THE IMPACT OF TECHNOLOGICAL ADVANCEMENT IN THE DEVELOPMENT AND GROWTH OF BANKING INDUSTRY IN NIGERIA

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THE IMPACT OF TECHNOLOGICAL ADVANCEMENT IN THE DEVELOPMENT AND GROWTH OF BANKING INDUSTRY IN NIGERIA

TABLE OF CONTENT

Title –  —          –           –           –           –           –           –           —          –           –           i

Certification —           —          –           –           –           —        –           –           –           ii

Approval Page –        –           –           –           –           –           –           –           –           iii

Dedication —  –           —          –           –           —          –           –           –           –           iv

Acknowledgements – –           –           –           —          –           –           –           –           v

Abstract –       –           –           –           –           —          –           –           –           –           vi

CHAPTER ONE

Introduction–            –           –           –           –           –           –           –           –           1

1.1       Background of the study-     –         –           –           –           –           1

1.2       Statement of the problem —  –             –           –           –           –           3

1.3       Objectives of the study                    –           –           –           –           4        

1.4       Research question-    –           –           –           –           –           –           –           4

1.5       Research hypothesis-            –           –           –           –           –           –           5

1.6       Scope of the study-    –           –           –           –           –           –           –           5

1.7       Significance of the study-     –           –           –           –           –              5

1.8       Limitations of the study        –           —          –           –           –           6

References—   –           –           –           –           –           –           –           –           –           7

CHAPTER TWO

Literature review–    –           –           –           –           –           –           –           –           9

2.1       Introduction- –           –           –           –           –           –           –           –           9

      Information Technology concept.-  –           –           —          –           13

2.2.1    Information:- –           –           —          –           –           –   –           –           13

Information technology:-    –           –           –           –           –           –           13Data:-            –           –           –           –           –           –           –           –           15Communication:-     –           —          —          —        —          –           –           15Online:-         –           —          –           —          –           –           –           –           15Disk storage:-           –           –           –           –           –           –           –           15Internet:-      –           —          –           –           –           –           –           –           16Electronic mail (email).-      –           –           –           –           –           –           16Voice mail-    –           –           –           –           –           –           –           –           17Bibliographic service-          –           –           –           –           –           –           18Teleconference.        –           –           –           –           –           –           –           18Video conference:-   –           –           –           –           –           –           –           18Video conference     –           –           –           –           —          –                18

2.3    Past researches on information technology   –           —           –           19

2.4       Evolution of information technology.            —        –           –           21

2.5       Development of information technology in banking industry 24

2.6       Computer technology in banking industry.            —-       – –           25

2.7       Information technology in growing Nigerian financial market 28

2.8       Globalization, information technology and Nigerian         Commercial bank.     –           –           –           –           –           –           –           29

2.9       Benefits of applying information technology.         –        –           30

2.10     Challenges facing the application of information technology in Nigerian banks.-        —          –           –           –           –           –           –           33

Reference       –           –           –           –           –           –           —          –           –           37

CHAPTER THREE

Research method       —          –           –           –           –           –            –           40

3.0       Introduction- –           —          –           –           –           –           –           –           40

 3.1      Research design-       –           —        –           —          –           –           –           40

3.3       Sample size and sampling technique-          —        –             –           40

3.4       Instrument for data collection          –           –           –            –           42

 3.5      validation of the instrument-            –           –           –                –           42

3.6 Method of data collection              –           —          –           –           –           42

3.7       Method of data analysis-      –           –           –           –           –           –           43

3.7.1    Chi-Square test of hypothesis–        —          –           –           –           -44

References–   –           –           –           –           –           –           –           –           –           45

CHAPTER FOUR

Data presentation and analysis.-      —          –           –           –          –           46

4.1       Introduction.-            –           –           –           –           –           –           –           46

4.2       Analysis of individual questions using simple percentages    46

4.2.1    Analysis of staff question responses using simple percentages. 51

4.2.2    Analysis of customers question responses using simple percentages.       55

4.3       Hypothesis testing.             –           –           –           –           –           57

4.4       Discussion of findings            –           –           –           –           –           60

CHAPTER FIVE

Summary, conclusion and recommendations          –           –           –           61

5.1       Summary       –           –           –           —          –           –           –           –           61

5.2       Conclusion-    —          –           –           –           —          –           –           –           62

5.3       Recommendations.    –           –           –           –           –              –           64

5.4       Recommendation for further studies-         –           –           –           65

Bibliography              –           –           –           –           –           –           –           66

Questionnaires                                                                                               71

LIST OF TABLES

Table 3.1: shows the distribution of staff and customers in the three First bank branches                                               41

Table 4.1    Respondents distribution by Age                       47

Table 4.2.        Respondent distribution by Sex                                48

Table 4.3.        Staff distribution by educational qualification 48

Table 4.4.        Type of account operated by customer. 49

Table 4.5.        Customer’s occupation.                                              50

Table 4.6.        Improvement in banking services.                                     51

Table 4.7.        Information technology and banking efficiency.   52

Table 4.8.        Level of customer satisfaction with service delivery. 53

Table 4.9.        Increase in profitability and growth of the bank. 54

Table 4.10.      Competitive edge over other banks.                         55

Table 4.11.      Level of customer satisfaction in relation to IT.         56

Table 4.12.Rate of information technology services rendered by the bank.  57

Table 4.13   Observed Table.                                                                                      58

Table 4.14    Expected Table                                                                                      58

DEFINITION OF TERM

ATM- Automated Teller Machines

BPR- Business Processing Re-engineering

CBN- Central Bank of Nigeria

CD-Rom- Compact Disk Read Only Memory

CISC- Complex Instruction Set Computing

EDP- Electronic Data Processing

E-MAIL- Electronic Message

E-PAYMENT- Electronic Payment

FISC- Fast Instruction Set Computing

IEEE- Institute of Electrical and Electronics Engineers

IBM- International Business machines

ICU- Internal Control Unit

IP- Internet Protocol

IT- Information Technology

LAN- Local Area Network.

MAN- Metropolitan Area Network

NC- Networking Computing

NIBBS- Nigeria Inter-bank Settlement Scheme

ODBC- Open Data Base Connectivity

OOP- Object Oriented Programming

RAM- Random Access Memory

RISC- Reduced Instruction Set Computing

SNA- Systems Network Architecture

TCP- Transmission Control Protocol

TQM- Total Quality Management

UPS- Uninterruptible Power Supply

URL- Uniform Resource Location

VSAT- Very Small Aperture Terminal

WAN- Wide Area Network

WWW- World Wide Web

ABSTRACT

The objective of this study was to examine how Information Technology impacted on the performance of commercial banks in terms of profitability, effectiveness, efficiency, competitiveness, and customer satisfaction. The main research instruments used were questionnaire and personal interview for staff and customers of the bank. The simple frequency percentage was adopted as the statistical measure and hypothesis testing was analyzed using chi-square. Population of the study comprised of the entire first Bank in Enugu, Enugu State. Data was collected using research questionnaire. It was recommended that Government should improve the electricity supply in the country, they should support and loan money to local IT firms to foster importation, lower tariff on importation of Information technology related equipments and their agencies and regulatory bodies should upgrade their equipments as well. The private sectors should invest into improving electricity and the banks should continuously implement customer centered IT products and services of international standard.

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

The financial services sector is becoming more technology-driven. Even in other sectors of the economy, technology is impacting on the way things must be done.

Before the advent of electronic age, banks used to be defined by their physical presence (Accad, 2001). Now, Information technology, particularly the internet has redefined the business of banking all over the world and with particular reference to Nigeria. Information technologies (IT) have also become the digital nervous system of banking operation. This is because the business of banking is no longer perceived as merely the generation of deposit liabilities and the creation of liquid assets, but rather the generations, storage, manipulation communication and application of financial information (Woherem, 2000). It is perceived as an instrument for engendering competitive advantage in enterprises as it promotes greater efficiency and effectiveness in financial transactions. This is the reason why Holloway (1995) assorts that, an increasingly important component of banks’ technological focus is the personal computer. From risk management to commercial and consumer lending and from employment training to product development and delivery, personal computer are being used as a tool to re-engineer the bank. In many instances Local Area Networks (LANs) and Wide Area Networks (WANs) are facilitating the process, enabling the bank employees to access and use information in a more timely and efficient fashion. The First Direct Bank in the U.K. provides comprehensive banking services to about 900.000 customers with just staff strength of less than two dozen. This feat is achieved through the use of IT.

It shows that banks today can operate in a more effective and efficient manner, with a lean number of staff, through the aid of technology.

According to frenzied (1996:104) IT is now used to automate most of the processes in the banking industry of the more developed parts of the world; to drive delivery processes; and to encapsulate many banking products. Technology in baking has proven to be one of the major success stories of this century, as technologies such as Automated Teller machine (ATM), LANs and WANs, Credit cards, Electronic point of sale systems, smart cards, Debit card, charge cards, Electronic Document interchange (EDI) systems, Image systems, Integrated Banking system (IBS), and client information filing (CIF)systems are now being routinely used by many banks to ensure a more efficient and effective operation and delivery of their products and service to customers. From all Indications, the applications of IT in all banking operations will intensify and spread in this 21st century.

 Globally, the financial services sector has been quick to embrace the information technology particularly internet an alternative delivery channel. In developed parts of the world, retail and corporate customers can review and transact on their accounts, get information about shares and execute trades, receive and pay bills, buy various forms of insurance and obtain credit cards, mortgages and other loan facilities, all through the internet.

Information technology has already become the nervous system of banks the world over. In this study, the researcher will concentrate on information technology in contemporary banking with particular emphasis on Nigeria banking sector. Nigeria banks will become uncompetitive if they do not have the means to deliver their banking services online and in real-time across all their branches within the country and abroad, if they do not have the backbone telecommunications infrastructure in the form of broadband local and wide area networks, if they were not able to communicate and trade globally with the rest of the world through cyberspace, and if they do not invest comprehensively in IT and training of their IT personnel. According to Woherem (1997:88), Nigeria banks since the 1980s have generally performed very well in their investment profile and use of IT systems compared to the rest of the industrial sector of the country. However a lot still needs to be done in the sector to catch be relevant in the globalized banking playing field of the 21st century.

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