Impact of E-banking products on Profitability of Listed deposit money banks (DMBs) in Nigeria




  • Background of the Study

Before the emergence of modern banking system, banking operation was manually done which lead to a slow down 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. Nigeria adopted electronic banking system in the early 2000s.  During the introduction of electronic banking system, the use of raw cash was said to have bred corruption through the “cash and carry syndrome” usually linked with the swift movement of Ghana-must go” bags by some politicians. Such bags as some analyst say, are a major source of corrupt practices as dubious persons seeks to bribe their way to avoid been checked in some sensitive areas or places in a corrupt society.

Since electronic banking started in all Nigeria banks, it has been a woe for civil servants; checks show that some staff in establishments such as the national boundary commission for instance, are yet to receive their salaries for the previous months as efforts to electrically transfer salaries into their account have failed according to Ibrahim, D. (2009).

“One bank will tell you it has transferred your salaries but the supposed recipient bank will tell you it has not received anything leaving you even more confused”, says John, I. (2009). Olekah, J. (2009) while acknowledging the initial hiccups that dogged the system, advises stakeholders against being discouraged as such “teething problems” are normal.

James, A. (2009) a banker reported to vanguard annual report that “we should not destroy electronic-banking by looking at the negative aspects, we must strive towards perfecting it”. James, A. (2009) also says that the volume of data generated by the Government ministry Agencies is much making it a bit difficult for banks to cope, Mathew S. (2009) a worker says in his report to vanguard annual report on banks and cards that government should have done its home work “very well” before introducing the system, “they plugged us into a system they were not prepared for and the result is untold hardship visited on innocent people”.

At this juncture, is good to know what e-banking is all about.

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 e.t.c. handled by e-holders, bank customers, and stake holders.

1.2       Statement of Problems

As earlier pointed out, there is delay in payment of cheques which lead to the adoption of electronic banking system. Adoption of electronic banking which suppose to ease banking transactions rather resulted to woes to customer. Most people complain of time wasted in banks. This occurs when there is power failure in banks resulting to slow down in operation.

Another problem that emerged was that banks do not have information backup to fall back on should there be any computer break down.

In investing in electronic banking, the country will need a large amount of financial resources in computer technology, obviously, the resource is in short supply in Nigeria, couple with high level of poverty. For an efficient functioning of electronic payment system, there must be availability of infrastructural facilities such as electricity and telecommunication network, however, power supply fluctuates and there is still constant failure links in networks.

Since early 2000s banks have been developing and introducing payment cards for their customers as well as deploy ATM’s cards. Usage was however low due to lack of interconnectivity i.e. switching platform to interconnect the ATM’s for card holders.

1.3       Research Objective

This study aims mainly to analyze and measure the impact of the use of e-banking products on the profitability of listed deposit money banks in Nigeria.     
The specific objectives of this study are:

  1. Assess the impact of e-banking products on returns on assets of listed deposit money banks in Nigeria.

1.4       Research Hypotheses

Based on the objectives raised by the study, the following research hypotheses are stated in null form:

H01 E-banking product has no significant impact on returns on assets of listed deposit money banks in Nigeria.

1.5          Scope of the Study

The study traces the impact of e-banking products on the profitability of listed deposit money banks in Nigeria. The study therefore covers the period of 10 years using the annual financial report of listed deposit money banks. The study will look into the activities of the bank from 2006-2015. As such the historical background of the bank, the application of e-banking and its products and the impact it has made, together with the problem encountered are to be given detailed analysis. finally, the study intends not only to help enrich the existing literature in the field, but to serve as a reference material to those who wish to further research in the same area of study.

1.6     Significance of the Study

This study is significant for the fact that:

  1. It will enlighten Accountant on how best application of e-banking products to generate information needed for profitability, growth and survival of the organization.
  2. Students and managers to stand benefit a lot from this research in that it will help keep them in the tract of new technology, trends in business cycle.
  3. It will enlighten the staffs that the use of e-banking will not lead to job losses but rather it will increase the efficiency in the organization.
  4. The study will also enlighten public and private organization on how to use e-banking for improvement in their activities.