Financial institutions have been tasked with sustaining and setting the pace and direction of the economic development of Nigeria. The success of the federal government’s fiscal and monetary policies is particularly dependent on the support and cooperation of the financial institutions. The banking sector, in particular, has a significant role to play.
The new millennium brought with it, new possibilities in terms of information access and availability, simultaneously introducing new challenges in protecting sensitive information from intruders while making it available to others.
Today’s business environment is extremely dynamic and experiences rapid changes as a result of technological improvement, increased awareness and demands that banks serve their customers electronically. Banks have traditionally been in the forefront of adapting technology to improve their products and services due to the sensitive nature of financial and personal documents often required.
The banking industry of the 21st century operates in a complex and competitive environment characterized by changing conditions and a highly unpredictable economic climate.
Information and Communication Technology (ICT) is at the centre of this global change curve in African banking today. Over time, banks have been making use of electronic and telecommunication networks for delivering a wide range of value added products and services.
In Nigeria, bank industry leaders cannot ignore information systems because they play a critical impact in current banking trends, monitoring and tracking entire cash flow transactions. The application of information and communication technology concepts, techniques, policies and implementation strategies to banking services has become a subject of fundamental importance and concern to all banks and indeed a prerequisite for local and global competitiveness banking.
Technological advancement has played an important role in improving service delivery standards. In the simplest form, Automated Teller Machines (ATMs) and deposit machines now allow consumers carry out banking transactions beyond banking hours. With online banking, individuals can obtain account balance information and make payments without having to visit the banking hall.
Gradually, a cashless society is being enshrined, one in which consumers are not expected to pay for purchases with hard cash, thus improving customer relationship management systems. Bank customers can pay for airline tickets and subscribe to initial public offerings by transferring monies directly.
Mobile banking has been introduced to cater for customers always on the move. Mobile banking allows individuals check account balances and make fund transfers using mobile phones. Introduced by First Bank of Nigeria in a bid to declutter their banking halls, mobile banking was further popularized by Guaranty Trust Bank through e-commerce platforms and a huge advertising spend.
E-banking hasn’t come without challenges though. Delay in payment of cheques between banks; unforgivably long waiting times, and errors arising from manual work and fraud related cases have been causes for concern, not to mention frustration.
Long queues in banking halls, leading to bad service as bankers and customer service officers alike struggle to keep up are still the hallmark of many a banking hall experience. This takes a toll on bank staff as performance plummets leading to steady backlog of work. Paper trail and management of hardcopy documents are still inadequate.
Despite efforts to ensure that customers reap benefits of e-banking, customers still lament areas like malfunctioning Automated Teller Machines (ATMs), network downtime, online theft and fraud, non-availability of financial service, payment of hidden cost of electronic banking like Short Message Services (SMS), mandatory acquisition of ATM cards and non-acceptability of Nigerian cards for international transaction amongst others.
The concept of e-banking certainly works a delivery channel for banking services. Banks have used electronic channels for years to communicate and transact business with both domestic and international corporate customers. With the development of the Internet and the World Wide Web (WWW) in the latter half of the 1990s, banks have increasingly made use of electronic channels for receiving instructions and delivering their products and services to their customers. This form of banking is generally referred to as e-banking or internet banking.
The range of products and services provided by banks over electronic channels vary widely in content, capability and sophistication. The definition of e-banking varies amongst researchers partially because electronic banking refers to several types of services through which bank customers can request information and carry out most retail banking services via computer or mobile.
A consensus definition however, describes e-banking as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels. Electronic banking has long been recognized to play an important role in economic development on the basis of its ability to create liquidity in the economy through financial intermediation between savers and borrowers.
E-banking also offers financial services and products that accelerate settlement of transactions and in the process, reduces cash intensity in the financial system, encourages banking culture, and catalyzes economic growth. However, for the effective functioning of the financial system, the payment systems must be safe and efficient; otherwise, they end up becoming a channel for the transmission of disturbances from one part of the economy or financial system to others. It is for this reason that the Central Bank has been active in promoting sound and efficient payments system and is actively seeking the means to reduce risks associated with the system.
Nigeria has historically operated a cash driven economy particularly in the consumer sector, however, the system has witnessed improvements over the years, and particularly in recent times, has moved from the rudimentary level of the early years 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’s economy, in fact, the level of development of a country’s payment system is a reflection of the state or condition of the country’s economy.
The Nigerian 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 and definitions range from the simple to the more complex. For many consumers, electronic banking simply means 24-hour access to cash through an automated teller machine (ATM).
The Innovation Diffusion Theory, developed by Roger in 1983, explains the individual’s intention to adopt a technology as a modality to perform a traditional activity. The critical factors that determine the adoption of an innovation at the general level are the following; relative advantage, compatibility, complexity, trialability and observability.
It is concerned with the manner in which a new technological idea, artefact or technique, or a new use of an old one, migrates from creation to use. According to (IDT) theory, technological innovation is communicated through particular channels, over time, among the members of a social system.
The stages through which a technological innovation passes are: knowledge (exposure to its existence, and understanding of its functions); persuasion (the forming of a favorable attitude to it); decision (commitment to its adoption); implementation (putting it to use); and confirmation (reinforcement based on positive outcomes from it).
Early users generally are more highly educated, have higher social status, are more open to both mass media and interpersonal channels of communication, and have more contact with change agents.
Mass media channels are relatively more important at the knowledge stage, whereas interpersonal channels are relatively more important at the persuasion stage. Innovation decisions may be optional: where the person or organization has a real opportunity to adopt or reject the idea, collective: where a decision is reached by consensus among the members of a system, or authority-based: where a decision is imposed by another person or organization which possesses requisite power, status or technical expertise.
The introduction of electronic banking channels in Nigeria has generally improved the satisfaction of customers; especially among millennials in urban Nigeria as people get used to shorter lines and uncluttered banking halls. Everybody can now perform transactions in their rooms, from their phones and laptop computers.
The employment of electronic banking comes with unique challenges. There are instances of ATMs not disbursing cash despite reflecting otherwise on the bank account, ATMs not returning bank cards and wobbly internet connectivity preventing or disrupting transactions done with mobile phones.
The telecommunication companies in Nigeria have improved on service delivery but what currently exists isn’t quite as seamless as would be expected especially for high volume financial transactions.
Nigeria is certainly not light years away from becoming a proper banking sector that works properly. We are only a few years away. New banks like Heritage Bank, ALAT by Wema and Stanbic IBTC have done well in innovating electronic and digital channels for banking.
The financial future of Nigeria is bright.
Oluwatosin Adeshokan is a freelance journalist and writer reporting stories about West Africa. He was previously the Culture Editor for YNaija. He tweets at @TheOluwatosin