THE IMPACT OF INTERNET BANKING SYSTEM ON NIGERIA BANKING ENVIRONMENT (A CASE STUDY OF UNION BANK OF NIGERIA)

CHAPTER ONE

1.1     BACKGROUND OF STUDY

          In Nigeria, the banking industry witnessed lots of challenges due to increase in the awareness and utilization of banking services. The demand for bank services equally increased the staff strength and branches of most Nigerian banks. In spite of this these adjustments the banks cannot satisfy the demands of some of their transactions were based on manual and physical present of their customers.

          Modern Internet banking brought to relief to the increased volume and complexity of banking operations and services delivery. Experimentation with

Internet banking and electronic fund transfer gradually become part of daily transaction as arrangement were made with banks using microcomputer to pay some bill owed big department stores and companies, by this practices the internet becomes a service delivery mechanism of their customer has equally embraced it

          Meanwhile information technology through Internet banking is radically changing how banking is done all over the world and Nigeria is not an exception. The volume and speed of banking transactions has improved tremendously as a result of the growth of internet banking which has created a lot of changes and business opportunities for banks, operate bodies and industries. Infact Nigeria is believed to be the largest Internet user in the West African with about 100,000 Internet users as at year 2000. It was estimated to have risen to 350,000 in 2001 and projected to hit has a million by the end of 2002

          However, the population size of Nigeria calls for accelerated sensitization on the need to embrace information technology as the provision of an enabling environment for its operation. Internet is inevitable for the success of any modern banking institution since it is a competitive tool as it creates room for customized services and reduces the cost of operation, promotes profitability growth and efficient portfolio management.

          The emergence of a crop of new generation banks coupled with computerization of the Nigerian financial sector motivated the introduction of high technology in the Nigerian banking system

          Remarkably, information technology is dynamic continuously coming up in new challenges for human capital development virtually every Nigerian banks claims to be having internet banking and on-line union bank of Nigeria plc harbors large amount of information on-line and of course lowers the marketing distribution costs

          Indeed internet banking has brought a greater advantages for one bank over another depending on its application, operation and service delivery.

    1.2          STATEMENT OF PROBLEMS

          Banks since the inception of the use of Internet banking products in the late 1980's have not made their presence felt much. These are as a result of problems associated with the use of Internet banking include the following:

1.       Nigerian's poor Infrastructures:

The first major challenge for the future of Internet banking is Nigerian’s poor infrastructure. Word Bank data indicates that in Nigeria there are only 6 computers and 4 mainline telephone lines per thousand people. Electricity supply is sporadic and inefficient. Most importantly, Nigeria has very low Internet penetration, with less than one Internet services provided per thousand people and only an estimated 30,000 Internet users out of over 100 million. In addition, Internet bandwidth is negligible when compared with more developed nation as they has been insufficient deregulation of the telecommunications sector to allow for investor to provide bandwidth and sell commercially. Finally, many of the area crucial to the financial sector such as the cleaning and trade processes are not automated which will limit the efficiency of internet banking in this country.

2.       Lack of security:

The second challenge for the future of Internet banking in Nigeria is the issue of security. Resent research carried out in Africa shows that companies consider the biggest obstacle to being used the Internet for financial transaction to the lack security. Many companies are concerned about the integrity of financial information that travels over the internet and would rather accept the inefficiencies and incontinences of a manual system that subject themselves to the uncertainty of the internet, in addition Nigeria is a cash economy and the issue of trust in such that even cheques are not generally accepted as payment for goods and services rendered. Recently, the Nigerian market has witnessed the development of electronic purse products such as value card and the smart pay card, designed to move the economy although it is hoped that they will eventually help lessen the importance of cash in our society. It is therefore clear that in such an environment, most consumers will be skeptical that a click on a computer screen will result in a completed financial transaction.

3.       Cost of ownership and Adoption:  

          Internet banking’ very expensive because it entails the acquisition of computers, telecommunication gadgets. Banks spend a lot on these products because of the exchange rate between the Naira and the dollar.

4.       Poor orientation (illiteracy):

          So many people are still ignorant of the services and benefits available to them through the use of Internet banking product. The benefits include that it is fast, safe and reliable.

1.3     OBJECTIVES OF RESEARCH

                   The purpose of this research is to identify the effects of INTERNET BANKING has exerted on the banking industry since its inception. It would also identify the various uses and also new technologies brought into banks in the late twentieth century. The study would pay special attention to union Bank of Nigeria plc in trying to state these new technologies.

          The local area network and wide area network (LAN and WAN) in particular are critical to the effective operations of computer system. This helps banks to make global connections with their branches access customer’s accounts and also pay in or with draw funds any branch nations wide.

          This study would bring into accounts and a general study or the application of Internet banking   products rendered by banks and how its application has affected output and efficiency

1.4     SCOPE OF THE STUDY

          The scope of this research work will be limited to the Nigerian commercial banks, using union bank plc as a case study.

1.5. Research hypothesis

H0: bank performances have not increased since the advent of internet banking

H1: bank performances have increased since the advent of internet banking

1.6     RESEARCH QUESTIONS

          This study will try to answer the following research questions drawn from the study the research questions are as follows:

1.       How many financial product or services are computerized?

2        Has the use of Internet banking helped to improve bank operation?

3.       Are banks fully or partially computerized?

4.       Has the performance of the bank being since introduction of Internet banking

5.       What financial services or product exists in the financial market?

6.       What financial services or product exist in the financial market?

1.7     SIGNIFICANCE OF STUDY

 It is helped that the findings are recommendations of the study will include:

i         IMPROVED CUSTOMERS SERVICES: internet banking will enable banks  provide new faster and better products and services to its customers thereby bringing the banking to international level enhancing competition amongst the banks. This can take the form of the funds transfer signature verification in ministers

 i.i      RELIABILITY OF TRANSACTION

Internet banking will help to ensure accurate and timely transaction unlike when done manually which is prove to human errors, which are embracing and costly at times.

iii       SAFETY:

Internet banking technology ensures safety of banks dealing with its customers. Under these circumstances, banks must developed security features for their Internet sites, which adequately address tier customers concerns and must educate their customers on the protection that the Internet sites provides. Under safe banking practices can cause huge losses to the banks especially in the case of misrepresentation of account owners. The banking technology prevents this signature verification, voice mail and prints verification and unauthorized access into computer system

iv       REDUNDANCY OF STORAGE

          Internet Banking helps to reduce the use of files, which are archaic thereby reducing storage space, using of files could lead to loss of vital information about bank customers through mutilations, easy and unauthorized access to files and misplacement of important documents. This can be presented through storage of information in diskettes, hard disk and back- ups of important   information. 

1.7     DEFINITION OF TERMS:

  1      INTERNET BANKING:  A quick and easy way to access your account through the Internet.

2.       I.T:  The study and the use of electronic processes and equipment to store information of all kinds, including words, numbers, pictures and abbreviation for information technology

3        WAN:  Wide areas network a system in which computers in different places are connected, usually over a large area.

4.       LAN: Local area network for communication by computer within a large building

5.       ON-LINE:  Controlled by or connected to a computer or to the Internet.

6.       HYPER LINK:  A place in electronic documents on a computer that link to another electronic document.

7.       GLOBALIZATION :Is a world trade.

8        WEBSITE: Where accompany has information about itself on the web.

9.       ACCESS:  To open a computer file in order to get or add information.

10.     SEARCH ENGINE: An act of looking for information in a computer database or network.

11.     NETWORK: Computing a number of computers and other devices that are connected together so hat equipment and information can be shared, the office network allows users to share files and software and to use a central printer LAN, WAN.

12      DISK: A device for storing information on a computer with a magnetic surface that records information received in electronic form.