The Economic Implications Of Electronic Banking In Nigerian Banks

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The Economic Implications Of Electronic Banking In Nigerian Banks


Abstract


This study was carried out on the economic implications of electronic banking in Nigerian banks using Diamond Bank as a case study. The study was specifically carried out to assess the extent of electronic payment in banking activities as well as identify the various types of electronic banking, evaluate the major problems associated with the development of electronic banking system in Nigeria as well as evaluate possible solutions to these problems, examine the effect of electronic banking on profitability of banks, and identify the different types of electronic banking used in Nigeria banks. The survey design was adopted and the simple random sampling techniques were employed in this study. The population size comprised of staff of Diamond Bank. In determining the sample size, the researcher conveniently selected 80 respondents and 70 were validated. Self-constructed and validated questionnaire was used for data collection. The collected and validated questionnaires were analyzed using frequency tables, while the hypotheses was tested using Chi-square Statistical tool. The result of the findings reveals that E-banking has an economic implications in Nigeria. Therefore, it is recommended that skilled manpower and computer wizard should be employed by every Bank, in other to stop, prevent fraudulent personal and hackers from manipulating the Banks data and stealing money from the Banks accounts. In smooth functioning of the payment system the government have the major role to play, in aspect of financing the payment system which require a lot of capital to maintain and also in the aspect of creating awareness the government should endeavor to inform the public about the benefits derived on the payment system. To mention but a few.


Table of Content


Chapter One:

Introduction

  • 1.1 Background of the Study
  • 1.2 Statement of the Problem
  • 1.3 Objective of the Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Significance of the Study
  • 1.7 Scope of the Study
  • 1.8 Limitation of the Study
  • 1.9 Definition of Terms
  • 1.10 Organization of the Study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the Study
  • 3.3 Sample Size Determination
  • 3.4 Sample Size Selection Technique and Procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Validity of the Study
  • 3.9 Reliability of the Study
  • 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • APPENDIX
  • QUESTIONNAIRE

Chapter One


Introduction

1.1 Background of the Study

Before the emergence of modern banking system, banking operation was manually done which lead to a slow down in settlement of transactions. This manual system involves posting transactions from one ledger to another which human handles. Figures or counting of money which should be done through computers or electronic machine were computed and counted manually which were not 100% accurate thereby resulting to human errors. Most bank then use only one computer in carrying out transactions which ameliorate the sluggish nature of banking transaction.

Nigeria do not embrace electronic banking early compared to developed countries. Nigeria adopted electronic banking system in the early 2000s. During the introduction of electronic banking system, the use of raw cash was said to have bred corruption through the “cash and carry syndrome” usually linked with the swift movement of Ghana-must go” bags by some politicians. Such bags as some analyst say, are a major source of corrupt practices as dubious persons seeks to bribe their way to avoid been checked in some sensitive areas or places in a corrupt society.

Since electronic banking started in all Nigeria banks, it has been a woe for civil servants; checks show that some staff in establishments such as the national boundary commission for instance, are yet to receive their salaries for the previous months as efforts to electrically transfer salaries into their account have failed according to Ibrahim, D. (2009).

“One bank will tell you it has transferred your salaries but the supposed recipient bank will tell you it has not received anything leaving you even more confused”, says John, I. (2009). Olekah, J. (2009) while acknowledging the initial hiccups that dogged the system, advises stakeholders against being discouraged as such “teething problems” are normal.

James, A. (2009) a banker reported to vanguard annual report that “we should not destroy electronic-banking by looking at the negative aspects, we must strive towards perfecting it”. James, A. (2009) also says that the volume of data generated by the Government ministry Agencies is much making it a bit difficult for banks to cope, Mathew S. (2009) a worker says in his report to vanguard annual report on banks and cards that government should have done its home work “very well” before introducing the system, “they plugged us into a system they were not prepared for and the result is untold hardship visited on innocent people”.

At this juncture, is good to know what e-banking is all about.

According to Anyawaokoro, M. (1999). Electronic banking is defined as the application of computer technology to banking especially the payment (deposit transfer) aspects of banking. He also defined electronic banking as a system of banking with an electronic communication network which permits on-line processing of the same day credit and debit transfers of funds between member institutions of a clearing system.

According to Clive, W. (2007) in his Academic dictionary of banking, electronic banking is defined as a form of banking in which funds are transferred through an exchange of electronic signals between financial institutions, rather than an exchange of cash, cheques or other negotiable instruments.

According to Omotayo, G. (2007) defines electronic banking as a system in which funds are moved between different accounts using computerized on line/real time systems without the use of written cheques.

According to Edit, O. (2008) in international Journal of investment and finance, electronic banking is defined as a system by which transactions are settled electronically with the use of electronic gadgets such as ATMs, POS terminals, GSM phones, and V-cards e.t.c. handled by e-holders, bank customers, and stake holders.


1.2 Statement of Problems

As earlier pointed out, there is delay in payment of cheques which lead to the adoption of electronic banking system. Adoption of electronic banking which suppose to ease banking transactions rather resulted to woes to customer. Most people complain of time wasted in banks. This occurs when there is power failure in banks resulting to slow down in operation.

Another problem that emerged was that banks do not have information backup to fall back on should there be any computer break down.

In investing in electronic banking, the country will need a large amount of financial resources in computer technology, obviously, the resource is in short supply in Nigeria, couple with high level of poverty. For an efficient functioning of electronic payment system, there must be availability of infrastructural facilities such as electricity and telecommunication network, however, power supply fluctuates and there is still constant failure links in networks.

Since early 2000s banks have been developing and introducing payment cards for their customers as well as deploy ATM’s cards. Usage was however low due to lack of interconnectivity i.e. switching platform to interconnect the ATM’s for card holders.


1.3 Objectives of the Study

This research work intends to assess the extent of electronic payment in banking activities as well as identify the various types of electronic banking.

The researcher will also evaluate the major problems associated with the development of electronic banking system in Nigeria as well as evaluate possible solutions to these problems.

The effect of electronic banking on profitability of banks will also be assessed. There are different types of electronic banking used in Nigeria banks; the researcher will like to evaluate the impact of these e-payment systems on banking industry and also assess the impact of electronic banking in Nigeria economy.


1.4 Research Question

In order to get information from respondents the following questions where formulated:

  1. What are the various types of electronic payment and the extent of electronic payment in banking activities?
  2. In what extent can e-banking improve or enhance banking services?
  3. What are the major problems associated with the development of electronic banking system in Nigerian?
  4. What are the solutions to the problems associated with the development of e-banking?
  5. What extent has e-payment affected banking activities?

1.5 Research Hypothesis

  • Ho: E-banking has no economic implications in Nigeria.
  • Ha: E-banking has an economic implications in Nigeria.

1.6 Significance of the Study

Electronic banking in our economy today is a welcome development and also its impacts in the society are over-whelming, so this research is significant in so many ways.

  1. It will expose the strength and weakness of electronic banking.
  2. It will motivate banks and other economic agents to computerize their services.
  3. Knowledge in the area of electronic banking will be advanced.
  4. Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.

1.7 Scope of Study

This research is on economic implication of electronic banking in Nigeria banks and also the various forms of payment and electronic systems used by banks. The researcher will base this work on the entire deposit money banks in Nigeria but to Diamond Bank in particular.


1.8 Limitation of Study

Time is a major factor to the researcher as research of this kind requires enough time in gathering of data, but it was not given to carryout the research, distribution, collection and analysis of questionnaire.

Also the school system has made it difficult for student to go out in search for information by not granting exeat for student. Some banks hud information from students who desires such information in other to maintain the banks secrecy thereby making it difficult for students to gather information for their research.

Finally, finance was infact the most limited factor, in spite of this the researcher have to travel out to the sampled organization to interview some of the managers and supervisors.


1.9 Definition of Terms

Electronic Banking

Electronic banking has been defined by Shahriari (2014) as the automated delivery of new and traditional banking products and services directly to customers through electronic and interactive communication channels.
Quality Service: This is a comparison of perceived expectations of a service with perceived performance.


1.10 Organization of the Studies

The study is categorized into five chapters. The first chapter presents the background of the study, statement of the problem, objective of the study, research questions and hypothesis, the significance of the study, scope/limitations of the study, and definition of terms. The chapter two covers the review of literature with emphasis on conceptual framework, theoretical framework, and empirical review. Likewise, the chapter three which is the research methodology, specifically covers the research design, population of the study, sample size determination, sample size, and selection technique and procedure, research instrument and administration, method of data collection, method of data analysis, validity and reliability of the study, and ethical consideration. The second to last chapter being the chapter four presents the data presentation and analysis, while the last chapter(chapter five) contains the summary, conclusion and recommendation.


Chapter Five


Summary, Recommendation and Conclusion

5.1 Introduction

This chapter summarizes the findings on the economic implications of electronic banking in Nigerian banks using Diamond Bank as a case study. The chapter consists of summary of the study, conclusions, and recommendations.


5.2 Summary of Finding

The introduction of electronic banking in Nigeria has a strong influence on the development of the payment system in particular and the banking system in general. However, the introduction of the system, involves commitment of huge amount of financial resources on computer technology and telecommunication facilities, computer technology is a primary requirement for the proper functioning of the electronic monetary transfer system (EMTS)/electronic banking.

The use of computer in payment system would not reduce the importance of branch banking in Nigeria or reduce customer’s confidence on the banking industry, from responses obtained from staff of the bank studied; the introduction of electronic banking has rather increased customers loyalty to banks in general.

The major problems hindering the effective operation of electronic banking in Nigeria are infrastructural deficiencies such as erratic power supply, lack of government support and high charge on payment terminals (POS, ATMS) e.t.c. These problems are only peculiar to Nigeria as it is known that in developed countries issues like power failure or failure links are not in existence.

However, the introduction of electronic Banking System has also contributed significantly to bank income by way of fee or changes gotten from these services.


5.3 Conclusion

The Nigeria system is as old as the banking industry; this dynamism is manifested by the nature and quality of payment products paraded in the system. These products range from common paper money, cheque, cash to electronic payment Products such as Automated teller machine (ATM), SMARTCARD telephone Banking, internet Banking etc with the introduction of these electronic payments products, it is expected that the volume and cost of processing cheque will be drastically reduced or eliminated.

The C.B.N other financial authorities and banks have a role to play in enhancing the system through effective banking and momentary policies, efficiency and stability are also ensured and promoted. Furthermore, to sustain the electronic payment system, certain strategic measures must be taken to reduce negative effects of the problems identified as obstacles to the smooth functioning of the system.


5.4 Recommendation

  1. Uninterrupted Power Supply: The government should endeavor to provide 24 hours uninterrupted power supply because without electricity these products cannot be boosted and effective, but in this country there is erratic power supply, therefore all banking industry should have a standby generator incase of power failure, in other to cover the deficiency of power failure.
  2. Government Supports: In smooth functioning of the payment system the government have the major role to play, in aspect of financing the payment system which require a lot of capital to maintain and also in the aspect of creating awareness the government should endeavor to inform the public about the benefits derived on the payment system.
    Provision of skilled manpower and computer Wizard in operation of the payment system
  3. Skilled manpower and computer wizard should be employed by every Bank, in other to stop, prevent fraudulent personal and hackers from manipulating the Banks data and stealing money from the Banks accounts.
  4. Provision and maintenance of public network, system such as telephone (Nitel) the availability of these basic infrastructures is fundamental to the efficient functioning of the payments system.
  5. Failure to maintain these infrastructures implies that the banks must be ready to provide their own communication networks and operate electronic generating sets to ensure reliable power supply.
  6. Collaboration Among Banks: Electronic payment system as a result of its huge financial involvement requires that banks must jointly set and manage a network system such as ATMs v-cards etc. collaboration helps to spread and reduce the initial costs of setting up the electronic Banking system.

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