AN APPRAISAL OF IMPLICATION OF ELECTRONIC BANKING IN NIGERIA BANKING SYSTEM
A CASE STUDY OF ACCESS BANK PLC AKURE ONDO STATE)
Using electronic delivery channels for banking services and products in Nigeria has become increasingly popular in recent years.
Electronic banking makes it possible to offer banking services around the country 24 hours a day. The dependences on technology for providing the services with the necessary security and the cross – border nature of transaction involves additional risks for banks and new challenges banking (Electronics) operators providers, regulators and supervisors.
This project will focus and provides an overview of some of the issue resulting from the development of electronic banking in Nigeria and how they are currently being addressed by operators regulatory and supervisor authorities. Purpose or judgmental sampling techniques is sued in selecting the providers and users of the products and services, while the research instrument adopted was the uses of questionnaires, distributed to both providers and the users of the products and services that were to be selected. The sample selected being small completes that used of the chi – square analysis.
The result of the research finding revealed that although electronic banking is still at its younger age in Nigeria and considering its potential benefits and opportunity, electronic banking is facing a lot of challenges such as financial constraints security, low patronage, risk, but which are currently addressed by open regulators and supervisory authorities.
1.1 BACKGROUND OF THE STUDY
Access Bank PLC is a remarkable story of the remarkable of the transformation of a small obscure Nigerian Bank into a African Financial Institute of note with emerging footprints on the international banking landscape.
Access bank to day is one of the top to largest banks in Nigeria in term of assets base. A phenomena accomplishment considering its antecedents.
The bank was incorporated as Private Limited Liability Company on 8 February, 1989 and commenced business on 11 may 1989. The bank was converted to a Public Limited Company on 24 March 1998 and its share was listed on the Nigerian Stock Exchange on 18 November, 1998. The Bank was issued a Universal Banking License by the Central Bank of Nigeria on 5 February, 2001.
The principal activity of the bank continues to be the provision of money market activities, retail banking, granting of loans and advances, equipment leasing, cooperate finance and foreign exchange operations.
The Central Bank of Nigeria (CBN) prescribed a minimum capital base of N25 billion for all banks operating in Nigeria effective 31 December 2005. To achieve the N25 billion Capital directives, the Bank combined its business with those of Capital Bank International Limited and Marina International Bank Limited. The combination was approved by the Central Bank of Nigeria and the High Court of Justice on the 7th October 2005 respectively.
Electronic banking is the conduct of banking business electronically which
involves the use of information communication technology to drive banking
business for immediate and future goals. Daniel (1999) cited in Alhajri  describes e-banking as the provision of banking services to customers through internet technology. According to Basel Committee on banking supervision, electronic banking is defined to include the provision of retail and small value banking products and services through electronic channels as well as a large value electronic payment and other wholesale banking services delivered
electronically Though, Alsmadi and Alwabel (2015) expressed that the definition of electronic banking varies among researchers partially because electronic banking refers to several types of services through which bank customers can request information and carry out banking services..
However, the revolution in the banking industry in Nigeria started with the advent of electronic devices to assist in the discharge of quality services to bank customers. The introduction of these electronic devices has increased competition in the industry which has gone a long way to reducing customers’ waiting time for banking transactions. This innovation is brought in by the use of computers and other networking gadgets. In Nigeria, the networking started with the LAN (Local Area Network) MAN (Metropolitan Area Network) and subsequently the WAN (Wider Area Network).
Generally, the automation of banks makes transaction and data processing very
easily accessible for quick management decision making. This led to another level of benefit which ushered in what is today referred to as electronic banking. Electronic banking helps the banks to speed up their retail and wholesale banking services. The banking industry believes that by adopting the new technology – e-banking, the banks will be able to improve customer service level and tie their customers closer to the bank Yang J., Whitefield M. and Bhanot R. (2005) . According to Simpson, what
actually motivates the investment in electronic banking is largely the prospects of
minimizing operating costs and maximizing operating revenue. Nevertheless, the adoption of electronic banking (e-banking) has brought major challenges to the banking industry in terms of risk exposure. The volume of deposits has increased as well as the fraudulent practices experienced by Nigerian banks since its
adoption in the economy. This is the reason why Ovia posits that Nigeria’s banking scene has witnessed phenomenal changes, especially in the mid 1980s and these have manifested in the enormous volume and complexity in product or service delivery, financial liberalization and business process re-engineering. The effectiveness of deploying information Technology in banks therefore can not be put to doubt. The fact remains that the reality of using IT in banks is necessitated by the huge amount of information being handled by these banks on a daily basis. On the customers’ side, cash is withdrawn or deposited, cheques are deposited or cleared, statement of accounts are provided, money transfers etc. At the same time, banks need up-to-date information on accounts, credit facilities and
recovery, interest, deposits, charges, income, profitability indices and other control of financial information.
STATEMENT OF THE PROBLEMS
In Nigeria Banking system, there are many problems that lead to the failure of the banking system in Nigeria.
(i) Problem of assessing the performance and effectiveness of electronic banking system into the monetary policy formulation and implementation in the economic to achieve macro economic objective
(ii) There is also a problem of control, security and database management put in place by operators to avoid fraud and unauthorized access
It is the consideration of the above that the research is designed to conduct a critical examination on a assessments of electronic banking system in Nigeria banking industry.
1.2 OBJECTIVES OF THE STUDY
The board objective of the study is to access the implication of electronic banking in Nigeria bnaking system a case study of access bank . The specific objectives of the study are:
(i) To develop an understanding of the significance of the banks electronic activities within and across business line.
(ii) To access the current and potential impact of the electronic activities on the electronic activities on the institution financial profits and condition.
(iii) To asses the adequacy of risk management and oversight of electronic banking activities including outsourced activating.
1.3 SIGNIFICANCE OF THE STUDY
Nigeria banking industry is growing rapidly and many universal banks are going into provision of electronic banking service and products, without facing a critical look on the risk involved and banking habits of the citizen. The possibility of these banks getting into problem is however on the high side. However a need is there arise to evaluate the challenges of electronic banking system and to prove a lasting solution.
1.5 THE RESEARCH QUESTIONS / HYPOTHESES
Given the potential opportunities and benefits of electronic banking system to banking performance the research question that emerged for this study was:
(i) How would electronic banking have significance effects of business activities across business lines?
(ii) What are the impacts of electronic activities on the financial profits?
(iii) Does electronic banking provide adequate risk management and oversight on banking activities?
For the purpose of this research to be achieved the following hypothesis will help in verifying the research statement.
Ho: Introduction of electronic banking not improves the payment system and services delivery of banks in Nigeria banking industry.
Hi: Introduction of electronic bank improves the payment system and services delivery of banks in Nigeria banking industry
Ho: The challenges confronted or face by the banks in the industry not outweighs the potential opportunities and benefits derived form the system.
Hi: The challenges confronted or banks in the industry outweigh the potential opportunities derived form the system.
Ho: Introduction of electronic bank not improves the performance of Nigeria banks.
Hi: Introduction bank improves the performance of Nigeria banks.
1.6 RESEARCH METHODOLOGY
This comprises of the collection of instrument, the sample techniques, the procedures and methods of data analysis that is used which is based on questionnaire and data form Access Bank , through textbooks, magazines, interview and observation which provide reasonable information for the research work.
1.7 SCOPE AND LIMITATION OF THE STUDY
The research work will be based on the implication of electrnnic banking in nigeria Therefore, it will be limited to banks practicing universal banking system only. This research work will limit the study to access Bank Plc, in Akure, Ondo State. The research will appraise the impact of electronic banking system to the operational and overall performance of the bank since its introduction of the bank.
Moreover, this study is generally focused on internet banking practice (electronic banking) of commercial banks within big commercial banks in eastern part of Nigeria services. This is done out of the fact that the commercial banking services. The choice of the location was also as a result of large volume of commercial activity going on there, in the recent part.
The study of some selected commercial banks would enables us generalize about the challenges of concept also system are inter – related and interwoven.
The subject is a quite topical in Nigeria in view of the fact that technologically, it embraces a very broad field. Because of the dynamic nature of the concepts of the electronic baking on commercial banking services will be discussed in this study.
1.8 DEFINITION OF TERMS
(a) ELECTRONIC BANKING PRODUCTS: Today in access bank, electronic banking is still restricted to value card business. Value card is a smart card device that stores data, financial information and money value electronically. In its broadest sense, electronic banking offers several services that consumes may find practical. The following are some of the electronic services that have been introduced by the banks in Nigeria.
(b) AUTOMATED TELLER MACHINE:
Automated Teller Machine or 24 hours Teller Electronic terminals that lets customers bank almost anytime to withdraw cash, make deposit or transfer funds between accounts, the customer generally insert an ATM Card and enter Pin some banks and ATM Owner change a fee, particularly to consumer who don’t gave accounts with them or an transaction at remoter locations.
(c) DIRECT DEPOSIT: Direct deposit enables a customer to authorize specific deposit, such as pay cheques to his account on a regular basis. Customer may also pre – authorize direct withdrawals so that recurring bills, such as insurance premiums, mortgages and utility bill are paid automatically
(d) TELEPHONE BANKING/PAY – BY – PHONE: Pay – by –phone or telephone- banking system will enable a customer to call his bank with instruction to pay certain bill or to transfer funds between accounts. Account statement and balances can be obtained through this means.
(e) PERSONAL COMPUTER (PC) BANKING: Personal Computer Banking allows a customer to handle many banking transaction via his personal computer. For instance, he may use his computer to view his account balance request transfer between accounts and pay bills electronically.
(f) MOBILE BANKING: Mobile Banking enables customers to carry out banking transaction via their mobile phones. For instance, mobile phone may be used to view accounts balance, carry out money transfer and pay bills electronically.
(g) POINT – OF – SALE TRANSFER: Point – of – sale transfer let customer pay for purchase with a debt card, which also may be his ATM card. The process is simple to using a card with some important exception. While the process is fast and easy debt card purchase transfer – money quickly from the customer bank account to the store’s account.
(h) CARD: Cards are key tool electric banking providing authentication and access to banking service. Most common in Nigeria are most smart cards containing one or more integrated circuit chips supporting multiple applications, therefore facilities access to funds in the card holders account on the basis of information communication electrically.
(i) INTERNET BANKING: The internet offers the possibility of open system payment and settlement system which operates in parallel to existing more traditional bank – based networks and which is particularly suited to meet the currently unsatisfied requirement for processing payments electronically.
Making payment as well a conducting banking transaction over the internet has become so easy and thus popular especially with the rapid expansion of the internet. All that is needed to process and manage transaction over the internet is a payment system, a credit card account and a computer with an internet connection and a web browser.
Access bank plc, has presently signed on to e – Transact for the banks internet/mobile banking application E – Transact is a mobile phone and internet payment system which enable subscribers to shop securely, transfer money online and pay bills via telephone bills and the web.
(j) ELECTRONIC CHEQUES CONVERSION: Electronic cheques conversation convert a paper cheques into an electronic payment of the point of sale elsewhere such as when a company receives a customer’s cheques in the mail store, when a customer gives his cheques to a store cashier the cheques is processes through an electronic system that capture the customer banking information and the amount of the cheques. Once the cheque is processed the customer is asked to sign a receipt authorizing the merchant to present the cheques to the customer’s bank electronically and deposit the fund into the merchants account.
The customer gets a receipt of the electronic transfer for his records. When the customer’s cheques has been processed and returned to him by the merchant it should be voided or market by the merchant so that it cannot be used again.
(k) ELECTRONIC CARD: This is another types of electronic payment that enable customer make payment and cash withdrawal via their cards. There are two types of cards debits card and credits card. Electronic cards are sometimes refers to as smartcards. Smartcards is a generic term for a wide variety of products that evolved in card technology.
(l) CREDITS CARDS: Credits cards are distinguished from debits cards by having access to line of credits made available for the card holder by the card issuer. They generally require four spare parties to each transaction, the card holder, the merchant selling the goods and services, the merchant acquire processing the credit card payment and the card issuer.
(m) DEBITS CARD: This is brand of smartcard which stores data, financial information and money value electronically. It is electronic purses which hold an electronic equivalent of cash. For example OKA debits card is valuecard which is widely used in Nigerian banking industry the smartness of value card comes for the integrated circuit embedded in the plastic.
Value card can be used as a means of payment and services as an access control system and as a means of identification. However, one of the main limitation of the value card is offline status, which limits its functionality into areas of online leading or access to banking accounts, online settlement of merchant transactions and money transfer. There together with the value card business contributed the profit being recorded by banks.
END OF CHAPTER REFERENCES
C.B.N, (2003) “Guideline on Electronic Banking in Nigeria” C.B.N. Abuja.
Ayocharley, K. (2006) “E- Commerce Prospect and Implementation”, UAC, Ikeja Lagos.
Femi, O. (2004) “Review of Central Bank Guideline for Electronic Banking” UCA, Abuja
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