Electronic banking (e-banking) system has become an important practice among commercial banks in Nigeria. The introduction of this banking system has improved banking efficiency in rendering services to customers and the public. This post will provide information on "what are the prospects and problems of electronic banking in Nigeria and also provide answers to questions regarding Electronic Banking System in Nigeria.
Electronic Banking or e-banking is a method of transacting modern banking business through the use of automated processes and electronic devices such as computers, telex and fax machines, the internet, card payments, automated teller machines, telephone and other media.
Business organization especially the banking industry of the 21st century operates in a complex and competitive environment characterized by changing factors and highly unpredictable climate, thus, information and communication technology is at the centre of this global curve as an absorber and to provide a cooling effect. Banks cannot ignore information system because it plays a critical role in their competitive edge both locally and globally, they point out that most fortune banks' cash flow is linked to their adoption of information system. The adoption of .Information and Communication Technology in banking sector is generally referred to as electronic banking (E-banking) and application of its concepts, techniques, policies, and implementation strategies to banking services has become a subject of fundamental importance and concerns to all banks and indeed a pre-requisite for local and global competitiveness because, it directly affects the management decisions, plan and products and services to be offered by banks. It has continued to change the way banks and the corporate relationships are organized worldwide and the variety of innovation of service delivery. These advantages are many despite the fact that Nigeria is yet to fully utilize its potentials in electronic banking. The Structural Adjustment Programme (SAP) initiated in 1986 by the Babangida Administration brought to an end the kind of banking services rendered by the first generation of banks, which have been described as "Arm Chair Banking". The SAP changed not only the structure but also the content of banking business. Just as the number of banks grew tremendously from 40 in 1985 to 125 in 1991, the SAP made possible the licensing of more banks and which posed more threat to existing ones and the more aggressive the marketing techniques adopted by them. In the process of the intensed competition, adoption of electronic banking was seen as a necessity to maintaining a good competitive position, whereas, e- banking stormed the British Banking scene in the late sixties. Nigeria started the long and tortuous journey in November, 1990 when Societe Generate bank launched their first Automated Teller Machine.
The automation in the banking industry manifests in Nigeria via:
- Automated Payment Systems which include automated teller machine, ATM
It allows a customer to withdraw cash from his or her bank account by entering a Personal Identification Number (PIN) after the insertion of a card into the machine and having the amount of the withdrawal immediately debit to the account of the customer
- Electronic Cards which include credit and debit cards
Among the companies that are offering this service to banks are also Visa international, Master card incorporated and an indigenous company called smart switch Nigeria Ltd. Among banks in Nigeria operating this service are Diamond Bank, United Bank for Africa, Eco bank and Skye Bank (Skye card debit) and GTB cash plus
- Automated Delivery Channels
The Home link banking/interactive television banking, On-line banking and the internet banking are examples of automated delivery channels
- Telephone banking (tel-banking)
- Banker Automated Clearing System
MICR for cheque processing (Magnetic Ink Character Recognition) was introduced first in Lagos in 1991. On the cheques are pre-encodes of standard information like bank code, branch code, account holder number and cheques leaf number. With a special reader sorter machine, it is possible to separate the cheques into different banks and branches
- Track Spending
Customers who engage in little or no budgeting now using available banking mechanisms to track their spending rate with the advent of E-banking. Track spending is made possible by customers via the use of electronic banking system
- Industrial Benefits
This method has enabled banks to minimize the cost of labor and the cost of supply by making the customers to handle certain transactions by themselves instead of the banking officials handling it.
- Saves Money
Nigerians can now minimize the rate at which they transport themselves to the bank to perform their transactions. This electronic banking system is a money-saving mechanism in Nigeria
- Saves Time
E-banking saves time as the process is performed via the internet and it is automatic. It saves both the time of the customer and the time of the banking officials. Manual banking actually has some crude attributes and one of them is that a lot of time is spent performing a transaction that can be performed within a short time.
- Portability
This allows the banks to be more mobile for customers. The use of alerts and other banking mechanisms have made transactions mobile-friendly. Flexibility is now promoted in our banking systems due to the advent of e-banking
- Location Independent
Electronic banking system can be performed comfortably in your house by using electronic devices without increasing road traffic. The rise of electronic devices has also made electronic banking in Nigeria a rising trend. This method of banking have also reduced excessive traffic in certain cities in Nigeria by reducing the number of people who wake up in the morning to start rushing to the bank just to perform transactions that can be performed with their mobile devices thereby reducing traffic congestions
- Importation
Electronic banking has made importation a lot more easier in Nigeria unlike manual banking. Nigerians can now stay in Nigeria and pay for products from anywhere in the world and get them imported using electronic banking. This banking method facilitates the importation of goods in Nigeria. This method has also enabled Nigerians to participate with others in global marketing
No doubt, electronic banking in Nigeria possesses a huge amount of prospects, it is obvious that it also has a lot of problems associated with this new development and they include:
- Electronic fraud
This is now very rampant in Nigeria as there are now many fraudsters who take advantage of the electronic banking system to defraud fellow Nigerians.
- High insecurity for banks
Hackers in Nigeria now hack into banking database in Nigeria via e-banking which leads to loss of funds unlike the manual banking system in which the person has to be manually verified by the bank before performing any transactions
- By beefing up the security measures as regards to electronic banking
- The use of anti-hack systems
Banks in Nigeria should make use of better systems that discourage hacking systems. These systems will promote electronic banking system in Nigeria. Fraud alert systems should be encouraged in Nigeria as well
- Awareness creation
Banks should notify their customers to take necessary precautions. The government should also create more awareness on the techniques used by fraudsters. This can be done by making use of the radio and television.
- Use Of credible and competent staff by Banks
Traditional Banking Habits. Despite the benefits of online banking, 49 percent of Nigerian adults do not participate in it at all
Security
Transaction Difficulty
Technical Issues
Small Budgets
The existing business environment also poses some challenges to the smooth operations of electronic banking in Nigeria. Some of these operational challenges include:
- Epileptic power supply
- Dominance of cash transaction in the economy
- Low level of awareness among Nigerians
There are three key aspects of electronic banking: automated teller machines (ATMs), direct deposits and debit card purchases.
- Online banking service to make the transaction process easy and safe
- ATM and debit card services to provide instant cash to the customers
- Phone banking service to benefit the customers by saving their time
- SMS banking to provide alerts and information to the customers