APPRAISAL OF THE ECONOMIC IMPLICATION OF ELECTRONIC BANKING IN NIGERIA BANKS
(A CASE STUDY OF DIAMOND BANK)
BY
CHINEDU JAMES E
DEPARTMENT OF BANKING AND FINANCE
FACULTY OF MANAGEMENT AND SOCIAL SCIENCES
CARITAS UNIVERSITY, AMORJ NIKE, ENUGU
AUGUST, 2010
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Before the emergence of
modern banking system, banking operation was manually done which lead to a slow
down in settlement of 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 computer in carrying out
transactions which ameliorate the sluggish nature of banking transaction.
Nigeria do not
embrace electronic banking early compared to developed countries. Nigeria
adopted electronic banking system in the early 2000s. 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. 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.
Since
electronic banking started in all Nigeria banks, it has been a woe for civil
servants; checks show that some staff in establishments such as the national
boundary commission for instance, are yet to receive their salaries for the
previous months as efforts to electrically transfer salaries into their account
have failed according to Ibrahim, D. (2009).
“One
bank will tell you it has transferred your salaries but the supposed recipient
bank will tell you it has not received anything leaving you even more
confused”, says John, I. (2009). Olekah, J.
(2009) while acknowledging the initial hiccups that dogged the system, advises
stakeholders against being discouraged as such “teething problems” are normal.
James,
A. (2009) a banker reported to vanguard annual report that “we should not
destroy electronic-banking by looking at the negative aspects, we must strive
towards perfecting it”. James, A. (2009) also says that the volume of data
generated by the Government ministry Agencies is much making it a bit difficult
for banks to cope, Mathew S. (2009) a worker says in his report to vanguard
annual report on banks and cards that government should have done its home work
“very well” before introducing the system, “they plugged us into a system they
were not prepared for and the result is untold hardship visited on innocent people”.
At this juncture, is good to know what e-banking is all
about.
According
to Anyawaokoro, M. (1999). Electronic banking is defined as the application of
computer technology to banking especially the payment (deposit transfer)
aspects of banking. He also defined electronic banking as a system of banking
with an electronic communication network which permits on-line processing of
the same day credit and debit transfers of funds between member institutions of
a clearing system.
According
to Clive, W. (2007) in his Academic dictionary of banking, electronic banking
is defined as a form of banking in which funds are transferred through an
exchange of electronic signals between financial institutions, rather than an
exchange of cash, cheques or other negotiable instruments.
According
to Omotayo, G. (2007) defines electronic banking as a system in which funds are
moved between different accounts using computerized on line/real time systems
without the use of written cheques.
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.
1.2 STATEMENT OF PROBLEMS
As earlier pointed out,
there is delay in payment of cheques which lead to the adoption of electronic
banking system. Adoption of electronic banking which suppose to ease banking transactions
rather resulted to woes to customer. Most people complain of time wasted in
banks. This occurs when there is power failure in banks resulting to slow down
in operation.
Another
problem that emerged was that banks do not have information backup to fall back
on should there be any computer break down.
In
investing in electronic banking, the country will need a large amount of
financial resources in computer technology, obviously, the resource is in short
supply in Nigeria, couple with high level of poverty. For an efficient
functioning of electronic payment system, there must be availability of
infrastructural facilities such as electricity and telecommunication network, however,
power supply fluctuates and there is still constant failure links in networks.
Since
early 2000s banks have been developing and introducing payment cards for their
customers as well as deploy ATM’s cards. Usage was however low due to lack of
interconnectivity i.e. switching platform to interconnect the ATM’s for card holders.
1.3 OBJECTIVES OF THE
STUDY
This
research work intends to assess the extent of electronic payment in banking
activities as well as identify the various types of electronic banking.
The researcher will also evaluate
the major problems associated with the development of electronic banking system
in Nigeria
as well as evaluate possible solutions to these problems.
The
effect of electronic banking on profitability of banks will also be assessed.
There are different types of electronic banking used in Nigeria banks;
the researcher will like to evaluate the impact of these e-payment systems on banking
industry and also assess the impact of electronic banking in Nigeria
economy.
1.4 RESEARCH QUESTION
In
order to get information from respondents the following questions where
formulated:
What
are the various types of electronic payment and the extent of electronic
payment in banking activities?
In
what extent can e-banking improve or enhance banking services?
What
are the major problems associated with the development of electronic banking
system in Nigerian?
What
are the solutions to the problems associated with the development of e-banking?
What extent has e-payment affected banking activities?
The research shall attempt to find answers to these
questions in the next chapter.
1.5 SIGNIFICANCE OF THE
STUDY
Electronic
banking in our economy today is a welcome development and also its impacts in
the society are over-whelming, so this research is significant in so many ways.
It will expose the strength and weakness of
electronic banking.
It will motivate banks and
other economic agents to computerize their services.
Knowledge
in the area of electronic banking will be advanced.
Apart from contributing to
the knowledge of electronic banking, it forms a reference for future research
in this area.
1.6 SCOPE OF STUDY
This
research is on economic implication of electronic banking in Nigeria banks
and also the various forms of payment and electronic systems used by banks. The
researcher will base this work on the entire deposit money banks in Nigeria but to
Diamond Bank in particular.
1.7 LIMITATION OF STUDY
Time
is a major factor to the researcher as research of this kind requires enough
time in gathering of data, but it was not given to carryout the research,
distribution, collection and analysis of questionnaire.
Also
the school system has made it difficult for student to go out in search for
information by not granting exeat for student. Some banks hud information from
students who desires such information in other to maintain the banks secrecy
thereby making it difficult for students to gather information for their
research.
Finally,
finance was infact the most limited factor, in spite of this the researcher
have to travel out to the sampled organization to interview some of the
managers and supervisors.
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
Electronic
banking have long been recognized to play an important role in economic
development on the basis of their ability to create liquidity in the economy
through financial intermediation between savers and borrowers. It also offers
financial services and products that accelerate settlement of transactions and
in the process reduce cash intensity in the financial system, encourage banking
culture, and catalyses economic growth.
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