A Study On The Factors Affecting E-Commerce Adoption In Nigerian Banks
This study’s focuses on “Factors Affecting the Adoption of Electronic Commerce: Evidence from Nigerian Banks”. There are three reasons for concentrating on this topic: 1) Limited research on ecommerce in developing countries particularly in Africa, 2) Nigeria with a population of 135 million is a potentially lucrative market for ecommerce services, and 3) The banking sector has been most successful with ecommerce in Nigeria. Since ecommerce is still a relatively new concept in Nigeria despite, innovation diffusion theory was used as a foundation for the study. Drawing from technological innovation literature, an integrated model of ecommerce adoption in Nigerian banks was developed. Nine variables affecting the adoption of ecommerce were identified. They are: top management support, organizational competency, IT capability, perceived benefits, perceived compatibility, perceived complexity, supporting industries, market, and government e-readiness. An empirical study of banks that were using ecommerce was conducted in order to answer the research questions. The commercial banks in Nigeria make up the population of this research. Banks that use ecommerce were identified by examining their websites; after which managers and executives were approached and asked to participate in the research. Data was collected by means of survey questionnaires and semi-structured interview. The rank of the factors affecting adoption of ecommerce (in descending order of impacts) is: Perceived complexity, Perceived benefits, Organizational competence, Perceived compatibility, Supporting industries e-readiness, Management support, Market e-readiness, IT capability, and Government e-readiness.
1.1 Background of the Study
Advances in information and communication technologies and the emergence of the internet have revolutionized business activities enabling new ways of conducting business referred to as electronic commerce (Zwass 2003; Turban, King, Lee, & Viehland, 2004). Electronic commerce (ecommerce) describes the process of buying, selling, transferring, or exchanging products, services, and/or information through computer networks, principally the Internet (Turban et al., 2004). Electronic commerce can also be defined as “the sharing of business information, maintaining of business relationships, and conducting of business transactions by means of telecommunications networks” (Zwass, 2003).
Electronic commerce activities include the inter-organizational processes of market-based sell-buy relationships and collaboration (known as business-to-business, or B2B, commerce) and consumer-oriented activities (business-to-consumer, i.e., B2C, and consumer-to-consumer, or C2C), as well as the intra-organizational processes that support them (Zwass, 2003). Electronic commerce as a way of doing business has significant advantages; organizations are embracing e-commerce as a means of expanding markets, improving customer service, reducing costs, and enhancing productivity (Wenninger, 1999). Efficiencies are experienced in marketing and advertising; ecommerce makes disintermediation possible, eliminating the middleman (Turban et al., 2004). Other efficiencies include reduced inventory and round the clock access at no additional cost. Ecommerce enables higher customization (Choi & Whinston, 2000) allowing organizations to improve customer service. A vital benefit of ecommerce is access to global markets which enables businesses to expand their reach. The Internet allows for unconstrained awareness, visibility and opportunity for an organization to promote its products and services (Senn, 2000).
Despite the global reach of e-commerce, not all countries have taken advantage of or benefited from e-commerce. There is a big gap in Internet and ecommerce adoption between the developed and developing countries (Licker & Motts, 2000); thus creating a digital divide. Digital divide is defined as the “differential capabilities of entire social (or regional) groups to access and utilize electronic forms of knowledge” (Straub, 2003), segregating the ‘haves’ from the ‘have-nots’ in the information society.
Mbarika, Okoli, Byrd and Datta (2005) state that much of the discussion on digital divide has focused on that which occurs among different social groups; they note the existence of international digital divide between countries. According to them this digital divide is abundantly clear when comparing Sub-Saharan Africa with countries of the west like US or UK. One area where international digital divide is evident is in electronic commerce, one only needs to examine the major ecommerce sites to detect the inequality. The main obstacles that prevent developing countries from leveraging the internet are lack of adequate communication infrastructure, technical know-how, and information processing about the economy and environment. The lack of adequate banking infrastructure is also considered as one of the problems faced by developing countries in building ecommerce solutions (Khalfan & Akbar, 2006)
1.2 Overview of Ecommerce in Nigeria
Internet usage in Nigeria is still relatively low compared to developed countries and ecommerce is still in an elementary stage, notwithstanding there is growing awareness in of the benefits and opportunities offered by ecommerce amongst Nigerians (Bamodu, 2005).
Ecommerce activity in Nigeria is steadily growing as a result of vast improvements in telecommunication services.
The Telecommunications Industry has experienced exponential growth in the last four years with about 20 million telephone lines connected to date (Ndukwe, 2006). Alongside this growth, there has been an increase in the number of private telephone operators offering fixed wireless service with data transfer capabilities leading to an increasing number of people with internet access at home in the major cities and in some rural areas. Moreover, with the reduction in tariffs and further cuts expected, telecommunications service will become more affordable and essential to many Nigerians. The recent advances in the telecoms market, and the explosion in the number of subscribers, demonstrate the potential market for information communication technology services generally in Nigeria (Ndukwe, 2006). Given Nigeria’s sizable population it is a potentially lucrative market for electronic commerce services.
According to the Economist Intelligence Unit (EIU, 2006), the stock of personal computers (PCs) per 1,000 persons grew from 10.66 in 2004 to 11.09 in 2005. The greatest obstacle to the growth of e-commerce is low PC penetration. However affordable Asian technologies and falling microchip prices have fuelled a market in cloned as well as branded PCs.
Electronic banking is one area of ecommerce that has proven successful in Nigeria (EIU, 2006). Nigerian banks are increasingly seeking to provide general banking facilities online. Internet banking is slowly and steadily gaining ground, banks have set up websites which publish corporate information and allow customers to carry out some form of transaction – limited in most cases. Despite the growing focus on internet banking not all banks are moving at the same pace, some still have only informational websites. Given that the banks exist in the same operational environments, some other factors other than the often cited country context must be responsible for the difference in attitude to electronic commerce among banks.
The initial advances that have been made in electronic banking is a step in the right direction and could be a motivator in the adoption of ecommerce services amongst Nigerians (EIU, 2006).
1.3 Problem Statement
Implementing successful e-commerce service is not as easy as most people might think. Many obstacles exist and they all revolve around three major pieces of the electronic commerce puzzle-money, technology and people. Hence, there is limited research on e-commerce in developing countries particularly in Africa. Sometimes the cost of avoiding e-commerce is greater than the cost of initiating it. Web technology is still developing. Despite the global reach of e-commerce, not all country has taken advantage of ecommerce. There is a big gap in the internet and e-commerce adoption between the developed and developing country, thus creating a digital divide.
Nigeria with a population of about l5Omillionpeople is a potentially lucrative market for e-commerce services. Nigeria being one the few nations in the world blessed with abundant mineral wealth, and entrepreneurial population and productive agricultural base. By virtue of size, population location is well positioned to the economic activities in Africa. E-commerce is an opportunity to use private sector to drive economic development.
The banking sector has been most successful with e-commerce in Nigeria. The main obstacles that prevent developing countries from leveraging the interest are lack of adequate communication infrastructure, technical know-how and information processing about the economy and the environment. The lack of adequate banking infrastructure is also considered as one of the problems faced by developing countries in building economic solution.
1.4 Research Question
The research questions of this study relate to the factors that influence the adoption and implementation of ecommerce in developing counties with particular reference to the Nigerian banking industry. The specific questions to be examined are:
- What factors determine the likelihood of adoption of ecommerce in Nigerian banks?
- What is the ecommerce adoption behavior of banks and the factors that could drive or inhibit the wide adoption and use of electronic commerce in the Nigerian Banking Industry?
- What is the importance of such factors on the decision to adopt and use ecommerce applications in Nigerian banks?
1.5 Objectives of the Study
- To examine the factors that determine the likelihood of adoption of ecommerce in Nigerian banks.
- To understand the ecommerce adoption behavior of banks and the factors that could drive or inhibit the wide adoption and use of electronic commerce in the Nigerian Banking Industry.
- To rank the importance of such factors on the decision to adopt and use ecommerce applications in Nigerian banks.
1.6 Scope of the Study
The study is carried out on the factors affecting e-commerce adoption in Nigerian banks. The study is limited to twenty-five commercial banks.
1.7 Significance of the Study
The following are the significance of this study:
- The outcome of this study will educate bank managers and the general public on the role of E-commerce in reducing the operational cost of business organizations.
- This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area
Conclusion and Recommendation
This study is an attempt to identify the factors that determine the likelihood of adoption of ecommerce in Nigerian banks. The objectives of the study was to understand the ecommerce adoption behavior of banks and the factors that could drive or inhibit the use of ecommerce in the Nigerian banking industry; and to rank the importance of such factors on the decision to adopt and use ecommerce.
Results from our statistical analysis provide a picture of the adoption of ecommerce in the Nigerian banking sector. Generally, the results support all the hypotheses but one; this is consistent with previous research in ecommerce adoption (Molla & Licker, 2005; Grandon & Pearson, 2004). Adopters of ecommerce were different from non-adopters in terms of top management support, organizational competence, and IT capability.
A number of conclusions can be drawn from these results. Firstly, banks with a strong support and commitment to ecommerce from top management are more likely to adopt ecommerce. Secondly, banks that have the requisite IT and business resources (infrastructure and skills) for ecommerce adoption stand a better chance at adopting ecommerce. Thirdly, banks that have sound IT infrastructure in place are in a better position to adopt ecommerce.
The data analysis also showed that ecommerce characteristics have a major effect on the decision to adopt. Banks with more positive attitude towards ecommerce characteristics are more likely to adopt ecommerce. This result provides support for Roger’s innovation theory. Three essential attributes of innovation that affect the formation of attitude are benefits, compatibility, and complexity. If ecommerce is viewed as better than the existing method of operations, consistent with the needs of the adopting bank, and is easy to use, then there is a greater chance that a favorable attitude towards ecommerce will be formed.
External factors also influence the adoption of ecommerce. A highly developed supporting industry will improve the adoption of ecommerce. The perception of the market banks operate in affects the decision to adopt. Adopters believe their customers and business partners are ready to do business on the internet while non-adopters think otherwise. The low level of government support did not stop adopters from adopting ecommerce; however, government can play a key role in the development of ecommerce in Nigeria by providing the necessary infrastructure.
The rank of the factors affecting adoption of ecommerce (in descending order of impacts) is: Perceived complexity, Perceived benefits, Organizational competence, Perceived compatibility, Supporting industries e-readiness, Management support, Market e-readiness, IT capability, and Government e-readines.
The main objectives were:
- To understand the ecommerce adoption behavior of banks and the factors that could drive or inhibit the wide adoption and use of electronic commerce in the Nigerian Banking Industry, and
- To rank the importance of such factors on the decision to adopt and use ecommerce applications in Nigerian banks.
These objectives have been achieved. This study focused on the business side perspective of the adoption of ecommerce. However one of the variables in the research suggest the existence of customers for ecommerce affects the wide adoption of ecommerce within the banking industry. Thus an area of further research is the adoption behavior of bank customers. Another area of future research is the replication of the study in other industries with modifications to suit the target industry. Such research could help in generalizations about ecommerce adoption in Nigeria.
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