research/ Limitations/ Implications: Several limitations were encountered due to the small Lebanese banking sector and the lack of reliable data. The study focuses only on the top Lebanese banks and did not take into consideration the perceived risk of online banking, the ease of use and awareness of this new technology by customers. Practical Implications: this research is meant to provide guidance to bank managers and executives in understanding the impact that online banking can have on their strategies. It sheds the light on aspects of commercial branch profitability that is rarely considered in their choices of future expansion. Originality/ Value: as far as we know, there has been no study of the sort in Lebanon. Our aim is to give a quantitative justification to the way banks expand and to their approach to commercial operations.