EFFECTS OF ELECTRONIC BANKING ON THE FINANCIAL PERFORMANCE OF BANKING INSTITUTIONS IN NIGERIA
- BACKGROUND OF THE STUDY
Before the emergence of modern banking system, banking operation was manually done which lead to a slowdown 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 does not embrace electronic banking early compared to developed countries.
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 etc. handled by e-holders, bank customers, and stake holders.
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.
The introduction of electronic banking has improved banking efficiency in rendering services to customer. Information and Communication Technology (ICT) is at the centre of electronic banking system in Nigeria today. Banking industry cannot ignore information systems because they play a critical impact in current banking system, they point out that the entire cash flow of most banks are linked to information system.
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. Bank customers can pay for airline tickets and subscribe to initial public offerings by transferring the money directly from their accounts, or pay for various goods 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. Customers can also recharge their mobile phones via SMS. Since this innovation, banks has perfected by interlinking customers deposit accounts with mobile money transfer. This e-banking has made banking transactions easier around the World and it has fast gaining acceptance in Nigeria.
Despite the potential benefits of ICT and e-commerce, there is debate about whether and how their adoption improves bank performance. Use of and investment in ICT requires complementary investments in skills, organization and innovation and investment and change entails risks and costs as well as bringing potential benefits. There are positive impacts of e-banking on bank turnover and profitability and to a lesser extent on employment, most notably when e-commerce is part of larger business strategies of bank. The use of e-banking can contribute to improved bank performance, in terms of increased market share, expanded product range, customized products and better response to client demand. E-banking continues to influence banks activities and their income structure. Among the activities that may be subject to stronger pressures for change are those that, up to today, have remained relatively insulated from ICT developments. This applies mainly to some retail banking activities that are suitable for standardization, and also to developments in remote banking (Kariuki, 2005).
For the instrument to gain acceptance, it should have some of the following characteristics: anonymity, security (reliable authentication procedures, or solutions to compensate users in case of loss, theft or malfunction), liquidity (subject to wide acceptability), low transaction costs (from paper handling and clearing), speed (time saving in transactions, faster balance updating).
1.2. STATEMENT OF THE PROBLEM
As technology becomes the order of the day and new development in the economy creates new opportunities which are hard to assume, many organization are looking for ways on how to embrace technology as way of survival. Electronic banking services can be used to raise efficiency and boost business growth through cheap, efficient and reliable money service support systems that reduce the need for cash transaction and the risks associated. The benefits of cashless transaction including less opportunity for fraudulent and criminal activities, and mobile money technology (Wishart 2006) have increased adoption rates, (Mbogo 2010). Commercial banks are entering into partnership with companies that provide utility service, Electronic service operators with the aim of providing E-banking services. These Services have seen an unprecedented development and growth during the last few years and it is becoming a major catalyst for economic and social development in many countries Nigeria inclusive. Commercial banks have continued to deploy huge investments in Electronic banking services. In addition more and more banks in Nigeria are strategically launching newer and newer Electronic Banking platforms hence the need to
investigate the effect of electronic baking on financial performance of commercial banks. In addition, today many people in Nigeria are still without effective access to Electronic banking services and this may have also affected the financial performance of commercial banks. The main literature gap exists in revealing how Electronic banking has affected the financial performance of the banking industry in Nigeria. Therefore this study sought to fill this knowledge gap by establishing the effect of Electronic Banking on financial performance of Commercial Banks in Nigeria.
- OBJECTIVES OF THE STUDY
The study sought
- To identify e-banking tools used by commercial banks in Nigeria
- To determine the effects of electronic banking on the financial performance of banking institutions in Nigeria.
iii. To determine the extent to which electronic banking influence the financial performance of commercial banks in Nigeria.
The specific objective is to establish the effect of Electronic banking transactions on the financial performance of commercial banks.
- RESEARCH QUESTION
The following research question guided the study:
what are the electronic banking tools used by commercial banks in Nigeria?
- What are the effects of electronic banking transactions on the financial performance
of commercial banks?
iii. To what extent does electronic banking influence the financial performance of commercial banks?
- SCOPE OF THE STUDY
The study concentrated on assessing the effect of E-banking services on financial performance of commercial banks in Nigeria and also the various forms of electronic systems used by banks.
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