The banking industry recently is being filled with staff competition, ever changing technology sensitivity and high taste customers, and this therefore leave no one for laggards. It is now more like survival of the fittest. One of the numerous strategies that will help the banks achieve their goals is the creation of a cashless society through adoption of e-banking in the financial sector. This study examines this strategy, highlighting the challenges accompanied by the adoption and also provides useful suggestions to present to the potential users of the strategy. This study adopted survey method of investigation in the collection of data. The instrument was mainly questionnaire, and was administered to banks staffs of the selected banks and bank customers in Enugu metropolis. Three hypothesis were tested using chi-square test tool. From the analysis, it was seen that there is what is called digital divide, huge cost of putting enhanced facilities in place. Recommendations were also made like, considering the issue of security, the bank should work with other face to  upgrade specific services government should provide some services to reduce cost for some banks when installation and also there should be existence of privacy on a bank website for insurance purposes.

Chapter One


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. E-banking 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 efficiency and competitiveness, so that existing and potential customers can benefit from a greater degree of convenience offered 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 effect” 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 left with payment and settlement business event his could be cast into a doubt.

It may be difficult for traditional banks to make acquisitions for cash as opposed to being able to offer 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 offered 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 sufficiently 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 offices, 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 sufficient 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.

1.2      Statement of the Problem

Implementing successful E-baking services is not easy as most people mighty think. Many obstacles exist and they all resolve around three major pieces of the E-banking puzzle – money, technology and people. Despite the global reach of e-banking, not all banks have taken advantage from e-banking. There is a bid gap in the internet and e-banking adoption between the developed and developing countries, thus creating a digital divide. This divide is mostly influenced by the huge finance requirement for the adoption and operation of e-banking system which is traceable to most distress problems encountered by Nigerian banks.

Therefore, a percentage development of internet users embodied the picture of the galloping Nigerian improvement, according to Adeyinka (2008). The start-up cost of an e-banking are high, establishing trusted brand is very expensive as it requires significant advertising expenditure in addition to purchase of expensive technology. E-banks have already found that retail banking only becomes profitable once a large critical mass is achieved. Consequently, many E-banks are limiting themselves to providing a tailored service to be better off.

A bank may be faced with different levels of risk and exceptions arising from electronic-banking as opposed to traditional banking. Customers who rely on e-banking services may have greater intolerance for a   system that is unreliable of one that does not provide accurate and current information. Clearly, the survival of E-banking depends on its accuracy, reliability and accountability. The challenge of many banks is to ensure that savings form the E-banking technology are more than the offset cost.

Furthermore, e-banking/commerce in Nigeria has started not long ago, so law enforcement and implementation is not complete. The independent regulatory body that promotes growth in information technologies and communication in the country is the Nigeria communication commission (NCC). There current tax laws do not specifically classify E-commerce transaction in Nigeria. Also, there is no specific legislation on consumer protection and electronic commerce in  the country. Therefore the need to access the E-banking operation in Nigerian financial sector in relation to creation of a cashless society from the basis of this research.

1.3      Objectives of the Study

The main purpose of this study is to examine the capabilities and the importance of E-banking in the financial sector. Using Nigeria financial sector, the specific objectives of this research includes the following:

1)         To examine carefully the history and practice of E-banking in Nigeria.

2)         To find out customers perception of e-banking in Nigeria

3)         To find out the impact of E-banking in Nigerian financial sector

4)         To find out the challenges and survival of E-banking in Nigeria.

5)         To determine the future of e-banking practice in Nigeria.

6)         Using collective data to suggest the realistic method for creating a cashless society in Nigeria using E-banking as a major tool in the financial sector.

1.4      Research Question

1)         Is E-banking widely accepted as a method of banking in Nigeria and how does it affect Nigerian economy?

2)         Do customers see E-banking as a safe method of banking?

3)         Does E-banking have any impact on the Nigerian financial sector?

4)         What are the challenges of E-banking in Nigeria?

1.5      Hypothesis

Hypothesis  I

Ho:  E-banking does not offer basic banking services on a daily basis.

H1: E-banking offers basic banking services on a daily basis.

Hypothesis  II

Ho:  E-banking is not useful in providing efficient financial services to customers on a daily basis.

H1: E-banking is useful in providing efficient financial service to customers on a daily basis.

Hypothesis  III

Ho:  Financial institutions are not in a position to benefit commercially form E-banking practices.

H1: Financial institutions are in a position to benefit commercially from E-banking practices.

1.6      Significance of the Study

This research tends to explain the need and the benefits of efficient E-banking services. The quest for reducing the population in banking halls, offering of basic banking services on a daily basis and increase in income generation have led to the adoption of E-banking in financial institutions. Recently, many banks are internet banks only. Unlike the ones that has been established many years ago, these internet only banks do to maintain “bricks and mortar” branches, instead they differentiate themselves by offering better interest rates, and also online banking features.

Moreover, these are several factors surrounding the view and acceptance of E-banking practices both by financial institutions and customers in Nigeria. One of the key challenges encountered by banks in the internet environment is how to predict and manage the volume of customers that they will obtain. Many banks has inadequate systems to cope with demand, and even comprises insecurity of extra systems that are inadequately configured are brought on-line to deal with the capacity problems. The study will be beneficial in implementing E-banking in financial sector, it will also exhume the challenges faced by Nigerian institution in adoption of E-banking, strategies to be adopted to achieve an efficient. E-banking services delivery will also be exhausted.

Finally, this study will be beneficial to the students, general public and researchers who might want to embark on similar study in future.

1.7      Scope and Limitations of the Study

This connotes how far the study or the extent this research study will go. It will be on E-banking practices in the Nigerian financial sector with banking industry. However, due to limited time, the main area of concentration would be on some selected financial institutions (banks) in Enugu state in Nigeria.

It will also focus on the adverse and favourable state and the usefulness of E-banking. Responses from staff of the financial institutions and customers will be the main focus. It will serve as a measure on customers interest in E-banking effects on financial services and future of electronic banking in the Nigerian financial sector.

In the conduct of this research, certain limitations were encountered, these include:

1)         Non-challant attitude on the part of the respondent as they looked at the researcher as an agent of other banks, tax officials or EFCC and ICPC due to the pending problems of bank reform in Nigeria.

2)         Failure on the part of some respondents to return their filled questionnaires due to their hectic nature of bank job and busy schedule which caused the researcher several visitations to the banks before filling and returning them, leading to time and money consumption.

3)         Lack of sufficient finance and limitations of time. The money and time made available for this research work was not enough hence the research and known individuals cordial relationship pave way for a meaningful study.

1.8      Definition of Terms

Automated Teller Machine (ATM):  This is a computerized electronic machine that performs basic baking functions, in other words, it is a terminal which enables debit or credit card holders to access and carryout baking transactions without a teller.

E-Banking (Electronic Banking):  It is an automated delivery of new and traditional banking products and services directly to customers through electronic, interactive and communication channels.

Interactive Voice Response:  This is the transaction of business using computers and dedicated telephone links typically through the internet or a private system.

Point of Sale:  It is a payment machine where debit and credit holders swipe their cards to make payment.

Internet:  This is an electronic communication network that connects computer networks and organizational computer facilities around the world


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