Problems And Prospect Of Electronic Banking In Nigeria

Project and Seminar Material for Accountancy / Accounting

Problems And Prospect Of Electronic Banking In Nigeria


This research work is an attempt to find out the “problem and prospects of electronic banking in Nigeria”. The research geared toward explaining what Electronic Banking is all about and when it was introduce into Nigeria. The research also explained the services and the features of electronic Banking in Nigeria. Though some of the information is between the bankers and their customers, the researcher was able to finally outline some of those problems and challenges associated with electronic banking, the information contained in this research will educate a lot of ignorant citizens, concerning how they can transact business with their bankers or their customers through electronic device effectively without fear or prejudice.

Chapter One


1.1 Background of the Study

Financial institutions have been early adopters of smart card and credit cards technology, in the system and more recently, the launching of internet banking have transformed the world into a global village linked with electronic impulses. The idea or when the Apex Bank of Nigeria (Central Bank of Nigeria) gave the approval to all states. Trust Bank Limited to issue a financial product known as the ESCA an electronic purse to the public. Later on, Diamond Bank Limited, introduced a parallel product know as Diamond pay card. In February 1998 the smart card received a boost, when 19 licensed banks floated a smart card company. Although a lot of research works have been done on the prospects and challenges of information. Technologies in the banking industry, these research works are broad based (E-banking). Opera etal, (2010), posits that, modern banks now realize that only those that overhaul their payment services delivery and operations are likely to survive and prosper in the 21st century. Connel and Saleh (2004) are of the view that, due to pressure of globalization, consolidation, privatization, deregulation and rapidly changing technology, in order to properly place themselves in favorable positions for competitions and be one of those corporations, to be reckoned with in the new century, banks are making use of internet to executes mobile banking, this developed from bringing personal computer (PCS) together to form local and wide area network through client/server technology.

Many banks have installed modern computer interconnectivity that would enable them achieve communications of data and multimedia over internets, intranets and extranets. They also realize that they have to achieve not only management staff, wide computer literacy but what could be called information literacy i.e. knowing how to locate, analysis, store and use information. All staff and managers in a modern bank need to be able to search and gather data from several types of sources, analyze them, select relevant ones and organize them in such a manner to allow them make decisions based on the organized data, banks future realizes that the banking of nowadays requires more of electronic banking and shuffling and other banking transaction, instead of paper. In other words, paper base transactions are now being replaced by electronic based transaction e.g. the internet. Whether a bank would be successful or not depend on the extent to which it is investing on IT and using it in an innovative manner. This area has been tipped to be a major competitive ground for banks that are operating in the post-consolidation era. Often times scholars tend to ask questions like;

  1. What are the major issues needed to be mastered by Nigerian banks in order to compete with the rest of the world?
  2. What are the major developments and challenges in the Nigerian banking environment that are affecting the growth of electronic banking?

These are some of the questions that the researcher intend to addressed in the course of this study, “problems and prospect of electronic banking in Nigeria”.

1.2 Statement of the Problem

Electronic banking is a driving force that is changing the landscape of the banking environment fundamentally towards a more competitive industry. Electronic banking has blurred the boundaries between different financial institutions, enabled new financial products and services, and made existing financial services available in different package, (Anderson S. 2000), but the influences of electronic banking go far beyond this.

The developments in electronic banking together with other financial innovativeness are constantly bringing new challenges to finance theory and changing people’s understanding of the financial system. It is not surprising that in the application of electronic banking in Nigeria, the financial institutions have to face its problems:-

  1. Communication over the internet is insecure and often congested.
  2. The financial institutions would also have to contend with other internet challenges including insecurity, quality of services and some aberrations in electronic finance.
  3. Besides, the existing banking environment also possesses some challenges to the smooth operations of electronic banking in Nigeria. Some of these operational challenges includes. Epileptic power supply, dominance of cash transaction in the economy, low level of awareness among Nigerian etc. The thrust of this research work shall be to examine the trend of electronic banking in Nigeria and a critical examination of the challenges, (Danwa P. A 1991)

1.3 The Objective of the Study

The main focus of this project will be on the problems and challenges, which the introduction of electronic money scheme throws up, adequate attention will also be devoted to prospects or control mechanism that has put in place to ensure effective management of electronic product vis-à-vis likely impact on the economy as a whole.Some of the sub objectives which this research work aims to achieve are as follows:-

  1. To investigate the impact of Electronic banking on the efficiency and reliability of banks services.
  2. To examine the impact of electronic banking on the operations of financial institutions with specific reference to the organization understudy.
  3. To examine the relationship between Electronic banking and bank-customer relationship.
  4. To test the efficacy of Electronic banking in enhancing the fortune of the banks.
  5. To proffer solution/recommendations where necessary.

1.4 Research Hypotheses

The following hypotheses are formulated by the researcher for the smooth research of the above topic:

Ho: Electronic banking does not enhances banks profitability and efficiency.
H1: Electronic banking do enhances banks profitability and efficiency.

Ho: Electronic banking does not improves bank-customer relationship.
H2: Electronic banking does not improves bank-customer relationship.

1.5 Research Questions

The researcher intend to provide answers to the following questions in the course of this study:

  1. What are the prospects of electronic banking in first bank plc in Nigeria?
  2. What are the impacts of electronic banking on the operation of financial institutions with specific reference to the organization understudy?
  3. To what extend has electronic banking affect customer and their relationship with the organization?

1.5 Significance of the Study

It is expected that at the end of this study the findings will be relevant to operators in the banking industry and other concerned individuals and organization’s adoption of electronic banking.

The research shall basically identify the technical and operational challenges facing electronic banking in Nigeria banking environment and suggests ways by which they could be tackled. The study is significance to lecturers in the sense that, the lecturer valuable time that would have been wasted in the process of compiling and processing students notes has been reduced as a result of the advent of E-banking system compared to when operating manually. It is also important to researchers and students because, it reduced the stress of consulting series of textbooks and travelling from place to place looking for information, thereby provides avenue for browsing, thus, make the work to be done at ease.

1.6 Scope and Limitation of the Study

The scope of this project work is restricted to only the banks and their customer in Nigeria and between a company or fir operating on electronic banking and their customers, the researcher encounters some limitations which limited the scope of the study;

Inadequate Time:

There is a limited for the researcher to work his project considering the short semester of the school.

Inadequate Respond:

Some bank does not disclose how they operate on electronic banking because it is a secret between them and their customer.


The researcher has limited money to carry out the research more effectively.

Inadequate Material:

Because the project is a new development the material for the project is limited.

1.7 Definition of Terms

Automated Teller Machine (ATM):

Gives customers’ easy access to his/her cash whenever he/she needs it (24 hours a day 7days a week).

Internet banking:

With a PC connected to the bank via the internet, the product empowers a customer to transact banking business when where and how he/she wants with little or no interaction with the bank physically.

Mobile Banking:

Offer customers the freedom of banking with mobile phone. The product keep a customer in touch with his/her finances all the time and anywhere.

Electronic Banking /E-Banking:

This refers to the use of computer and telecommunication to enable banking transactions to be done by telephone or computer.

Electronic Funds Transfer (EFT):

This involves transfer of money from one bank account to another by means of communication links.

Smart Cards:

Is a plastic card that contains a microprocessor that store and update information, typically used in performing financial transactions.


Is also known as electronic cash which refers to money or script which exchange only electronically. A good example of e-money is money transfer.

Bill Payment:

It refers to e-banking application whereby customer directs the financial institutions to transfer funds to the account of another person or business.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to evaluate the problems and prospects of electronic banking in Nigeria.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges and problems of electronic banking in Nigeria.

5.2 Summary

It is crystal clear that the adoption electronic banking has influenced the content and quality of banking operations in Nigeria. The study investigates the problems and challenges of electronic banking on customers’ satisfaction. It also review extant literatures that have expounded the existing factors that affects electronic banking system in Nigeria, how they have been managed, and its relative effect on profitability and performance of banks in Nigeria.

The study’s research design was the survey design and the population used was the entire staffs of First Bank of Nigeria Plc, Zenith Bank Plc, United Bank for Africa Plc, Diamond Bank Plc all in Nigeria. A simple random sampling technique was employed to get 200 respondents. Simple percentage was used to analyze the data, while chi-square was used to test the hypothesis.

5.3 Conclusion

Electronic banking is a welcomed development in Nigerian banking system. Although electronic banking reduces bank robbery activities, and safeguards customers. It also eliminates reconciliation challenges that comes with manual transaction processing and promotes operational efficiency. There are some challenges which pose threat to electronic banking. However, a lot of prospects have been recorded in Nigeria banking system through electronic banking which should be encouraged. Observation on this study shows that Electronic Banking when properly adopted will contribute substantially to the increase of accessibility and profitability of bank customer. It was revealed from the findings that high literacy level negatively impact on the electronic banking in Nigeria electronic fraud and infrastructural deficiency are a major constraint to internet banking in Nigeria. The study further revealed that power cuts during transaction send wrong signals about electronic banking and poor regulation of the e-banking structures is a limitation of banking in Nigeria. A significant portion of the population are of the opinion that electronic banking has increased banking cost and charges and that customers have been compelled against their wish to use ATM in a bid to imbibe e-banking culture. Furthermore, some banks have lost customers due to poor implementation of electronic banking. The study also shows that nevertheless electronic banking has helped to increase customer’s satisfaction especially the corporate ones. There is a significant improvement in general banking services as a result of the introduction of electronic banking, while the level of profit made by banks can be attributed partly to the introduction of electronic banking. Electronic banking has help to increase banks market share.

5.4 Recommendations

Having identified how crucial electronic banking is to an organization and its effectiveness, organizations are therefore encouraged to utilize electronic banking to the fullest advantage in order to enhance their effectiveness. With regards to the above findings, the following recommendations were made:

  1. The migration of our normal banking system to electronic banking system would require some reform and a lot of effort and sensitization especially for low income customers, who are currently deeply rooted in using cash and see it as a convenient and easy way of receiving and making payments any point in time.
  2. Critical infrastructure like power; security and telecommunication should be strengthened to ensure the application of electronic banking in Nigeria and optimum satisfaction on the part of customers.
  3. The organization should always train and retrain their staff to ensure that they keep up with the dynamism of information technology.
  4. Banks should always ensure that ICT serves core-banking activities not core banking fitting into IT legacy. This can be achieved by outsourcing ICT to a third party, however, this as to be pursued within caution.
  5. Every Banks need to design proper customer identification and screening techniques, develop audit trails, and conduct periodic compliance reviews, frame policies and procedures to spot and report suspicious activities in electronic internet transactions to NDLEA and CBN.

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