CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY        

 E-banking is defined as the provision of retail and small value banking services through electronic channels. Such products and services include deposit taking, lending, account management, the provision of financial advice, electronic bill payment, and the provision of other electronic payment products and services such as electronic money (Basel Committee on banking supervision, 2003). It covers both computer and telephone banking and refers to the use of information and communication technology by banks to provide services and manage customer relationship more quickly and most satisfactorily (Charity-Commission, 2003 and Ovia, 2005). Electronic Banking (e-banking) is defined as ―the use of technology to communicate instructions and receive information from a financial institution where an account is held. This service includes the system that enables financial institution customers, individuals or businesses to access accounts, transact business, or obtain information on financial products and services through a public or private network‖ (Prakash & Malik, 2008; 84 in Sanni, 2009). However, electronic banking has experienced tremendous growth in many countries especially Africa and today it has transformed the traditional banking practice in Nigeria. Currently, electronic banking in Nigeria has changed the way services are delivered by the banking sector to customers. Electronic banking service, have lower operating costs, improve customer services‘ delivery, retain customer, reduce branch traffics, and downsize the number of branch staff (Parisa, 2006 in Sanni, 2009).

 Banks are important in every country and have a significant effect in supporting economic development through efficient financial services. They provide a mechanical system to group saving and convert them into investment. For over a decade, banks have been affected by changes associated with globalization and financial liberalization. Reacting to these changes, banks expand the choice of services offered to the customers and increase their reliance on technology (Al-Smadi and Al-Wabel, 2011). Banks have been significantly affected by the evaluation of technology; competition between banks has forced them to find new market to expand, and the number of financial institutions that offer electronic banking products increased. Hence, banks have begun to offer electronic banking services to improve the effectiveness of distribution channels through reducing the transaction cost and increasing the speed of services. Recently, electronic banking has become the way for the development of banking system, and the role of electronic banking is increasing in many countries. It offers opportunities to create services processes that demand few internal resources, and therefore, lower cost. As well as it provides wider availability and possibility to reach more customers. From the customers' point of view, electronic banking allows customers easier access to financial services and time saving in managing their finance (Almazari and Siam, 2008; Ayrga, 2011; Tan and Teo, 2000). Indeed, the emergence of electronic banking has prompted many banks to develop marketing and information technology strategies in order to stay competitive. Venkatesh, Morris, and Davis (2003) noted that the successful implementation of information systems is dependent on the extent to which such a system is used and eventually adapted by the potential users. Information system implementation is not likely to be considered successful if users are unmotivated to use that type of technology, and thus it will not bring full benefits to the organization. In order to motivate customers to use electronic banking, banks must make key improvements that address the customers' concerns. Therefore, it is necessary to understand the key factors that influence the adoption of electronic banking among the banking customers.

Essentially, through the use of Information and Communication Technology (ICT) banks now employ different channels such as online banking, mobile banking and Automated Teller Machine ATM etcto deliver their services. Report on Electronic banking system in Nigeria reveals that e-payment machinery, especially the card technology, is presently enjoying the highest popularity in Nigerian banking market. According to INTER SWITCH statistics, Nigeria has over 30 million ATM card holders who conduct over 30 Billion worth of transactions on the machines every month. Nigeria's banks operate over 9,000 ATM machines across the country's 36 states and Federal Capital Territory. Therefore, this study focuses on the factor affecting the adoption E-Banking in Nigeria Banking Industry.

STATEMENT OF THE PROBLEM

E-banking is now a global phenomenon. It is a precious and influential tool for heavy development, supporting growth, promoting innovation and enhancing competitiveness. A physically powerful banking industry is essential in every country and can have a major effect in supporting economic development through competent financial services sector, with huge impact on the banking industry. Banks require developing creative solutions of how to make full use of the new technology and provide their customers with high e-banking service quality. When lacking face to face interaction, banks must increase the experienced e-banking service quality among customers in order to attain and sustain competitive advantages and customer relationships. (Aronsohn et al, 2006 in Ms. Fozia2013). The pre consolidation era witnessed a situation of many banks with little or fewer financial products/services. However, the consolidation exercise reduced the number of banks to 24 resulting in very stiff competition. Thus; the banks became more aggressive in service delivery, marketing, innovation and productivity. This ushered in the introduction of series of financial products/services in the effort to meet customers‘ demands by these banks and ensure business continuity.

The use of phone banking and Internet banking is strongly promoted to bring about a change in consumers’ banking behaviors. However, Internet banking has not been widely adopted by bank customers. These problems necessitates the need to carry out a study on the factor affecting the adoption E-Banking in Nigeria Banking Industry.

OBJECTIVES OF THE STUDY  

The general objective of this study is to examine the factor affecting the adoption E-Banking in Nigeria Banking Industry, a case study of Ikorodu LGA of Lagos state. The specific objectives include the following:

1.     To identify the perception of bank customers on the various channels of e-banking.

2.     To find out the impact that the demographic characteristics have on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state.

3.     To examine the influence of education on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state.

4.     To determine the role of customers’ access to internet on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state.

5.     To ascertain the influence of the factors affecting the adoption of E-banking by bank consumers in Ikorodu LGA of Lagos state on its implementation.

RESEARCH QUESTIONS

The relevant research questions related to this study include the following:

1.     What is the perception of bank customers on the various channels of e-banking?

2.     What is the impact that the demographic characteristics have on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state?

3.     What is the influence of education on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state?

4.     What is the role of customers’ access to internet on the adoption of E-banking by bank consumers’ in Ikorodu LGA of Lagos state?