CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The new millennium brought with it new possibilities is 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 banks to serve their customers electronically. Banks have traditionally in the forefront 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. Information and communication technology (ICT) is at the centre of this global change curve of electronic banking system in Nigeria today (Steven’s 2002). Assets that they have over the time been using electronic and tele –communication networks for delivery a wide – range of value added products and service, managers in banking industry in Nigeria cannot ignore information systems because they play a very critical impact on current banking system, they point out that the entire cash flow of most fortune banks are linked to information system. 

The application of information and communication technology concepts, techniques policies and implementation strategies to banking services has become as subject of fundamental important end concerns to all banks and indeed a pa-requisite 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 (ATM) and deposit machines now allow consumers carry out banking transactions beyond banking hours 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 consumes no longer have to pay for all their purchases with hard cash. For example; bank customers can pay for airtime 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 phone, 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 funds transfer using their mobile phones. This was popularized by First Atlantic Bank (now FinBank Plc) through its “flash me cash” products customers can also recharge their mobile phones Via SMS. Electronic 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 ATM, Point of Sales (POS), Telephone Banking, Smart cards, Internet Banking etc. personal computers on the banking industry was first introduced into Nigeria by society Generale Bank as the popular PC easy access to the internet and world wide web (www) and internet is increasingly used by banks as a channel of delivering the products and services to the numerous customers. 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. 

The delivery of products by banks on public domain is an indication of advertisement which is known as electronic commence. E-commence 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. E- commence involves individuals and business organization exchanging business information and instructions over electronic media using computers, telephones and other communication equipments. This covers a range of different types of business from consumers to retails products. However, electronic banking as it as a product of E – commence in the field of banking and financial services. Its 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, 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. These internets enable services all translate to reduced cost. There are less overhead, greater economies of scale and increased efficiency. 

E-banking greatest promise is timeliness, 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. The proms of E – banking is offset by the security challenges associated with the disintermediation of data access. One security challenges results from “cutting out the middleman”, that too often cuts out the information secure the middleman provides. Another is the expansion of the user community from a small group of know vetted users accessing data from the internet to thousands of users accessing data from the internet. Application service providers (ASP) and exchange offer especially stringent and sometimes contradictory requirements of per user and per customer security, while allowing secure data sharing among communities of interest.

E –banking depends on providing customers, partners and employees with access to information, in a way that is controlled and secured. 

Technology must provide security to meet the challenges encountered by E – banking. Virtually all software and hardware vendors claims to build secured products, but what assurance does an E- banking have of a product security? E – banking want a clear answer. To the conflicting security claims they hear from vendors, 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. Customers 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. Even after the “dot – com crash”, these raised expectations linger. The growth in the applications and acceptance of the 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 cost and risk. The internet introduce customers to a new perception of business time as always “on available” 24/7, and demanding an urgent and rapid response. 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. 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 employees and the floor of companies entering the market, present a series of key challenges to companies, it is easy and cheap to put up a website. But to create an environment delivery effective service on the web to a significant proportion of your customer requires an E- banking.

STATEMENT OF THE PROBLEM

In Nigeria, customers of banks today are no longer concerned about safety of their funds and increase returns on their investments only. Customers demand efficient, fast and convenient services. Customers want a bank that offer them services that will meet their particular needs (personalized banking) and support their business goals, for instance, a businessman want to travel without carrying 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 download transaction records into their own computer at works or home. Customers want a preferential treatment and full attention by their choice bank. All these are only achievable through Electronic Banking. 

OBJECTIVES OF THE STUDY

The main objectives of this research work is to examine the impact of Electronic Banking in Nigerian Banking System, on how difference channels could enhance the delivery of customers and retails products and also how Banks chose to support their Electronic Banking component/services internally, such as Internet Service Provider (ISP), Bill payment providers, credit business and credit scoring company, E-banking system rely on a number of common components or process. Specifically the study objectives are:

To evaluate the prospects of E –banking in Unity Bank Plc.

To evaluate the impacts of E – banking in Unity Bank Plc. 

To examine whether E – banking has improved the fortune of banks. 

To examine the effect of E – banking has it improve the fortune of the Banks.

To examine whether the Bank Electronic Banking guide line comply with the CBN electronic Banking guideline policy.

STATEMENT OF THE RESEARCH HYPOTHESIS

The following hypothesis is formulated in Null form to guide the study. 

HO: Electronic Banking does has no prospects in the Nigeria Banking System.

HI: Electronic Banking has prospects in the Nigeria Banking System.

HO:Electronic Banking has no impact on the Nigerian Banking System.

HI:Electronic Banking has an impact on the Nigerian Banking System.

HO:Electronic Banking has no significant impact on performance and risk profile of Banks. 

HI: Electronic Banking has significant impact on performance and risk profile of Banks.

SIGNIFICANE OF THE STUDY

The study would enable the banks executive and indeed the policy makers of the banks and financial institutions to be aware of electronic banking as a product of electronic commence with a view to making strategic decisions. The research is equally significant because it would provide answers to factors militating against the implementation of electronic banking in the Unity Bank Plc; prove the success and growth associated with implementation of electronic banking highlight the areas of banking operations that can be enhance via electronic banking and also be an invaluable tool for students, Academican, institutions, corporate managers and individual that want to know more about Electronic Banking trends especially in Nigeria.

SCOPE AND LIMITATION OF THE STUDY SCOPE 

In pursuance of the objectives of the study; attention shall be focused on electronic banking among other electronic commence implementation. In order to conduct an empirical investigation into the adoption of electronic banking in Nigeria and will also examine the nature of electronic banking operations in Unity Bank Plc from 2003 to 2010.

LIMITATIONS

Finance constraints on this study was also in fact the must and major limitations factor inspite of this students and researchers have to travel out to the sampled organization to inter – view some members of the organization in question. Time constraints is another major factor to the researcher of this kind, its required enough time in gathering of data, but it was not given to carry out 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 withheld information from students / researchers who desires such information on other to protect the bank secrecy thereby making it difficult for students/researchers to gather information for their research.

DEFINITION OF RELATED TERMS

Access Products: Products that allow customers to access traditional payment instrument electronically, generally from remote locations. 

ATM Card: UB Debit card is a chip device consisting of circuit element on single silicon chip. The card is a complex circuits that process micro – processors with a single chips that contain the complete arithmetic and logic unit of computers. It provided for Unity Bank customers to perform balance inquiry, mini statement and cash withdrawal ship is well as transfers through the use of Automated Teller Machines. This card can also be used for internet / online and P.O.S transaction.

Chip Card: Also known as an integrated circuit (IC) Card, a card containing one or more computers chips or integrated circuits for identifications, data storage or special purpose processing used to validate personal identification numbers, authorized, purchases, verify account balances and store personal records.

Electronic Data Interchange (EDI): The transfer of information between organizations in machine readable form. 

Electronic Money: Monetary value measured in currency units stored in electronic form of an electronic device, in the consumer’s possession. This electronic value can be purchased and held on the device until reduced through purchase or transfer. 

Electronic Requirement: This is an online recruitment services to all kinds and categories of clients such as (ARMY, NAVY, Police and paramilitary)through customizable web portals and the use of scratch card/PIN for a prospective applicants simply by the scratch cards, visit portal and fill relevant information. Information collected about applicants could then be analyzed appropriately using “what if” capabilities and filtered according to several criteria to be set by client. Shortlisted applicants could then be contacted automatically via email or SMs or both. 

Electronic Web Collection: This enable the bank partners with universities of higher institutions of learning to handle admission, registration, examinations, managements and fees collection needs. electronic admissions by prospective candidates, electronic school fees payment, automated registration, examinations and result publication/ management. 

Internet Banking: This is a product that enables the Banks leverage on the internet banking system module on built on the new banking application (BANKS) implemented by the bank to serve the internet banking needs of the bank’s customers. 

Mobile Banking: This is a product that offers customers of a bank to access services as you go. Customers can make their transactions anywhere such as accounts balance, transaction enquiries, stop checks and other customers service instructions, balance inquiry, Account verification, Bill payment, electronic fund transfer, account balance, updates and history, customer service via mobile, transfer between account. 

Payment System: A financial system that establishes that means for transferring money between suppliers and sellers, usually by exchanging debits or credits between financial institutions. 

Point of Sale (POS) Machines: A point – of – sale machine is the payment device that allows credit / debit cardholders make payment at sales / purchases outlets. It allowed customers to perform the following services, retail payments, cashless payment, Cash Back Balance Inquiry, Airtime Vending, loyalty redemption, printing mini statement etc.

Smart Card: A card with a computer chip embedded on which financial health, educational and security information can be stored and processed.

TRANSACTION ALERT: Customers carry out debit / credit transactions on their accounts and the need to keep track of these transactions prompted the creation of the Alert system by the bank to notify customers of those transactions, the alert system also serves as notification system to reach out to customers when necessary information need to be communicated.

Western Union Money Transfer (WUMT): Is a product that allowed people with relatives in Diaspora who may be remitting money home for family up keep, projects financing school fees, business etc.

BRIEF PROFILE OF UNITY BANK PLC

Unity Bank Plc is one of the leading retail banks in Nigeria, which emerged from the largest merger and consolidation in Nigeria Banking Industry. Following the merger and consolidation of Nine (9) banks; First Interstate, Tropical Commercial, Pacific, Centre point, NMB, Bank of the North, Intercity Bank and New Africa Bank Limited and spearheaded by the Central Bank of Nigeria (CBN). The financial institution with competence in investment banking, corporate and retail banking came together in January 2006 to form Unity Bank Plc. It has 248 business officers spread across the country and working to increase this numbers in the nearest further.

Unity Bank is the sixth (6th) largest bank in Nigeria today by business locations. The head office is located at Plot 785, Hebert Macaulay ay, Central Business District Abuja, while the head office Annex is at No. 290A, Akin Olugbade Street, Victoria Island, Lagos. 

The MISSION of the Bank is to create superior wealth for our stakeholders and the VISION is to be one of the top five (5) financial service institutions in Nigeria by 2012.

Vision driven strategic objectives 

Financial

Attain a set minimum balance sheet size with respect to asset size and profitability by the year 2012. This is referred to 5 – in – 5 taking it from 2008 to 2012. 

Achieve industry top five (5) positions in rate of “return on equity”. 

Achieve industry top five (5) ratio of income to cost.

Customer

Build a superior customer service environment within Unity Bank Plc. 

Technology

Significantly improve technology leverage within the bank.

Human capital 

Build a winning human capital and spirit 

Retail focus

Build the nation number one (1) retail bank.

Business value: TEAMWORK – The bank has all levels of staffs within the bank, working together to ensure that the commitments to stakeholders are delivered; PASSION – The bank is driven by the desire to exceed the qualitative and quantitative expectation of his customers; ROSOURCEFULNESS – The personals are ingenious and imaginative in seeking solutions to issues; INTEGRITY – The personnel’s are forthright in all their dealings with internal and external customers and partners; DEPENDABILITY – The customers o the banks can always count on its reliability and loyalty; EMPATHY – Unity Bank Plc holds itself to the enduring principle of showing respect and compassion to all; EXCELLENCE – While the bank seek to create and raise standards in the dealings for business.