CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The evolution of Nigeria financial sector can be traced to as far back as 1980, when the monetization of the Nigerian economy has growing side by side with barter system of trade. By then, the use of cash has grown sufficiently through out west Africa. Though Nigerian banks can offer basic banking services as at 1969, they could to compete with their other counter parts in other countries of the world, in innovation and other service delivery. This prompted the emanation of the “new generation banks” in the late 80s and early 90s with the introduction of the new banking technology, better and faster service delivery, novel innovations in products with thigh returns of investments and increased level of competition transactions. This era saw the adoption of electronic banking and establishment of the Nigerian inter-bank settlement scheme (NIBSS) in 1994 to handle inter-bank payments in order to remove the bottle necks and settle delays associated with high value and retail transactions in the money market as well as inter-bank deals between banks in different countries and locations. e-banking in Nigeria, is only in the initial stage. Today most banks offer internet banking service allowing customers to bank online, in the right places like their homes or offices. The growth and acceptance of credit cards and debit cards and automated teller machines (ATMs) also positively influence the development of country banking. The area of electronic commerce that has developed mainly in Nigeria is electronic banking, otherwise known as E-baking. Today, most Nigeria banks offer online banking services in real time. Moreover banks who cannot offer these services to people are losing their customers significantly. The online banking systems have become common for customers in Nigeria as it offers the flexibility of operating their accounts in any branch of your bank’s network. E-banking benefit cannot be denied but on the other hand, the risks are on the high side. The banks require keeping the balance of benefits versus risk
E-banking can be said to be the automated delivery of new and traditional banking products and services directly to customers through electronic interactive communication channels. This E-banking system includes the system that enables financial institutions, customers, individuals or business to access accounts, transact business or obtain information or financial products and services through a public or private network, including the internet. Ebanking transactions needs some interface to communicate with the customer. All the E-transactions work through some medium or interface. The electronic devices which perform interact with customer and communicate with other banking system is called “electronic banking delivery service”, such as automated teller machine (ATM), interactive voice response, cash deposit machine, and point of sale. One of the issues currently being addressed is the impact of e-banking on traditional banking players. It might be convenient to outline two views that are prevalent in the market, briefly. The view that the internet is a revolution that will sweep away the older holds much sway. Arguments in favour are as follows: E-banking transactions are much deeper than branch or even phone transactions. This could turn yesterday’s competitive advantage a large branch network into a competitive disadvantage, allowing e-banks to undercut bricks and mortar banks. This is commonly known as “beached dmosaur” theory. e-banks are easy to set up so lots at new entrants will arrive. The older system cultures and structures will not encounter there new entrants. Instead, they will be adaptable and responsive. E-banking gives customers much more choices. Customers will be less incline to remain loyal. E-banking can improve a bank’s eiciency and competitiveness, so that existing and potential customers can benefit from a greater degree of convenience oered by the bank, when combined with new services, expand the bank’s targeted customers beyond those in the traditional markets. Consequently, financial institutions are becoming more aggressive and adopting electronic banking capabilities that include sophisticated marketing system and stored value programs. Internationally, familiar examples like telephone banking, automated teller networks and automated clearing house system. Such technological advances have brought greater sophistication to all users. E-banking will lead to an erosion of the “endowment eect” currently enjoyed by the UK banks. Deposit will go elsewhere with the consequence that these banks will have to fight to regain and retain there customers’ base. This will increase their cost of funds, possibly making their business less valuable. Lost revenue even results in these banks taking more risks to breach the gap. Portal providers are likely to attract the most significant share of the banking profits. Indeed banks could become glorified marriage brokers. They would bring two parties together, example buyers and seller, payers and payee. The products will be provided by monoclines, experts in the field. Traditional banks may simply be le with payment and settlement business event his could be cast into a doubt. It may be diicult for traditional banks to make acquisitions for cash as opposed to being able to oer shares they will be unable to obtain additional capital from the stock market. This is in contrast to the situation for internet firms for whom it seems relatively easy to attract investment. There is another dimension which sees E-banking more as an evolution than a resolution. E-banking is just banking oered via a new delivery channel. It simply gives customers another service. Like ATMs, E-baking will impact on the nature of branch but at remove their values. Brief history on the Nigeria Financial Sector The evolution of the baking system can be traced back to the ancient times before our Lord Jesus came into the world as a being. According to Anyanwaokoro (1996), in his contribution, Kehinde (2009), in Nigeria, the evolution of banking system can be traced back to 1890 during the monetization of Nigeria, then, the use of cash have grown suiciently throughout West Africa. According Agboola (2006), conventional banking system started in Nigeria in 1952 since. Then, the industry has witnessed a lot of regulatory and institutional advances. The industry was controlled by at most five out of 89 banks in existence before the commencement of the on-going banking industry reformation in the country. Multiple branches system is also one of the notable features of Nigerian banks with a total of 89 banks accounting for about 3017 bank branches nationwide as at 2004. Also, the industry is faced with heavy challenges, including the overbearing impact of fraud and corruption, erosion in public confidence, poor capital base, and persistence case of distress and failure, poor asset quality etc. The extent the regulatory body have gone to resolve these lingering problem including the banking reform initiated by the central bank of Nigeria in June 2004, which was largely targeted at reducing the number of banks in the country and making the emerging banks much stronger and reliable. In the quest to catch up with global development and improve the quality of their service delivery. Akinseye (2009) started that Nigeria having no doubt invested much in technology, and have widely adopted electronic and telecommunication networks for delivery a wide range of value added services and products. The banks have in the last five to seven years transformed from manual to automated systems, unlike before when ledger cards were used. Today, banking has been connected to computer, thereby facilitating the practice of inter-bank/inter-branch banking transactions. Development in technology, at home or oices, such as the introduction of mobile telephone in 2001 and improved access to personal computer and internet service facilities have also helped immensely to enhance the growth of electronic banking, thereby making the country to go cashless through its adoption and adequate and suicient use. However, where as local banks most commonly practice real time online internet banking, the integration of customers into the processes far from being realized. Many of the reasons are attributed of the high prevalence of fraud and lack of an adequate regulatory frame work to protect the bank from volatility of risk associated with internet banking, especially at the levels of communication and transaction. In his view, Aaron (2005) Nigeria is globally regarded as the headquarters of advance fee fraud which is perpetrated mostly through the internet.