TABLE OF CONTENT
Title page i
Declaration ii
Dedication iii
Certification iv
Acknowledgement
v
List of Tables vii
Abstract viii
CHAPTER ONE INTRODUCTION
1.1Background of the study 1
1.2 Statement of problems. 3
1.3 Objectives of
the study. 4
1.4 Research Questions. 5
1.5 Research Hypotheses. 5
1.6 Significant of The Study. 6
1.7 The Scope of the study 7
1.8 Definition Of Terms. 7
CHAPTER TWO:LETERSTURE REVIEW
2.1 Concept of Electronic Banking. 10
2.1.2.The Entering of Nigerian Banks into Electronic
Banking 12
2.1.3 Benefit of E-Banking. 13
2.1.4 The problems of Electronic Banking 16
2.1.5 Threats of Cyber-Crimes on the Nigerian Banking
Premises 18
2.1.6 The Regulatory Challeges 19
2.2 The concept And measurement of Profitability. 22
2.2.1 Measures of Profitability 23
2.2.2.1 Return on Assets (R.O.A) And Return on Capital
(R.O.C). 23
2.2.2.2.Return on Equity. 25
2.3 Theorietical Framework. 26
2.3.1. Theory of Reasoned Action(TRA) 26
2.3.2 The Decomposed Theory of Planned Behaviour. 26
2.3.3 Innovation Diffusion Theory. 27
2.4 Empirical studies on Electronic Banking and
Profitability 28
CHAPTER THREE:RESESRCH METHODOLOGY.
3.1. Research Design. 31
3.2 Area of The
Study. 31
3.3 Sources And method of Data Collection. 34
3.4 Variables of the Study. 35
3.4.1 Independent variable. 35
3.4.2 Dependent variable. 36
3.5 method of Data Analysis. 36
3.6 Model to the study. 37
CHAPTER FOUR:PRESENTSTION OF DSTA ANALYSIS AND
DISCUSSION
4.1 presentation of Data. 38
4.2 Presentation of Results And Discussion. 38
4.2.1 Descriptive Statistic. 39
4.2.2 Regression Analysis. 40
4.2.3 Discussion of Results and Hypotheses Testing. 42
CHAPTER FIVE:SUMMARY OF FINDINGS,CONCLUSION AND
RECOMMENDATION
5.1 Summary of Findings. 45
5.2 Conclusion.
46
5.3 Recommendations
46
APPENDIX.
APPENDIX 1. Descriptive Statistic 47
APPENDIX 2. Regression Results 48
EXPONENTIAL
48
SEMI LOG.
49
DOUBLE LOG. 49
REFERENCES
LIST OF TABLES
Table 4.1 Time Series Data from 2002 to 2016 35
Table
4.2 Descriptive Statistic 36
Table
4.3 Regression Results (Dependent
variable, return on assets) 38
CHAPTER ONE
INTRODUCTION
1.1 .Background to the Study
Before the emergence of modern banking system
(1959-2000s), banking operation was
manually done which lead to a slowdown in settlement of transactions.
Were one will walk into the banking hall and spend many hours waiting to settle
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 means in carrying out transactions, which ameliorate the sluggish
nature of banking transaction (Steve, 2006).
Nigeria has embrace electronic banking early compared
to developed countries. Nigeria adopted electronic banking system in the early
2000s.as at that time people find it hard to go to the banking hall to transact
because of time wasted and filling of forms and the banker(s) asking their
customer variety of questions involving the kind of transaction they want to
do. Cash was seen carried on bags or in their socks or inner wear. 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(Steven,2002). 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(adgbala,2008).
The financial system of any country provides the catalyst through
financial intermediation where funds are transfer from surplus economic unit to
the deficit (spending) economic unit for productive activities to ensure
economic growth and development,(Olowo,2008). The Nigerian financial market
where we have the capital market and the money market under the financial
system is undoubtedly the most important in the political-economic systems;
because, it provides the necessary lubricant that keeps the wheel of the
economy turning and it is an engine for economic growth. Electronic banking is
the use of electronic and telecommunication networks to deliver a wide range of
value added products and services to bank customers,(Steven, 2002). The use of
information technology in banking operations is called electronic banking.
(Ovia,2001) argue that Electronic banking is a product of e-commerce in the
field of banking and financial services. In what can be described as
Business-to-consumer (B2C) domain for balance enquiry, request for cheque
books, recording stop payment instruction, balance transfer instruction,
account opening and other forms of traditional banking services.
However, many of the Nigerian banks adopted electronic banking system in the
early 2000s. Today the Automated Teller
Machine, Electronic Mobile Banking, Internet Banking, and Point Of Sale are
major e-payment channels currently in use in Nigeria.
This variables are used in Nigeria today to settle transaction in
Nigeria and abroad, one don’t need to go to the bank to transact except when
necessary. Hence charges are involve for the service of using this electronic
media hence increasing bank profitability
In the recent years, electronic banking has been viewed as a driving
force that is changing the landscape of the banking industry fundamentally, in
particular, towards a more competitive industry. E-Banking has blurred the
boundaries between different financial institutions, enabled new financial
products and services and made existing financial services available in
different packages, (Agbala, 2008).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.
Recently, one can stay in this room and transact using mobile
money transfer or service code made by the bank itself to send money to their
family members or friends.
This study is carried out to identify the contributions of the adoption of the
various electronic banking channels to the profitability of commercial banks in
Nigeria.
1.2 Statement of the problem
The vast majority of the recent literature on
electronic money and banking suffers from a narrow focus. It generally ignores
internet banking entirely and equates electronic money with the substitution of
currency through electronic gadget such as smart cards and virtual currency.
For example, Freedman, (2000) proposes that internet banking and electronic
money consist of three devices; access devices, stored value cards, and network
money. Internet banking is simply the use of new access devices and is therefore ignored. Electronic money then is
the sum of stored value (smart) cards and network money (value stored on
computer hard drives). What is most fascinating and revealing about this
apparently popular view is that internet banking and electronic money are no
longer functions or processes, but devices.
Within this rather narrow scope for internet banking
and electronic money, there are nonetheless many research that address one or
more of the challenges facing it. Santomero and Seater (1996), Prinz (1999),
and Shy and Tarkka (2002), and many others present models that identify
conditions under which alternative electronic payments substitute for currency.
Most of these models indicate that there is at least the possibility for
electronic substitutes for currency to emerge and flourish on a large scale,
depending on the characteristic of the various technologies as well as the
characteristics of the potential users.
Berentsen (1998) considers the impact that the
substitution of smart cards for currency will have on monetary policy, arguing
that although electronic substitutes for currency will become widespread,
monetary policy will continue to work as before because this currency
substitution will leave the demand for central Bank reserves largely intact.
Goodhart (2000) discusses how monetary control would work in an economy in
which Central Bank currency has been partially or completely replaced by
electronic substitutes.
Friedman (1999) point out that internet banking
presents the possibility that an entire alternative payment system, not under
the control of the Central Bank may arise. In an extreme variant of Friedman,
King (1999) argues that today computers make it at least possible to bypass the
payment system altogether, instead using direct bilateral clearing and
settlement; the responses to Friedman.
Given the above scenario, therefore, this study focuses on finding
how e-banking has been able to enhance the profitability of commercial banks in
Nigeria, so as to fill the research gap.
1.3 Objectives of the study
The main objective of this study is to examine the relationship between
e-banking and the profitability of commercial banks in Nigeria. More specifically,
the study seeks to achieve the following objectives:
1. To determine the impact of automated teller machine (ATM) transaction on the
profitability of commercial banks in Nigeria.
2. To ascertain the influence of Point of Sales (POS) terminal transactions on
the profitability of commercial banks in Nigeria.
3. To examine the contribution of Electronic Mobile Banking (EMB) to the
profitability of commercial banks in Nigeria.
4. To evaluate the impact of Internet Banking transactions on the profitability
of commercial banks in Nigeria.
1.4 Research Questions
The study seeks to provide answers to the following research questions as a
guide to achieving the above stated objectives:
1. How far has automated teller machine (ATM) transactions affected the
profitability of commercial banks in Nigeria?
2. To what extent has Point of Sales (POS) terminal transactions influence the
profitability of commercial banks in Nigeria?
3. What is the extent of the effect of Electronic Mobile Banking (EMB)
significantly contribute to the profitability of commercial banks in Nigeria?
4. What is the effect of the Internet (WEB) Banking transactions on the
profitability of commercial banks in Nigeria?
1.5 Research Hypotheses
In order to provide answers to the above questions, the following hypotheses
have been formulated in null form:
H01: ATM transactions have no significant effect on the
profitability of commercial banks in Nigeria.
H02: Point-of-sales transactions have no significant effect
on the profitability of commercial banks in Nigeria.
H03: E-Mobile banking has no significant effect on the
profitability of commercial in Nigeria.
Ho4: Internet (WEB) banking services has no significant
effect on the profitability of commercial banks in Nigeria.
1.6 Significance of The Study
The study will aid commercial banks in Nigeria to
understand banking in a new dimension. Findings from the study will highlight
the various benefits of cashless banking and how these measures if properly
taken can reduce operations cost and increase profitability. Apart from
interest from loans and other investments commercial banks partake. This model
as presented in this study will enlighten managers of commercial banks on how
to serve customers better while gaining their loyalty and money using internet
banking.
This study is
also significant for the fact that:
a. It will
enlighten Accountant on how best
application of e-banking products to generate information needed for
profitability, growth and survival of the organization.
b. Students and managers to stand benefit
a lot from this research in that it
will help keep them in the tract of new technology, trends in business cycle.
c. It will
enlighten the staffs that the use of
electronic-banking will not lead to job losses but rather it will increase the efficiency in the
organization.
d. The
study will also enlighten public and
private organization on how to use
electronic-banking for improvement in their activities.
1.7 The
Scope of the Study
The study covers a sample of 15 banks out of the 19
commercial banks (with 6000 branches across the country.) in Nigeria for the
periods of 2002 to 2016.we adopt this period because of pre-post consolidation
of commercial banks profitability in Nigeria.
The study traces the effect of electronic-banking
products on the profitability of commercial bank
in Nigeria. The study therefore covers the period of 14 years using the annual
financial report of commercial banks. The study will look into the
activities of the bank from 2002-2016. As such the historical
background of the bank, the application of electronic-banking and its
profitability and the effect it has on banks, together with the problem encountered
are to be given detailed analysis. finally, the study intends not only to help
enrich the existing literature in the field, but to serve as a reference
material to those who wish to further research in the same area of study.
1.8
Definition of Terms.
Internet
banking: is an electronic payment system that enables
customers of a financial institution to conduct financial transactions on a
website operated by the institution, such as a retail bank, virtual bank,
credit union or building society. Online banking is also referred as Internet
banking, internet, virtual banking and by other terms.
CBN:
Central Bank of Nigeria Profitability: The state or condition
of yielding a
financial profit or gain. It is often measured by
price to earnings ratio.
Return on Asset (ROA): This shows the percentage of
how profitable a company's assets are in generating revenue.
ROE:
Return on equity (ROE); it measures the rate of return for
ownership interest (shareholders' equity) of common stock owners. It measures
the efficiency of a firm at generating profits from each unit of shareholder
equity, also known as net assets or assets minus liabilities. ROE shows how
well a company uses investments to generate earnings growth. ROEs 15-20% are
genera t can be described as using the internet as delivery mode for the
provision of services like opening a deposit account, electronic bill payment,
online transfers, online withdraws, and in fact, any other online banking
transaction. (Allen et al ,2002) gave the definition of electronic finance
(e-finance) as the provision of financial
services and market using electronic communication and
computation. Electronic banking has also been defined by (Lafford and Li ,2005)
as the medium of using electronic devices, like internet, wireless connections,
networks, ATM, phone and cell phones in banking services. These services are
part of providing currency for the economic system of the country
Electronic
banking services can be grouped into four major classes, namely:
a) Telephone banking
– This form of electronic banking model can be considered as a form of distance
or virtual banking, which is basically the delivery of branch financial
services via telecommunications devices where the bank’s clients can perform
retail banking transactions by calling a phone or mobile communication unit,
which is linked to an automated system of bank by utilizing Automated Voice
Response (AVR) technology. (Balachandher
et al, 2001). It allows clients to
phone their financial institutions to check account balances, pay certain bills,
transfer funds between accounts and change PIN.
b)
Internet banking (Online or WEB banking) – this form of
electronic banking model involves conducting banking transactions such as
account enquiry, printing account statements, 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 for goods and services over the
internet between the merchant and the customer. Currently,
the most common internet payments are for customer
bills and purchase of air ticket through websites of the merchants. (Littler,
2006).
c)
Mobile banking (m-banking) – This form of electronic banking
involves the use of mobile phone for settlement of financial transactions. It
supports person to person transfers with immediate availability of funds for
the beneficiary. Mobile payments use the card infrastructure for execution of
payment instructions as well as secure short message service (SMS) messaging
for confirmation of receipt to the beneficiary. Mobile banking his meant for
low value transactions, where speed of completing the transaction is the key.
The services covered under this product include account enquiry, funds
transfer, phones recharge, change of passwords, and bill payments, which are
offered by few institutions, (Sathye,1999).
d)
Electronic card – This form of electronic banking is a
physical plastic card that uniquely identifies the holder and can be used for
financial transactions on the internet. For instance, Automatic Teller Machine
(ATM) and Point-of-sale (POS) terminals are used to authorize payments to the
merchant or seller (James, 2009). The various types of electronic cards include
debit card, credit card, releasable card, which require visiting the banks for
replenishment. (Jame2009).
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