ABSTRACT
Banking has come a long way from the time of ledger
cards and other manual filing systems. Most banks today have electronics
systems to handle their daily voluminous task of information retrieval, storage
and processing. The purpose of this research is to examine the contribution of
electronic banking services to bank profitability in Nigeria. The descriptive research design
was employed in this research. The annual report
and account of the banks was used for the period of study, 10 years from 2008 to 2017. Data
analysis was done using ordinary least square multiple regression method.
Multiple regression models were employed. The
research shows that adoption of electronic banking strategies has a positive
effect on banks’ profits. The study concludes that electronic banking has
contributed positively to the profitability of banks in Nigeria. It is
recommended among other things that commercial banks should increase their
efforts towards adoption of electronic banking to automate their service
delivery to customers. This follows the positive effect that electronic banking
usage has on the profitability of Nigeria’s banks.
TABLE
OF CONTENT
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Contents vi
List of Tables vii
List of Figure x
Abstract xi
CHAPTER
ONE
INTRODUCTION
1.1
Background of the Study 1
1.2
Statement of Problem 4
1.3
Objectives of the Study 5
1.4
Research questions 5
1.5
Research
hypotheses 6
1.6
Scope of the
Study 6
1.7
Limitations of
the Study 6
1.8
Significance of
the study 6
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1
Conceptual
Framework 10
2.1.1 Types
of Electronic Banking 11
2.1.2 Application of Electronic Banking 12
2.1.3 Challenges
faced by the banks while using E-banking 15
2.1.4 Benefits
of E-banking 15
2.2
Theoretical Review 17
2.3
Empirical Review 18
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research Design 25
3.2 Population of the Study 25
3.3 Data Collection 25
3.4 Method of Data Analysis 26
3.4.1 Model Specification 26
CHAPTER
FOUR
DATA
PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Presentation
of Descriptive Statistics 28
4.2 Presentation
of Correlation Analysis 28
4.3 Presentation
of Regression Result 29
4.3.1 Model Summary 31
4.3.2 ANOVA (Analysis of Variance) 32
4.3.3 Coefficient of Table 32
4.4 Discussion
of Results 33
4.5 Test of
Hypotheses 34
CHAPTER
FIVE
SUMMARY
OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings 36
5.2 Conclusion 37
5.3 Recommendations 37
APPENDIX I
LIST
OF TABLE
Table 4.1: Presentation of Descriptive Statistics
Table 4.2: Presentation of Correlation Analysis
Table 4.3: Model Summary
Table 4.4: ANOVA (Analysis
of Variance)
Table 4.5: Table of
coefficient
LIST
OF FIGURE
Figure 1.1 Conceptual framework
ABSTRACT
Banking has come a long way from the time of ledger
cards and other manual filing systems. Most banks today have electronics
systems to handle their daily voluminous task of information retrieval, storage
and processing. The purpose of this research is to examine the contribution of
electronic banking services to bank profitability in Nigeria. The descriptive research design
was employed in this research. The annual report
and account of the banks was used for the period of study, 10 years from 2008 to 2017. Data
analysis was done using ordinary least square multiple regression method.
Multiple regression models were employed. The
research shows that adoption of electronic banking strategies has a positive
effect on banks’ profits. The study concludes that electronic banking has
contributed positively to the profitability of banks in Nigeria. It is
recommended among other things that commercial banks should increase their
efforts towards adoption of electronic banking to automate their service
delivery to customers. This follows the positive effect that electronic banking
usage has on the profitability of Nigeria’s banks.
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Banking has come a long way from the time of ledger
cards and other manual filing systems. Most banks today have electronics
systems to handle their daily voluminous task of information retrieval, storage
and processing.
The application of electronic payment (concepts,
techniques, policies) and implementation of electronic devices in banking
industry has become a subject of fundamental importance and concerns to all
banks operating within Nigeria and indeed a prerequisite for local and global
competitiveness. The recent consolidation exercise in Nigerian banking sector
has drawn the attention of many banks to application of various technological
devices in promoting/achieving better customer service delivery that guarantee
continuous increase in profitability and higher return on investment. However,
the rapid growth in the global banking services has increased the pressure on
Nigerian banks for improved productivity. The new age of banking allows
customers to walk into any computerized bank and conclude their transaction
within a twinkle of an eye. In order to enhance banking services, all banks in
Nigeria have adopted electronic banking services to enhance their customer
service delivery through the deployment information communication technologies
(Adewoye, 2014).
The adoption of Information and Communication
Technology in banking sector is generally referred to as electronic banking
(E-banking). Electronic banking directly affects management decisions, plan,
products and services to be offered by banks. It has continued to change the
way banks and the corporate relationships are organized worldwide and the
variety of innovation of service delivery.
Information and Communication Technology (ICT) is the
automation of process, controls and information production using computers,
telecommunication, software and ancillary equipment such Automated Teller
Machine and Debit Cards. Formation needs of a business at all levels. Laudon
and Laudon (2017), assert that Information and Communication Technology deals
with the physical devices and software that link various computer hardware
components and transfer data from one physical location to another. Harold and
Jeff (2015) contend that financial service providers should modify their
traditional operating practices to remain viable in the 1990s and decades that
follow. They claimed that most significant shortcomings in the banking industry
today is a wide spread failure on the part of senior management in banks to
grasp the improvement of technology and incorporate it into their strategic
plans.
Woherem (2014) claims that only banks that overhaul
the whole of their payment and delivery systems and apply Information and
Telecommunication Technology to their operations are likely to survive and
prosper in the new millennium. He advises that banks should re-examine their
service and delivery systems in order to properly position themselves within
the framework of Information and Communication Technology. Information and
Communication Technology has provided self-service facilities (automated
customer service machine) from where prospective customers can complete their
account opening direct online. It assists customers to validate their account
numbers and receive instruction on when and how to receive their cheque books,
credit and debit cards.
It is information technology that brought about
electronic banking that is banking services that are conducted on the platform
of mobile devices and wireless networks, also provision of banking and
financial services with the help of mobile telecommunication devices.
Consequently, electronic payment system deals with clearing network
characteristics which is automated clearing service which manifest in the use
of magnetic ink character reader in Nigeria. The remote services or point of
sales characteristics addresses the units of banking activities that transfer
fund from one bank's account to another. The transfer is always authorized and
the record is kept on file of that authorization. Also deals with
pre-authorized debit and credit characteristics of electronic payment which
manifests in the use of cards.
Plastic cards are used to identify customers and pass
same to machine to initiate a paper or electronic payment. Steve (2016) said it
is a mechanism by which personal customer could interface with electronic
banking industry.
Financial institutions issue credit/debit cards
designed as a system in order to provide credit or debit facilities to their
customers. Debit cards are card designed as a convenient method of payment in
place of cash while credit cards are used as means of borrowing or as a
convenient method of payment. In order to enhance the customer service delivery
in Nigeria banks, banks are expected to adopt latest technologies available for
electronic payment system brought about by the advancement in the information
technology. The increase in emerging Information Technology has made banking
services become more and more automated and less paper work than in the past as
averred in the Central Bank Nigeria reports and statistical bulletins, annual
reports of most Nigerian banks and other literature of banking and finance
(Keramati, 2007). Banks in Nigeria have realized that they would soon go out of
corporate existence unless they keep with the pace at which Information
Technology (IT) has redefined the creation of value and worth for their
customers.
Electronic Payment Methods (EPM) has become a marvel
to the world especially the developing nations (Nigeria inclusive). Electronic
payment methods (EPM) are simply methods of carrying out transactions (in the
internet) without involving physical cash or paper cheque (Daniel, 2015). Gone
are the days in which one must carry large sums of cash and perhaps stay
endlessly in the banking halls in order to pay or get paid (Adewoye, 2014).
Electronic Payment Methods have abridged this gap by offering speed,
efficiency, comfort and security to banking procedures. Thus, the role of
electronic payment methods in the banking business and our daily transactions
cannot be undermined.
With the Automated Teller Machine (ATM) and Point of Sale
(POS) among others, one does not need to physically carry cheques to withdraw
and pay money from ones’ accounts (Olasope, 2014). All that is needed is to
slot the card, provide the needed information and the transaction is done. This
scenario is replicated in other electronic payment methods such as mobile
phone, web, NIBSS instant payment and NEFT.
It is no gainsaying that electronic payment methods
have hugely been accepted in Nigeria going by the share volume and value of
transactions done through the ATM, POS, and Mobile phones etc. Little wonder,
the volume of transactions done with the ATM was put at 109,151,646 (amounting
to N548.60 million) in 2015 and this increased to 400,102,507 (amounting to
N3,679.88 billion) in 2017 (CBN, 2017). Thus, no one is left in doubt about the
penetration of electronic payment methods in Nigeria. But the question that
clearly ought to be answered is “To what extent has electronic payment methods
influenced the profitability of banking firms in Nigeria?” This seminar aims to
address this question among others.
1.2 Statement of Problem
According to Central bank of Nigeria (CBN Report, 2016)
there is delay in payment of cheques between banks; time wasted in banks as
people line in queue waiting for service, errors as a result of manual work and
fraud related cases was common. As a result, some clients complain of the
above, it is upon this that is why the researcher sought to examine the
contribution of E-banking towards banking on performance of banking
Institutions because researcher believes that adoption of electronic banking
will ease banking transactions and woe customers basing on experience from
other developed countries.
Despite the obvious benefits attributed to electronic
payment method in Nigeria, it has not come without some challenges. One of the
major challenges negating against electronic payment methods in Nigeria is the
tendency of fraudsters to clone ATM cards and hack into bank depositors’
accounts (Shehu et al., 2014). These acts have become a source of fear and
worry to electronic payment users and have even discouraged some from enrolling
into the EPM (Electronic Payment Methods) platforms. Ultimately, the banking
industry may have been adversely affected since the volume (value) of
transactions that would have boosted its profitability has been reduced.
Accordingly, this research attempts to address the effects of electronic
banking services on bank profitability in Nigeria.
1.11 Objectives of the Study
The
purpose of this research is to examine the contribution of electronic banking
services to bank profitability in Nigeria. The specific objective includes the
following;
i.
To identify e-banking tools used by the selected
banks in Nigeria.
ii.
To examine the effects of electronic
banking services on profitability of the selected banks.
iii.
To evaluate the significance of the
performance of the selected banks before and after adoption of e-banking
system.
1.3 Research
questions
i.
What are e-banking tools used by the
selected banks in Nigeria?
ii.
How does the adoption of E-banking affect
the performance of the selected banks of Nigeria?
iii.
How does E-banking services affect the
profitability of the selected banks pre and post the introduction of E-banking
services?
1.4 Research
hypotheses
H0: Electronic
banking service does not have significant effects on bank profitability
H1: There
is no significant difference in the performance of the selected banks before
and after the introduction of E-banking services
1.5 Scope of the Study
This research sought to examine the impact of E-banking
on performance of banks in Nigeria. The study will be conducted using annual
reports of selected Banks of Nigeria. The study will analyse E-banking and
performance of bank of Nigeria for a period of ten years (2008 - 2017), since
when e-commerce became fully recognized in banking institutions in Nigeria.
1.6 Limitations
of the Study
The research is limited to
the measurements printed by the annual report and account of the selected banks
pertaining to profits and assets.
1.7 Significance of the study
With the rapid development
of Information Technology (IT) banks are beginning to rely heavily on
conducting banking transactions electronically.
The study would enable the
banks executives and indeed the policy makers of the banks and financial
institutions to be aware of electronics banking as a product of electronic
commerce with a view to making strategic decisions. The research is equally significant
because it would provide answer to factors militating against the
implementation of electronic banking in the selected banks in Nigeria.
It is the researcher’s
intention that when this work is completely carried out, it will contribute
immensely to the existing literature on the general application of e-banking
services in modern day business. It will also contribute to efficient and
effective performance of the staff that comes closer to the use of electronic
banking services. This will eventually widen
the horizon of business executive and employee in the application of electronic
banking services in such vital accounting systems, investment appraisal and a
host of others.
Furthermore,
the problems associated with the manual process like delay, inaccuracy,
inefficiency which is the bottleneck, the impact of e-banking will show how it
has completely phased it.
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