The impact of e-banking in Nigeria
E-banking helps a Nigerian firm such as Zenth bank to make sure that it would reach to more clients and give them a faster and effective service. Nigerian entrepreneurs were benefiting from Nigerianization and regionalism with better access to banks and government contracts and loans, in addition to acting as licensed buyers of a state-controlled export marketing scheme. New industries were being established and the domestic market was witnessing an upsurge. With very limited reflection on the implications of their actions, the politicians assured all Nigerians that development and improved standards of living were just around the comer. The 1950s became the golden era of hope and optimism in the history of modern Nigeria. Nigeria’s banking system consistently allocated a smaller proportion of credit to the public sector than those of Ghana, Tanzania and Malawi. In the later period, the share of the public sector declined further to 50 per cent. However, when measured in relation to GDP, banking institutions mobilized fewer financial assets and granted less credit to the private sector in the adjustment period (Aryeetey & Nissanke 1998). Financial liberalization was incorrectly sequenced, given the unstable macroeconomic environment and weak supervisory framework. Thus it is not surprising that liberalization has not produced any significant positive trend in the aggregate financial indicators (Fischer & Papaioannou 1992).
The number of distressed financial institutions and non-performing loans has grown rapidly, and this has led to a sharp contraction of credit to the private sector, since government financing requirements have first claim on credit. The assumed function of banking institutions in savings mobilization and intermediation for productive investment was severely circumvented with the adoption of liberalization and deregulation of the financial sector in Nigeria. Competition has also been limited by a high degree of interlocking ownership among financial institutions, as in Malawi and Nigeria (Gup 2002). The absence of healthy competition for efficiency in mobilization and intermediation functions in Nigeria, despite reduced government ownership and a large number of institutions, suggests that neither public ownership nor paucity of institutions, in terms of both structure and number, may necessarily be the main source of inefficiency in the formal sector. Electronic technology in banking has received a great deal of attention in recent years and has made major inroads in back-office and bank-to bank operations. It has probably also had significant effects on wholesale/global banking. One day, such technology could have profound effects on retail banking and on the competitive effects of bank mergers. Among these effects is that local markets might no longer be the relevant areas for analyzing competition. This would be true if it became unnecessary for banks to enter local areas with a physical presence in order to attract customers and provide them with the full range of bank services. Customers would not be significantly constrained by information and transaction costs in selecting and conducting business with distant banks (Guttmann 2002).
Home banking never had a chance to show its true potential. Its life cycle was cut short by the arrival of the internet in the mid-1990s as a better alternative for electronic banking. Even though the use of the banks’ own proprietary computer networks and call-up services may have given home banking a comparative advantage in terms of greater security, online banking via the internet proved in the end the more attractive medium. One advantage concerns cost. The internet provides a ready-made infrastructure for the computerization of retail banking, pre empting the need for banks to build their own networks from scratch. And customers do not have to pay anything for online banking beyond internet-access charges, whereas home banking usually involved extra subscription fees. In addition, internet-based banking carries a major marketing advantage compared to home banking. With private networks for their own customers, the banks cannot increase their customer base at all. In contrast to the monopoly rents earned from paper-based banking, the banks have to share their income from electronic banking with nonbank firms providing high tech components that are essential for the automation of financial services (Duetsch 1998). Electronic banking is one of the first things that come to mind when one thinks about the future of banking. It is generally assumed that electronic banking is new and that it will replace or supplement many channels of delivery of retail banking services. It includes automated teller machines (ATMs), automated call centers, digital cash, Internet banking, screen telephones, and so on. These channels of delivery can be used for presenting and paying bills, buying and selling securities, transferring funds, and providing other financial products and services. Electronic banking can be used for retail banking and business-to-business (B2B) transactions, as well as for facilitating large-dollar transfers. Equally important, electronic banking is a worldwide phenomenon. As the term is used here, it involves transactions. Some institutions only offer web sites that provide information about services offered but do not allow for transactions. These would not be covered under the definition of electronic banking. However, web sites that are transactional are considered electronic banking (Stegman 1999).
References
Aryeetey, E & Nissanke, M 1998, Financial integration and
development: Liberalization and reform in Sub-Saharan Africa,
Routledge, London.
Duetsch, LL (eds.) 1998, Industry studies, M.E. Sharpe, Armonk,
NY.
Fischer, KP & Papaioannou, GJ (eds.) 1992, Business finance in
less developed capital markets, Greenwood Press, Westport, CT.
Gup, B (eds.) 2002, The future of banking, Quorum Books,
Westport, CT.
Guttmann, R 2002, Cybercash: The coming era of electronic money,
Palgrave Macmillan, New York.
Stegman, MA 1999, Savings for the poor: The hidden benefits of
electronic banking, Brookings Institution, Washington, DC.
Credit:ivythesis.typepad.com
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