ABSTRACT
The
internet is perhaps one of the most useful tools to businesses and individuals
in contemporary world economies. Its use has touched virtually every aspect of
human endeavor including banking. Since the introduction of
electronic banking, there have been challenges facing the adoption of
electronic banking in Nigeria. It was in line with this that this study aims at
examining electronic banking and the challenges of the
Nigerian business environment. Through the cluster sampling and
random sampling technique, data was collected by means of questionnaires from
(45) Ecobank officers and the result were analyzed using the total scores,
simple percentage method and chi-square. The hypothesis testing was done at
five per cent level of significance.
The result shows that Ecobank
electronic banking guidelines are in line with the CBN electronic banking
guideline. The bank has an effective electronic banking system which has
improve its customer’s relationship and satisfaction. The Nigerian
Business environment hinder the smooth operations of Electronic banking in the bank
through the various challenges it posses on electronic banking. To this end, it is recommended that the bank
information technology training programme should be encouraged among the
staffs, and regulatory authorities must stipulate standards for the
banks to follow to avoid making Nigerian Banking Sector a dumping ground for
the outdated technological infrastructures.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication iii
Acknowledgements
iv
Abstract
v
Table of Contents
vi
List of Tables
ix
CHAPTER
ONE: INTRODUCTION
PAGES
1.1 Background to the Study
1-4
1.2 Statement of the Problem
4-5
1.3 Objectives of the Study 5-6
1.4 Statement of Research
Questions
6
1.5 Research Hypotheses 7
1.6 Significance of the Study
7-8
1.7 Scope of the Study
8
1.8 Definition of Terms
8-11
References
12-13
CHAPTER
TWO: LITERATURE REVIEW
2.1 Introduction
14
2.2 The View on Electronic
Banking 14-16
2.3 Nature of Electronic Banking
16-18
2.4 Development and Prospects of
Electronic Banking in Nigeria 18-20
2.5 Areas of Information and
Communication Technology Deployment by Banks 20
2.5.1 Automated Payment Systems
20-21
2.5.2 Electronic Card 21-22
2.5.3 Automated Delivery
Channels
22-23
2.5.4 Mobile Banking 23-24
2.5.5 Telephone Banking
24
2.6 Benefits of Electronic
Banking 25
2.7 Challenges of Regulatory On
Electronic Banking in Nigeria 26-28
2.8 Electronic Banking
Competitiveness
28
2.8.1 Rivalry among Competing
Parties
28
2.8.2 New Entrants
29
2.8.3 Suppliers
29
2.8.4 Buyers
30
2.8.5 Substitutes
30-31
2.9 The Emerging Issues in Electronic
Banking
31
2.9.1 Electronic Banking
Profitability, Efficiency and Reliability 31
2.9.2 Operations of Financial
Institution
32
2.9.3 Bank Customers
Relationship 32
2.9.4 The Regulatory Challenges
32-34
2.9.5 Measures Taken By Banks to
Address Electronic Banking Challenges 34
2.9.5.1 CBN Standards and Guidelines
on ATM Operations in Nigeria
34-36
References
37-40
CHAPTER
THREE: RESEARCH METHODOLOGY
3.1 Introduction
41
3.2 Research Design
41-42
3.3 Population of Study
42-43
3.4 Sampling, Procedure and Sample
Size
43
3.5 Data Collection Instrument and
Validation
43-45
3.6 Method of Data Analysis
45
3.7 Limitation of the
Methodology
45
References
46
CHAPTER
FOUR: DATA PRESENTATION AND ANALYS
4.1 Introduction
47
4.2 Presentation and Analysis of Data
According To Research Questions
47-60
4.3 Test of Hypothesis and
Inference
60-65
4.4 Discussion of Findings 65
Reference
66
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMEDATIONS
5.1 Summary of the Study
67
5.2 Conclusion
67-68
5.3 Recommendations
68-69
5.4 Suggestions for Further Studies
69
Bibliography
70-75
Appendix - Proposed Research
Questionnaire
76-79
LIST
OF TABLES
Table
4.1: Academic Qualification
of Respondents
48
Table
4.2: Years of Working Experience with EcoBank Plc. 49
Table
4.3: Cadre of Respondents
50
Table
4.4: Professional Qualification
50
Table
4.5: Department of Respondent 51
Table
4.6: Usage of Computer
Technology
52
Table
4.7: Usage of
Electronic Banking
53
Table
4.8: Threat to Electronic Banking
54
Table
4.9: Threat Assessment
54
Table 4.10: EcoBank Electronic
Banking System 55
Table
4.11: Information Technology Program
56
Table
4.12: Customer Satisfaction Improvement
57
Table 4.13: Efficiency and Reliability of
Banks
58
Table 4.14: Prospect of Electronic Banking in
Ecobank Plc 59
Table 4.15: Fortune of the Bank
60
Table 4.16: Chi-Square Table on
Bank-Customer Relationship 61
Table
4.17: Chi-Square Table on the CBN Electronic Banking Guideline 62
Table
4.18: Chi-Square Table on the Nigerian
Business Environment
64
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Globalization and Information and
Communication Technology (ICT) took the world by storm and this has posed great
challenges to the banking industry- (Garuba, 2008). Information and
Communication Technology (ICT) has changed not just the business world but also
the world we live in. It has changed the way things are done that today no
matter what you plan to do, whether you will work with people or money, with
words or numbers, technology plays an important role. In fact, it has
re-defined the world order. With technological breakthrough and advances in
telecommunications, speed of equipment and the use of computers, bankers can
now use these same links to transmit data. This gave rise to Electronic banking
which is simply the application of information technology (telecommunications
and computers) to transmit data from one point to another. The electronic
delivery of banking services has grown rapidly in popularity that every bank
now realizes that electronic banking has become a basic element of today’s
financial service delivery.
E-banking includes familiar and relatively
mature electronically-based products in developing markets, such as telephone
banking, credit cards, ATMs, and direct deposit. It also includes electronic
bill payments and products mostly in the developing stage, including
stored-value cards (e.g., smart cards/smart money) and Internet-based stored value
products. E-banking in developing countries is in the early stages of
development. Most banking in developing countries is still doing the
conventional way. However, there is an increasing growth of online banking,
indicating a promising future for online banking and Nigeria banks are taking
good advantage of it. Muniruddeen,
(2007) cited in Adesina & Ayo, (2010), corroborated this submissions that
the banks’ huge investment in telecommunication networks and various e-Banking
services delivery could be seen as an effort towards measuring up with global
standard. This is among other reasons such as increased customer demand, increased
competition among banks themselves; derived minimized cost, new entrants, and
better service delivery. Moreso, Schaechter (2002) argued that electronic
banking has made it easier for customers to compare banks' services and
products, increase competition among banks, and allows banks to penetrate new
markets and thus expand their geographical reach. Some even see electronic
banking as an opportunity for countries with underdeveloped financial systems
to leapfrog developmental stages. Customers in such countries can access
services more easily from banks abroad and through wireless communication
systems, which are developing more rapidly than traditional "wired"
communication networks. Prior to the introduction of electronic banking in Nigeria
in the 1990’s masterminded by the new generation banks such as Intercontinental
Bank, Zenith Bank, Guarantee Trust Bank etc., financial services delivery was
very poor. Customers had to spend hour in long queues in the banking hall to
carry out transactions either to withdraw or deposit cash into their account.
This was the era of manual processing of transactions. The old generation banks such as United Bank
of Africa, First Bank of Nigeria and Union Bank of Nigeria saw themselves as
lords in the financial service industry. They dictated the pace in the banking
industry and being market leader with many products and services. The
competition train in the banking industry has shifted to technology and
intensive delivery of services which has created paradigm shift in banking
services in Nigeria. Banks like First Bank, Zenith Bank, and Guaranty Trust
Bank used technology as a competitive weapon and successfully became one of the
largest banks in Nigeria within four years post-consolidation era. Banking
service delivery was re-engineered with the introduction of technology.
Integrated
Banking Solutions (IBS) was also introduced in most banks. A central server
replaced all branch level and controlling office level servers. Every
transaction that is taking place across any service point like a branch or ATM
is recorded in the server. This new operational method helps customers to
conduct normal banking transactions like deposit/withdrawal of cash from
account, account transfers etc. from any branch of the twenty – five banks in
Nigeria without the account being domiciled in that branch. Automated Teller
Machines (ATM) are equipped to facilitate several transactions, customers can
withdraw from the ATM of a bank that they don’t have an account. Other roles
like account transfers, payment of bills, balance enquiry are all possible
through ATM. Over 25,000 ATMs are currently in use in the country connected to
Inter Switch Network. Electronic banking is gaining patronage where information
from central server is made accessible to the account holder using a PIN or
PASSWORD. Account statements, account transfer facilities, bill payment
facilities, list of cheques to be cleared, loan facilities in form of assets,
vehicle and mortgage, international bank transfer are some of the facilities
given by the banks to their customers.
Technology must provide security to meet
the challenges encountered by E-Banking. Virtually all software and hardware
vendors claim to build secure products, but what assurance does an E-Banking
have of a product’s security? E-Banking want a clear answer to the conflicting
security claims they hear from vendors. How can you be confident about the
security built into a product? Independent security evaluations against
internationally-established security criteria provide assurance of vendors’
security claims. The growth of the Web and Internet as new channels, the growth
in their use by customers, the growth in their use by customers, and the floor
of companies entering the market, presents a series of key challenges to
companies. It is easy and cheap to put up a website. But to create an
environment delivering effective service on the Web to a significant proportion
of your customer base requires an E-Banking strategy.
The
purpose of the present study is to analyze major issues needed to be mastered
by Nigeria banks in order to compete with the rest of the world and to show the
major developments and challenges in the Nigerian operating environment that
are affecting the growth of electronic banking in the industry.
1.2 STATEMENT OF THE PROBLEM
Despite the growing popularity of
e-banking in the world, its rate of adoption in Nigeria has been relatively
slow. This has been so despite its enormous benefits. In order to make the
e-banking experience more pleasurable and beneficial to bank customers, the
Central Bank of Nigeria (the regulatory institution of the Nigerian banking
industry) in 2003 brought out policy guidelines. However, recent studies have
shown that e-banking is growing at a slow pace.
The payments and clearing system in the country is under
developed. There is no central clearing system to clear debit card transactions
between banks. The banking halls continue to be immersed with the long queues
as people come in to collect their monthly wages or salaries. Many people have
been holding large sums of money outside the banking system as a result of the
ordeal one has to go through before withdrawing money or making payment.
However, faced with such problems in the payment process, only a few payment solutions
have been introduced so far in Nigeria to solve them. Cash still remains the
most popular retail payment instrument, despite the increase in the
introduction of electronic payment schemes in the country. Payment for goods
and services, settling utility bills, and money transfers has been a major
headache for individual and firms in Nigeria resulting in declined business
activities and huge debt to most of the utility providers (Sarpong, 2003).
Besides, the existing business environment also poses some
challenges to the smooth operations of electronic banking in Nigeria. Some of
these operational challenges include epileptic power supply, dominance of cash
transaction in the economy, low level of awareness among Nigerians etc (Agbada,
2008). The thrust of this research work shall be to examine the trend of
electronic banking in Nigeria and a critically examination of the challenges
noted above.
1.3 OBJECTIVES OF THE STUDY
The main objective
of this research work is to examine the challenges of the Nigerian business
environment on the adoption and implementation of electronic banking in Nigeria
banking system.
Specifically the
study objectives are;
Ø To evaluate the prospect of
electronic banking in Ecobank Plc;
Ø To
evaluate the impact of electronic banking on the operations of Ecobank Plc;
Ø To
examine the effect of electronic banking on bank-customer relationship;
Ø To
examine whether the Bank electronic Banking guideline comply with the CBN electronic
Banking guideline policy;
Ø To
examine whether electronic banking has improve the fortune of the Bank;
1.4
STATEMENT OF RESEARCH QUESTIONS
The
study would provide answers to the following questions:
Ø Does
Electronic banking contribute to the efficiency and reliability of banks and
banking?
Ø Does
Electronic banking improves bank-customer relationship and retains them to
their respective banks?
Ø To
what extent would Electronic banking improve the fortune of banks?
Ø What
are the results of frequent changes and upgrading of information Technology
equipments on the bank’s profitability?
Ø What
are technical and operations challenges facing the adoption of electronic
banking in Nigeria?
Ø Does
the electronic banking guideline of the banking industry comply with the CBN
electronic banking guideline?
1.5
RESEARCH HYPOTHESES
The
following hypotheses are formulated from the research questions above:
Hypothesis
1:
H1: Electronic banking does improve bank-customer
relationship in Ecobank Plc.
Hο:
Electronic banking does not improve bank-customer
relationship Ecobank Plc
Hypothesis
2:
H1: The Bank electronic
banking guideline does comply with the CBN electronic banking guideline.
Hο: The Bank
electronic banking guideline does not comply with the CBN electronic banking
guideline.
Hypothesis 3:
H1: The Nigerian Business environment does hinder
the smooth operations of Electronic banking in Ecobank Plc.
Hο:
The Nigerian Business environment does not hinder the smooth
operations of Electronic banking in Ecobank Plc.
1.6
SIGNIFICANCE OF THE STUDY
The
study would enable the banks executives and indeed the policy makers of the
banks and financial institutions to be aware of electronic banking as a product
of electronic commerce with a view to making strategic decisions. The research
is equally significant because it would provide answers to factors militating
against the implementation of electronic banking in Ecobank Plc; prove the
success and growth associated with implementation of electronic commerce
highlight the areas of banking operations that can be enhanced via electronic banking
and also be an invaluable tool for Students, Academician, institutions,
Corporate managers and individuals that want to know more about electronic banking
trends especially in Nigeria.
1.7 SCOPE OF THE STUDY
In
pursuance of the objective of the study, attention shall be focused on
Electronic banking among other electronic commerce implementation. In order to
conduct an empirical investigation into the adoption of Electronic banking in
Nigeria, this study shall examine the nature of Electronic banking operations
in Ecobank Plc from 2009 to 2011.
1.8
DEFINITION OF TERMS
Automated Teller Machine (ATM)
- ATM is a combined computer terminal, with cash vault and record-keeping
system in one unit, permitting customers to enter the bank’s book keeping
system with a plastic card containing a Personal Identification Number (PIN).
It can also be accessed by punching a special code number into the computer
terminal linked to the bank’s computerized records (Rose, 1999)
Bio – Metrics:
It is a security device that uses an element of a person’s biological make-up
to confirm identification. These devices includes writing pads that detect the
form and pressure of a person writing a signature, eye scanners that read the
pattern of blood vessels in a person’s retina, and palm scanners that read the
palm of a person’s hand. It is also the use of measurement of human features
such as fingers or eyes in order to identify people
Credit Cards
- This is a plastic card that assures a seller that the person using it has a
satisfactory credit rating and that the issuer will see to it that the seller
receives payment for the goods or items delivered. This represents the
automated capture of data about purchases against a revolving credit account,
(Pierce, 2001).
Debit Cards
- These were a new form of value-transfer, where the card holder after keying
of a PIN, uses a terminal and network to authorize the transfer of value from
their account to that of a merchant. Introduced more recently, debit together
with credit cards represent the most rapidly growing method of payments in
several OECD countries. (Pierce, 2001) When a payment is made through a debit
card, the funds are immediately withdrawn from the purchaser's bank account.
Electronic Cheque
- Electronic cheques also known as e-cheques are virtual cheques that allow
consumers to use Internet in making cheque payments. The buyer fills out a form
(that looks like a cheque on the screen) with the necessary information, and
then clicks the "send" button. The information then goes through a
computer or a transaction service, depending on which way one chooses to accept
check payments.
Electronic Funds Transfer at Point of
Sale (EFT/POS) - EFT/POS is an online system that
involves the use of plastic cards in terminal on merchants’ premises and
enables customers to transfer funds instantaneously from their bank accounts to
merchant accounts when making purchases. It uses a debit card to activate an
EFT process, (Chorafas, 1988). It actually comprises two distinct mechanisms:
debit and credit cards.
Electronic Purses/Wallets
- There are two categories of e/wallet, these are;
a)
E-wallets that store card numbers and cash. It operates like having a virtual
savings account where charges are made for ongoing purchases, particularly
micro-payments. This category of a digital wallet is where consumers store
digital cash, which has been transferred from a credit card, debit card or
virtual cheque inside their e-wallets.
b)
E-wallets that store card numbers. This is a virtual wallet that can store
credit card and debit card information. Other information that can be stored on
this card is passwords, membership cards, and health information. Some of the
e-wallets make it easier for consumers to buy goods using the card.
Electronic Money
– Monetary value measured in currency units stored in electronic form on an
electronic device in the consumer’s possession. This electronic value can be
purchased and held on the device until reduced through purchase or transfer.
Home Banking
- This term is used for a variety of related methods whereby a payer uses an
electronic device in the home or workplace to initiate payment to a payee. In
addition to computer technology, it can be performed using the telephone and
IVR2. (Chorafas 1988) “PC- Banking is a service which allows the bank’s
customers to access information about their accounts via a proprietary network,
usually with the help of proprietary software installed on their personal
computer”. (Abor, 2004) It is used to perform a variety of retail banking
tasks, and offers the customer 24-hours services.
Mobile Banking -
This is a product that offers Customers of a Bank to access services as you go.
Customer can make their transactions anywhere such as account balance,
transaction enquiries, stop checks, and other customer’s service instructions,
Balance Inquiry, Account Verification, Bill Payment, Electronic fund transfer,
Account Balances, updates and history, Customer service via mobile, Transfer
between accounts etc.
Payment System
– A financial system that establishes that means for transferring money between
suppliers and of fund, usually by exchanging debits or Credits between
financial institutions.
Smart Cards
- A smart card is a plastic card with a computer chip inserted into it and that
store and transacts data between users. The data, in a form of value or
information is stored in the card’s chip, either a memory or microprocessor.
“Smart card-enhanced systems are in use today throughout several key
applications, including healthcare, banking, entertainment and transportation.”
Telephone Banking
- Under this mechanism, the customer transacts business by dialing a touch-tone
telephone connected to an automated system of the bank. Telephone banking or
telebanking is a form of virtual banking that deliver financial services
through telecommunication devices. This is normally done through Automated
Voice Response (AVR) technology”. (Balachandher et al, 2001).
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