THE IMPACT OF INFORMATION TECHNOLOGY ON BANKING OPERATIONS IN NIGERIA (A Case Study of United Bank for Africa (UBA) Plc)
study was designed to investigate the impact of Information Technology on
Banking Operations in Nigeria. Information Technology is the modern trend in
banking today. It is absolutely necessary for banks to access its impact
operational performance so as to justify the growing trend towards Information
Technology in banking sector and the huge capital invested on it, analyse their
problem and proffer possible solutions.
objectives of this study is to examine how the adoption of Information Technology
affects the operations of commercial banks in terms of effectiveness,
efficiency, competitiveness, customer base and globalisation of the bank.
main research instruments used are questionnaire and personal interview for
staff and customers of the bank. The simple frequency percentage was adopted as
the statistical measure and hypothesis testing was analysed using chi-square.
result obtained reveals that Information Technology has greatly improved the
growth and performance of the Nigerian commercial banks. The result equally
shows that Information Technology has led to increased customer satisfaction,
improved operational efficiency, saved transaction time, gives the bank a
competitive edge, saved the running cost and ushered in swift response in
research work also recommend Government support to local IT firms to foster
importation, lower tariff on importation of IT related equipment and their
agencies and regulatory bodies to upgrade their equipment as well. Government
should improve electricity supply in the country. The private sectors should
equally support by investing into improving electricity and the banks should
continuously implement customer centered IT products and services of
OF THE STUDY
recent times, Information Technology (IT), which basically involves the use of
electronic gadgets especially computers for storing, analyzing and distributing
data, is having a dramatic influence on almost all aspects of individual lives
and that of the national economy- the banking sector inclusive. The increasing
use of IT has allowed for integration of different economic units in a
spectacular way. This phenomenon is not only applicable to Nigeria but other
economies of the world, though the level of their usage may differ. In Nigeria,
IT usage especially in the banking sector, has considerably improved, even
though it may not been as high as those observed for advanced countries
(Adeoti, 2005; Adeyemi, 2006).
use of IT in the banking sector became of interest to this study due to the significant
role it plays in the economy. It helps in stimulating economic growth by
directing funds to economic agents that need them for productive activities.
This function is very vital for any economy that intends to experience
meaningful growth because it makes arrangements that bring borrowers and
lenders of financial resource together and more efficiently too than if they
had to relate directly with one another (Adam, 1998; Ojo, 2007). In essence,
the banking sector acts as a bridge that connects lenders and investors in the
economy. Hence, the need for reforms in theCentral Bank of Nigeria-CBN.
banking industry is one of the critical sectors of the economy whose
contribution to the pace of development and economic growth cannot be fully
quantified. Changes in today's modern world reveal
that the preponderance of natural factors cannot equip the banking
sector fully to grapple with the exigencies of global completion. According to
Hanna (1994), information, flexibility and fast response are the key new
factors for coping with global competition and information communication
technology plays a critical role in these areas for the purposes of quality
enhancement. Antholt (1993) has declared that information is just as important
as a production factor like land, labor and capital.
significance of IT in today's successfully organisation cannot be
underestimated. It plays a major role in the success of the organisation in
highly competitive world by providing easy andfast means of collecting,
storing, retrieving, processing transmitting and distributing information.
There can be various others factors that determine the success of a firm, and a
firm may use various strategies to pursue the path of success. However, fast
and easy access of information through the use of IT is very important to the
firm because, it influences all other success factors, and the competitive
strategies cannot be practically implemented without its support. Therefore, no
business firm that minimizes the use of IT can attain the topmost position in
its business. This is quite much true in the case of financial institutions,
which include commercial banks. Hence, commercial banks are highly information
intensive and the use of IT by them for easy and fast means of information
collection, storage, retrieval, processing, transmission and distribution of
information, should have extensive contribution to their performance.
evolution and recent developments in information and communication technology
has come to shape the way organisations operate and do business. The emergence .of the World Wide Web (internet) and mobile
telephony i.e. telecommunication system is the driving force behind this
development. Consequently, manual and traditional forms of doing business are
becoming things of the past as they give way to the sophisticated technology
that is based on automation and interconnection of computers and other
electronic devices vide electronic communication. For instance, ledger books,
paper invoice, printed materials and business trips are being replaced with
online billing and payments, elaborate website with product information and
real-time teleconferencing across
and time zones.
technology has radically changed how banking is done all over the world, the
volume and speed of banking transaction has improved tremendously as a result
of quantum growth in information technology which has created business
opportunities for banks. The positive impact of information technology IT on
the global criteria, especially improved revenue corroborates with the findings
of Laudon&Laudon, (1991) that
studied the entire cash flow of most fortune 500 companies and linked their
success to Information System. They concluded that Information Technology
directly affects how managers decide, how they plan and what products and
services are to be produced.
Technology (IT) is the automation of processes, controls, and information
production using computers, telecommunications, software and ancillary
equipment such as automated teller machine and debit cards. It is a term that
generally covers the harnessing of electronic technology for the information
needs of a business at all levels.
1980s, Nigeria banks have performed better in their investment profile and use
of ICT systems, than the rest of industrial sector of the economy. An analysis
of the study carried out by African Development Consulting Group Ltd. (ADCG) on
IT diffusion in Nigeria shows that banks have invested more IT personnel, more
installed base for Personal Computers (PCs), LANs and WANs and a better linkage
to the Internet than other sectors of the Nigerian economy. The study, however
pointed out that whilst most of the banks in the west and other parts of the
world have at least one PC per staff, Nigeria banks are lagging seriously
behind, with only a PC per capital ratio of 0.8, Woherem (2000).
and communication technology (ICT) is the modern handling of information by
electronic means which involves access to storage of, processing,
transportation or transfer and delivery (Ige, 1995). It refers to the
convergence of the computer and telecommunication system in a seamless flow of
information around the world. The fusion of computer and telecommunication and
their uses in obtaining relevant and purposeful management information system
is the main thrust of information technology. It is the acquisition,
processing, storage and dissemination of vocal, pictorial, textual and
numerical information by a micro-electronic based combination of computing and
telecommunications. The focus of ICT is on telecommunication and
computerization. It implies the convergence of computing and communication
(Telecommunication) technologies and its uses or application for global
Internet, Intranet, Extranet, World Wide Web (WWW), Visual reality,
Cyberspace-the New Digital Mentality and Culture (Uwaje, 2000). Communication
Technology comprises the physical devices and software that link (connect)
various computer hardware components and transfer data from one physical
location to another. Connectivity has facilitated the use of electronic
delivery channels. Distances and geographical locations are no longer barriers
to financial transactions.
online, real-time capabilities have revolutionized electronic transfer of
funds. Electronic fund transfer (EFT) is an electronic oriented payment
mechanism. It allows customers accounts to be credited electronically within 24
hours (Ugwu, et al., 1999). Mark (1975) classified the basic elements of EFT
system into three:
network characteristics, remote service or point of sale characteristics and
pre-authorized debit and/or credit characteristics.
fund transfer has also been various designed to ease international transfer of
money. In 1977, the international payment system known as SWIFT (Society for
Worldwide Inter-bank Financial Telecommunication) became operational. SWIFT
enables user banks to use electronic mode to transfer international payments,
statements and other banking messages. In Nigeria, First Bank's' Western Union,
Monogram of United Bank for Africa (UBA) among others performs international
technology is the term which generally covers the use of electronic technology
for the information needs of a business at all levels. It has made it possible
for banks to:
in service delivery with the availability of online, real-time transactions.
2. Funds transfer will be faster, more
accurate and cheaper in charges.
to process large volume of transactions which will require lower administrative
of cash transactions with long term prospects of minimal cash handling.
technology application by bank is centered on customer's service. Banks now
respond to customers for balance on their account, statement of account and
account activity enquiries.The work of front office teller (cashier) is at
minimal (ATM) Banks are able to serve customers outside the banking hall 24
hours on daily basis. Merchant customers are able to make local and
international business transactions online, they allow online payment via
online, telephone or mobile payment medium (Interswitch,
etranzactetc), with this payment switch, the merchant account holder's
customers can make payment for goods and service without necessarily seeing the
business merchant in person.
has become stiff; banks now do many things in different ways. Bank that has
concentrated its activities in the old media can invest in the new media by
recognizing its activities especially if it finds out, albeit painfully that it
is losing ground to those competitors utilizing sophisticated technology.
to Odubanjo (2000), Nigeria banks are responsible albeit at a snail speed to
the information technology revolution enveloping the universe. The deregulation
of the banking sector in Nigeria in 1986 brought far-reaching transformation
through computerization and improved bank service delivery. The watershed in
the computerization of the Nigerian financial sector started with the changing
policy environment enumerated with Structural Adjustment Programme (SAP) 1986.
advent of information technology in the operations of the commercial banks in
Nigeria among other sectors has brought about several noticeable developments
but at the same time, it brings about its attendant problems. The paradox
behind the information technology productively makes many managers to believe
that the huge investment does not commensurate with increase in productivity.
the high level of financial stakes involved, the investigation of the impact of
information technology on organizational and employee performance has been and
continues to be a major research concern for both academics and practitioners.
questions this research work intends to answer are as follows: -
How has information technology aid
are banks unable to strictly comply with the mission statement/corporate
mission? With information technology, some banks management does not adequately
plan to meet the services quality. For example, the required number of
customers to be attended to by a cashier within the daily working hours to
guide against long queues is neglected - this causes delay in service delivery
time leading to long queues in the banking hall.
is high incident of bank fraud borne out of information technology? This' fraud
ranges from ATM card fraud, internet banking fraud, email and text message
fraud, fund transfer to untraceable offshore accounts, among others.
the huge investment into information technology in banks have a proportionate
1.3 OBJECTIVES OF THE STUDY
project work is therefore, aimed at examining how the adoption of information
technology affects the operations of commercial banks in Nigeria. The specific
investigate how the adoption of information system has influence on the growth
and development in the banking sector;
investigate the extent at which effectiveness and efficiency in banking sector
after the advent of information technology.
examine the modes by which commercial banks can improve on their service
delivery in order to attract depositor's funds.
determine how information technology has assisted in the enhancement of
globalisation of Nigeria commercial banks.
1.4 JUSTIFICATION OF THE
dominant role that the banking industry plays in Nigerian economy cannot be
over-emphasized. Government, statutory corporations, corporate bodies,
businessmen, civil servants depend on the banks for the transaction of one
business or the other. The banking system is required as a catalyst for a rapid
macro-economic development of other sectors of the economy; hence, its
be the priority of the government most especially during the domestic
dispensation. Going by the recent distress in banking industry in Nigeria, the
level of public confidence in the sector has dwindled and this has led to the
instability syndrome in the sector and as such the public assurance and
confidence on efficiencyin the private
sector in decaying, (Akpoyibo, 2006; Soludo, 2007).
major cause of this syndrome can be traced to the problems inherited in the
banks operational system.