CHAPTER ONE

INTRODUCTION

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.

1
 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”.

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.

2
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 were formulated:

1. What are the various types of electronic payment and the extent of electronic payment

in banking activities?

2. In what extent can e-banking improve or enhance banking services?

3. What are the major problems associated with the development of electronic banking

system in Nigerian?

4. What are the solutions to the problems associated with the development of e-banking?

5. 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

impact 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.

3
 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 exit for student. Some banks hide 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 in fact 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.

4
 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.

However, for the effective functioning of the financial system, the payment systems

must be safe and efficient; otherwise they can be a channel for the transmission of

disturbances from one part of the economy or financial system to others. This is why central

bank have been active in promoting sound and efficient payments system and in seeking the

means to reduce risks associated with the system.

Nigeria historically operated a cash-driven economy particularly in the consumer

sector, however the system has witnessed improvements over the years, and particular in

recent times has moved from its rudimentary level of the early years of banking business to

the current state of sophistication comparable to other economies at the same level of

development.

One important reason for financial liberalization and deregulation is the need to

develop a good payment system which promotes an appropriate mechanism for efficiency in

mobilizing and allocating financial resources in the economy. The payment system occupies

an important place in the development of a country economy, infact the level of development

of a countries payment system is a reflection of the state or condition of the countries

economy.

5
 Nigeria payment system is paper-based and this accounts for the high level of cash in

the economy (cash outside bank), the concept “payment system” has different meanings

among writers the definition range from a more simple to a more complex definition.

According to Report on the survey of developments in the e-payments and services

products of banks and other financial institutions in Nigeria payment system is defined as a

system which consists of net works which link members, the switches for routing message

and rules and procedures for the use of its infrastructure.

According to Anyanwaokoro M. (1999), in theory and policy of money and banking,

payment system is defined as a system where settlement of financial obligations are done by

the use of credit cards or even pressing some bottoms that transfer the amount in their bank to

the account of another person through the computer.

According to element of banking by Orjih, J. (1999), payment system is defined as a

which consists of different methods of payments which are cheques, credit cards, Bankers

drafts, standing order, documentary credits swift etc for the settlement of transactions.

2.2 ELECTRONIC BANKING

It is a fact that today a good number of banks cannot use their IT (information

technology) infrastructure to adequately deal with their immediate information requirements.

Do such banks qualify to be called e-banks?

E-banking is about using the infrastructure of the digital age to create opportunities

both local and global. E-banking enables the dramatic covering of transaction cost and the

creation of new types of banking opportunities that address the barriers of time and distance.

Banking opportunities are local global and immediate in E-banking.

The benefit of electronic banking comprises a broad range of functions which

includes;

6
 Electronic mail (email) improves communication between individuals, external

parties and between banks. The availability of online information provides bankers and

customers with a powerful vehicle for research, banks can provide information and services

on line, which customer can pay for and receive. Banking processes are made more efficient

and cost effective by integrating other aspects of banking operations such as treasure

management and financial control.

If banking functions does not require physical interaction it may drive the benefits of

electronic banking.

WHERE SHOULD THE REAL E-BANKING BE?

First of all the bank must fully understand and appreciate the fact that the banking

industry now exist, in a global village. It must therefore strive to provide local and global

banking services using the infrastructure of the global village. Most current E-banking

applications use the internet, the advantages of on line banking are in providing convenience

and flexibility for customers, and let’s take a look at some.

Online banking allows customers to get current account balances at any time.

Customers do not need to wonder whether a cheque of has cleared or a deposit has been

posted at the click of a button, customers can easily check the status of their current savings

and money-market accounts through online banking. Banks can provide immediate account

enquiry or statements online for customers.

Online banking gives the ability to pay bills electronically, customers can also

download account transactions on line, it should be easy to import the transactions directly

into typical PC programs at home or office, the transfer of money between accounts is

another powerful application of online banking, online banking provides flexibility by

allowing the customer to assess his finances from any part of the globe.

7
THE INTERNET

Most of the applications mentioned involved the use of internet, the internet is the

infrastructure for the current age, but hold it? E-banking is more than just internet banking in

the still evolving e-climate in the economy, it involves using the net to exploit new

opportunities by transforming products and markets and business processes.

E-banking also means developing new relationship with customers, regulatory

authorities’, suppliers and banking partners with digital age tools, for example, it requires all

understanding. Customer/bank relationships will be more personalized resulting in novel

modes of transaction processing and services delivery.

E-banking is essentially about banks using new age methods and tools to expand into

new banking markets and grow. Creating a corporate online presence for your bank should be

more than just buildings a website. It should be about building a web business for your bank,

to do this effectively the people in charge, i.e. the CEOs not just IT directors and managers

must have a deep knowledge of what E-banking culture demands.

Banks can only apply IT effectively if management appreciation exists, unfortunately,

many managers who claim to appreciate IT cannot use IT, and can you use what you don’t

have?

E-business

IT today, E-business, E-commerce is not about routine information management or

automation, it is about being these unique tools to create opportunities, create new markets,

new processes and growth or increase the creation of e- wealth.

The E-banking must monitor the environment local and global with the aim of

understanding and mastering its environment. E-banking thus involves collaboration (local

and international) on payments systems, cashless transactions, digital cash and other

electronic based projects.

8
 It can be seen that other immense potentials can only be realized if bank management

and staff, not just the systems staff are sufficiently literate and aware, and presently the

banking industry still has a lot to do in terms of training staff. The speed of change together

with the need for proper orientation for the e-world makes training even more of a necessity.

For E-banking to be effective, an area that must be addressed is security, for any IT

based service associated with e-banking increases the need for security, in e-banking the core

security areas should be addressed. A key concern is that of privacy, you cannot expect to do

business on the net without addressing the piracy concerns of people you do business with.

Do you have a privacy policy? No customer wants to click away to a negative balance.

Security in online banking is typically provided through the use of an ID and password, these

and other security measures must be effective to prevent not only the breach of privacy, but

other security concerns like the alteration of data.

In conclusion to be a true E-bank each bank must identify its own unique targets,

focus and style, banks needs to realize that E-banking is more than simply banking on the

internet, E-banking is more than having a web-site, E-banking is about building a web

business for your banks.

2.3 TYPE OF ELECTRONIC BANKING

Electronic banking consists of the following, mobile banking, internet banking,

telephone banking, electronic card etc.

MOBILE BANKING

Mobile banking involves the use of mobile phone for settlement of financial

transactions, it support person to person transfers with immediate availability of funds for the

beneficiary, mobile payments use the card infrastructure for movement of payment

instructions as well as secure SMS messaging for confirmation of receipt to the beneficiary,

mobile banking is meant for low value transactions where speed of completing the

9
transaction is key, mobile payment have a very exciting potential within Nigeria, given the

low infrastructure requirements and a rapidly increasing mobile phone penetration. The

services covered under this product include account enquiry, funds transfer, recharge phones,

changing of passwords and bill payment which are offered by few institution.

According to the research report on the survey of developments in the e-payments and

service products of banks and other financial institutions in Nigeria on 2007 carried out by

Alhaji Suleiman and staff of banking operation department of Central bank of Nigeria page 6,

it was reported that twenty one institutions offered these service with very low patronage by

the customers for funds transfer. Further more recharge phone service was provided by

sixteen (16) fell within low and medium range respectively, thus signifying low patronage.

So the analysis above indicated that mobile banking has not really gained recognition

among the banking public and is still a far cry from what is expected in terms of its usage.

INTERNET BANKING

Internet banking involves conducting banking transactions such as account enquiry

printing of statement of account; funds transfer payments for goods and services, etc on the

internet (world wide web) using electronic tools such as the computer without visiting the

banking hall. E-commerce is greatly facilitated by internet banking and is mostly used to

effect payment, internet banking also uses the electronic card infrastructure for executing

payment instructions and for final settlement of goods and service over the internet between

the merchant and the customer, currently the most common internet payments are for

consumer bills and purchase of air ticket through the websites of the merchants.

Report by staff of banking operation department of central bank of Nigeria in the

survey of developments in the E-payments and service products of banks and other financial

institutions in Nigeria reported that twenty-four institutions provided the service of account

enquiry and the patronage was somewhat between low and medium, ten and nine

10
institution had low and medium patronage respectively, while only five recorded high

patronage level. Seventeen institutions provided the service of funds transfer in the

proportions of Co, 51 and 2, with low, medium and high patronage levels respectively.

In particular, the internet shopping (local) had eight institutions in the proportion of

seven in low and one in high patronage levels respectively, the internet shopping

(international) comprised of six institutions only and all were in the low patronage level. The

recharge phone class was offered by seven institutions, out of which four two and one were

all in the low, medium and high patronage levels, respectively. For viewing and/ or printing

of statement twenty institutions offered the service and the distribution was nine, eight

change pin class, there were twenty – one institutions in the order of eleven, eighty patronage

respectively. Another variation of this category was the bill payments class with eleven

institutions with nine and two has low and medium patronage levels.

TELEPHONE BANKING

These are banking services which a customer of a financial institution can assess

using a telephone line as a link to the financial institution’s computer centre. Services

rendered through telephone banking include account balance funds transfer, change of pin,

and recharge phones and bills payment.

The survey carried out by staff of banking operation department of Central Bank of

Nigeria page 9 shows that much has not been achieved in telephone banking for now, for

example, in the account enquiry class, only ten institution were involved in the order of

seven, two and one in the range of low, medium and pin (CP) classes phone (RP), and bill

payment (BP) classes had ten institutions offering the services through telephone banking, in

funds transfer there were only six institutions involved, four of which were in the low

patronage level, while the other one fell within the medium range.

11
 Change Pin had seven institutions in the proportions of five and two in the levels of

low and medium patronage in addition recharged phone services was offered by two with one

each having low and medium patronage level, only two institutions offered bill payment and

both experienced low patronage.

ELECTRONIC CARD

An electronic card is a physical plastic card that uniquely identifies the holder and can

be used for financial transactions on the internet, automated teller machine (ATM) and point-

of sales (POS) terminal, to authorize payment to the merchant (seller). The various types of

electronic cards includes debt, credit cards, releasable cards require visiting banks for

replenishment, debt cards are linked to local bank accounts and offer immediate confirmation

of payment while credit line are linked to a credit line and can be used for accessing local

and international networks and were widely accepted in most countries, the underlying

infrastructure and operational rules are often provided by global trusted schemes (such as

visa and master card) in addition to local lines. Debit cards are the dominant card mechanism

in Nigeria, they are also known as ATM cards and ATM usage is wider than POS

transactions given the current limited deployment of POS terminals.

There were five classes of services in this category namely, releasable card, debit

card, naira credit card, visa card, master card and other survey carried out by staff of banking

operation department of central bank of Nigeria reported that for reload able card, seventeen

institutions offered the product, ten of which experienced low patronage while five where

within the medium, and two in the high patronage levels respectively.

Twenty three institutions offered debit card, and the patronage was distributed in the

proportions of eight five and ten in the low, medium and high patronage levels.

12
 In the class of naira credit card, sixteen institutions offered the service, four were in

the low patronage level, seven fell within medium, while five were in the high patronage

class.

Visa card was offered by nine institutions in the proportions of five institutions in the

low and four institutions in the high categories.

The master card class was offered by seven institutions, out of which six institutions

experienced low patronage and one institution was in the medium patronage level.

2.4 THE PROBLEMS AND SOLUTIONS ASSOCIATED WITH THE

DEVELOPMENT OF ELECTRONIC BANKING IN NIGERIA

The development of an efficient monetary transfer system in Nigeria has been

hampered by so many factors. These problems are infrastructural deficiency such as erratic

power supply and communication link. In this case government should endeavor to provide

stable and efficient power supply and telecommunication system.

Another problem is inadequate skilled managers and requisite tools on end users and

client systems, here efforts should be done in provision of infrastructure and skilled man

power. Another problem is the large accumulation of cash in the country so the government

should compel legislation that would charge the dominance of cash usage to electronic

payments. Also there is high charge or cost for the e-payment terminals (ATMs) so the

banking legislation should setout standard charges for e-payment services.

Another problem is non-provision of adequate security for fraud prevention, banks

should endeavor to provide stand-by-camera in every ATMs machine for confirming identify

of operators account and employ a good computer wizard in detecting and preventing frauds

committed by computer hackers.

Another problem is lack of government support for the improvement of e-banking,

there should be an involvement of C.B.N in public awareness campaign and escalating

13
infrastructural challenges to the relevant government agencies and also encourages Nigerians

to trust and migrate to e-payments.

Lastly one of the major problem is low level of awareness in computer appreciation

and literacy among the public and also over dependence on cash for all types of transaction.

Awareness should be created to the public through media such as, television, bill board, radio

etc on the trust and benefits derived from the usage of e-payment and also continuous

promotion of cashless society via payments system reform programmes.

2.5 NEGATIVE IMPACT OF ELECTRONIC BANKING IN NIGERIA

Power Failure and Communication Link

Constant electric failure leads to deficiencies in infrastructures such as ATMs

computers etc which slows down the rate of electronic transactions and also failure links from

Nitel lines which are often as a result of spekes and surges caused by NEPA’s in consistent

electronic power supply.

LACK OF COMPUTER BACK UP

As a result of lack of computer backup when the bank system is corrupt there will be

a loss of information about a customer, and this may lead to misappropriation of customers

account, therefore the bank should have a manual backup (ledger) containing all data about

the customers.

LACK OF ADEQUATE INVESTMENT CAPITAL

Funds that can be used to buy new information technologies and for modernizing

existing systems is generally in short supply. While there are a number of modern banking

applications in use, there is also integrated banking system, Nigeria has continued to

experience innovations in terms of product development specifically, there has been

tremendous improvement in the speed in which funds are transferred within and outside the

domestic economy (international money transfer).

14
REDUCES EMPLOYMENT IN THE COUNTRY

Electronic banking in the country today has reduced the rate of employments in the

country whereby most works that should be done by human are done by machines thereby

lead to minimum rate of employment and high rate of unemployment in the country.

HIGH CHARGES ON MACHINES

The rate of commission or charges imposed by banks is too high thereby discouraging

customers from using the electronic machine for exchange of transactions example of such

charges are charges on withdraw ATMs and online transfer from one bank branch to another.

LOW PUBLIC ACCEPTANCE

Customers and public do not have trust in the machine in the sense that fraudulent

personnel uses the system in carryout fraudulent activities, even today banks uses the

machine in looting customers money from their accounts. Some customer complains that

sometimes when they go for withdraw with their ATM the machine will seize the card while

their account will still be debited with unwithdraw sum in course of ratification of this

problem, the customer might be discouraged because it will take a longer time or end up

unsolved.

INSECURITIES IN BANKS

Most electronic machines today are not secure thereby making it easier for fraudulent

personnel to carryout their fraudulent activities without been caught. Due to insecurity, banks

cannot prevent stop or detect any fraudulent activity. Computer hackers also use the system

in stealing data or information by breaking of codes.

ENCOURAGES EXCESSIVE WITHDRAWAL

Un-operational days like Saturdays when banks are not in operation customers can go

and withdraw with their ATM cards, especially when there is a function like welding

ceremonies, customers with little or no money can rush to a nearby ATM machine to

15
withdraw money for excessive spending, customers complained about this in an interview

conducted by banks.

2.6 POSITIVE IMPACT OF ELECTRONIC BANKING IN NIGERIA

Speedup Settlement of Transaction: Electronic banking speedup settlement of transaction

either national or international level where the bank stand as paying bank to the customers for

settlement of transaction or debt and collection bank for the collection of payment on

transaction made.

Reduces the Rate at Which Customers Visit Banks: The introduction of this system has

bridge the gap between customer and his bank, where the customer can easily go to any

branch bank close to him and withdraw money from the ATM’s machine through the help of

the inter bank-switch and also safes time, energy and reduces stress of the customer. Also

customers can make or carryout transaction while at home with the use of telephone.

Move into a Cashless Society: The introduction of the electronic machine has reduced the

use of raw cash thereby moving the country into a cashless economy. As stipulated by

Anyanwaokoro M. (1997), that the settlement of financial obligations are now done by the

use of electronic gadgets such as computer, facsimile and telex, instead of currency notes and

coins. He went on to say that individuals can pay their bills by using credit cards or even

pressing some buttons that transfer money from one account to another. The perfection of this

system is what he described as a move into cashless society.

Reduction of Theft: The use of electronic payment system has reduced the rate of theft

stealing in the society. The federal government reported to daily champion on Tuesday, April

21 (2009) that due to endemic corruption in official transaction and incessant robbery attacks

on bullion van and bank vaults which made the federal government to direct immediate

automation of government fiscal operations through a system known as electronic payment

(e-payment).

16
Clearance of Good: Payment system in the custom areas help in ensuring easy facilitation of

clearance of goods by importers, also the money accrue to the government would be paid up

electronically thereby making the gathering of revenue very easy and checking of any

fraudulent moves as reported by Mumdu H. daily sun, Friday May 21, 2010.

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.

17
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

Design is the “specification of procedures for collecting and analyzing the data

necessary to help solve the problem such that the difference between the cost of obtaining

various levels of accuracy and the expected value of information associated with each level of

accuracy is maximized”. It comprises a series of prior decisions and provides a master plan

for executing a research project.

According to the research, this chapter comprises of the following:

 Areas of study

 Population studied

 Sample and sampling techniques

 Instruments of data collection

 Methods of data presentation

 Methods of data analysis

3.1 AREA OF STUDY

In this research work the Diamond bank of Nigeria Plc constituted the population

studied however, it was not possible to study the bank entirely, the researcher adopted a

survey technique and as such the branch in Enugu metropolis at Okpara Avenue (Enugu main

branch) was selected for the study. A population of one hundred (100) was targeted and

studied.

3.2 SAMPLE AND SAMPLING TECHNIQUES

A sample was determined to obtain a broad view on the economic implication of

electronic banking from the bank under study based on this, the population of one hundred

was targeted.

18
 Thus, from the target population the sample size was determined using the formulae,

Taro Yamane below:

n= N
1+N (e) 2

Where n = sample size

N = the target population (100)

e = margin of error (5%)

n= 100
1+100 (0.05)2

= 100 = 100 = 80
1+0.25 1.25

3.3 INSTRUMENTS OF DATA COLLECTION

The instrument of data collection for this research work was through distributed

questionnaires.

3.4 METHOD OF DATA COLLECTION

The primary and secondary sources of data collected were adopted in this research

work.

Primary Source: Data in the category were collected mainly through visits, personal

participation and observation and distribution of questionnaires to the bank under study.

The various methods were adopted independently to reduce the incidence of bias or

subjective views about the subject on investigation.

Secondary Source: Secondary data in this research work were collected through the review

of related literature; the relevant literatures were obtained from books journals, magazines,

and newspapers.

Consequently, libraries were consulted, prominent among them were the institute of

management and technology library, national library, central bank of Nigeria (C.B.N)) zonal

library, Banking and Finance Department library (Caritas University) and Caritas University

19
main library etc. More so, in this era of globalization, information from the internet was also

valuable.

3.5 METHOD OF DATA ANALYSIS

To accomplish the research, analysis of the data was of utmost importance since the

data collected was in disarray and as such cannot make any meaning to the reader.

Direct report of the qualitative data from observation has been made while descriptive

statistics was utilized in the analysis of the descriptive data collected from questionnaires to

generate frequencies and parentages. Statistical analysis is carried out on each of the research

questions based on the data extracted from the computation of data which was effected using

simple parentages after which comparisons were done to determine the effectiveness in

achieving the desired objectives.

20
 CHAPTER FOUR

DATA PRESENTATION, INTERPRETATION AND ANALYSIS

4.1 DATA PRESENTATION

The method of data analysis was based on the statistical table format using frequency

distribution and consequently converted into percentages for easy analysis. Each tabular

presentation represents the analysis of each question in the questionnaire which was

subsequently described and with further discussion.

In all, eighty (80) questionnaires were administered of which seventy were returned the

seventy questionnaires received formed the basis for our analysis and conclusion.

OBJECTIVE 1

The extent of automation in the payment system.

Table 4.1

Would you say that all the operations of your bank are fully computerized?

Variables Frequency Percentage (%)

Yes 45 64
No 25 36
Total 70 100
Source: Field Survey (2021)

From the table, 45 respondents who filled the questionnaires of the bank are fully

computerized.

Out of the 70% respondents 25 representing 36% did not agree with this, from the above it is

clear that a good number of Nigeria banks based their operations on computer technology.

21
Table II

Table 4.2

Does your bank use computer technology in the rendition of banking services?

Variables Frequency Percentage (%)

Yes 70 100
No - -
Total 70 100
Source: Field Survey (2021)

All the respondents share the same view or agreed that computer technology is used by the

bank in the rendition of banking services.

Table III

Table 4.3

Does your bank offer computer based payment services (such as smartcard, money transfer

internet payment)?

Variables Frequency Percentage (%)

Yes 60 86
No 10 14
Total 70 100
Source: Field Survey (2021)

With a total of 60 respondents representing 86% saying yes, it is deducible that banks in

Nigeria offer one kind of computer based payment services, while 10 respondents

representing 14% disagree with it.

Table IV

Table 4.4

To what extent does your bank use computer technology to offer computer based payment

services?

Variables Frequency Percentage (%)

Large extent 42 60
Some extent 28 40
No extent - -
Total 70 100

22
Source: Field Survey (2021)

From the above, 60% of respondents are of the view that computer technology is greatly used

in rendition of services while 40% described the use of computer technology in service

rendition as some extent.

OBJECTIVE 2

The major problem associated with the development of electronic momentary transfer system

(electronic banking) in the Nigeria economy.

Table V

To what extent are the problems hindering electronic payment system?

Problem Large Some extent Partly No %

extent extent

Infrastructure
deficiencies such as 35 - - - 50%
critic power supply and
communication link
Non- provision of
adequate security for - - 15 - 21%
fraud prevention
Inadequate skilled
managers and requisite - - - - -
tools on end users and
client systems
High change or cost for
the e-payment 10 - - - 14.5%
terminals
Lack of government
support on - - - - -
improvement of e-
banking
Low level of awareness
and over dependence 10 - - - 14.5%
on cash by the public
for all types of
transactions
Total 70 100%
Source: Field Survey (2021)

On the list of problems hindering the implementation of electronic payment system in Nigeria

is the problem of infrastructural deficiencies, which is associated with erratic power supply

23
and communication link. 50% of the respondents recertified it was having a very great impact

on the development of electronic payment system in Nigeria. 10 respondents, representing

14.5% respectively identified the problems of high charge or cost in using the payment

terminals, while 15 respondents constituting 21% said that inadequate security for fraud

prevention has little impact on the development of electronic payment system in Nigeria. 10

respondents representing 14.5% complained that there is low level of awareness and over

dependence on cash by the public for all types of transaction in the economy.

OBJECTIVE 3

The effect of electronic banking system on bank’s profitability.

Table VI
Table 4.6
Would you say that the rendition of computer based payment services has improved your
banks profit level?
Variables Frequency Percentage (%)
Yes 45 64
No 25 36
Total 70 100

From the table, 64% of the bank staff of officials who filled the questionnaires believe that

the introduction of the computer based payment system have improved the profitability of

their banks operation. 36% however has a contrary opinion.

24
Table VII

Table 4.7

To what extent has the introduction of computer based or electronic payment services

improved your banks operational efficiency?

Variables Frequency Percentage (%)

Large extent - -
Some extent 10 10
Partially 15 21
No extent 45 69
Total 70 100
Source: Field Survey (2021)

A good number of respondents representing 69% are on the opinion that the introduction of

the electronic payment system has no impact or positive influence on their banks operational

efficiency. 21% said that the impact is partially or insignificant while 10% claimed its impact

or positive influence on operational efficiency described may be as some extent.

OBJECTIVE 4

The impact of various electronic payment systems on banking industry.

Table VIII

Table 4.8

Has the introduction of electronic payment products such as smartcard, ATMs, internet

payment etc reduced your customer’s strength (financial ability)?

Variables Frequency Percentage (%)

Yes 70 29
No 50 71
Total 70 100
Source: Field Survey (2021)

The response from the table is a clear indication that electronic monetary system cannot lead

to financial disintermediation in banking industry. 71% of the respondents said since the

25
inception of the electronic monetary system (EMTS) that their customer’s strength has not

reduced. While 29% of the respondents had a different opinion.

Table IX

Table 4.9

How would you describe the relationship between your bank and customer since the

introduction of the products?

Variables Frequency Percentage (%)

Increased customer loyalty Patronage 50 71
No changed improvement 8 11
Decreased customer loyalty 12 18
Total 70 100
Source: Field Survey (2021)

The introduction of EMTS from our table has shown how increased the confidence and

loyalty of customers are to the banking industry, 71% of the respondents describe the

relationship between bank and customers as an improved one after the introduction of EMTS

has no improvement on bank-customers relationship. While 18% said that customer loyalty

has declined towards the banking industry.

OBJECTIVE 5

The impact of electronic payment system on economic activities in Nigeria.

Table 4.10
Do you think the introduction of electronic payment products has increased the level of
economic activities?
Variables Frequency Percentage (%)
Yes 20 28.5
No 50 71.5
Total 70 100
Source: Field Survey (2021)

From the above table, it is very clear that electronic payment products has not increased the

level of economic activities, 71.5% agree and share this view while only 28.5% had different

opinion.

26
Table XI

Table 4.11

It there price stability since the introduction of electronic payment products in Nigeria?

Variables Frequency Percentage (%)

True 22 31
False 42 63
I don’t know 4 6
Total 70 100
Source: Field Survey (2021)

As against the general belief of many writers the introduction of SMTS has not really brought

about price stability in the economy. 63% of the respondents are of this view while 31%

claimed that EMTS has created an atmosphere of stability in the pricing system of Nigeria

economy.

Table XII

Tale 4.12

Have electronic payment products improved the country’s gross Domestic product (GDP)?

Variables Frequency Percentage (%)

True 15 21
False 59 71
I don’t know 50 8
Total 70 100
Source: Field Survey (2021)

A large number of 71% respondents are of the view that EMTS does not have any

incremental impact on the nation’s GDP only and insignificant percentage of 21 respondents

share a different view, 8% of respondents claimed ignorance of the impact of EMTS on the

GDP.

27
Table XIII

Table 4.13

The introduction of EMTS has the potential of increasing bank’s deposit base?

Variables Frequency Percentage (%)

Yes 18 26
No 52 74
Total 70 100
Source: Field Survey (2021)

From the table above, 52 respondents who filled the questionnaire and which represents 74%

disagree that the introduction of EMTS has the potential of increasing banks deposit base and

out of the 70 respondents, 18 representing 26% agree with this.

4.2 DATA ANALYSIS

The use of computer technology in service rendition in the banking industry remains

indispensable, from the responses obtained from bank official, more than 90 percent of

Nigeria banks make use of information technology in offering payment services.

In a total of 70 respondents, 60 respondents representing 86% acknowledged the use of

computer technology in table 4.3 providing services like money transfer, smartcard electronic

funds transfer etc. this shows the extent of computer technology application in the banking

industry.

Although the use of information technology (I.T.) is still not widespread in the banking

industry, there are clear indications that in the nearest future I.T will become fully diffused in

the industry. So far a good number of banks which offer computer based services tent to be

constrained by a lot of factors. These factors constitute the major problem hindering the

development of electronic banking system in Nigeria.

28
In this study some I.T related problems were identified they include: infrastructural

deficiencies in communication link, inadequate skilled managers and requisite tools on end

users and client systems non-provision of adequate security for fraud prevention.

Lack of government support in improvement of electronic banking, low level of awareness

and over dependence on raw cash by the public in carrying out transactions and high charge

or cost for the e-payment terminals, however, infrastructural deficiencies in communication

link is a problem induced by the respondents as having a very great impact in the

development of electronic payment system. About 50% in table 4.10 of the respondents

attested to this. However, in spite of these problem banks profit margin has continued to

increase, according to our respondents it’s attributed to the introduction of computer based

payment services. About 63% of respondents shared this view.

But as the extent, the introduction of electronic monetary transfer system (EMTS) has

improved banks operational efficiency, the general consensus is that (EMTS) has improved

bank’s operational efficiency, the consensus is that (EMTS) has a little or no impact on banks

operational efficiency 69% of respondents are of the view that EMTS has no impact on

efficiency while 21% described the impact as partial and about 10% described the impact as

to some extent. Equally, 71% of respondents are of the view that EMTS cannot lead to

financial disintermediation in the banking industry while only 29% of respondents had a

different opinion.

By implication, the introduction of electronic banking system (EMTS) has generally

increased customers loyalty to banks. This view was shared by about 72% of total

respondents.

Be that as it may, it is not very clear as to how electronic banking (EMTS) can constitute a

problem to monetary authority in terms of money control and management or how it could

increase the GDP or influence economic growth. But one thing clear is that electronic

29
banking (EMTS) seems to show some level of uncorrelation with economics growth neither

does it increase the GDP of a nation. On the average about 75% of respondents had shared

this view.

CHAPTER FIVE

SUMMARY, RECOMMENDATION AND CONCLUSION

5.1 SUMMARY OF FINDING

The introduction of electronic banking in Nigeria has a strong influence on the

development of the payment system in particular the banking system in general. However,

the introduction of the system, involves commitment of huge amount of financial resources

on computer technology and telecommunication facilities, computer technology is a primary

requirement for the proper functioning of the electronic monetary transfer system

(EMTS)/electronic banking.

The use of computer in payment system would not reduce the importance of branch

banking in Nigeria or reduce customer’s confidence on the banking industry, from responses

obtained from staff of the bank studied; the introduction of electronic banking has rather

increased customers loyalty to banks in general.

The major problems hindering the effective operation of electronic banking in Nigeria

are infrastructural deficiencies such as erratic power supply, lack of government support and

high charge on payment terminals (POS, ATMS) e.t.c. These problems are only peculiar to

Nigeria as it is known that in developed countries issues like power failure or failure links are

not in existence.

However, the introduction of electronic Banking System has also contributed

significantly to bank income by way of fee or changes gotten from these services.

5.2 RECOMMENDATION

Uninterrupted Power Supply

30
 The government should endeavor to provide 24 hours uninterrupted power supply

because without electricity these products cannot be boosted and effective, but in this country

there is erratic power supply, therefore all banking industry should have a standby generator

incase of power failure, in other to cover the deficiency of power failure.

Government Supports:

In smooth functioning of the payment system the government have the major role to

play, in aspect of financing the payment system which require a lot of capital to maintain and

also in the aspect of creating awareness the government should endeavor to inform the public

about the benefits derived on the payment system.

Provision of skilled manpower and computer Wizard in operation of the payment

system

Skilled manpower and computer wizard should be employed by every Bank, in other

to stop, prevent fraudulent personal and hackers from manipulating the Banks data and

stealing money from the Banks accounts.

Provision and maintenance of public network, system such as telephone (Nitel) the

availability of these basic infrastructures is fundamental to the efficient functioning of the

payments system.

Failure to maintain these infrastructures implies that the banks must be ready to

provide their own communication networks and operate electronic generating sets to ensure

reliable power supply.

Collaboration among banks: Electronic payment system as a result of its huge

financial involvement requires that banks must jointly set and manage a network system such

as ATMs v-cards etc. collaboration helps to spread and reduce the initial costs of setting up

the electronic Banking system.

31
5.3 CONCLUSION

The Nigeria system is as old as the banking industry; this dynamism is manifested by

the nature and quality of payment products paraded in the system. These products range from

common paper money, cheque, cash to electronic payment Products such as Automated teller

machine (ATM), SMARTCARD telephone Banking, internet Banking etc with the

introduction of these electronic payments products, it is expected that the volume and cost of

processing cheque will be drastically reduced or eliminated.

The C.B.N other financial authorities and banks have a role to play in enhancing the

system through effective banking and monetary policies, efficiency and stability are also

ensured and promoted. Furthermore, to sustain the electronic payment system, certain

strategic measures must be taken to reduce negative effects of the problems identified as

obstacles to the smooth functioning of the system.

32
 BIBLIOGRAPHY

Anyanwaokoro, M. (1999). Theory and Policy of Money and Banking,  Enugu, Nigeria:
Hossana Publications.

Anyanwaokoro, M. (2001). Element, Practice and Processes of Banking  Operations,

Enugu, Nigeria: Hossana Publication.

Anyanwaokoro, M. (2006). Nigeria Banking Laws and Regulations, Enugu,

         Nigeria: Hossana Publication.

Clive, W. (2007). Academics Dictionary of Banking, New Delhi, India: Arrangement

Academic New Delhi.

Omotayo, G. (2007). A Dictionary of Finance, West Bourme, England: West Bourme

Business School.

Onwurah, A. (1998). Introduction to Academics Research Methods, Enugu, Nigeria:

Gostak Printing and Pub. Co. Ltd.

Orjih, J. (1996). Element of Banking, Enugu, Nigeria: Rock Communication

Publication.

Orjih, J. (1999). Business Research Methodology, Enugu, Nigeria: Metteson Publishers.

JOURNAL ACTIVITIES AND NEWSPAPERS

Akinuli, O. (1999). Information Technology in Business Industry, Operational

Application, Problems and future Challenges. C.B.N Bullion, Vol. 56, P.A 7-24.

Edet, O. (2008). Electronic Banking in Banking Industries and its Effects.  International
Journal of Investment and Finance, Vol. 3, A.P 10-16.

Hodagho, E. (1996). Assessment of Risk Involved in the Payment System. A paper

Presented at C.B.N Seminar on Payment System, Vol. 1, P.A 22- 46.

Suleiman, B. (2007). Report on the Survey of Developments in the e-   payments and

Service Products of Banking and other Financial    Institutions in Nigeria.
Central Bank of Nigeria Library, P.A 6-    14.

Usman, S. (1998). Electronic Banking in Nigeria and the Automation of   the Nigeria
Financial System. A Paper presented at C.B.N seminar    on the Dynamic of
Managing the Nigeria System in 21st century,    Vol. 1, P.A. 12-30.

Ibrahim, D. (2009, April 12). Boosting Payment Solution with Visa Card.
        Daily Champion, P. A. 12.

33
James, A. (2009 April 21). Boosting Payment Solution with visa Cards.               
Daily Champion, P.A.12.
James, O. (2009, April 21). E-payment and its Challenges. Daily Champion,        P.A.
13.

Mundu, H. (2010, May 21). Importance of e-payment on Clearing and

Forwarding. Daily Sun, P.A.8.

Oleka, J. (2009, April 21). E-payment and Its Challenges. Daily Champion,        P.A.13.

34
 APPENDIX

Department of Accountancy
Federal Polytechnic,
Idah,
Kogi State,
20th March, 2021.

Dear Sir/Madam,

I am a final year student of the above department undertaking a research on

“Appraisal of the economic implication of electronic banking in operation of bank in

Nigeria” (A case study of Diamond Bank of Nigeria) in partial fulfillment of the award of

National Diploma (ND) in Accountancy.

It would be appreciated if you will sincerely answer the questions contained therein.

Be assured that all information will be treated with utmost confidence and will be

used for the purpose of this study.

Yours faithfully,

Muhammed K. Buba

35
 QUESTIONNAIRE

Please tick () or fill in the gap in the appropriate place:

1. What is your name? ……………………………….……….

2. What is your occupation? ........................................

3. Sex?

(a) Male [ ]

(b) Female [ ]

4. Would you say that all the operations of your bank

are fully computerized?

(a) Yes [ ]

(b) No [ ]

5. Does your bank use computer technology in the rendition of banking services?

(a) Yes [ ]

(b) No [ ]

6. Does your bank offer computer based payment services (such as SMARTCARD,

MONEY TRANSFER and INTERNET PAYMENT)?

(a) Yes [ ]

(b) No [ ]

7. To what extent does your bank use computer technology to offer computer based

payment system?

(a) Large extent [ ]

(b) Some extent [ ]

(c) No extent [ ]

36
8. Extent of impact of the problems hindering electronic payment system?
i. Infrastructural deficiencies such as erratic power supply and communication link.
(a) Large extent [ ]

(b) Some extent [ ]

(c) Partially [ ]

(d) No extent [ ]

ii. Non-provision of adequate security fraud prevention.

a) Large extent [ ]

(b) Some extent [ ]

(c) Partially [ ]

(d) No extent [ ]

iii. Inadequate skilled managers and requisite tools on end users and client systems.

(a) Large extent [ ]

(b) Some extent [ ]

(c) Partially [ ]

(d) No extent [ ]

iv. High charge or cost for the e-payment financials?

(a) Large extent [ ]

(b) Some extent [ ]

(c) Partially [ ]

(d) No extent [ ]

v. Lack of government support in improvement of e-banking

(a) Large extent [ ]

(b) Some extent [ ]

37
 (c) Partially [ ]

(d) No extent [ ]

9. Would you say that the rendition of computer based payment services has improved

your banks profit levels?

(a) Yes [ ]

(b) No [ ]

10. To what extent has the introduction of computer based or electronic payment services

improved your banks operational efficiency?

(a) Large extent [ ]

(b) Some extent [ ]

(c) Partially [ ]

(d) No extent [ ]

11. Has the introduction of electronic payment products such as smartcard ATMs, internet

payment e.t.c reduced your customer strength (financial ability)?

(a) Yes [ ]

(b) No [ ]

12. How would you describe the relationship between your bank and customer since the

introduction of the products?

(a) Increased customers loyalty/patronage [ ]

(b) No charge/improvement [ ]

(c) Decreased customer loyalty [ ]

13. Do you think the introduction of electronic payment products has increased the level

of economic activities?

(a) Yes [ ]

(b) No [ ]

38
14. Is the price stability since the interdiction of electronic payment products in Nigeria?

(a) True [ ]

(b) False [ ]

(c) I don’t know [ ]

15. Has electronic payment products improved the countries gross Domestic products

(G.D.P)?

(a) True [ ]

(b) False [ ]

(c) I don’t know [ ]

16. Has the introduction of EMTS has the potential of increasing bank’s deposit base?

(a) Yes [ ]

(b) No [ ]

39
40