Costs-Benefit Analysis of Digital Banking for Commercial Banks in Uganda: A Case Study of Stanbic Bank Uganda Limited

Abstract

The study sought to perform a cost-benefit analysis of digital banking for commercial banks in Uganda, taking Stanbic Bank Uganda Limited as a case study. The study was conducted with three objectives including; to establish the costs and risks of digital banking for banks in Uganda, to establish the benefits of digital banking for banks in Uganda and to provide plausible recommendations towards improving the efficiency of digital for banks in Uganda. To achieve the above stated objectives, the study collected data through primary and secondary sources. This was a cross sectional qualitative study where questionnaires were issued to collect data from thirty (30) respondents who are employees of Stanbic Bank Uganda limited, selected through purposive and convenience sampling. These were bank employees from Products team, Digital Channels team, Reconciliations team, Finance department, and Retail branches, as these are closer to the digital strategy of the bank by virtue of their daily jobs. This helped to add reliability to the data retrieved from the study.

The results from the study established that banks are incurring high capital and operational expenditure to establish and sustain digital banking channels. The study also established that the advent of digital banking has created increased operational risks such as cyber fraud, for the banks. The study also established that despite the increasing risks and costs of pursuing the digital strategy, banks are reaping benefits in form of operational efficiency for transaction processing, costs savings, better customer experience among other added value features, although the banks had not fully maximised the anticipated benefits of digital banking. Accordingly, the came up with plausible measures to improve the efficiency of digital banking for banks in Uganda including, focusing on customer needs as digital products are developed, driving high adoption and utilisation of digital channels to achieve economies of scope, adopting a universal banking strategy where internal silos are broken while solutioning for the customer and enhanced IT Security for sustainable digital banking.