Full Project – IMPACT OF INTERNET BANKING SYSTEM ON BANKING ENVIRONMENT. A CASE STUDY OF FIRST BANK OF NIGERIA
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CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
Internet banking, according to Obe (2012), improves the banking industry overall by fostering client loyalty and decreasing turnover. There has been a marked decrease in customer wait times at banks as a result of the growing use of internet banking. Banks have been able to cut expenses thanks in part to internet banking. Al-Mutairi et al. (2015) claim that internet banking’s many benefits include the ability to transfer funds and pay bills from a home computer, eliminating the need to travel to a branch or use an automated teller machine.
Since less human labor is required to attend to customers in person, banks that offer internet banking can reduce their costs of operation by as much as 50%, as stated by Adelakun and Folorunso (2013). Internet banking has the same effect, since it allows customers to consolidate their banking needs by providing access to a variety of financial institutions from a single location. This suggests that Nigerian banks may see increased profits and accelerated expansion if they adopt internet banking.
Internet banking offers numerous benefits, but it also has some drawbacks. Internet fraud and theft are a significant problem with internet banking that can undermine customers’ faith in financial institutions (Sadiq et al., 2012). Therefore, financial institutions providing internet banking services should implement safeguards like firewalls, encryption, two-factor authentication, and the use of protocols like Secure Sockets Layer (SSL) to protect customers’ personal data. Internet banking is used and adopted differently throughout the world.
Obe (2012) claims that internet banking is still a novel idea in Nigeria. Because of the country’s still-evolving economy, just 33% of Nigerians are internet at any given time. Banks in Nigeria are preparing to reap the rewards of what is likely to be a surge in internet banking customers as a result of the country’s rapid digitization. Internet Banking and Its Effects on Nigeria’s Financial Sector Internet banking has had several effects on the Nigerian financial system.
Internet banking has been well welcomed by clients, according to research by Al-Mutairi et al. (2015); as a result, banks may expect to see a rise in their customer base, revenue, and ability to compete by encouraging their customers to use the service more frequently. This is due to the fact that the low transaction costs associated with internet banking make its services more affordable to a larger population. Because customers no longer have to physically visit a bank, internet banking has reduced operational expenses and freed up capital for product innovation and other uses. Internet banking has been credited by Adelakun and Folorunso (2013) for helping to boost Nigeria’s economy. The increased efficiency, rapidity, and precision of financial transactions made possible by Internet banking are a direct outcome of its widespread use. These are crucial for the economy’s growth because they lessen the likelihood of inefficiencies that can slow progress.
Banks have been eager to take advantage of this breakthrough by creating internet banking platforms where consumers have access to their accounts and other financial services around the clock. Understanding the effects of internet banking on the banking industry is crucial in light of the growing popularity of internet banking and the quick changes brought about by technical breakthroughs.
McKinsey & Co. found that about 55 percent of banking transactions in the US are happening internet, with that percentage likely to rise to 70 percent by 2020. This indicates that internet banking is the preferred method of banking for the vast majority of users. This shift has fueled interest in internet banking features beyond simple money transfers, such as mortgage and investment opportunities. The amount of financial dealings that take place in actual bank branches has decreased as a result of the rising popularity of internet banking. JP Morgan found that physical bank branches are shutting at a pace of 3% per year (JP Morgan, 2017), and this trend is only predicted to accelerate as customers migrate to internet banking. The advent of internet banking has also allowed financial institutions to deliver better service to their clients by allowing them to provide more individualized assistance. Customer satisfaction has increased as a result of banks’ increased ability to observe their clients’ patterns of behavior and tailor their advice and solutions accordingly.
Banks have been able to save money because to the rise of internet banking. Internet transactions are much more cost- and time-efficient than those made at traditional bank offices. Now that banks are saving money, they can offer their services to customers at reduced rates. New hazards and security vulnerabilities have emerged as a result of the rise of internet banking. Banks are more susceptible to cyberattacks by hackers looking to acquire private consumer information. Financial institutions have a responsibility to safeguard their customers’ personal information and financial transactions conducted over the internet.
1.2. Statement of the Problem
Internet banking has many benefits, but it also faces a number of hurdles and concerns that must be resolved if it is to continue to have a major influence on the banking industry.
Security and preventing fraud are major concerns. Many people are wary of using online banking because of the risk of having their personal and financial data stolen by hackers and fraudsters who take advantage of security flaws in these systems. Because of this, consumers’ trust in online banking has declined, which slows its growth.
The problem of unequal internet access is another one. Only about one-third of the population in Nigeria has access to the internet at this time. Because of this, a sizable portion of the population, especially in less-populated areas, still lacks access to online banking. The expansion of electronic banking in the country faces this obstacle right now.
Finally, in order to reap the full benefits of online banking, financial institutions must continually invest in digital infrastructure and training. Internet banking in Nigeria might suffer from poor adoption rates if this isn’t done.
1.3 Purpose of the Study
The main purpose of the study is to examine the impact of digital technology in Nigeria banking system. In this regard the specific purpose of this study is to:
- Determine the extent to which ICT products enhance the performance of banking sector.
- Identify the benefits banking sector derived from the adoption of digital technology.
- Find out the challenges facing the banking sector on the application of digital technology.
1.4 Research Questions
The following research questions were raised to guide the study:
- What are the impacts of ICT products on operational performance of the banking sector?
- To what extent has the banking sector benefitted from the adoption of digital technology?
- What are the challenges facing the banking sector in the internet application?
1.5 Significance of the Study
The significance of the study cannot be over emphasized. It can be seen below:
The study will enables the banking sector see the need for information and communication in the day to day running of its activities and the contribution Information and communication technology has on the efficiencies of its service to their customers. It will also reveal the need for improvement in the use of various Information and communication technology so as to satisfy the demanding, desires of their customers and compete with their counter parts in the banking industry.
It will help to improve customer’s knowledge on the use of computer and other gadgets through which they can access their bank account and make any other payment in the world.
This will also be beneficial to students that will carry out further research work and also to Government for policy making implementation.
1.6 Scope of the Study
The study examines impact of digital technology in Nigeria banking system. The research work is limited to three branches of First bank of Nigeria PLC in Asaba, Delta State.
1.7 Operational Definition of Terms
The following terms will be encountered in the course of this study and will be defined as operationally used in the study.
Computer: Is an electronic machine that can store, organize and retrieve information, perform calculations and control other machines.
Extranet: Extranet is a collaborative network that used internet technology to link with their suppliers, customers or other business that share common goals.
Digital technology: Is the study or the use in electronic processes for gathering and storing information.
World Wide Web: Is the system on the internet that allows you to find and use information that is held on computers all over the world.
Electronic Banking: Is the situation whereby transfer of payment is done via computers.
Automated Teller Machine: Is a machine that enables banks customers to withdraw money from their checking or saving account by inserting an Automated Teller machine.
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Full Project – IMPACT OF INTERNET BANKING SYSTEM ON BANKING ENVIRONMENT. A CASE STUDY OF FIRST BANK OF NIGERIA