ELECTRONIC BANKING AS AN AID
TO COMMERCIAL BANK OPERATIONS IN NIGERIA
(A CASE STUDY OF FIRST BANK
OF NIGERIA)
Abstract
This study examines critically Electronic Banking as
an Aid to Commercial Bank Operations in Nigeria, using first bank as a case
study. Electronic banking (e-banking) has brought about a revolution in the
functioning of banks as it offers major opportunities to banks and their
customers. This has made the transition to electronic banking a necessity for
banks in order to be viable. Despite its benefits, developing countries still
lag behind in the adoption of electronic banking. Due to emergence of global economy, e-business has
increasingly become a necessary component of business strategy and a strong
catalyst for economic development. E-banking has become popular because of its convenience and flexibility, and also
transaction related benefits like speed, efficiency, accessibility, etc. The
customers (respondents) perception is that e-banking provides convenience and flexible advantages. It also
provides transaction related benefits like easy transfer, speedy transaction, less cost and time
saving. The researcher used primary and secondary methods of data
collection to gather the needed data. The data obtained through questionnaires
were presented in tables and analyzed using the simple percentage. The findings
have also shown that factors which militate against successful effectiveness of
electronic banking on bank growth and developmentare: power supply fluctuates, slow down in operation and poor
network. The study recommends that Banks need to well
package and market E-banking Products and services effectively to customers to
close the seemingly knowledge gap that exists among the populace with regard to
the benefits that can be derived from the services.
Chapter
one
1.0
introduction
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. The Nigerian banking industry has
witnessed a lot of changes since the mid 1980s and this is reflected in the
increased volume and complexity of operations, increased innovations and
varieties in product and services delivery. These developments have not only
been technologically driven, but have influenced more technological advances.
Information technology, which is the foundation of modern electronic banking,
through desktop computers and terminals, provide tools for delivery of new
products and innovations characterized by Automated Teller Machines (ATM) and
Credit Cards. Information technology (IT), through electronic banking, is
rapidly changing how banking is done all over the world. E-service is becoming
more important, not only in the area of determination of success or failure of
electronic commerce (Yang, 2001:164), but also in the provision of customers
with superior experience with respect to the interactive flow of information.
However, technology has had remarkable influence on the growth of service
delivery options Bagozzi, M. (2002:27). According to (Dabhollear, 2000:19) in
his view claimed that when the customer is in direct contact with the
technology, there is a greater control such as with electronic banking.
However, in the absence of direct contact such as with telephone banking, it is
assumed that there is less perceived control by the customer during this transaction.
He suggests that direct contact with such technology gives the customer a
feeling of great control. He also goes on to say that electronic banking allows
customers to perform task at time and places convenient for them. (Ovia, 1997,
p.2) states that the new technology has created an unparallel wired economy,
transferring money from point to point using bits and bytes through satellite
transponders, fibre optic cables or regular telephone lines. The installation
of customer friendly technology, such as Automated Teller machines and internet
banking service, as a means of delivering traditional banking service, has
become common as a way of maintaining customer loyalty and increasing market
shares. This technology is used by banks to meet the competitive challenges
posed by online banks as well as a method of reducing the cost of producing
services that were once delivered exclusively by bank personnel (Joseph, C.
2007:76). Millions of Naira is being spent on information technology by bank,
making the use of electronic banking expensive, yet it is still suited in
Nigeria where transport, telecommunication and energy is inefficient and
ineffective, hampering the movement of goods and service. Imiefoh (2012:24)
sees electronic banking as an umbrella term for the process by which a customer
may perform banking transactions electronically without visiting a
brick-and-mortar institution. That is, automated delivery of new and
traditional banking products and services directly to customers through
electronic, interactive communication channels. E banking generally implies a
service that allows customers to use some form of computer to access
account-specific information and possibly conduct transactions from a remote
location like home or workplace, (Odulaja 2012:7). The willingness of banks to
take up efficiency seeking technology depends just as much on internal factors
like cost of adoption and ownership of infrastructure like telecommunication.
Tony, S. (2006:82) opined that service equality impact on customer satisfaction
which in turn affects the financial performance of the banks. Thus, customer
access electronic banking services using an intelligent electronic devices such
as a personal computer (PC), personal digital assistant (PDA), automated teller
machine (ATM), kiosk or touch tone telephone Auta (2010:17). Today, based on
the considerable economic benefit of electronic banking system in terms of
reduction of the cost and increase of banks profitability, increasing quality
of services to the customers, removing the temporal and spatial limitations and
development of bank activities and marketing, in most of the advance countries,
there are many experienced banks that extended their operation by electronic
methods by establishing independent banks, also they continued their current
activities and new banks also present their services to the customers via
electronic methods. Electronic banking is one of the great results of IT
communication revolution in the economic field. Electronic banking made a revolution
in the past commercial method and trend the focused mostly on speed and saving
time (Gudarzi2008:140). Before the emergence of modern banking system, banking
operation was manually done which lead to slowdown in settlement of
transactions. This manual system involves posting transaction from one lager to
another which human handles. Figures or counting of money which should be done
through computer or electronic machine were computed and counted manually which
were not up to 100% accurate thereby resulting to human error. Most banks then
use only one computer in carrying out transactions which ameliorate the
sluggish nature of banking transaction.
Electronic banking remains a strategic tool employed by banks to gain
competitive edge both within and outside the boundaries of Nigeria. According
to Kamokodi K. (2008:34), e-banking is important in six different areas:
1. Augmenting profit pool.
2. Enhancing operational
efficiency.
3. Customer management.
4. Distribution and reach.
5. Product innovation.
6. Efficient payment and
settlement.
The
concept of e-banking differs amongst scholars. This is due to the fact that
e-banking encompasses variety of services provided through electronic devices
and over the internet. It is the most recent delivery channel of banking services
which is used for both business-to-business and business-to-customer
transactions. According to Burr O. (1996:90), electronic banking is the
electronic connection between the bank and customer in order to prepare, manage
and control financial transactions. E-banking also refers to the use of
information and communication technology by banks to provide services and
manage customer relationship more quickly and most satisfactorily
(Charity-Commission, 2003). According to
Salehi and Alipour (2010:145)
who indicated that e-banking includes the systems that enable financial
customers, individuals or businesses, to access accounts, transact business, or
obtain information on financial products and services through a public or
mobile phone. With e-banking, transaction costs would be low when compared to
the cost of banking through conventional methods. The
business environment is not only dynamic and discontinuous but also turbulent
which has made the benchmark for services quality to rise. This has led to
intense competition among banks to attract new customers and retain existing
ones. Banks are increasing deploying IT as a means of generating insights into
customer’s behavioral pattern and preferences in response to the demand for
quick, efficient and reliable service. This is done through automated teller
machine (ATM), card processing, bill presentment and payment, software
development, call center operations and network management.
Today, we
cannot think about the success of the banking industry without information and
communication technology as it has enlarged the role of banking sector in the
economy. Financial transaction and payment can be processed quickly and easily.
Banks with the latest technology and techniques are more successful in the
competitive financial market since they are able to generate more and more
business resulting in the greater profitability. The Easiness of transacting
economic substances as well as a safer and quicker access to funds, among other
factors, has placed e-banking system on a more glorified pace than cash-based
system, Obiano W. (2009:78).
1.1
THE
STATEMENT OF THE PROBLEM
The
E-banking is a global phenomenon which no nation can opt away from. The use of technology forms the backbone
for better results in banking. However, the problem
of transparency of the system and poor dissemination of accurate financial
information and protection of consumers remain an issue on point. Sharp
practices are noticed by the customers many a time especially when financial
information are electronically generated by the banking, where the accuracy and
ability to verify same by the customers might be difficult. Since the
inception of the use of electronic banking product in the late 1980s, banks
have not made their presence felt much and this is arising as a result of
problems associated with the use of electronic banking which includes:
1.
Cost of
ownership and Adoption:– Cost of ownership or acquiring electronic banking
by the banks tend to e very expensive, as it entails the acquisition of
computers and telecommunication gadgets which are usually brought from
overseas, making the bank spend more on the shipment and installation of these
gadgets by the experts, as a result, most banks could not afford E-banking.
2.
Poor
Orientation: – The lack of knowledge about the use of the computer by
employees can also be said, as most bank staffs are not computer literate which
serves as a perquisite for e-banking operation.
3.
Lack of
Infrastructure: – The poor condition of power supply in the country as well
as the unavailability of property installed telecommunication system are said
to be great setbacks in the use of electronic banking.
1.2PURPOSE OF THE
STUDY
The
purpose of this study is to determine the advance of electronic banking as an aid to commercial bank
operations in Nigeria, and on the growth of the
economy, profitability and satisfaction of the customers. It is hope that such
an attempt provides ground for more attentions on functional aspects of service
quality in e-banking approach by bank managements.
1.3 OBJECTIVE OF THE STUDY
1.
To
access the impact of electronic banking as an aid to commercial bank operations
in Nigeria banking industry.
2.
To
identify the major problems associated with electronic banking system in
Nigeria banking industry.
3.
To
examine the benefit of electronic banking on profitability of commercial bank
operations in Nigeria.
4.
To
access the masses perception toward the use of electronic banking in Nigeria
commercial bank operations.
1.4 RESEARCH QUESTIONS
1. What are the impacts of electronic banking as an
aid to commercial bank operations in Nigeria banking industry?
2. What are the major problems associated with
electronic banking system in Nigeria banking industry?
3. What are the benefits of electronic banking on
profitability of commercial bank operations in Nigeria?
4. What are the masses perceptions toward the use of
electronic banking in Nigeria commercial bank operations?
1.5 SIGNIFICANCE OF THE STUDY
In this research, the significance of this study is to
bring together the various ways and facts as regards to subject matter, against
this back drop, it is anticipated that the study will be of immensely help to
banking industries and the customers to know the benefit of E-banking.
Electronic banking in our economy today is a welcome development and also its
impact in the society is over-whelming. It will motivate banks and other
economy sectors to computerize their services. It will provide knowledge in the
area of electronic banking that will advance the customers understanding. It
can also serve many purposes in the following ways.
1. For
customers: – Increased convenience, reduction in risk of cash related
crimes, access to credit and cheap access to banking service.
2. For
Corporations: – Better access to capital due to shorter payment processing
times, increased efficiency of payment process and accounting, reduced revenue
leakage and efficiency in treasury management.
3. For
Government:- Increased tax collection, increased economic growth.
4. For Banks:
– Efficiency through electronic payment processing, reduced cost of operation
and increased banking penetration.
The study will also be of great important to any
student who will want to go for further research on this topic.
1.6 SCOPE OF THE STUDY
This research study is limited to first bank Plc,
alone where the researcher wants to find out empiricallyelectronic banking as an aid to commercial bank operations in
Nigeria.
1.7
LIMITATION OF THE STUDY
A study of this nature is bound to experience certain
problems as such the constraints imposed on the research include:
A. time: a study of this nature needs relatively long
time during which information for accurate or at least near accurate inference
could be drawn. the period of the study was short, time posed as constraints to
the research.
B. cost: the research would have extended the survey to
other area at the empirical level, but limitation as included cost of
transportation to the source of material and the cost of time setting of the
already completed work.
C. lack of cooperation: many of the respondents are
usually aggressive on issue that border cooperation among the respondents
border.
1.8 DEFINITION OF TERMS
(ATM): – Automated Teller Machine.
Electronic banking
(E-banking): – Is define
as a system by which transaction are settle electronically with the use of
electronic gadgets such as ATM, POS terminals, GSM phone and V-cards according
to Edit O. (2008).
Computers: – This is a general purpose electronic device
that can be programmed to carryout asset of algorithm or logical operations
automatically.
Economic growth: – Is the increase in market value of the
goods and services produced by an economy over time.
Modern: – Is a loosely concept delineating a number
of societal, economic and ideological feature that contrast with pre-modern
time or society.
Information and communication
technology (ICT):- This is
an umbrella term that is include any communication device or application,
encompassing: radio, television, cellular phones, computer and network hardware
and software satellite system and soon, as well as the various services and
application associated with them.