Full Project – An evaluation of the impact of electronic payment (e-payment) system in the public sector

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CHAPTER ONE

INTRODUCTION

1.1    Background of the Study

The most significant development of the millennium which has substantially influenced business operations in the world is the emergence of the information age. The remarkable progress achieved in Information and Communications Technology (ICT) has made it possible for information to be digitalized and transmitted faster and cheaper in mega or terra bytes. Taking advantage of rapid technological progress and financial market development, a number of innovative products for making payments have been developed in recent years. Payment involves the transfer of monetary value from one person to the other, thus, a payment system consists of mechanisms, which include institutions, people, rules and technologies that make the exchange of payments possible.

The worldwide proliferation of Internet has given birth of Electronic payment system which is “the use of debit and credit cards on the Internet or other electronic devices to perform daily transactions which include paying for goods and services, transfer of money and bill payments at any time of the day”, stated Gholami et. al. (2010) with Andam (2003). Electronic payment offers the benefit of acquiring and using goods and services without paying for them with cash, thus removing the burden of carrying cash (Fosent et. al. 2010). Electronic payment systems refer to various innovative applications and approaches including the use of credit card, debit card, Automated Teller Machine(ATM), Electronic Fund Transfer(EFT), online payment that are used to facilitate customer’s decision to pay for a product or services (Vassilious,2004). Research indicated that use of electronic payment are largely influenced by demographic characteristics of users such as gender, age, education level, income, marital status, culture and attitude towards debt (Abdul-Muhmin and Umar, 2007).

However, transactions made using these innovative products are accounting for an increasing proportion of the volume and value of domestic and cross border retail payments. Currency and notes are converted to data, which are transmitted through telephone lines and satellite transponders (Ovia, 2002). These new financial services created through electronic payments systems have resulted in a substantial reduction in financial costs and the ease of transfer of funds.

Electronic payment system otherwise called e-payment is a payment system consisting of electronic mechanisms, which make the exchange of payments possible. It can simply be defined as payment or monetary transactions made over the internet or a network of computers (Kulkarni 2004). In other words, it involves the provision of payment services and transfers through devices such as telephones, computers, internet, Automated Teller Machine (ATM) and smartcards. It is a paperless system of payments that offers an alternative to the traditional system of payment, which involves the use of cash and cheques. E-payment system has the advantage of facilitating transactions more conveniently and is available round the clock independent of the customer’s location.

The objective of this study is to investigate the impact of electronic payment systems on the banking sector.

1.2    Statement of the Problem  

Electronic payment systems are pivotal to the digitalization of the financial system here in Nigeria, with numerous advantages ranging from financial inclusion, convenience in carrying out financial transactions to security of these transactions in a digital platform which would culminate to economic development of the economy. However, digital finance is not without it downsides, which constitute the problem this study seeks to resolve.

Providers of digital finance services are profit- seeking corporations that use digital finance to maximize their profitability or to maximize the profitable opportunities of businesses affiliated with digital finance providers namely banks, financial and non- financial institutions. Corporate providers of digital finance services can discriminately use a more aggressive marketing tactic to persuade high- and middle income customers to use a new or existing digital finance platform or infrastructure and use a less- aggressive marketing tactic to persuade low- income  and poor customers to use new of existing digital platforms or infrastructure if they believe the later cannot afford the associated fees, thereby leading to lower financial inclusion for poor and low-income customer since the net monetary pay-off  to digital finance providers is higher with high- and –middle  income customers than  with low- income and poor customers.

Also bias in the provision of digital finance can be geographical because digital finance providers, based their own internal risk assessment which may change from time to time, can choose to withdraw or discontinue the provision of specific digital finance services to high- risk rural areas or communities that do not have the supporting infrastructure to sustain specific digital finance services, thereby leading to lower financial inclusion.

Another dimension is that educational bias can be introduced in the provision of digital financial services. If the net monetary value of providing digital finance to poor communities is very negligible, digital finance provider finance providers, based on their profitability assessment, can choose to focus less on the delivery of digital finance poor and uneducated communities that do not have the basic financial literacy to use and understand digital finance.         

1.3    Objective of the Study

The main objective is an empirical investigation of the impact of electronic payment systems on banking sector. Specific objectives are:

1. To examine whether e-payment have positive impact on the service delivery of Banking Sector.
2. To evaluate whether e-payment systems can help in preventing and controlling fraud in Banking Sector.

• To access whether there is significant relationship between electronic payment systems and banking sector.

1.4    Research Hypotheses

Hypothesis I

Ho:    E-payment does have positive impact on the service delivery of banking sector

Hi:     E-payment has positive impact on the service delivery of banking sector.

Hypothesis II

Hi:     E-payment systems cannot help in preventing and controlling fraud in Banking Sector.

Ho:    E-payment systems can help in preventing and controlling fraud in Banking Sector.

Hypothesis III

Hi:     There is no significant relationship between electronic payment systems and banking sector.

Ho:    There is   significant relationship between electronic payment systems and banking sector.

1.5    Significance of the Study

Firstly, the findings will shed more light on the importance of e-payment to the banking sector and Nigerian economy and the benefits that can be derived from the population adopting these technologies. The findings will provide information that will guide policy makers in making decisions on appropriate policies that will improve the use of e-payment systems in order to capture the money in circulation within the banking system and formal market.

Secondly, this work will be of importance to the private sector and general public as it will educate the public and potential investors on the growing potential of payment system users and the potential market they can capture for their businesses or markets.

Lastly, with the growing level of insecurity in the country, the use of e-payment systems enables the ease of movement and transaction without cash, thereby preventing incidences of robbery and extortion by ill vices in Nigeria. It also aids security agencies in tracking down and tracing kidnappers and robbers as it places a limit on the cash flowing in the system therefore making it difficult for them to carry out their nefarious activities and also less attractive to pursue the trade.

1.6   Scope of the study

The study covers an empirical investigation of the impact of electronic payment system on banking sector with particular reference to GT bank, Lokoja Kogi State.

1.7    Limitation and Constraints of the Study

Virtually every research work comprises of one limitation or the other.  During the course of carrying out this research work, a lot of set locks were also encountered which include:

1. Time Constraints: Time constraints was strong factor that posed as a limitation to this research because, the study was carried out when the researcher had so much work load such as, attending lectures, assignments and reading for examination.
2. Non-challant Attitude of Some Respondent: The response gotten from some of the staff poses another problem. Most of them due to fear of losing their job they could not give vital information that are necessary for this research study
3. Taking the economic situation into consideration, the issue of finance posses a lot of problem to the researcher, the cost of getting materials for the research work, cost of typing and printing.

1.8    Definition of the Terms

Banks:   A bank is a financial institution licensed to accept deposits and make loans. But they may also perform other financial services (Asaolu et.al, 2011).

Banking:   According to Ifinedo (2019) banking is the business of protecting money for others.

Banking Sector: Banking sector means all licensed financial institutions, financial holding companies and for the purposes of these regulations, includes the home mortgage banks (Geetha & Malarvizhi,2012).

Cashless Policy: Cashless policy is the ability to carry out transactions without the use of banknotes. It is a policy introduced by the Central Banks to reduce the amount of physical cash in circulation, thereby encouraging the use of electronic platforms for settlement or payment of goods and services( Richardson, 2014).

Electronic:  Babajide &  Emma (2019) is the branch of science that deals with the study of flow and contact of electrons and the study of their behaviour and effect in vacuums or is the science of controlling electronically energy.

Electronic Payment (e-payment): This is the way of making transactions or paying for goods and services through an electronic medium, without the use of cash or cheques (Terfa, 2015)

Impact:  Refers to a physical force (like a collision), an influence (a bad role model or a hero), or a strong effect (Ranjani & Bapat 2015)

Investigation:  Is a thorough search for facts, especially those that are hidden or need to be sorted out in a complex situation (Terfa, 2015)

Monetary Policy: This is the macroeconomic policy measures undertaken by the government or central bank to influence the availability, cost and use of money and .credit (Tuesta et.al 2015).

System: is a collection of elements or component that are organized for a common purpose. The word sometime describes the organization or plan Babajide &  Emma (2019)

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Full Project – An evaluation of the impact of electronic payment (e-payment) system in the public sector