1.1 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 do 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
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
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
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
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
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
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 OBJECTIVES OF THE STUDY
This research work intends to assess the extent of electronic payment
in banking activities as well as identify the various types of
The researcher will also evaluate the major problems associated with
the development of electronic banking system in Nigeria as well as
evaluate possible solutions to these problems.
The effect of electronic banking on profitability of banks will also
be assessed. There are different types of electronic banking used in
Nigeria banks; the researcher will like to evaluate the impact of these
e-payment systems on banking industry and also assess the impact of
electronic banking in Nigeria economy.
1.4 RESEARCH QUESTION
In order to get information from respondents the following questions where formulated:
What are the various types of electronic payment and the extent of electronic payment in banking activities?
In what extent can e-banking improve or enhance banking services?
What are the major problems associated with the development of electronic banking system in Nigerian?
What are the solutions to the problems associated with the development of e-banking?
What extent has e-payment affected banking activities?
The research shall attempt to find answers to these questions in the next chapter.
1.5 SIGNIFICANCE OF THE STUDY
Electronic banking in our economy today is a welcome development and
also its impacts in the society are over-whelming, so this research is
significant in so many ways.
It will expose the strength and weakness of electronic banking.
It will motivate banks and other economic agents to computerize their services.
Knowledge in the area of electronic banking will be advanced.
Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.
1.6 SCOPE OF STUDY
This research is on economic implication of electronic banking in
Nigeria banks and also the various forms of payment and electronic
systems used by banks. The researcher will base this work on the entire
deposit money banks in Nigeria but to Diamond Bank in particular.
1.7 LIMITATION OF STUDY
Time is a major factor to the researcher as research of this kind
requires enough time in gathering of data, but it was not given to
carryout the research, distribution, collection and analysis of
Also the school system has made it difficult for student to go out in
search for information by not granting exeat for student. Some banks
hid information from students who desires such information in other to
maintain the banks secrecy thereby making it difficult for students to
gather information for their research.
Finally, finance was infact the most limited factor, in spite of this
the researcher have to travel out to the sampled organization to
interview some of the managers and supervisors