THE USE OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) IN THE BANKING SYSTEM

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CHAPTER ONE

INTRODUCTION

1.1    Background to the study

From time immemorial, Information has always played a prominent role in human life but the emergence of social progress and the vigorous development in science and technology has immeasurably increased the role of information in every facet of human endeavour (Aladwani, 2001).

The rapid expansion of a mass of diversified information has born the term information explosion and gave rise to a scientific approach in information and elucidation of its most characteristic properties which has led to principal changes in interpretation of the concept of information. It was broadened to include information exchange not only among men but also among machines as well as the exchange of signals in the animal and plant worlds. The pace of change brought by new technologies has had a significant effect on the way people live, work, and play globally (Aladwani, 2001).

Today’s business environment is very dynamic and experiences rapid changes as a result of creativity, innovation, technological changes, increased awareness and demands from customers. Business organizations, especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate with Information and Communication Technology (ICT) is at the centre of this global change curve (Ojo, 2007).

Laudon and Laudon, (1991) contend that managers cannot ignore Information Systems because they play a critical role in contemporary organization. They point out that the entire cash flow of most fortune 500 companies is linked to Information System. The application of information and communication technology concept, techniques, policies and implementation strategies to banking services has become a subject of fundamental importance and concerns to all banks and a prerequisite for local and global competitiveness. ICT directly affects the various management functions of planning, organizing and the nature of services offered in the banking industry. It has continuously changed the way banks organized their corporate relation worldwide with the variety of innovative devices available to enhance the speed and quality of services delivery.

The banking sector in Nigeria has in the last decade gone through a traumatic period of a mixed fortune of expansion and contraction, expectations and frustrations, and resilience in the struggle for survival.

From the mid-1990s, the sector recorded phenomenal growth in the number of banking institutions that were registered to begin operation. The number of licensed banks rose to 89 in 1998 (Fabian, 2003). The prevailing political crisis and the appalling human rights records of the military government had brought global sanctions on the country, which almost completely destroyed its socio-economic foundations. During the period of economic blight, all the public utilities were deteriorated. The banking sector floundered and became distressed. Returning to democratic governance in May 1999, Nigeria emerged from economic sanctions and global isolation. It was the dawn of a new optimism and new expectations. For the banking sector, it also brought a new phase of sanitization, including organizational and ethical reforms and recapitalization. In the struggle for survival and for many other reasons, the Nigerian banking industry seemed to have accepted the inevitability of investing in IT. It had become evident from the developments around the world that the tremendous role of information technology in the management of information and business processes left no more option of indifference.

1.2 Statement of the Problem

Information Communication and Technology (ICT) is laced with so many challenges. They are buttressed below:

Electronic banking in the country today has reduced the rate of employments in the country whereby most works that should be done by human are done by machines thereby lead to minimum rate of employment and high rate of unemployment in the country.

And again, the rate of commission or charges imposed by banks is too high thereby discouraging customers from using the electronic machine for exchange of transactions example of such charges are cheques on withdraw ATMs and online transfer from one bank branch to another.

Furthermore, Nigerian Banks are laden with security issues and without great confidence in security, customers are unwilling to use a public network, such as the Internet, to view their financial information online and conduct financial transactions. Some of the security threats include invasion of corporate and individuals’ privacy; and theft of confidential information.

1.3 Aims and Objectives

The purpose of the study is to examine the impact and use of information and communication technology in the banking sector. Specifically, the objectives of the study are stated below:

1.        To show the positive effect of information and communication technology on the banking system.
2.       To evaluate the benefits and challenges of information communication and technology in the banking system.
3. To show how information communication and technology has been able to bridged the digital divide gap between Nigerian Banks and it foreign counterparts.
4.      To examine the impact of ICT banking on customers’ satisfaction.

1.4    Relevant Research Questions

Based on the purpose of the study, the following questions are raised to serve as a guide and solution to the research problems:

1.        How effective is information and communication technology on the banking system?
2.       What are the benefits and challenges of information communication and technology in the banking system?
3. To what extent has information technology been able to bridge the gap between Nigerian Banks and it foreign counterparts?
4.      How effective is ICT banking on customers’ satisfaction?

1.5 Relevant Research Hypotheses

In carrying out this research work these theoretical statements are made to serve as a direction on which the work will premised.

1.       H_o: Information and communication technology does not have positive effect on the banking operation in Nigeria.

H₁: Information and communication technology does have positive effect on the banking operation in Nigeria.

2.       H_o: There is no positive relationship between ICT Banking and customers’ satisfaction

H₁:  There is positive relationship between ICT Banking and customers’ satisfaction.

1.6    Scope of the Study

The research work examines the use of information and Communication Technology (ICT) in the banking system with a view to explore to First Bank of Nigeria PLC, Marina, Lagos.

1.7 Limitation of the Study

Some perceived constraints may be encounter by the researcher in the course of carrying out the research work. The perceived limitations are as follows:

1. Inadequate material: Inadequate material constituted one of the limitations of the research work. The non-availability of materials like journals, textbooks etc the research study.
2. Finance: The researcher also may encounter some financial constraints which will contribute in limiting the work in the sense that fund available was not enough to carry out the research to a logical conclusion.
3. Time: Time is also another factor or limitation that may affect the research work. The limited time may not give the researcher enough opportunity to do more rigorous work.

1.8    Significance of the Study

It is hoped that the findings and recommendations of the study will be of great benefit through the following ways:

The study will equip students on the relevance of ICT banking in service delivering. This can take the form of funds transfer, signature verification in minutes etc.

The study will give customers insight on how ICT banking services can help to ensure accurate and timely transactions, unlike when done manually which is prone to human errors which are embarrassing and costly a times.

Furthermore, the study will serve as added advantage to the banking sector, revealing ways in which Electronic banking technology can ensure safety of banks dealings with its customers. The banking technology prevents this through its signature verification voice mail and prints verification and unauthorized access into the computer system.

Finally, the study will help organization to reduce the use of files which are archaic thereby reducing storage space. Using files could lead to loss of vital information about bank customers through mutilation easy and unauthorized access of files and misplacement of important documents. This can be prevented through storage of information in diskettes, hard disks and back-ups of important information.

1.9    Definition of Terms

Bank: A bank is a financial institution and financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets.

Customer: A person, institution or organization that consistently patronize a particular product brand or service.

Electronic Banking: This system in which funds are moved between different accounts using computerized on line/real time systems without the use of written cheques.

Electronic Payment: The term electronic payment can refer narrowly to e-commerce “ a payment for buying and selling goods or services offered through the internet, or broadly to any type of electronic funds transfer.

Information Communication and Communication (ICT): Information and Communication Technology (ICT) is the automation of processes, controls, and information production using computers, telecommunications, software’s and other gadget that ensure smooth and efficient running of activities.

Payment System: This is a system used for transferring money. What makes it a system is that it employs cash-substitutes; traditional payment system or electronic payment system.

Service: Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

REFERENCES

Aladwani, A. (2001). Online Banking: A Field Study of Drivers, Development Challenges, and Expectations, International Journal of Information Management, 21, pp. 213“225.

Fabian, M. (2003). Financial services and the internet-what does the cyberspace mean for the financial services industry? Internet Research: Electronic Networking Applications and Policy, vol.7, n.2, pp. 120-128.

Daniel, E. (1999).  Provision of electronic banking in the UK and the Republic of Ireland,International Journal of Bank Marketing, 17, 2, , pp. 72“82.

Laudon, D. P. and Laudon, J. P. (2001). Business Information System: A Problem Solving Approach, New York, HBJ, College Publishers. 21.

Ojo, J.A.T. (2007). Financial Sector Maladaptation, Resource Curse and Nigeria’s Development Dilemma, journal of international mgt., p. 25.

Ovia, J. (2001). Financing Information and Communication Technology.Opportunities and Constraints at the African IT exhibitions pp. 64-68.

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