Effects of ICT on Bank Branch Performance: a Sri Lankan Case Study

Banks are spending heavily on Information and Communication Technology (ICT) for operational and strategic reasons. Many are now getting concerned about the utilization and the returns of such investments. This paper reviews empirical and theoretical information and attempts to analyse the effects of ICT on bank branches. Initial findings indicate a scarcity of empirical research with respect to benchmarking on the ICT competency of bank branches in Sri Lanka. The research study was carried out on a leading commercial bank in Sri Lanka within the year 2008. Data collection was done from branch managers selected from 18 branches, staff members and customers attached to the same set of branches of the bank using survey method. All 18 branches selected are of equivalent grade according to the grading set by the bank. Three types of questionnaires were designed with structured and semi structured questions with 5 point and 4 point likert scale. Questionnaire distribution was done by post, via e-mail and hand delivery. Quantitative analysis of primary and secondary data collected for the study revealed that ICT usage at branches has a positive effect on financial performance and quality performance of bank branches. The factors such as bank employee attitude towards ICT usage, ICT literacy level of bank employees and scope and complexity of the ICT applications have a positive impact on bank branch performance. The appropriate use of ICT has a significant impact on branch performance. The positive impact on the overall profit of the branch is very high. Establishment of on-line inter branch network covering most of the branches in island has increased the convenience of customers. The achievement of anytime and anywhere banking has reduced customer visits to branches. The level of ICT usage at some branches, despite the core banking application availability was not at an adequate level. Functionalities provided by ATM machines need to be enhanced as ATM usage is very popular among customers. Most of the customers use ATM cards for cash withdrawal and balance inquiry. This paper concludes with a discussion and recommendation to improve the positive effects of ICT on bank branch performance.