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THE IMPACT OF ELECTRONIC BANKING IN NIGERIA BANKING SYSTEM (CRITICAL APPRAISAL OF UNITY BANK PLC)
ABSTRACT
Electronic banking system has become an important practice among commercial banks in Nigeria. The introduction of this electronic banking has
improve banking efficiency in rendering services to customer, It was in line with this that the study aim at examine the impact of electronic banking system
in Nigeria. Through the cluster sampling technique,
data
was collected by means of questionnaires from 40 Unity Bank officers and the result shows that Unity
Bank 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. To this end, It is recommended
that the bank information technology training programme
should be encourage
among the staff of Unity Bank, necessary legal codes banking should be established in order to enhanced growth of the industry.
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TABLE OF CONTENTS
Title Page
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1
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Certification
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2
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Dedication
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3
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Acknowledgement
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4
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Abstract
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5
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List of Tables
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6
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CHAPTER ONE: INTRODUCTION
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Objectives of the Study
1.4. Statement of Research Questions
1.5. Research Hypothesis
1.6. Significance of the Study
1.7. Scope of the Study
1.8. Limitation of the Study
1.9. Definition of Terms
1.10. Brief Profile of Unity Bank PLC
CHAPTER TWO: LITERATURE REVIEW
2.1. Introduction
2.2. The View on Electronic Banking
2.3. Electronic Banking
and the Common
Banking Products
2.3.1. Telephone and PC Banking Products
2.3.2. The Card System
2.3.3. The Automated Teller Machine (ATM)
2.4. The Entry
of Nigerian Banks Electronic Banking
2.5. The Emerging
Issues in Electronic Banking
2.5.1 Threats of Cyber Crimes
on the Nigerian Banking Premises
2.5.2. The Regulatory Challenges
2.5.3. Electronic Banking
Profitability and Efficiency
2.5.4. Bank Customers
Relationship
2.5.5. Operations of Financial Institution
CHAPTER THREE: RESEARCH METHODOLOGY
3.1. Introduction
3.2. Population of Study
3.3. Sampling Techniques
3.4. Sample Size
3.5. Sources of Data
3.6. Method of Data Analysis
3.6.1 Test of Hypothesis and Inference
3.6.2. Decision Rule and Justification
CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION OF FINDINGS
4.1. Introduction
4.2. Presentation and Analysis
of Data
4.3. Discussion of finding
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMEDATIONS
5.1. Summary of the Study
5.2. Conclusion
5.3. Recommendations
REFERENCES- Bibliography
APPENDIX - Proposed Research
Questionnaire
CHAPTER ONE INTRODUCTION
1.1. Background of the Study
The new millennium brought with it new possibilities in terms of information access and
availability simultaneously, introducing new challenges in protecting sensitive information
from some eyes while making it available
to others. Today’s business environment is extremely dynamic and experience
rapid changes as a result of technological improvement, increased
awareness and demands
Banks to serve
their
customers
electronically. Banks have traditionally been in the forefront
of harnessing technology to improve their products and services.
The Banking industry of the 21st century
operates in a complex
and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology (ICT) is at the centre of
this global change curve of
Electronic Banking System in Nigeria today. (Stevens
2002). Assert that they have over the time, been using electronic and telecommunication networks for delivering a wide range of
value added products and services, managers
in Banking industry in Nigeria cannot ignore Information
Systems because they play a critical
impact in current Banking
system, they point out that the entire cash flow
of most fortune Banks are linked to Information System.
The application of information and communication technology concepts,
techniques, policies and implementation
strategies to banking services has become a subject of fundamental importance and concerns to all Banks and indeed a prerequisite for local
and global competitiveness Banking.
The advancement in Technology has played an important role in improving
service delivery standards in the Banking
industry. In its simplest
form, Automated Teller Machines (ATMs) and deposit machines now allow consumers carry out banking transactions beyond
banking hours.
With online banking, individuals can check their account
balances and make payments
without having to go to the bank hall. This is gradually creating a cashless society
where consumers no longer have to pay for all their purchases with hard cash. For example: bank customers can pay for airline tickets and subscribe 1to initial public offerings
by transferring the money directly
from their accounts,
or pay for various gods and services
by electronic transfers of credit to the sellers account.
As most people now own mobile phones, banks have also introduced
mobile banking to cater for customers who are always on the move. Mobile banking allows individuals to check their account balances and make fund transfers
using their mobile phones. This was popularized by First Atlantic Bank (now First Inland
Bank) through its “Flash
me cash” product Customers can also recharge their mobile phones via SMS. E-Banking
has made banking transactions easier around the World and it is fast gaining
acceptance in Nigeria.
The delivery channels today in Nigeria electronic
Banking are quite numerous has it is mentioned here Automatic
Teller Machine (ATM), Point of Sales (POS), Telephone Banking, Smart Cards, Internet
Banking etc Personal computers in the Banking
industry was first introduced into Nigeria by Society
Generale Bank as the popular PC easy
access to the internet
and World Wide Web (www) and internet is increasingly used
by Bank’s as a channel of delivering the products and services to the numerous
customers. Virtually almost all Banks in Nigeria
have a web presence; this form of Banking is referred to as Internet
Banking which is generally part of Electronic Banking. The
delivery of products by banks on public domain is an indication of advertisement which is known has E-Commerce.
Electronic commerce on the other hand is a general term for any type of business
or commercial transaction it involves the transfer of information
across the internet. E-Commerce
involves individuals and business organization exchanging business information and instructions over electronic media using computers, telephones and other communication equipments. This covers a range of different types of business from consumers to retails products.
However, Electronic banking as it is; is a product of E-Commerce in the field of banking
and financial services. It’s offers different online services like balance enquiry, request
for cheque
books, recording
stop payment instructions,
balance transfer instructions,
account opening and other form of traditional banking
services. The Internet allows
businesses to
use
information more effectively, by allowing customers, suppliers, employees, and partners
to get access to the business
information they need, when they need it. These Internet- enabled services all translate
to
reduced cost: there are less overhead, greater economies
of scale, and increased
efficiency. E-Banking’
greatest promise is timelier, more valuable
information accessible to more people, at reduced cost of information access. With the changes in business operations as a result
of the Internet era, security concerns move from
computer labs to the front page of newspapers. The promise of E-Banking is offset by the
security challenges associated with the disintermediation
of
data access. One security
challenge results from “cutting
out the middleman,”
that too often cuts out the information security the middleman
provides. Another is the expansion of the user community
from a small group of known, vetted users accessing data from the intranet, to thousands
of users accessing data from the Internet. Application service providers (ASP) and exchanges
offer especially stringent — and sometimes contradictory — requirements
of
per user and per
customer security,
while allowing secure data sharing among communities of interest.
E- Banking depends
on providing customers,
partners, and employees
with access to
information, in a way that is controlled and secure. 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.
Customer expectation, in terms of service delivery and other key factors have increased
dramatically in recent years, as a result of the promise and delivery of the internet. Even
after the “dot –com crash”
these raised expectations linger.
The growth in the application and acceptance of internet-driven
technologies means that
delivering an enhanced
service is more achievable than ever before, however
it is also more
complex and fraught with potential costs and risk. The internet introduces
customers to a new perception of business time as always “on available 24/7, and demanding an urgent
and rapid response.
The challenge for managers is to reconcile their business and their own personal perceptions
of
time with the perceived reality of internet time. The internet has decisively shifted the balance of power to the customer.
The internet
is revolutionizing sales techniques and perceptions of leading brands,
and the internet is intensifying competition in all its forms.
Banking are continuing to use the internet
to
add value for their customers; but in order for this to work effectively - maximizing opportunities, reducing risks and overcoming problems
– an E-Banking strategy is required as an impact.
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.
Electronic Banking offers different
online services like balance enquiry, request for cheque
books, recording stop payment
instructions, balance transfer
instructions, account opening and other form of transitional Banking services.
1.2. Statement of the Problem
In Nigeria, customers of
banks today are no longer
about safety of their funds and increase returns on their investments only. Customers demand efficient, fast and convenient services.
Customers want a Bank that will offer them services that will meet their particular needs
(personalized Banking)
and support their Business goals for instance;
businessmen want to travel without carryout cash for security reasons.
They want to be able to check their balance online, find out if a cheque is cleared,
transfer funds among accounts
and
even want to download transaction records into
their own computer
at work or home. Customers
want a preferential treatment
and full attention by their choice Bank. All these are only
achievable through
electronic Banking.
In line with rendering
qualities and acceptable
services that most Banks in Nigeria are
gearing toward
and investing large sum of money in information and communication
Technology, expectedly such Banks services have been improved. United Bank for Africa
(UBA), Zenith Bank, GT Bank (to mention few) are in the forefront
in
the use of IT in
rendering services
to their Customers (The Guardian Newspaper April 18, 2008p 21). It also
seeks the challenges involved in Electronic Banking and Best industrial practice and the
approach of implementing them in Nigeria Banking system. While also S
1.3. Objectives of the Study
The main objective
of this research work is to examine impact of electronic
Banking in Nigeria banking system on how difference
channels could enhance the delivery of
consumers and retails products, and also how Banks choose to support their Electronic Banking component/services internally, such as internet services provider, Internet
banking software, Core banking vendor, Managed security service provider, Bill payment provider,
Credit Business and Credit scoring company, E-Banking systems rely on a number of common
components or process
Specifically the study objectives are;
I. To evaluate the prospects of electronic Banking in Unity bank PLC II. To evaluate
the impact of electronic Banking
in Unity Bank PLC
III. To examine whether electronic banking has improve the fortune of the Bank.
IV. To examine the effect of electronic banking has it improve the fortune
of the bank.
V. To examine whether
the Bank electronic Banking guideline comply with the CBN
electronic Banking guideline policy.
1.4. Statement of Research Questions
Since the release by CBN, August 2003 and the subsequent policy on the guideline
of
Electronic Banking
system in Nigeria,
One of the question
that currently being addressed
is
the impact of electronic Banking on the traditional
banking players; there are two views that are prevalent in the Market. The controversies that the internet is a revolution that will sweep away the old order, argument in are as follow;
• Electronic Banking transactions are much cheaper than branch transactions. Banks are
easy to set up with lots of new entrants. ‘Old world’ systems, cultures and structures will not encumber these new entrants;
instead they will be adaptable
and responsive. Electronic Banking
gives consumers
much more choice
and consumers
will be less inclined
to remain loyal.
• Deposits will go elsewhere because these banks will have to fight to regain their customer base. There would be increase
in their cost of funds, making their
businesses less viable.
• Portal providers are likely to attract the most significant share of banking profits.
• Traditional banks will find
it
difficult to evolve; they
will be unable to obtain additional
capital from stock market.
E-Banking as an Evolution than a revolution;
1.5. Research
Hypothesis
The following hypotheses are formulated in null form to guild the study.
1. Hο: Electronic banking does have prospect in Unity Bank Plc
Hµ: Electronic banking does not have prospect in Unity Bank Plc
2. Ho: Electronic banking does impact in Unity Bank Plc
Hµ: Electronic banking does not impact in Unity Bank Plc
3. Ho: Adoption of Electronic banking does enhance the fortune of Unity Bank Plc
Hµ: Adoption of Electronic banking does not enhance the fortune of Unity Bank Plc
4. Ho: Electronic banking does improve Bank Customer relationship
Hµ: Electronic banking does not improve Bank Customer relationship
5. Ho: The Bank electronic
banking guideline does comply with the CBN electronic banking guideline.
Hµ: The Bank electronic banking guideline
does not
comply with the CBN electronic
banking guideline.
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 Unity Bank Plc; prove the success and growth associated
with implementation of electronic banking 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 and will also examine the nature of electronic banking operations in Unity Bank Plc from 2007 to 2009.
1.8. Limitation of the Study
In view of the technicalities involved, it would be unrealistic to assume that all necessary
facts have been gathered in the process
of the study. Information gathered
is limited to those accesses
and made available by the respondents and also those
gathered from end users.
However, the impacts of this limitation will be reduced
to the barest
minimum.
1.9. Definition of Related Terms
Access Products – Products that allow consumers
to
access traditional payment
instrument electronically, generally from remote locations.
ATM Card - UB Debit Card is a Chip device consisting of circuit element on single silicon chip. The Card a complex circuits
that process microprocessors
with a single chips that contain the complete
arithmetic and logic unit of computers.
It provided for Unity Bank customers
to perform balance inquiry,
mini statement and cash withdrawal as well as transfers
through the use of Automated Teller
Machines. This green card can also be used for Internet/Online and POS transactions.
Chip Card – Also known as an integrated circuit (IC) Card. A card containing one or more
computers chips or integrated circuits for identification,
data storage or special purpose
processing used to validate personal
identification
numbers, authorize purchases, verify
account balances and store personal
records.
Electronic Data Interchange (EDI) – The transfer of information between organizations in
machine readable
form.
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.
Electronic Recruitment –This is
an
online recruitment services to all kinds and categories of clients such as (Army, navy, police and the Paramilitary)
through customizable web portals
and
the
use
of
scratch
cards/PINs
for
a
Prospective applicants simply buy the scratch cards, visit portal and fill relevant information. Information collected
about applicants could then be analyzed appropriately using ‘what if’ capabilities and filtered according to several criteria to be set by client. Short listed applicants could then be contacted automatically via email or SMS or both.
Electronic Web Collection - This enables the Bank partner
with Universities and higher institutions of learning to handle Admission, Registration, Examination Managements and Fees Collection needs. Electronic Admission
by Prospective Candidates, Electronic School
Fees Payment, Automated
Registration, Examination and Results
Publication/Management
Internet
Banking- This is a product that enables the Bank leverage on the Internet Banking System Module in-built on the new Banking Application (BANKS)
implemented by the Bank to serve the Internet Banking
needs of the Bank’s customers.
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.
Point Of Sale (POS) Machine - A Point-of-Sale
machine is the payment device that allows credit/debit cardholders make payments at sales/purchase outlets. It allowed customers to perform the following
services Retail Payments, Cashless
Payments, Cash Back Balance
Inquiry,
Airtime
Vending, Loyalty
Redemption,
Printing
mini
statement etc.
Smart Card – A Card with a computer chip embedded, on which financial health,
educational, and security
information can be stored and processed.
Transaction Alert - Our customers
carry out debit/credit transactions on their accounts
and the need to keep track of these transactions prompted the creation of the alert system by the Bank to notify customers
of those transactions. The alert system also serves
as notification system to reach out to customers when necessary information
need to be communicated.
Western Union Money Transfer (WUMT) -
Western union Money transfer is a product
that allowed people with relatives
in Diaspora who may be remitting money home for family up-keep,
Project financing, School fees etc. Nigerian Communities known for having their siblings gainfully employed in other parts of the world are idle markets for
Western Union Money Transfer.
1.10. Brief Profile of Unity Bank Plc
Unity Bank PLC is one of the leading retail
banks in Nigeria
which emerged from the
largest merger and consolidation in Nigeria's banking industry. Following the merger
and consolidation of Nine Banks Intercity Bank, First Interstate, Tropical Commercial,
Pacific, Centre
Point,
NNB,
Bank of the
North
and
New
Africa
Bank
limited
and
spearheaded by the Central Bank of Nigeria,
(CBN). The financial
institutions with competences in investment banking,
corporate and retail banking came together in January 2006 to form Unity Bank Plc. It has 248 business offices
spread across the
country
and working to increase this number in the nearest
future. Unity Bank is the sixth
largest bank in Nigeria today by business locations.
The Head Office is located at
Plot 785, Herbert Macaulay Way, Central
Business District, Abuja,
while the Head Office Annex is at No. 290A, Akin Olugbade
Street, Victoria Island,
Lagos. The Mission of the Bank is to create
superior wealth for our stakeholders and The Vision is to be one
of the top five financial services institutions in Nigeria by 2012.
Vision Driven Strategic Objectives a) Financial
• Attain
a set minimum balance sheet
size with respect to Asset size and
profitability by the year 2012. This is referred
to as 5-in-5 taking it from 2008 to
2012.
• Achieve Industry
Top 5 position in rate of “Return
on Equity”
• Achieve
Industry Top 5 ratio of Income to cost b)
Customer
• Build a
superior customer service
environment within Unity Bank
c) Technology
• Significantly improve Technology leverage within
the Bank d) Human
Capital
• Build a
winning human capacity and spirit e) Retail Focus
• Build the nation’s number 1 retail Bank
Business Values: Teamwork – The Bank has all levels of staff within the bank work
together to ensure that the commitments to stakeholders are delivered; Passion – The Bank is driven by the desire to exceed
the qualitative and quantitative expectations of his customers; Resourcefulness – The Personnel’s are ingenious and imaginative in seeking solutions
to issues; Integrity – The Personnel’s are
forthright in all their dealings with internal
and
external customers and partners; Dependability - The Customers of the Bank's can always count on its reliability and loyalty; Empathy - Unity Bank holds itself
to the enduring principle
of showing respect and compassion to all;
Excellence – While the Bank seek to create and raise standards
in the dealings for
Business.
ADOPTION OF NEW NOMENCLATURE
Following
the impressive performance of the subsidiaries, a Management retreat
was
held in February,
2009 where it was agreed that Unity Bank and its compendium of subsidiaries be adopt an Integrated
Group Structure. Therefore, Unity Bank Plc and its
subsidiaries will adopt a new nomenclature
that includes “Group”. This is now ‘UNITY
BANK GROUP’. The members of this Group include:
SUBSIDIARIES:
1) Unity Capital
& Trust Limited
2) Caranda
Management Services LTD
3) Unity Registrars LTD
4) Northlink Insurance Brokers LTD
5) Newdevco
Investments & Securities LTD
6) UnityKapital Assurance PLC
7) Pelican
Prints LTD
8) Unity Bank BDC
9) Hexali
Properties Limited
ASSOCIATE COMPANIES:
1. FUG Pension LTD
2. Kakawa
Discount House LTD
3. First Securites Discount
House LTD
4. Banque
Internationale Du Benin,
Cotonou, Benin Republic
5. African
Export-Import Bank,Cairo-Egypt
6. ICHL Nig LTD
OPERATIONAL STRUCTURE
The Bank’s operation is divided into five zones,
namely: Lagos & South West, North
West, Central, North
East and South.
Each of the Zones is headed by a Group Executive Director or a Zonal Head. The Zones are further broken for operational efficiency into eighteen
(18) Regional Offices across the country. This helps in maintaining one of the fastest decision making processes in the industry
today.
Service Efficiency-
Unity Bank Plc service efficiency is more practical, meaning the business values are embedded with new thinking on the minds of our employees.
The Personnel believe is that the behaviour of the people at the point of service will define the reputation. This will impact on the success
of the business. The acculturation
process was conceived to communicate
the new brand values across board, establish
clear line-of sight between our daily operations
and the vision of the entire business. It
aims to create verifiable monitoring processes and platforms for continuous
training of our employees to ensure long-term sustainability. We have
created a quality assurance
system to ensure consistency in the application of
our corporate brand assets bank-
wide. We are confident that
teamwork can be further
enhanced when the fidelity of such assets are maintained without
compromise in all the locations where we have
established business. To us, such discipline is the surest way to sustain the desired
blend of physical assets with the intangible attributes and brand values that our new assets
are designed to communicate without
words. Unity Bank’s
rebranding is a product of an innate desire to build a distinct
banking service
identity by redefining
what we stand for, what we can do and what we can achieve through team work and continuous talent
development geared at exceeding customer
satisfaction.
Products: Complimenting the time-tested fare of banking products (Consumer
and Corporate) Unity Bank offer Products & Channels Division is strongly
positioned with a
bouquet of electronic products and solutions to help drive the retail
banking initiatives. To enhance service delivery we deployed
124 active and functioning
ATM
machines across the 6 geopolitical zones of the nation. The Bank has an arrangement to deploy
1000 ATMs jointly with CHAMS. Other products are as listed below; Unity Bank Plc has
a functional, fully equipped and staffed customer
contact/call centre. This has satisfactorily handled and provided
solutions to customer
inquiries, prompt response and resolutions to customers’ complaints, after service follow-up
calls, hence achieving
and giving customers the ‘personal
banking feel’
Technology: The Banking application known as BANKS’ runs on the latest oracle 10g platform with capability for multiple
sequences and responses.
The application is highly integrated embedded with straight-Through-Processing (STP) features deployed in
web-enabled architecture. The application is sitting on the state-of-the-art Real Application Cluster
(RAC) servers. This has made it possible for all our 248 branches
to provide services 24/7
online real-time
as they are linked via a robust network platform comprising fiber optic, high speed RADIO and VSAT. There are other applications deployed which are equally functioning effectively and are assisting the Bank in
providing efficient customer-focused services to the growing
clientele pan-Nigeria.
Rebranding: Recently, Unity Bank Plc rebranded,
the Bank has modified the corporate
signature and changed colour schemes to
capture the essence
of the distinctive attributes and values that will define the way the Bank run their business
in the medium and long-term. The objective is to create a refreshing
and reinvigorating “look and feel” through our new corporate
brand assets. Our strategy is to drive our
reputational capital by building a corporate
perception of meaningful partnership with our stakeholders and embedding a new culture
that is driven
by competent talent and characterized by
quality service and improved systems and processes expected of a 21st century bank. The
Re-branding of Unity Bank has equally resulted in significant changes to the
architecture of the business premises
nation-wide. The aim is to create natural
warmth to dilute the rigid seriousness that is peculiar
to most business environments.
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