This research critically analyzed the
effect of electronic banking on the Nigeria banking sector, using Zenith
Bank Plc as a case study. The objective of the study is to justify the
application of information technology in banking services delivery in
terms of profitability to banks. This could be used as yardstick by
banks that are yet to adopt information technology in the operations.
The research design adopted for the study is survey research design. The
main instrument used was questionnaires and statistical package for
social science (SPSS). The questionnaire was used to analyze the date
collected. The questionnaires was structured for easy administration,
64 copies of the questionnaires were distributed and administered.
Chi-square method was used in testing the hypothesis. The finding shows
that majority of the respondents strongly agreed that information
communication technology has positive impact on banking operations. That
is the impact of ICT has an impact on the efficiency effectiveness on
the Nigeria banking system it was recommended that firms must introduce
and adopt information and communication technology as a measure to
increase it profit, market share and customers’ satisfaction.
TABLE OF CONTENT
Title page i
Table of Contents vi – viii
1.0 Background to the Study 1 – 5
1.1 Statement of the problem 5 – 9
1.2 Objectives of the Study 9
1.3 Significant of the study 9 – 10
1.4 Research Questions 11
1.5 Statement of hypotheses 11
1.6 Scope of the study 12
1.7 Limitation of the study 13
1.8 Organization of the study 14
1.9 Definition of terms 14 - 17
2.0 Introduction 18 – 24
2.1 Problems and prospects of delivering the
expectations on banking technology 25 – 30
2.2 History/development of commercial banks
in Nigeria 30 – 31
2.3 Zenith bank plc: a typical Nigerian bank for banking 31 -33
2.4 The role of payment system in Nigeria 33 – 34
2.5 General overview of payment system in Nigeria 34 – 35
2.6 The principles for systemically important
payment system 36 – 39
2.7 Smart Cards In Nigeria 30-40
2.8 Theoretical Framework On Electronic Banking 40 – 45
2.9 Empirical studies on e- banking 45 – 39
3.0 Introduction 50
3.1 Research design 50 - 51
3.2 Restatement of research hypotheses 51
3.3 Population of the study 52
3.4 Sampling Design 52 – 53
3.5 Method Of Data Analysis 53
3.6 Administration Of Data Collection Instrument 54
3.7 Validity And Reliability Of Research Instrument 54
3.8 Method Of Data Analysis 55
3.9 Limitation Of The Study 55
DATA ANALYSIS AND PRESENTATION OF FINDINGS
4.1 Introduction 56
4.2 Presentation And Analysis Of The Data 56 – 68
4.3 Testing Of Hypotheses And Interpretation 68 – 71
SUMMARY OF FINDING CONCLUSION AND RECOMMENDATION
5.0 Introduction 72
5.1 Summary of Findings 72 – 74
5.2 Conclusion 74
5.3 Recommendations 75 – 76
5.4 Suggestion for further reading 76
Bibliography 77 – 79
Questionnaires 80 - 83
1.0 BACKGROUND TO THE STUDY
A bank is a financial institution where
you can deposit your money. Banks provide a system for easily
transferring of money from one person or business to another. Banks and
the many services they offer saves an incredible amount of time and
ensures that funds pass hand in a legal and structured manner.
Banking is a system of trading in money
which involved safeguarding deposits banking and making funds available
for borrowers. Banking developed in the middle ages in response to the
growing needs for credit in commerce.
E-banking refers to the computerized, advance and technological approaches to banking service (Ogunfowora 2005).
The main purpose that banks have been
serving since their inception is keeping our money safe for us. While
keeping our money safe. They also let us earn a certain amount of
interest on the money deposited with them. Traditional banks have been
doing this and internet banks continues the same function. The only
difference is the way the transactions are made.
Computerized advance and technology
refer not only to ways of providing goods and services but also ways of
fulfilling needs and deriving satisfaction. The technology of
consumption has a profound impact on the structure of the economy,
influencing the goods and services to be produced and rendered. Even the
attitude and values of people are in sense, a part of technology since
they affect the capabilities of a nation (Ogunfowora 2005).
In today’s world, computers play an
incredibly large role in the way the world exists in general, and the
majority of tasks could actually not be completed if not for the use of
Although there are certainly some areas
of jobs that cannot yet be completed solely by computers and which thus
still require actual manpower, for the most part, computers have helped
to make life significantly easier, productive and more convenient for
Electronic banking have been around for
quite a few years now, but has really only become prominent over the
past year or so in particular. E-banking offers an array of different
advantages to the user, including account balances and history including
year – to-year information the ability to transfer money from one
account to another to payees for bill payments, check history, records,
and stop payments, check credit card balances and statements.
Complete online loan application, secure interactive messaging with staff, and much more (Adebisi 2003)
Electronic banking such as internet
banking basically allows you to be able to do everything that you can in
your regular banking institution, only with the benefit that you can do
it all right from the convenience of your own home. Not only is this
great because you can be comfortable and have peace of mind knowing that
you can keep track yourself of all your banking issues, but as well it
allow for more ease because you never have to worry about rushing out
and making it to the bank (Onabanjo 2008).
Nigeria along with almost all other
African countries and beyond is more often than not referred to as a
“third world country” To an African who have lived in any of the
advanced economic of Europe and America. The reason for the tag “Third
world” is clear, the advanced economy are further referred to as
cash-less societies because the closing of transaction in most cases
does not involve the use of cash as means of payment but other forms of
convenient payment instrument. This includes cheques, credit, debit
cards and electronic transfer of funds.
Banks as a service industry find
information technology most amendable to its operations. It has the
strategic potential to change the overall structures of a banking
organization or even the banking industry and commerce.
This suggest that the creation of an
internet electronic payment system will provide opportunity for creation
of completely new sets of global and national banking relationships.
The internet offers the possibility of an “Open system” payment and
settlement system which operates in parallel to the existing more
traditional bank-based networks, and which is particularly suited to
meet the currently unsatisfied requirements for processing low value
payment systems electronically. However, the institutional framework to
exploit there opportunities does not yet exist, regulatory policy issued
will need to be addressed in order that full advantages can be taken
of the new types of commerce, which could emerge.
Nigeria of today is still gambling with
the problems associated with an ineffective payment system and serious
efforts have not been made to solve the problem. The re-public of South
Africa has through the South Africa (equivalent to the Nigeria Central
Bank) established a national payment system committee, which in November
1995 publish the framework and strategy for the implementation of an
effective payment system. The South Africa payment committee is almost
like the Nigeria inter-bank settlement system (NIBSS), is how ever
concerned with eth clearing of financial instrument.
Banking at the global level as well as
in Nigeria has appreciated the immense benefits derivable form
information technology (IT) and has warmly embrace it, hence, such
facilities as electronic fund transfer (EFT) Automated Teller Machines
(ATM), automated cheques clearing facilities, abound in the banking
In Nigeria of today cash has remain the
chief means of payment for goods and services. This situation is not
unknown to eth authorities as confirmed by Dr Paul A Ogwuma (OFR)
government of the Central Bank of Nigeria (2000) saying that: “as a
result of the declining confidence in the financial system, most
Nigerians today prefer to settle their transaction in cash. This
explains why between the end of 1986 and December 1994, total current in
circulation and in particular currency outside the banking system had
both increased substantially. Financial instruments cheques, drafts etc
are used by a few who hold bank depots accounts.
Nigerian banks have no alternative but
to embrace the new information, technology in order to achieve,
efficiency and competitive advantage. It is encouraging that many banks
have joined the global trend and are obviously reaping the immense
benefit, few of them have hooked up to the information supper high way.
The internet and the implication on their performance have been
far-reaching. (Adebisi 2003).
1.1 STATEMENT OF THE PROBLEM
The primary purpose of the banking
system is to create and manage financial resources and to meditate
between surplus and deficit economy units. In the process of carrying
out this fundamental role, the banking system provides secondary
services, which includes mobilizing financial resources for investment
purpose assisting in resources allocation, promoting the payment system a
facilitating international trade. In the final analysis, the
performance of the sector is measured not only by the number a variety
of services that are provided but also more importantly by the speed
efficiency and safety with which these services are provided.
With the problems and limitations
associated with manual banking procedures as witnessed in most
parastatals today, the problem associated with the existing application
programs even much more in the presence of serious technological
advances aimed at improving information system. This is activities aimed
at shedding light upon the need for improvement in accounting
activities and the means of achieving efficiency, effectiveness
reliability and success promising future through computer intervention.
E-banking identifies a particular set of
technological solution for the development and the distribution of
financial services, which rely upon the open architecture of the
internet. With the implementation of an internet banking system, the
banks maintain a direct relationship with the end users via the web and
are able to provide a personal characterization to the interface, by
offering additional customized services.
As already observed, one way of
enhancing these has witnessed phenomenal growth change especially since
the mid 1980’s and these have manifested in the enormous volume and
complexity of operation increased innovations and variety in product /
service delivery, financial liberalization, growing competition,
customer sophistication and business process re-engineering.
Online banking services has grown from
simply allowing customers to check balances, to trading assets. Today
banks like ING Direct are functioning entirely online. With no brick
and motar building. With the costs saved by requiring fewer employees
and the lack of facility expenses, these virtual banks can often offer
higher interest rate than their traditional counterparts. E-banking
gives you the power to control your finances completely, you are no
longer tied down to managing your money during the hours the bank is
open. If you want to transfer a balance after business hours, you can!
if you have access to the internet and have a number of recurring
monthly bills. Then you should use internet banking to make you life
These developments have not only been
driven by technology advances but have also in turn spawned
technological development. It is therefore true to say that technology
has been the hub of banking development since the last decade and will
continue to be so into the 21st century.
Therefore, there are however problem that arise from the era of technological advances: which are
- The unequal rate of development between IT and the nation economy and this poses threat to IT development in banking industry.
- The problem associated with the deficiency of technological infrastructure which may be useful to facilitate it.
- The unskilled manpower problem, which further incapacitate the growth rate of IT development in the banking industry.
- The problem of the usage of internet which the banking industry may
not have identified as a faster way of internationally
Nigeria banks has been slow adapter of
information technology (IT). They are slow at moving from the
conservative business practices to that oriented towards the emerging
paradigm driven by now technology
1.2 OBJECTIVES OF THE STUDY
The main purpose of this study is to
examine the impact of E-banking on the banking sector in Nigeria.
Specifically, the study aims to:
(i) Examine the prospect of information technology in modern banking operations in Nigeria.
(ii) Evaluate the impact of electronic banking on the operations of financial institution in the country.
(iii) Examine the role of organizational structure in information processing
(iv) Examine the effect of electronic – banking on bank – customer – relationship.
(v) Identify barriers to efficient technology system with a financial institution.
(vi) Make suggestions on how to
make information technology system more efficient in modern banking
operations relying on the opinions of operators in the industry.
1.3 SIGNIFICANT OF THE STUDY
Technology has played a very important
role in the modernization of banking sector especially in terms of
the development of the product and payment systems. The increase
volume, complexity competitiveness, customers sophistication and
globalization of financial services required modern technology if the
bank want to remain in the business.
The tidal wave of the internet with its
rapidly expanding use as an information exchange tool by individual
business around the globe, has as spurned the expansion of business
across national frontier resulting in the globalization of trade. The
global computers network is also binging to the fore, the famed
The volume a speed of banking
transactions have improved significantly because of the growth of
internet connectivity indeed; internet has opened greater business,
opportunities. In order to capture a segment of an increasingly
sophisticated clientele, Nigeria banks in the last two years gave
embraced contemporary electronic options whereby a customer needs not
physically visit a bank before transaction would be affected.
The Nigeria banking industry is
emerging from the work period of distress in nations financial systems
to focus in capturing the niche staked in business.
Nigeria banks are making a transition
from the conservative business practice towards the emerging paradigm
driven by new technologies for increasing sophisticate customer demand
1.4 RESEARCH QUESTIONS
This research work shall be guided by the following research questions:
(a) Dose E-Banking contributes to the efficient of banks and bank-customer relationship in Nigeria?
(b) To what extent would electronic banking improve the fortune and profitability of banks?
(c) How has E-Banking effect performance in the banking sector?
(d) How has E-banking improved financial aspect of the Nigeria citizen?
1.5 STATEMENT OF HYPOTHESES
The null and alternative hypothesis to be tested are:
Ho: The adoption of information technology does not improve bank efficiency a bank – customer relationship
H1: The adoption of information technology improve bank efficiency a bank – customer relationship
Ho: E-banking in banks has no impact on efficiency and effectiveness on the Nigeria banking sector.
H1: E-banking in banks has an impact on efficiency and effectiveness on the Nigeria banking sector.
1.6 SCOPE OF THE STUDY
The study is limited to the examination
of the aspect of introduction and adoption of electronic banking and an
extension, and what form of card, is a major payments system in place
of the cash-based settlement, system predominant in Nigeria.
Apart from cards, which are now cash,
there are other form of contemporary payment instrument, they
are classified into three broad categories. These are cash (note and
coins) non-cash (paper-based instruments) such as cheques. electronic
system such as Automated Teller Machines (ATM).
The study also examine the feasibility
of using on-line banking and the use of cards for other objective other
than settlement based on the concept of electronic funds transfer
through such electronic system ATM etc.
The scope of the work will also extend to the basic infrastructural requirements and the gains to the society in general.
1.7 LIMITATIONS OF THE STUDY
The major limiting factor of this study
is the texts and papers on banks, electronic and the Nigeria payment
system unlike that of advanced economics. This may be attributed to the
newness of the introduction of electronic banking in Nigeria.
There is also the death of secondary
data and relevant information on the project topic. Banks which have
introduced one form of on-line banking or electronic banking and non
cash system like “western money transfer” “first cash” by first bank’
“money gram” by UBA “PAYCARD” by Diamond Bank” “Wema link by Wema Bank”,
value card by platinum Habib Bank in Nigeria are resisting to discuss
their product. This by understanding will enable them continue to
maintain competitive advantage over and above their competitors most
information available are only description and does not include
statistics on sales.
Finance was another major handicap, it
restricted the movement and sourcing of materials hence the scope of the
study will be restricted to few banks and to Lagos and its
1.8 ORGANIZATION OF THE STUDY
The rest of this study shall be divided
into four chapters: chapter two will deal with the literature review and
the role of information technology in business operations.
Apart from the profile of Zenith Bank
that would be examined in chapter three, the methodology analysis which
includes the characteristics and basic elements of the research study
shall also be presented. Data presentation, analysis and interpretation
will be covered in chapter four while the concluding part of the
research work will be chapter five where in a nutshell the summary, the
conclusion and the recommendations would be discussed.
1.9 DEFINITIONS OF TERMS
Banks: Banks are
institutions that create and manage the financial resources of
individual companies and nations. A bank is measured but its
profitability and efficiency of the services it provides in comparison,
to its peers. That is other banks in the same league (commercial or
Banking industry: This
refers to the financial institution in a particular environment in
relations to banking sector. This is a description of banking
environment in a comparison to the other sector. This can be measured by
how well bank are doing. In terms of profitability and efficiency in
relation to the other industry in the economy.
Current man power: This
term in this instance refers to the present work force in the bank, as
at the time the IT infrastructure is being out in place that has
knowledge of using information technology.
Internet: This is known
as the “information super high way’ where everyone is connected to each
other. The intent is a “high way” where we can go and ‘surf’ as long
as we have the address of person(s) organization, institution we are
looking for or a name surfing means that you go to these different web
sites to get the required information.
IT development: In
terms It development is the rate at which information has been
developed. Development would be in terms of the use of IT in the bank in
Technological infrastructure describe the structure that is put in
place to make IT a reality in the environment that is being
Automated Teller Machine (ATM): refers
to a unmanned automated teller device located either in or off bank
premises which are capable of dispensing cash and handling routine
Credit card: Is a
plastic card for changing purchases to an individual of corporate
account that at some later date use to extent credit outside the bank
Smart card: either
credit cash or debit card with on board electronic intelligence of its
own and program mable – store monetary value usable for payment of
exchange which is held in electronic form rather than physical nature.
Electronic purse: Refers to a debit card with funds loaded on it for the holder/owner to spend as he wishes.
Cheques: Are financial instruments issued by bank account holder authorizing a debt transaction on their account.
CBN: Central Bank of Nigeria, the apex financial institutions in the country
Off line: Refer to
system that are linked either directly or through any form of
communication, lines to a bank’s central computer system.
In line: Refers to systems that are linked in either way to a bank central computer system.
Master cards: Refers to a card at the point of sales and capable of recording information.
Value cards: A value card is a compact electronic circuit board with payment for goods and service could be effected.
Cash holder: Refers to the person or organization holding the debit and credit involving limited work but extensive use of computers.
Automated clearing housing: (ACH):
facility that performs exchange and settlement functions for electronic
payments that passed between financial institutions.
Transactions Log: It is the record of all transaction completed by a merchant over a period of time normally one day.