THE CHALLENGES OF ONLINE BANKING IN NIGERIA A CASE STUDY OF SKYE BANK

Abstract

This research evaluates the tangible benefits of online banking as an organizational tool and it’s influence on banking activities as well as customer satisfaction practices. It also examines the meaning of internet, it’s workability, the application of internet on banking operation, the benefits of internet banking and the challenges of internet banking. The emerging trend in online banking in Nigeria is of global concern for one thing the Nigerian economy is a strong force in Africa. On the home front, bank frauds, forgeries, money laundry, insider abuse and erosion of public confidence constitute a set of disturbing issues in the present-day Nigerian banking system. This explains why regulation has become of paramount importance in the entire internet banking development process. It identified lapses in the existing regulations of online banking and argues that without a comprehensive regulation and improved access to information infrastructure it might be difficult for meaningful advances to be made in this field of banking. For the banking industry to move forward technologically, at a faster rate, there is need for the nation to be adequately connected to the global village provided by internet facilities.

CHAPTER ONE

INTRODUCTION

• Background of the study

Few decade ago, banking activities were obsolete and less complicated, this is because an account holder cannot perform any transaction except he or she is on the banking floor. When customers open savings account, they received passbook from the bank with which the account would be operated; and when it is a current accounts, they received cheque books for the same purpose. Today, the banking industry has moved into an era of menu-driven ultra robust specialized software programmes called banking applications. These application is made possible with the aid of ICT or internet service provider (ISP) and this application are electronically driven. The application of electronic banking products/services to banking operations has become a subject of fundamental importance and concerns to all banks operating within Nigeria and indeed a condition for local and global competiveness (Ezeoha, 2006; Ikechukwu, 2000). The recent consolidation exercise in Nigerian banking sector has drawn the attention of many banks to application of various technological devices in promoting/achieving better customer service delivery that guaranteed customer satisfaction that translates into increase profitability and higher return on investment. Timothy (2012), customer’s satisfaction holds the potential for increasing an organization’s customer base, increase the use of more volatile customer mix and increase the firm’s reputation. Consequently, obtaining competitive advantage is secured through intelligent identification and satisfaction of customer’s needs better and sooner than competitors and sustenance of customer’s satisfaction through better products/services. Technology is then essential in providing faster and more efficient services to customers. Technology acquisition must be based on actual needs and the proven ability to deliver customer – friendly solutions. But with globalization, Nigerian banks have no choice but to adopt electronic banking services to enhance effective service delivery that transcends to customer satisfaction, if they really want to stay in the business race, let alone be profitable (Madueme, 2009). But it should be realized that electronic banking services is a brain child of Information and Communication Technology (ICT) that made it possible for service providers and their customers in developing economies to enjoy a good semblance of the services enjoyed in the developed societies. Electronic banking services have afforded banks the opportunities to impress customers which encourage them to keep coming back. Today, it would be difficult to see any bank in the country that does not render one form of electronic banking service or the other, even banks in the most remote parts of the world.

• Statement of problem

As interesting and efficient as the internet banking is, it has its own challenges in an emerging economy like Nigeria. Internet banking offers a lot of opportunities to both the bank and the customers as banking can now be done at the comfort of our homes, fund transfer at our finger tips, bills payable is now a thing of the past, all these is made possible because of internet banking. However the challenges of internet banking in Nigeria has been that of unreliability of the network system that the banks used it is on this backdrop that the researcher intend to investigate the challenges posed by internet banking in Nigeria.

1.3 Objective of the study

The main objective of the study is to ascertain the challenges of online banking in Nigeria, with emphasis on skye bank plc. However, for the successful completion of the study, the researcher intends to achieve the following sub-objective:

• To ascertain the challenges of online banking in Nigeria.
• To ascertain the impact of online banking towards customer satisfaction
• To evaluate the relationship between online banking and profitability
• To ascertain the role of online banking in the development of Nigeria banking sector.

• Research hypotheses

H0:  there are no significant challenges in the adoption of online banking in Nigeria

H1: there are significant challenges in the adoption of online banking in Nigeria.

H0: online banking does not have any significant impact towards customer satisfaction

H2:  online banking has a significant impact towards customers satisfaction.

• Research question

For the successful completion of the study, the following research question were formulated:

• What are the challenges of online banking in Nigeria?
• What are the impacts of online banking towards customers satisfaction?
• What is the relationship between online banking and profitability?
• What is the role of online banking in developing the Nigerian banking sector?

• Significance of the study

It is perceived that at the completion of the study, the findings will be of great importance to the management of banks as the study gives them an insight to the enormous benefit of online banking, the study will also be of great importance to the regulators of the banking sector in curbing cyber crime, the study will also be of great importance to researchers who intend to carry out a study on a similar topic, and finally the study will be of great importance to academia’s as it will add to the pool of knowledge.

• Definition of terms

Challenges

A call to someone to participate in a competitive situation or fight to decide who is superior in terms of ability or strength.

Banks

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Online banking

Online banking also known as internet banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution’s website. The online banking system will typically connect to or be part of the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.

• Organization of the study

This research work is organized in five chapters, for easy understanding as follows, Chapter one is concern with the introduction which consist of the (overview of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

• Brief history of Skye bank

The origin of skye bank date back to 1989 when prudent bank plc was incorporated as a limited liability company. In 1990, the bank was issued a license as merchant bank, that same year it rebranded as prudent merchant bank limited. Skye bank plc is a product of the merger of five legacy banks as a result of the banking industry consolidation and recapitalization exercise of 2005.  The legacy banks were Prudent Bank Plc, EIB International Plc, Bond Bank Limited, Reliance Bank Limited and Co-operative Bank Plc.

Following the merger and the seamless integration of the disparate resources, personnel, IT infrastructure, culture and procedures, the bank has since grown into a formidable financial institution showing strong growth and profitability and providing unique financial solutions to a wide customer base both in Nigeria and in the three West African subsidiaries of Sierra Leone, Gambia and Guinea.

In 2014, in a continuous quest to provide better customer experience, skye bank won the bid to acquire the 100 per cent ownership stake of Asset Management Corporation of Nigeria (AMCON) in mainstreet bank limited, a deal which made skye bank one of the top four banks in Nigeria.

Mainstreet bank’s operations has since been integrated into the bank’s operations in one of the smoothest and hitch free integration process recorded in the Nigerian banking industry, enabling it  to offer banking services to a wider segment of the Nigerian population and with significant positive impact on the bank’s  balance sheet, financial performance and profitability.

Skye bank is quoted on the Nigerian Stock Exchange (NSE) with over 450,000 diverse shareholders with a shareholding structure that puts no more than 5% in the control of any one individual or company.

Skye bank plc has evolved into one of the top financial institutions in Nigeria, after its very seamless consolidation exercise in 2006.

It operates as a group that provides facets of financial products and services powered by a purpose built technological framework that supports the service delivery process to customers.
With a cumulative wealth of experience that spans over 50 years, Skye Bank is historically one of the oldest banks in Nigeria and West Africa. We are quoted on the Nigerian Stock Exchange with over 450,000 diverse shareholders with a shareholding structure that puts no more than 5% in the control of any one individual or company.

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