APPRAISAL OF THE ECONOMIC IMPLICATION OF ELECTRONIC BANKING IN NIGERIA BANKS
(A CASE STUDY OF DIAMOND BANK)
CHAPTER ONE
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:
What
are the various types of electronic payment and the extent of electronic
payment in banking activities?
In
what extent can e-banking improve or enhance banking services?
What
are the major problems associated with the development of electronic banking
system in Nigerian?
What
are the solutions to the problems associated with the development of e-banking?
What extent has e-payment affected banking activities?
The research shall attempt to find answers to these
questions in the next chapter.
1.5 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.
It will expose the strength and weakness of
electronic banking.
It will motivate banks and
other economic agents to computerize their services.
Knowledge
in the area of electronic banking will be advanced.
Apart from contributing to
the knowledge of electronic banking, it forms a reference for future research
in this area.
1.6 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.
1.7 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.
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
Electronic
banking have long been recognized to play an important role in economic
development on the basis of their ability to create liquidity in the economy
through financial intermediation between savers and borrowers. It also offers
financial services and products that accelerate settlement of transactions and
in the process reduce cash intensity in the financial system, encourage banking
culture, and catalyses economic growth.
However,
for the effective functioning of the financial system, the payment systems must
be safe and efficient; otherwise they can be a channel for the transmission of
disturbances from one part of the economy or financial system to others. This
is why central bank have been active in promoting sound and efficient payments
system and in seeking the means to reduce risks associated with the system.
Nigeria historically operated a
cash-driven economy particularly in the consumer sector, however the system has
witnessed improvements over the years, and particular in recent times has moved
from its rudimentary level of the early years of banking business to the
current state of sophistication comparable to other economies at the same level
of development.
One important reason for financial
liberalization and deregulation is the need to develop a good payment system
which promotes an appropriate mechanism for efficiency in mobilizing and
allocating financial resources in the economy. The payment system occupies an
important place in the development of a country economy, infact the level of
development of a countries payment system is a reflection of the state or
condition of the countries economy.
Nigeria payment
system is paper-based and this accounts for the high level of cash in the
economy (cash outside bank), the concept “payment system” has different
meanings among writers the definition range from a more simple to a more
complex definition.
According to Report on the survey of
developments in the e-payments and services products of banks and other
financial institutions in Nigeria
payment system is defined as a system which consists of net works which link
members, the switches for routing message and rules and procedures for the use
of its infrastructure.
According to Anyanwaokoro M. (1999), in
theory and policy of money and banking, payment system is defined as a system
where settlement of financial obligations are done by the use of credit cards
or even pressing some bottoms that transfer the amount in their bank to the
account of another person through the computer.
According
to element of banking by Orjih, J. (1999), payment system is defined as a which
consists of different methods of payments which are cheques, credit cards,
Bankers drafts, standing order, documentary credits swift etc for the
settlement of transactions.
2.2 ELECTRONIC BANKING
It
is a fact that today a good number of banks cannot use their IT (information technology)
infrastructure to adequately deal with their immediate information
requirements. Do such banks qualify to be called e-banks?
E-banking
is about using the infrastructure of the digital age to create opportunities
both local and global. E-banking enables the dramatic covering of transaction
cost and the creation of new types of banking opportunities that address the
barriers of time and distance. Banking opportunities are local global and
immediate in E-banking
The
benefit of electronic banking comprises a broad range of functions which
includes;
Electronic
mail (email) improves communication between individuals, external parties and between banks. The availability of
online information provides bankers and customers with a powerful vehicle for
research, banks can provide information and services on line, which customer can pay for and receive. Banking
processes are made more efficient and cost effective by integrating other
aspects of banking operations such as treasure management and financial control.
If banking functions does
not require physical interaction it may drive the benefits of electronic
banking.
WHERE SHOULD THE REAL E-BANKING BE?
First
of all the bank must fully understand and appreciate the fact that the banking
industry now exist, in a global
village. It must therefore strive to provide local and global banking services
using the infrastructure of the global village. Most current E-banking
applications use the internet, the advantages of on line banking are in
providing convenience and flexibility for customers, lets take a look at some.
Online
banking allows customers to get current account balances at any time. Customers
do not need to wonder whether a check of has cleared or a deposite has been
posted at the click of a button, customers can easily check the status of their
current savings and money-market accounts through online banking. Banks can
provider immediate account enquires or statements online for customers.
Online
banking gives the ability to pay bills electronically, customers can also
download account transactions on line, it should be easy to import the
transactions directly into typical PC programs at home or office, the transfer
of money between accounts is another powerful application of online banking,
online banking provides flexibility by allowing the customer to assess his
finances from any part of the globe.
THE INTERNET
Most
of the applications mentioned involved the use of internet, the internet is the
infrastructure for the current age, but hold it? E-banking is more than just
internet banking in the still evolving e-climate in the economy, it involves
using the net to exploit new opportunities by transforming products and markets
and business processes.
E-banking
also means developing new relationship with customers, regulatory authorities’,
suppliers and banking partners with digital age tools, for example, it requires
all understanding. Customer/bank relationships will be more personalized resulting
in novel modes of transaction processing and services delivery.
E-banking is essentially
about banks using new age methods and tools to expand into new banking markets
and grow. Creating a corporate online presence for your bank should be more
than just buildings a website. It should be about building a web business for
your bank, to do this effectively the people in charge, i.e. the CEOs not just
IT directors and managers must have a deep knowledge of what E-banking culture
demands.
Banks
can only apply IT effectively if management appreciation exists, unfortunately,
many managers who claim to appreciate IT cannot use IT, and can you use what
you don’t have?
E-business
IT
today, E-business, E-commerce is not about routine information management or
automation, it is about being these unique tools to create opportunities,
create new markets, new processes and growth or increase the creation of e-
wealth.
The
E-banking must monitor the environment local and global with the aim of
understanding and mastering its environment. E-banking thus involves
collaboration (local and international) on payments systems, cashless
transactions, digital cash and other electronic based projects.
It
can be seen that other immense potentials can only be realized if bank
management and staff, not just the systems staff are sufficiently literate and
aware, and presently the banking industry still has a lot to do in terms of
training staff. The speed of change together with the need for proper
orientation for the e-world makes training even more of a necessity.
For
E-banking to be effective, an area that must be addressed is security, for any
IT based service associated with e-banking increases the need for security, in
e-banking the core security areas should be addressed. A key concern is that of
privacy, you cannot expect to do business on the net without addressing the
piracy concerns of people you do
business with. Do you have a privacy policy? No customer wants to click away to
a negative balance. Security in online banking is typically provided through
the use of an ID and password, these and other security measures must be
effective to prevent not only the breach of privacy, but other security
concerns like the alteration of data.
In
conclusion to be a true E-bank each bank must identify its own unique targets,
focus and style, banks needs to realize that E-banking is more than simply
banking on the internet, E-banking is more than having a web-site, E-banking is
about building a web business for your banks.
2.3 TYPE OF ELECTRONIC
BANKING
Electronic
banking consists of the following, mobile banking, internet banking, telephone
banking, electronic card etc.
MOBILE BANKING
Mobile
banking involves the use of mobile phone for settlement of financial
transactions, it support person to person transfers with immediate availability
of funds for the beneficiary, mobile payments use the card
infrastructure for movement
of payment instructions as well as
secure SMS messaging for confirmation of receipt to the beneficiary, mobile
banking is meant for low value transactions where speed of completing the
transaction is key, mobile payment have a
very exciting potential within Nigeria, given the low
infrastructure requirements and a rapidly increasing mobile phone penetration.
The services covered under this product include account enquiry, funds
transfer, recharge phones, changing of passwords and bill payment which are
offered by few institution.
According
to the research report on the survey of developments in the e-payments and
service products of banks and other financial
institutions in Nigeria on 2007 carried out by Alhaji Suleiman and staff
of banking operation department of Central bank of Nigeria page 6, it was
reported that twenty one institutions offered these service with very low
patronage by the customers for funds transfer. Further more recharge phone
service was provided by sixteen (16) fell within low and medium range respectively, thus signifying low patronage.
So
the analysis above indicated that mobile banking has not really gained
recognition among the banking public and is still a far cry from what is
expected in terms of its usage.
INTERNET BANKING
Internet
banking involves conducting banking transactions such as account enquiry
printing of statement of account; funds transfer payments for goods and
services, etc on the internet (world wide web) using electronic tools such as
the computer without visiting the banking hall. E-commerce is greatly
facilitated by internet banking and is mostly used to effect payment, internet
banking also uses the electronic card infrastructure for executing payment
instructions and for final settlement of goods and service over the internet
between the merchant and the customer, currently the most common internet
payments are for consumer bills and purchase of air ticket through the websites
of the merchants.
Report
by staff of banking operation department of central bank of Nigeria in the
survey of developments in the E-payments and service products of banks and
other financial institutions in Nigeria reported that twenty-four institutions provided the service
of account enquiry and the patronage was somewhat between low and
medium, ten and nine
institution
had low and medium patronage respectively, while only five recorded high
patronage level. Seventeen institutions provided the service of funds transfer
in the proportions of Co, 51 and 2, with low, medium and high patronage levels
respectively.
In
particular, the internet shopping (local) had eight institutions in the
proportion of seven in low and one in high patronage levels respectively,
the internet shopping (international)
comprised of six institutions only and all were I the low patronage level. The
recharge phone class was offered by seven institutions, out of which four two
and one were in the low patronage level. The recharge phone class was offered
by seven institutions, out of which four two and one were all in the low,
medium and high patronage levels, respectively. For viewing and/ or printing of
statement twenty institutions offered the service and the distribution was
nine, eight change pin class, there were twenty – one institutions in the order
of eleven, eighty patronage respectively. Another variation of this category
was the bill payments class with eleven institutions with nine and two has low
and medium patronage levels.
TELEPHONE BANKING
These
are banking services which a customer of a financial institution can asses
using a telephone line as a link to the financial institution’s computer
centre. Services rendered through telephone banking include account balance
funds transfer, change of pin, and recharge phones and bills payment.
The
survey carried out by staff of banking operation department of Central Bank of
Nigeria page 9 shows that much has not been achieved in telephone banking for
now, for example, in the account enquiry
class, only ten institution were involved in the order of seven, two and
one in the range of low, medium and pin
(CP) classes phone (RP), and bill
payment (BP) classes had ten institutions offering the services through telephone
banking, in funds transfer there were only six institutions involved, four of
which were in the low patronage level, while the other one fell within the
medium range.
Change
Pin had seven institutions in the proportions of five and two in the levels of
low and medium patronage in addition recharged phone services was offered by
two with one each having low and medium patronage level, only two institutions
offered bill payment and both experienced low patronage.
ELECTRONIC CARD
An
electronic card is a physical plastic card that uniquely identifies the holder
and can be used for financial transactions on the internet, automated teller
machine (ATM) and point-of sales (Pos) terminal, to authorize payment to the
merchant (seller). The various types of electronic cards includes debt, credit
cards, releasable cards require visiting
banks for replenishment, debt cards are linked to local bank accounts
and offer immediate confirmation of payment while credit line and can be used for are linked to a credit
line and can be used for accessing local
and international networks and were widely accepted in most countries, the
underlying infrastructure and operational rules are often provided by global
trusted schemes (such as visa and master
card) in addition to local lines. Debit cards are the dominant card mechanism
in Nigeria,
they are also known as ATM cards and ATM usage is wider than Pos transactions
given the current limited deployment of Pos terminals.
There
were five classes of services in this category namely, releasable card, debit
card, naira credit card, visa card, master card and other survey carried out by
staff of banking operation department of central bank of Nigeria reported that
for reload able card, seventeen institutions offered the product, ten of which
experienced low patronage while five where within the medium, and two in the
high patronage levels respectively.
Twenty
three institutions offered debit card, and the patronage was distributed in the
proportions of eight five and ten in the low, medium and high patronage levels.
In
the class of naira credit card, sixteen institutions offered the service, four
were in the low patronage level, seven fell within medium, while five were in
the high patronage class.
Visa
card was offered by nine institutions in the proportions of five institutions
in the low and four institutions in the high categories.
The
master card class was offered by seven institutions, out of which six
institutions experienced low patronage and one institution was in the medium
patronage level.
2.4
THE PROBLEMS AND SOLUTIONS
ASSOCIATED
WITH THE DEVELOPMENT OF ELECTRONIC BANKING IN NIGERIA
The
development of an efficient monetary transfer system in Nigeria has
been hampered by so many factors. These problems are infrastructural deficiency
such as erratic power supply and communication link. In this case government
should endeavor to provide stable and efficient power supply and
telecommunication system.
Another
problem is inadequate skilled managers and requisite tools on end users and
client systems, here efforts should be done in provision of infrastructure and
skilled man power, another problem is the large accumulation of cash in the
country so the government should compel legislation that would charge the
dominance of cash usage to electronic payments. Also there is high charge or
cost for the e-payment terminals (ATMs) so the banking legislation should
setout standard charges for e-payment services.
Another
problem is non-provision of adequate security for fraud prevention, banks
should endeavor to provide stand-by-camera in every ATMs machine for confirming
identify of operators account and employ a good computer wizard in dictating
and preventing frauds committed by computer hackers.
Another
problem is lack of government support for the improvement of e-banking, there
should be an involvement of C.B.N in public awareness campaign and escalating
infrastructural challenges to the relevant government agencies and also
encourages Nigerians to trust and migrate to e-payments.
Lastly
one of the major problem is low level of awareness computer appreciation and
literacy among the public and also over dependence on cash for all types of
transaction. Awareness should be created to the public through media such as,
television, bill board, radio etc on the trust and benefits derived from the
usage of e-payment and also continuous promotion of cashless society via
payments system reform programmes.
2.5 NEGATIVE
IMPACT OF ELECTRONIC BANKING IN NIGERIA
Power Failure and Communication Link
Constant
electric failure leads to deficiencies in infrastructures such as ATMs
computers etc which slows down the rate of electronic transactions and also
failure links from Nitel lines which are often as a result of spekes and surges
caused by NEPA’s in consistent electronic power supply.
LACK OF
COMPUTER BANK UP
As a
result of lack of computer backup when the bank system is corrupt there will be
a loss of information about a customer, and this may lead to misappropriation
of customers account, therefore the bank should have a manual backup (ledger)
containing all data about the customers.
LACK OF ADEQUATE INVESTMENT CAPITAL
Funds
that can be used to buy new information technologies and for modernizing
existing systems is generally in short supply. While there are a number of
modern banking applications in use, there is also integrated banking system, Nigeria has
continued to experience innovations in terms of product development
specifically, there has been tremendous improvement in the speed in which funds
are transferred within and outside the domestic economy (international money
transfer).
REDUCES EMPLOYMENT IN THE COUNTRY
Electronic
banking in the country today has reduced the rate of employments in the country
whereby most works that should be done by human are done by machines thereby
lead to minimum rate of employment and high rate of unemployment in the
country.
HIGH CHARGES ON MACHINES
The
rate of commission or charges imposed by banks is too high thereby discouraging
customers from using the electronic machine for exchange of transactions
example of such charges are chaques on withdraw ATMs and online transfer from
one bank branch to another.
LOW PUBLIC ACCEPTANCE
Customers
and public do not have trust in the machine in the sense that fraudulent
personals uses the system in carryout fraudulent activities, even today banks
uses the machine in looting customers money from their accounts. Some customer
complains that sometimes when they go for withdraw with their ATM the machine
will seize the card while their account will still be debited with un withdraw
sum in course of ratification of this problem, the customer might be
discouraged because it will take a longer time or end up unsolved.
INSECURITIES IN BANKS
Most
electronic machines today are not secure thereby making it easier for
fraudulent personnel to carryout their fraudulent activities without been
caught. Due to insecurity, banks cannot prevent stop or dictate any fraudulent
activity. Computer hackers also use the system in stealing data or information
by breaking of codes.
ENCOURAGES EXCESSIVE WITHDRAWAL
Un-operational
days like Saturdays when banks are not in operation customers can go and
withdraw with their ATM cards, especially when there is a function like weeding
ceremonies, customers with little or no money can rush to a nearby ATM machine
to withdraw money for excessive spending, customers complained about this in an
interview conducted by banks.
2.6 POSITIVE
IMPACT OF ELECTRONIC BANKING IN NIGERIA
Speedup Settlement of
Transaction:
Electronic banking speedup settlement of transaction either national or
international level where the bank stand as paying bank to the customers for
settlement of transaction or debt and collection bank for the collection of
payment on transaction made.
Reduces the Rate at Which Customers Visit Banks: The introduction of this
system has bridge the gap between customer and his bank, where the customer can
easily go any branch bank close to him and withdraw money from the ATM’s
machine through the help of the inter bank-switch and also safes time energy
and reduces stress of the customer. Also customers can make or carryout
transaction while at home with the use of telephone.
Move into a Cashless Society: The introduction of the
electronic machine has reduced the use of raw cash thereby moving the country
into a cashless economy. As stipulated
by Anyanwaokoro M. (1997), that the settlement of financial obligations are now
done by the use of electronic gadgets such as computer, facsimile and telex,
instead of currency notes and coins. He went on to say that individuals can pay
their bills by using credit cards or even pressing some buttons that transfer
money from one account to another. The perfection of this system is what he
described as a move into cashless society.
Reduction of Theft: The use of electronic payment system has reduced the
rate of theft stealing in the society. The federal government reported to daily
champion on Tuesday, April 21 (2009)
that due to endemic corruption in official transaction and incessant robbery
attacks on bullion van and bank vaults which made the federal government to
direct immediate automation of government fiscal operations through a system
known as electronic payment (e-payment).
Clearance of Good: Payment system in the custom areas help in ensuring
easy facilitation of clearance of goods by importers, also the money accrue to
the government would be paid up electronically thereby making the gathering of
revenue very easy and checking of any fraudulent moves as reported by Mumdu H.
daily sun, Friday May 21, 2010.
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
Design
is the “specification of procedures for collecting and analyzing the data
necessary to help solve the problem such that the difference between the cost
of obtaining various levels of accuracy and the expected value of information
associated with each level of accuracy is maximized”. It comprises a series of
prior decisions and provides a master plan for executing a research project.
According to the research, this chapter comprises of the
following:
- Areas of study
- Population studied
- Sample and sampling techniques
- Instruments of data collection
- Methods of data presentation
- Methods of data analysis
3.1 AREA OF STUDY
In
this research work the Diamond bank of Nigeria Plc constituted the population
studied however, it was not possible to study the bank entirely, the researcher
adopted a survey technique and as such the branch in Enugu metropolis at Okpara Avenue (Enugu main branch) was selected for the
study. A population of one hundred (100) was targeted and studied.
3.2 SAMPLE AND SAMPLING
TECHNIQUES
A
sample was determined to obtain a broad view on the economic implication of
electronic banking from the bank under study based on this the population of
one (hundred) was targeted.
Thus, from the target
population the sample size was determined using the formulae below:
n = N
1+n (e)2
Where n = sample size
N = the target
population (100)
e = margin of
error (5%)
\ n =
100
1+100 (0.05)2
= 100 = 100 =80
1+0.25 1.25
3.3 INSTRUMENTS OF DATA
COLLECTION
The
instrument of data collection for this research work was through distributed
questionnaires.
3.4 METHOD OF DATA
COLLECTION
The
primary and secondary sources of data collected were adopted in this research
work.
Primary Source: Data in the category were collected mainly though
visits, personal participation and observation and distribution of
questionnaires to the bank under study.
The
various methods were adopted independently to reduce the incidence of bias or
subjective views about the subject on investigation.
Secondary Source: Secondary data in this research work were collected
through the review of related literature; the relevant literatures were
obtained from books journals, magazines, and newspapers.
Consequently,
libraries were consulted, prominent among them were the institute of management
and technology library, national library, central bank of Nigeria (C.B.N))
zonal library, Banking and Finance Department library (Caritas University)
and Caritas University main library etc. More so, in
this era of globalization, information from the internet was also valuable.
3.5 METHOD OF DATA ANALYSIS
To
accomplish the research, analysis of the data was of utmost importance since
the data collected was in disarray and as such cannot make any meaning to the
reader.
Direct
report of the qualitative data from observation has been made while descriptive
statistics was utilized in the analysis of the descriptive data collected from
questionnaires to generate frequencies and parentages. Statistical analysis is
carried out on each of the research questions based on the data extracted from
the computation of data which was effected using simple parentages after which
comparisons were done to determine the effectiveness in achieving the desired
objectives.
CHAPTER FOUR
DATA PRESENTATION, INTERPRETATION AND ANALYSIS
4.1 DATA PRESENTATION
The
method of data analysis was based on the statistical table format using
frequency distribution and consequently converted into percentages for easy
analysis. Each tabular presentation represents the analysis of each question in
the questionnaire which was subsequently described and with further discussion.
In
all, eighty (80) questionnaires were administered of which seventy were
returned the seventy questionnaires received formed the basis for our analysis
and conclusion.
OBJECTIVE 1
The extent of automation in the payment system.
Table 4.1
Would you say that all the
operations of your bank are fully computerized?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
45
|
64
|
|
No
|
25
|
36
|
|
Total
|
70
|
100
|
From
the table, 45 respondents who filled the questionnaires of the bank are fully
computerized.
Out
of the 70% respondents 25 representing 36% did not agree with this, from the
above it is clear that a good number of Nigeria banks based their
operations on computer technology.
Table II
Table 4.2
Does your bank use computer
technology in the rendition of banking services?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
70
|
100
|
|
No
|
-
|
-
|
|
Total
|
70
|
100
|
All
the respondents share the same view or agreed that computer technology is used
by the bank in the rendition of banking services.
Table III
Table 4.3
Does
your bank offer computer based payment services (such as smartcard, money
transfer internet payment)?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
60
|
86
|
|
No
|
10
|
14
|
|
Total
|
70
|
100
|
With
a total of 60 respondents representing 86% saying yes, it is deducible that
banks in Nigeria
offer one kind of computer based payment services, while 10 respondents
representing 14% disagree with it.
Table IV
Table 4.4
To
what extent does your bank use computer technology to offer computer based
payment services?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Large extent
|
42
|
60
|
|
Some extent
|
28
|
40
|
|
No extent
|
-
|
-
|
|
Total
|
70
|
100
|
From
the above, 60% of respondents are of the view that computer technology is
greatly used in rendition of services while 40% described the use of computer
technology in service rendition as some extent.
OBJECTIVE 2
The
major problem associated with the development of electronic momentary transfer
system (electronic banking) in the Nigeria economy.
Table V
To what extent are the
problems hindering electronic payment system?
|
Problem
|
Large extent
|
Some extent
|
Partly
|
No extent
|
%
|
|
Infrastructure
deficiencies such as critic power supply and communication link
|
35
|
-
|
-
|
-
|
50%
|
|
Non-
provision of adequate security for fraud prevention
|
-
|
-
|
15
|
-
|
21%
|
|
Inadequate
skilled managers and requisite tools on end users and client systems
|
-
|
-
|
-
|
-
|
-
|
|
High
change or cost for the e-payment terminals
|
10
|
-
|
-
|
-
|
14.5%
|
|
Lack
of government support on improvement of e-banking
|
-
|
-
|
-
|
-
|
-
|
|
Low
level of awareness and over dependence on cash by the public for all types of
transactions
|
10
|
-
|
-
|
-
|
14.5%
|
|
Total
|
70
|
|
|
|
100%
|
On
the list of problems hindering the implementation of electronic payment system
in Nigeria
is the problem of infrastructural deficiencies, which is associated with
erratic power supply and communication link. 50% of the respondents recertified
it was having a very great impact on the development of electronic payment
system in Nigeria.
10 respondents, representing 14.5% respectively identified the problems of high
charge or cost in using the payment terminals, while 15 respondents
constituting 21% said that inadequate security for fraud prevention has little
impact on the development of electronic payment system in Nigeria. 10
respondents representing 14.5% complained that there is low level of awareness
and over dependence on cash by the public for all types of transaction in the
economy.
OBJECTIVE 3
The
effect of electronic banking system on bank’s profitability.
Table VI
Table 4.6
Would
you say that the rendition of computer based payment services has improved your
banks profit level?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
45
|
64
|
|
No
|
25
|
36
|
|
Total
|
70
|
100
|
From
the table, 64% of the bank staff of officials who filled the questionnaires
believe that the introduction of the computer based payment system have
improved the profitability of their banks operation. 36% however has a contrary
opinion.
Table VII
Table 4.7
To
what extent has the introduction of computer based or electronic payment
services improved your banks operational efficiency?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Large extent
|
-
|
-
|
|
Some extent
|
10
|
10
|
|
Partially
|
15
|
21
|
|
No extent
|
45
|
69
|
|
Total
|
70
|
100
|
A
good number of respondents representing 69% are on the opinion that the
introduction of the electronic payment system has no impact or positive
influence on their banks operational efficiency. 21% said that the impact is
partially or insignificant while 10% claimed its impact or positive influence on
operational efficiency described may be as some extent.
OBJECTIVE 4
The
impact of various electronic payment systems on banking industry.
Table VIII
Table 4.8
Has
the introduction of electronic payment products such as smartcard, ATMs,
internet payment etc reduced your customer’s strength (financial ability)?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
70
|
29
|
|
No
|
50
|
71
|
|
Total
|
70
|
100
|
The
response from the table is a clear indication that electronic monetary system
cannot lead to financial disintermediation in banking industry. 71% of the
respondents said since the inception of the electronic monetary system (EMTS)
that their customer’s strength has not reduced. While 29% of the respondents
had a different opinion.
Table IX
Table 4.9
How
would you describe the relationship between your bank and customer since the
introduction of the products?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Increased customer loyalty
Patronage
|
50
|
71
|
|
No changed improvement
|
8
|
11
|
|
Decreased customer loyalty
|
12
|
18
|
|
Total
|
70
|
100
|
The
introduction of EMTS from our table has shown how increased the confidence and
loyalty of customers are to the banking industry, 71% of the respondents
describe the relationship between bank and customers as an improved one after
the introduction of EMTS has no improvement on bank-customers relationship.
While 18% said that customer loyalty has declined towards the banking industry.
OBJECTIVE 5
The
impact of electronic payment system on economic activities in Nigeria.
Table 4.10
Do you think the
introduction of electronic payment products has increased the level of economic
activities?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
20
|
28.5
|
|
No
|
50
|
71.5
|
|
Total
|
70
|
100
|
From
the above table, it is very clear that electronic payment products has not
increased the level of economic activities, 71.5% agree and share this view
while only 28.5% had different opinion.
Table XI
Table 4.11
It
there price stability since the introduction of electronic payment products in Nigeria?
|
Variables
|
Frequency
|
Percentage (%)
|
|
True
|
22
|
31
|
|
False
|
42
|
63
|
|
I don’t know
|
4
|
6
|
|
Total
|
70
|
100
|
As
against the general belief of many writers the introduction of SMTS has not
really brought about price stability in the economy. 63% of the respondents are
of this view while 31% claimed that EMTS has created an atmosphere of stability
in the pricing system of Nigeria
economy.
Table XII
Tale 4.12
Have electronic payment
products improved the country’s gross Domestic product (GDP)?
|
Variables
|
Frequency
|
Percentage (%)
|
|
True
|
15
|
21
|
|
False
|
59
|
71
|
|
I don’t know
|
50
|
8
|
|
Total
|
70
|
100
|
A
large number of 71% respondents are of the view that EMTS does not have any
incremental impact on the nation’s GDP only and insignificant percentage of 21
respondents share a different view, 8% of respondents claimed ignorance of the
impact of EMTS on the GDP.
Table XIII
Table 4.13
The introduction of EMTS has
the potential of increasing bank’s deposit base?
|
Variables
|
Frequency
|
Percentage (%)
|
|
Yes
|
18
|
26
|
|
No
|
52
|
74
|
|
Total
|
70
|
100
|
From
the table above, 52 respondents who filled the questionnaire and which
represents 74% disagree that the introduction of EMTS has the potential of
increasing banks deposit base and out of the 70 respondents, 18 representing
26% agree with this.
4.2
DATA ANALYSIS
The
use of computer technology in service rendition in the banking industry remains
indispensable, from the responses obtained from bank official, more than 90
percent of Nigeria
banks make use of information technology in offering payment services.
In a
total of 70 respondents, 60 respondents representing 86% acknowledged the use
of computer technology in table 4.3 providing services like money transfer,
smartcard electronic funds transfer etc. this shows the extent of computer
technology application in the banking industry.
Although
the use of information technology (I.T.) is still not widespread in the banking
industry, there are clear indications that in the nearest future I.T will
become fully diffused in the industry. So far a good number of banks which
offer computer based services tent to be constrained by a lot of factors. These
factors constitute the major problem hindering the development of electronic
banking system in Nigeria.
In this study some I.T
related problems were identified they include: infrastructural deficiencies in
communication link, inadequate skilled managers and requisite tools on end
users and client systems non-provision of adequate security for fraud
prevention.
Lack
of government support in improvement of electronic banking, low level of
awareness and over dependence on raw cash by the public in carrying out
transactions and high charge or cost for the e-payment terminals, however,
infrastructural deficiencies in communication link is a problem induced by the
respondents as having a very great impact in the development of electronic
payment system. About 50% in table 4.10 of the respondents attested to this.
However,
in spite of these problem banks profit margin has continued to increase, according
to our respondents it’s attributed to the introduction of computer based
payment services. About 63% of respondents shared this view.
But
as the extent, the introduction of electronic monetary transfer system (EMTS)
has improved banks operational efficiency, the general consensus is that (EMTS)
has improved bank’s operational efficiency, the consensus is that (EMTS) has a
little or no impact on banks operational efficiency 69% of respondents are of
the view that EMTS has no impact on efficiency while 21% described the impact
as partial and about 10% described the impact as to some extent.
Equally,
71% of respondents are of the view that EMTS cannot lead to financial
disintermediation in the banking industry while only 29% of respondents had a
different opinion.
By
implication, the introduction of electronic banking system (EMTS) has generally
increased customers loyalty to banks. This view was shared by about 72% of
total respondents.
Be
that as it may, it is not very clear as to how electronic banking (EMTS) can
constitute a problem to monetary authority in terms of money control and
management or how it could increase the GDP or influence economic growth. But
one thing clear is that electronic banking (EMTS) seems to show some level of
uncorrelation with economics growth neither does it increase the GDP of a
nation. On the average about 75% of respondents had shared this view.
CHAPTER FIVE
SUMMARY, RECOMENDATION AND CONCLUSION
5.1 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.
5.2 RECOMENDATION
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.
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
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.
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.
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.
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.
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.
APPENDIX
Department of Banking & Finance,
Caritas
University,
P.M.B 01784,
Enugu
State,
1st Dec. 2009.
Dear Sir/Madam,
I am
a final year student of the above department undertaking a research on
“Appraisal of the economic implication of electronic Banking in Nigeria Banks”
(A case study of Diamond Bank of Nigeria in partial fulfillment of
the award of Bachelor of Science (B.Sc) Degree in Banking and finance.
It
would be appreciated if you will sincerely answere the questions contained
there in.
Be
assured that all information will be treated with utmost confidence and will be
used for the purpose of this study.
Yours faithfully,
Umoren
David .U.
QUESTIONNAIRE
Please tick (Ö) or fill in the gap in the appropriate place:
1. What is your name?……………………………….……….
2. What is your
occupation?........................................
3. Sex?
(a) Male
(b)
Female
4. Would you say that all the operations
of your bank
are fully
computerized?
(a) Yes
(b) No
5. Does your
bank use computer technology in the rendition of banking services?
(a) Yes
(b) No
6. Does your bank offer computer based
payment services (such as SMARTCARD, MONEY TRANSFER and INTERNET PAYMENT)?
(a) Yes
(b) No
7. To what extent does your bank use
computer technology to offer computer based payment system?
(a)
Large extent
(b) Some
extent
(c) No extent
8. Extent of impact of the problems
hindering electronic payment system?
i. Infrastructural deficiencies such as
erratic power supply and communication link.
(a) Large
extent
(b) Some
extent
(c)
Partially
(d) No extent
ii. Non-provision
of adequate security fraud prevention.
a) Large extent
(b) Some
extent
(c)
Partially
(d) No extent
iii. Inadequate skilled managers and
requisite tools on end users and client systems.
(a) Large
extent
(b) Some
extent
(c)
Partially
(d) No extent
iv. High charge or cost for the e-payment
financials?
(a) Large
extent
(b) Some
extent
(c)
Partially
(d) No extent
v. Lack of government support in
improvement of e-banking
(a) Large
extent
(b) Some
extent
(c)
Partially
(d) No extent
9. Would you say
that the rendition of computer based payment services has improved your banks
profit levels?
(a) Yes
(b) No
10. To what extent has the introduction of
computer based or electronic payment services improved your banks operational
efficiency?
(a) Large extent
(b) Some
extent
(c)
Partially
(d) No extent
11. Has the introduction of electronic
payment products such as smartcard ATMs, internet payment e.t.c reduced your
customer strength (financial ability)?
(a) Yes
(b) No
12. How would you
describe the relationship between your bank and customer since the introduction
of the products?
(a) Increased customers
loyalty/patronage
(b) No charge/improvement
(c)
Decreased customer loyalty
13. Do you think the introduction of
electronic payment products has increased the level of economic activities?
(a) Yes
(b) No
14. Is the price stability since the
interdiction of electronic payment products in Nigeria?
(a) True
(b) False
(c) I don’t know
15. Has electronic payment products improved
the countries gross Domestic products (G.D.P)?
(a) True
(b) False
(c) I don’t know
16. Has the introduction of EMTS has the
potential of increasing bank’s deposit base?
(a) Yes
(b) No
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