TABLE OF CONTENTS
1.2 Statement of the Problem
1.3 Statement of Research Objectives
1.4 Statement of Research Questions
Statement of Hypothesis
1.6 Relevance of the Study
1.7 Sources of Data and
1.8 Scope of Study
1.9 Limitation of the Study
1.10 Definition of Terms
What Is Information Technology (It)?
History of Computers
History of the Introduction of Information Technology in the Banking Industry of
The Purpose of Information Technology in Banks
2.5 Types of Electronic Devices Used For Banking
Electronic Fund Transfer (EFT)
Affecting the Development/Adoption of Information Technology
2.10 Impacts of Information Technology on Banking
Development of Electronic Market in
2.12 Regulatory/Supervisory Challenges of the Development of Information
Technology in Nigeria Banks
Legal and Regulatory Framework
Security of Financial Transaction
System and Infrastructure Failure
Money Laundering and Other Financial Crimes
Bank of Nigeria Supervisory Capacity and Information Technology in Nigeria
The Future of Electronic Banking in Nigeria
3.3 Re-Statement of the Research Problem
Re-Statement of Research Questions
Statement of Hypothesis
Sample Design and Procedure
Method of Data Analysis
PRESENTATION ANALYSIS AND INTERPRETATION
4.2 Presentation of Results and Data Analysis
STUDY, CONCLUSION AND RECOMMENDATION
The use of information technology, broadly
referring to computers and peripheral equipment, has seen tremendous growth in
service industries in the recent past. The most obvious example is perhaps the
banking industry, where through the introduction of information technology
related products in internet banking, electronic payments, security
investments, information exchanges (Berger, 2003), banks now can provide more
diverse services to customers with less manpower.
Information technology is a powerful force that
drives the world towards a converging commonality (Levitt, 1992). From the
beginning of the human era, technology has been of the most essential and most
important factor for the development of mankind (Coombs et al, 1987). During
the last two hundred years, technological changes have often been related to
economic growth in the forms of new types of goods and services Smith (1776)
first wrote about technical changes in the form of new machines as some of the
important causes of increasing incomes more than 200 years ago.
Research shows that information technology affects
financial institutions by easing enquiry, saving time and improving service
delivery (ALU 2002). Information technology also provides solutions to the
needs of modem societies in health care delivery, library services, education
and communication networks within organizations etc. Seeing this pattern of
growth, it seems obvious that information technology can bring about equivalent
contribution to profit.
Some available telecommunication and information
technologies which are presently being used in the banking industry in Nigeria
are telephone, facsimile, wireless radio phone, very small Aperture Terminal
Satellite (USAT), telegraphy, computer system, magnetic ink character
recognition (MICR) which provides room
for encoding of cheques and all documents on a character in magnetic ink,
electronic fund transfer (EFT), credit or value card etc.
According to Alu (2002), some banks in Nigeria have
LANS (Local area network) in most of their branches but none of the banks have
deployed home banking applications. As a result of the increased demand for
customer deposits Nigeria banks especially the new generation banks have
realized the imperative of good and prompt customer service.
Also, due to the fact that some customers lost
their deposits in the erstwhile technically insolvent or distressed bank
customers have now become wiser, more discerning, alert and sophisticated with
regards to choosing where it is safe to put their money and where they would be
served promptly, preferably in a pleasant, courteous and friendly environment.
Thus they have started looking at the level of services, with regards quality,
speed and efficiency has become the major imperative. On the parts of the
banks, they have realized that one way in which they can provide quality
service is through the use of technology.
Hence, there is a growing rate of adopting new
technologies in Nigeria banking operations. Moreover, there is growing evidence
that customers have started associating quality of service in a bank with the
bank’s possession of an online, real time system. Infact, possession of such
system is now judged to be the sine qua non of a high quality banking service,
in Nigeria, so a bank to be perceived as providing high quality service, that
banks have to have an information technology system, which it uses to deliver
services to customers in a more timely, friendly and considerate manner at no
extra cost to the customer.
To most people, information technology in banks
means 24 hours access to cash through an automated teller machine (ATM) or
paychecks deposited directly into saving or checking account. But information
technology in banking now involves many different types of transaction. Hence,
it uses computer and electronic technology as substitute for check and other
transactions. Many financial institutions use ATM or debit card and personal
identification number (PIN) for this purpose. Some use other forms of debt
cards such as those that require at the most the signature of the customer of a
Despite the fact that many of the new generation
banks base their marketing strategy on the possession of supposedly online,
real time systems, they find that their systems links are down for about 50
percent of the time. Many customers feel cheated by this reality and complain
about the incessant "downtimes". They were promised an online real
time system, only to find out that the banks systems are down at least half the
time, and that the national carrier NITEL (Nigeria Telecommunication) is to
blame. Whilst the responsibility of the affected banks to take care of these
problems and that they should be given the nationwide, online, real-time
banking services they were promised. Faced with this dilemma, many banks in the
country are resorting to alternative personal solutions by using the very small
Aperture Terminal (USAT) satellite systems for long distance electronic
communication. For short distances the MDS (Metropolitan Digital Services) system
is often used.
The problem here is that all the banks are trying
to procure appropriate VSATS independent of one another. In other words, there
is no collaboration between the banks in solving this very expensive technology
and thereby providing a cost effective solution to the problem. It would also
be fair to say that Nigeria banks are generally imbed with an overly
competitive mind-set, which tends to foreclose the benefits of synergy of
collaboration in solving most of their common problem.
1.2 STATEMENT OF THE PROBLEM
Banking industry in Nigeria has in recent times
become highly competitive and the competition is expected to intensify as new
players of local and global scope enter the industry. In an attempt to maintain
their competitive edge as the terrain becomes more challenging to navigate,
some banks have introduced information technology in one form or the other.
From all indication, the nations banking environment can reasonably be said to
be changing gradually from manual to an automated system with keenness and
determination already being displayed by
many banks towards information technology, the
attainment of the highest level of information technology using internet of
other types of online means) architecture is no doubt around the comer in the
Apart from making business processes easier and
more accessible in banks, the introduction of information technology in Banking
industry has brought with it series of innovations. The innovations have been
manifested in many areas such as the introduction of automated teller machine
(ATM), Smart cards, telephone banking, etc. Information technology in banks
offers customers advantages such as speed and convenience.
Inspite of its benefits, information technology
will pose a lot of challenge to the banking industry (Nigeria inclusive) and to
regulatory or supervisors in the system. Some of the challenges will include
system failure, customer protection, the loss of audit trait and legal issues
including money laundering or cybercrime. Above all, information technology
also present some security challenges. The effort of the research will be
directed to finding solutions to the following problems:
1. The change of information technology to the banking
2. To attain the highest level of information
technology in the banking industry.
3. Providing a cost effective solution, so that all
banks can source for this very expensive technology in other to provide quality
service to customers.
4. The present operating system of the banking
industry and how information technology improves on business process making
it more easier and accessible.
5. To determine the basic impact of information
6. The ineffectiveness of information technology to
tackle better banking services.
1.3 STATEMENT OF RESEARCH OBJECTIVES
The main aim of the study is based on the examination
of the impact of information technology on the banking industry in Nigeria.
the impact of information technology on the banking industry in Nigeria.
the various types of information technology devices and products used for
those factors that could affect the development or adoption of information
the regulatory/supervisory challenges of development of information technology
on the banking industry in Nigeria.
the Central Bank of Nigeria (CBN) capacity, acts and guidelines on information
the impacts of information technology on bank customer satisfaction.
the future prospect of information technology in the banking industry in
recommend measures on how to improve the information technology on banking
industry in Nigeria.
1.4 STATEMENT OF RESEARCH QUESTIONS
1. What are the factors that could affect the
development or adoption of information technology?
2. What are the various types of information
technology devices and products used for banking services?
3. What is the future prospect of information
technology on banking industry in Nigeria?
4. What is the Central Bank of Nigeria (CBN)
guidelines on information technology?
5. What are the measures recommended to improve
information technology on banking industry in Nigeria?
6. What are the basic impact of information technology
to bank customers.
STATEMENT OF HYPOTHESIS
Research hypothesis means an assumption in mind,
which is yet to be verified but put forward as a starting point for reasoning and
explanation of some theories or proposition concerning the topic of this
project. When an idea is verified, it becomes a theory as an accepted
assumption in small area when uphold. If it happens in a wide area then it
becomes a law.
That the impact of information technology in banking industry does not
improve the operations of banks in Nigeria.
H1: That the impact of information technology on
banking industry improves the operations of banks in Nigeria.
Y = f(x)
=> Y = β0 +β1 +X1 + β2
+X2 + β3 + X3 + U
Y = Returns from shareholders fund
β0 = Intercept
β1 = Parameter
X1 = Growth
rate in computer technology cost
X2 = Interest:
U = Stochastic
HO: Information technology does not provide banks with profits.
HI: Information technology provides banks with profits.
Y = f(x)
=> Y = β0 +β1 +X1 + β2
+X2 + β3 + X3 + U
Y = Bank profits
β0 = Intercept
β1 = Parameter
X1 = Total
X2 = Total Deposit
= Total Computer (Asset) Cost
U = Stochastic
1.6 RELEVANCE OF THE STUDY
Considering the present political and economic
situation in Nigeria and the condition that the numbers of banks in the
increase tremendously due to technological advancement in the banking industry.
There is every tendency for the research to be conducted to know the
contributions and future challenges of information technology in the banking
industry in Nigeria.
Banks being one of the main stays on the financial
sectors of the economy is very important to the society and need to be critically
looked into since the world at large is fast growing in technology. And this
has high effect on the banking sector of the economy, which in turn effects the
economic situation of the nation. This study will also give true picture of
banks to the public irrespective of information technology facilities so that
they will be aware of this innovation.
1.7 SOURCES OF DATA AND METHODOLOGY
This Involves the process of research design that
Is, how we are going to source for data or Information to be able to analyze
the research topic. In order to access the perception of banking services with
the use of regression model. The entire data would be carefully analysed and
aggregated, processed and developed into descriptive statistic utilized for the
evaluation of information technology on the banking industry.
1.8 SCOPE OF STUDY
The scope of this study will be restricted to the
First Bank of Nigeria Plc, Ikorodu branch to be precise because of the number
of branches the bank has in Nigeria.
1.9 LIMITATION OF
The introduction of information technology will
have a significant effect on the updating of banks services in order to
maintain their existing customers and attract more shares of the target market.
The basic limitation of the study will be the
inadequate literature or the subject being the fact that it is a new trend in
the banking industry in Nigeria.
However, a good research requires a lot of work but
there are constrains that may likely hinder the research from carrying out a
very successful research work. Some of these constrains are the difficulties in
getting proper and vital information’s from journals and articles.
Automated Teller Machine (ATM): It is called 24 hours teller. It is an electronic terminal that allows
customers to bank almost anytime.
Fund Transfer: This is a system that allows a customers account to
be credited electronically within 24 hours anywhere in the country.
The term computer is used to describe
a service that's made up of a combination of electronic and electro mechanical
It is used to store every information as regards to customers services.
Check Conversion (Ecc): It converts a paper check into electronic payment at
the point of sale such as when a company receives your check in the mail.
UNK: This is an electronic products that allows banks and
customers to transact business at home.
Banking: This is a system of banking in which personal computer (PC)
connected to the bank i.e. personal computer via the internet allows a customer
to transact banking business when, where and how he/she wants it with little or
no interaction with the bank physically.
Machine: It is used for counting notes and has assisted in counting
large amounts during savings and withdrawals by customers. It helps in reducing
the mistakes of the bank staff in counting boredom. And also, the customer now
spends few minutes in transacting banking business.
Door: This is used as a means of security check to prevent people
from gaining access into the bank with unwanted or very harmful materials e.g.
guns, knives or heavy metallic objects etc.
Smart Card: A type of store-value card in which one or more dips or
microprocessors are embedded, making the card capable of storing data,
performing calculations or performing special purpose.
Prepaid Card: A stored value card as well, on which monetary value is
stored and for which the customer has paid the issuer in advance.
Number: It is a
sequence of digits used to verify the identity of a device holder.
Value Card: This was generated from the idea of smart card, it
is an electronic equivalent of cash (substitute for cash and coins) reloaded
and could be accepted as a means of payment for goods and services.
This is a banking system that offers customers the
freedom of banking with mobile phone.
Banking: This involves the
transaction of banking business through telephone from anywhere there is access
to telephone anytime of the day.
Debit (OR Automatic Bill Payment): A form payment of regular, recurring bills from his or her account on a
specific date, and usually for a specific amount e.g. car payments, housing
payments, budget plan utility bills). The funds electronically transferred from
the customer's account to the creditors account.
Bill Presentation and Payment: This is a form of bill payments by which bills are presented to a
customer online, via either e-mail or a notice in an e-banking account. After
presentment, the customer may pay the bill online when convenient. The payment
is electronically deducted from the customer's account.
known as electronic payment, it is a form of payment that allows a customer to
pay bills through electronic fund transfer. Funds are electronically
transferred from the customer's account to the creditors account. Direct
payment differs from a pre-authorized debit in that the customer must initiate
each direct payment transaction.
is a form of payment by which an organization (such as employer or a government agency) pays
funds (such as employer benefits) via an electronic transfer. The funds are
transferred directly into a consumer's bank account.
Or Check Card: A card used at an ATM or a point-of-sale terminal that enables a
customer to have funds directly debited from his or her bank account.
Card: It is
a type of stored-value card issued by an employer instead of a paycheck that enables an
employee to access his or her pay at aims or point-of-sale terminals. The
employer adds the value of the employee's pay to the card electronically.