AN APPRAISAL OF IMPACT OF ELECTRONIC BANKING IN ZENITH BANK NIGERIA PLC
1.1 Background of the Study
The resultant of technological innovation has been the transformation in operational dimension of banks over some decades. Internet technology has brought about a paradigm shift in banking operations to the extent that banks embrace internet technology to enhance effective and extensive delivery of wide range of value added products and services.
The importance of banking industry in the world cannot be sidelined. 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 from banks to serve their customers electronically (Huang, 2011). Banks have traditionally been in the fore front 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 (Sabourhi, 2011). Information and Communication Technology (ICT) is at the center of this global change curve of Electronic Banking System in Nigeria today (Stevens, 2016). 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 (Odutola, 2017).
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 (Midgley, 2016). 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 (Ercan, 2014).
With online banking, individuals can check their account balances and make payments without having to go to the bank hall. According to Kaul (2014), 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 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 (Midgley, 2016). Mobile banking allows individuals to check their account balances and make fund transfers using their mobile phones. This was popularized by the then First Inland Bank through its“ Flash me cash” product Customers can also recharge their mobile phones via SMS (Levy, 2016). 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 General 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 (Kadiri, 2010). 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 (Odutola, 2017). 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 (Kearney, 2018). E-Commerce involves individuals and business organization exchanging business information and instructions over electronic media using computers, telephones and other communication equipments (Hoorn and Rodgers, 2018). 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 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 (Kadiri, 2010). 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 (Oparil, 2015). These Internet- enabled services all translate to reduced cost: there are less overhead, greater economies of scale, and increased efficiency (Kadiri, 2010). 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 (Dickson, 2016). In the words of Arkwright (2012), 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 (Arkwright, 2012). Another is the expansion of the user communication, Zenith Bank from a small group of known, veted 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 (Dickson, 2016). E- Banking depends on providing customers, partners, and employees with access to information, in a way that is controlled and secure (Liu, 2012). 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 (Kaul, 2014). 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 (Ireland, 2016). Even after the “dot–com crash” these raised expectations linger (Ireland, 2016). The grow thin 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 (Kaul, 2014). The internet introduces customers to a new perception of business time as always available on “24/7”, and demanding an urgent and rapid response (Sabourhi, 2012). 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 (Klodas, 2012).
According to Shaw (2012), 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 as a series of key challenges to companies (Chen, 2013). 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 (Kearney, 2015). 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.
By bank performance, generally it implies whether a bank has faired well within a trading period to realize its objectives. The only document that explains this is presumably the published financial statements. According to Rose, a fair evaluation of any bank’s performance should start by evaluating whether it has been able to achieve the objectives set by management and stockholders. Certainly, many banks have their own unique objectives. Some wish to grow faster and achieve some long-range growth objective, others seem to prefer quiet life, minimizing risk and conveying the image of a sound bank, but with modest rewards to their shareholders Ordinarily, stock prices and its behaviours are deemed to reflect the performance of a firm. This is a market indicator and may not be reliable always. However, the size of the bank, the volume of deposit and its profitability could be deemed as more reliable performance indicators. For the purpose of this study, profitability indicators, precisely the Return on Equity Capital (ROE) and the returns on Assets (ROA) are used to assess bank performance.
These ratios are indicators of management efficiency, and rate of returns. According to
Rose, these profitability measures vary substantially over time and from one banking market to another. The ROE and ROA are popularly in use today. Nikolai & Bazley posit that the amount of net income earned in relation to total assets is an indicator of how efficiently a company uses its economic resources. They further stressed that when the ROE is higher than the ROA, the company has favourable financial leverage. Sullivan, in his study took sample of banks that are located in tenth Federal Reserve District that have adopted internet bank and those that have not. Comparing their financial performances and risk positions, he observed that the profitability and risks of these grouped banks were similar. Hernando and Nieto found that the impact of adopting internet on the performance of banks as a delivery channel of e-banking takes time to appear. They hold the view that the adoption of a transactional website has a positive impact on profitability which becomes significant in terms of ROA and ROE three years after adoption. This finding actually conveys that there is a lag period for positive profitability impact to manifest on adoption of electronic banking.
However, their study revealed some weaker evidence of an earlier positive impact on adoption of e-banking particularly in terms of ROA. Siam citing the works of Shuqair (2013) on “practical electronic banking services by the Jordanian banks”, pointed out that one of the most important findings in that study is the high cost of electronic banking services on the short run due to the training of employees, and the cost of the infrastructure. The implication of this finding is that electronic banking services will have a negative effect on the bank’s profitability in the short run.
Onay et al, in their study reveal that adoption of online banking and its investment is a gradual process. They posit that electronic banking does not seem to have a significant impact on the performance of Turkish banks measured in terms of ROA, ROE or margin in the year of adoption of the technology. Further, they showed that in the following year, there was significant decrease in profitability which was also attributed to the increase in IT expenditure following the adoption of the new technology.
Also, in a similar study, Malhotra, and Singh, found that profitability and experience in offering of internet banking do not have any impact on banks’ performance in the Indian banking context. Khrawish and Al’sa’di, studied the impact of e-banking on bank profitability with evidence from Jordan. For banks that applied electronic services for less than two years, they found that there was no significant effect of these electronic services on the return of assets and the returns on equity. The study however, showed that such services made significant impact on the profit margin of the concerned banks. They also found that there was no significant effect of these services on banks profitability after two years of applying it in Jordan.
Alsmadi and Al’wabel, while studying e-banking on the performance of Jordanian banks, found that the adoption of e-banking affects bank performance negatively. In their opinion, they hold that e-banking may eventually become a very important factor affecting performance for many banks. From the research evidence so far, there has not been a research output of related study from Nigeria on electronic banking and banks profitability performance since the adoption of electronic banking. This study therefore makes an insight in this direction to close the gap.
1.2 Statement of the Problem
The fact that e-banking is fast gaining acceptance in Nigerian banking sector does not assuredly signify improved bank performance nor would conspicuous use of internet as a delivery channels
make it economically viable, productive or profitable. Whether progression is made in the use of internet technology (e-banking) or not, there should be parameter to empirically assess its impact over specified period of adoption. Consequently, the study will examine the impact of electronic banking on banks’ performance in Nigeria.
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 carry out 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 down load 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.
1.3 Objectives of the Study
The study sought to know an appraisal of impacts of electronic banking in zenith bank Nigeria plc. Specifically, the study sought to;
1. examine the influence of Electronic Banking on the operational performance of zenith Banks.
2. identify the contribution of Electronic Banking towards creating customer satisfaction in zenith Banks Nigeria.
3. evaluate the impacts of Electronic Banking in increasing or reducing the cost of operation of Zenith Banks.
4. examine whether the electronic banking guideline of Zenith Banks comply with the appraisal of Central Bank of Nigeria Electronic Banking guideline policy.
1. What is the influence of Electronic Banking on the operational performance of zenith Banks?
2. What is the contribution of Electronic Banking towards creating customer satisfaction in zenith Banks Nigeria?
3. What are the impacts of Electronic Banking in increasing or reducing the cost of operation of Zenith Banks?
4. Does electronic banking guideline of Zenith Banks comply with the appraisal of Central Bank of Nigeria Electronic Banking guideline policy?
Ho1: Electronic Banking has no influence on the operational Performance of zenith Banks.
Ho2: Electronic Banking has no contributions towards creating customer satisfaction in zenith Banks Nigeria.
1.6 Significance of the Study
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.7 Scope/Limitations of the Study
This study is on the appraisal of impacts of electronic banking in zenith bank Nigeria plc.
1. Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
Appraisal: Impartial analysis and evaluation conducted according to established criteria to determine the acceptability, merit, or worth of an item.
Impacts: the strong effects or influence that something has on a situation or persons.
Electronic Banking: also known as electronic funds transfer (EFT), is simply the use of electronic means to transfer funds directly from one account to another, rather than by cheque, or cash. You can use electronic funds transfer to.
Zenith Bank: Zenith Bank is a Nigerian multinational financial services provider. It is licensed as a commercial bank, by the Central Bank of Nigeria, the central bank and national banking regulator.
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