Impact of Telecommunication Development on the Efficiency of Commercial Banking Operations in Nigeria
Abstract on Impact of Telecommunication Development on the Efficiency of Commercial Banking Operations in Nigeria
The study examines the impact of telecommunication development on the efficiency of commercial banking operations in Nigeria. The survey design was used to fulfill the objectives of the study. The population of the study was the total number of staff of eight banks in Abraka. Sixty-four staff copies of the questionnaire were administered to the same number of respondents (purposive sample) to the banks. Commercial banks depend on the telecommunication network provider to empower few of their networks; therefore, there is a well-established relationship between commercial banks and telecommunication industry in Nigeria. FINTECH is the policy that brings telecommunication industry and the financial industry in making easy customer transactions and increasing the profitability of banks in Nigeria. Commercial banking rely on telecommunication to power their ATM networks to enable them serve the teeming customers base that have increased since the consolidation of the banking industry in Nigeria. Telecommunication helped banks to start mobile transactions making banks to develop another stream of income making. The study recommended that commercial bank in Nigeria should continue to review their activities with telecommunication to discover other channel that both industry can play together to increase profitability of both parties as well as increase customer satisfaction in banking industry, telecommunication should improve its network capacity to make other rural dwellers to benefit in the new policy of agent banking so as to increase that profit margin of the banks and telecommunication organizations and telecommunication should not be allowed to own commercial banks because they will be monopoly of network and commercial banks that cannot afford the high subscription might be declared insolvent.
Chapter One of Impact of Telecommunication Development on the Efficiency of Commercial Banking Operations in Nigeria
The chapter introduced the research work by providing background information, state of problem, objectives of the study, research questions, scope of the study, significant of the study and definition of terms.
Background to the Study
Banking industry is one of the most important industries in a given economy. Banksplay some specific role that shows the healthy status of the economy. Either a fail banking operation or failure in other sector will come to the bank industry. Hence, bank industry is the hub of Nigeria economy. According to Adegbie and Dada (2018) Banking industry which have banks as it instrument of operation is an important institution that contribute to the general development of the economy. Banks play principle financial bedrock of the economy by sourcing funds from the surplus sector and transfer same to develop the deficit sector of the same economy.
Over the years banking industry has been a taking different adjustment. This is to ensure that the banking industry retain its pivotal position in the industry. According to Ademola, Olusegun and Kehnde (2013), the first banking regulation started in 1952 and the establishment of CBN in 1958 to regulate and supervise the activities of banks in Nigeria. The emergence of the CDN introduced a regulatory framework into the financial system as of the effort by the government at promoting a sound financial structure and monetary stability in Nigeria.
Before this period, banking operation started during the colonial era with the establishment of colonial banks, with the primary aim of meeting the commercial needs of the colonial government. Banking industry in Nigeria is regulated through the central Bank of Nigeria, (Adekanmbi (2017), specifically, on July 1st 1959, Central Bank was established but the first bank in Nigeria was established in 1892. It was known to be African Banking corporation and British West Africa, which was later called the present first bank Adegbie and Dada (2018) posited that the introduction of banking into Nigeria economy in 1892 with the establishment of Africa Banking corporation which later became Standard Bank of Nigeria (Now First Bank PLC) came with high expectation to break into the development of Nigeria economy through the provision of the needed banking industry, which is regulated by central Bank of Nigeria, is made up of deposited money banks referred to as commercial bank, development female institutions and other financial institutions which include; micro-finance banks, finance companies; bureau de changes discount house and primary mortgage institutions, (Adekanmbi, 2017).
There is no way banking industry success can be mentioned without the contributions of telecommunication. Over the years, banking operations have becreat. The rapid innovation in the banking industry is the developments of different agents in telecommunications remain a vital engine for development of Nigeria economy. It is an essential infrastructural sector including agriculture, education, industry, health, banking, defense, transportation and tourism.
According to World Bank (2011), over the past two decades, Africa’s banking industry has changed radically. The most important factor driving this changes is the inclusion of advance technology. One of such technologies is the telecommunication. Ndukwe (2011) explained that telecommunication sector is a vital sector for human development and advancement was not given the necessary priority attention it deserves by successive government in Nigeria since independence.
The government monopolized the sector as NITEL was unwilling or unable to handle the volume of demand for telecommunication services in Nigeria against the increase in population. Nitel also had the problems of poor system maintenance and not making timely investment for network expansion to meet the demand for telecom services. These issues did not speak good for the economy. However, the need for deregulation of the economy motivated the government to include telecommunication in the deregulation.
According to Chidozie, Odunayo and Olutosin (2015), the Nigeria telecommunication sector was one of the sectors experienced deregulation. The sector was made up of the department of Post and Telecommunication (P &T), in charge of the internet network and a limited liability company, the Nigerian External Telecommunication limited (NET) responsible for external telecommunication services.it metamorphosed into NITEL in 1985and on the heels of the privatization policy of OlusegunObasanjo administration in 1999 other private telephone operators became keys players in the industry.
These private telecommunication companies were awarded license to operate in Nigeria. Ndukwe (2011) explained that from 1997 to 1999, good licenses were awarded to some private telecommunication operators to provide telecommunication services in various part of the country.
Olashore (1991), argues that deregulation is an economic policy and is often used synonymously with liberalization to mean the removal of official restrictions on consumer choice and the introduction or extension of competition on the supply side of market. He contends that it is a way of relying on private entrepreneurs as a motivator for development. He stress the differences between deregulation and privatization, saying while deregulation abolishes monopoly, privatization is what transfers ownership from public to private sector. In other words, privatization is an instrument under deregulation.
According to Nasikye (2009), Mobile banking (m-banking) involves the use of a mobile phone or another mobile device to undertake financial transaction linked to a client account. According to Owen, (2008) m-banking refers to provision and availing of banking and financial service with the help of mobile telecommunication device. Services include performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone which is most used in developing countries or Personal Digital Assistant (PDA).
Financial performance refers to the financial soundness where depositors‟ funds are safe in a stable banking system. (BOU, 2002)The financial soundness of a financial institution may be strong or unsatisfactory varying from one bank to another. According to Mugembe (2008), external factors such as: deregulation, lack of information among bank customers and homogeneity of the services bank offer do cause bank failure. The activities undertaken in m-banking contribute to the financial soundness of the commercial banks in Nigeria.
Some useful measures of financial performance are coined into what is referred to as CAMELS (Capital adequacy, Asset quality, and Management, Earning, Liquidity and Sensitivity analysis) which guide the banking sector Madhyam, Stichele (2010). The technology innovations have influenced the banking sector in one way or another. Kassim 2005 explains that the technological revolution has produced new development in the banking industry.
Mobile banking has transformed the way people in the developing world transfer money and now it is poised to offer more sophisticated banking services which could make a real difference to people’s lives. This type of banking can offer a wide variety of services ranging from account information, which has to do with alerting the customers on the updates and transactions on their account through their mobile phones. People receive short messages on their phones informing them of their immediate transactions in their bank accounts. Also, they help in payments (utility bills), deposits, withdrawals, transfers, purchase airtime, request bank statements and perform 13 other crucial banking tasks, all in real time over their mobile phones.
Nasikye (2009) the m- banking technology is similar to that of MTN (mobile money) Globacom, Airtel, Etisalat among others that has made banks uncomfortable given the shift of most transactions from banks to mobile phone kiosks In the banking sector in our world today, mobile money transfer services is a fast growing phenomenon. This has come to improve the level of banking system and can be described as the provision of banking or financial services with the aid of mobile telecommunication devices.
M-banking has come to stay, providing its customers with an expedient way of banking. This is not however without challenges, but they are minimal and can be handled without much stress.
Statement of the Problem
The deregulation of telecommunication has brought innovation to banking industry in Nigeria. Mobile money transfer service, designed to help institutions streamline their operations According Omwansa (2009), telecommunication has received overwhelming uptake in Nigeria since its introduction. This success is attributed to the service being affordable and accessible to both high and low income earners (Mbogo 2010). The technological invention is considered easy to use yet efficient and reliable with the potential to extend financial services to the unbanked or those preferring cheaper financial services.
It is an appropriate technological invention for clients that continue to face challenges related to limited affordable and accessible financial services to support their business operations. Needs for payment and transactional services are not always well served by conventional banks since they do not always find it easy or cost effective to adopt a full- feature package for banking services.
However, there are some transaction gapsthat many bank customers in Nigeria are complaining. This is the liability of network from the telecommunication in going banking transactions in Nigeria. Most often, the USSD code fail while customers are doing transaction. Also, some, the banks witness service downtime which results to bank deficiency in the excellent services promised to their customers. Therefore, this research seeks to find pertinent answers to the questions that focus on the impact of telecommunication on the banking industry and the challenges that face the technological development of the banking industry.
Objective of the Study
- To establish the relationship between telecommunication and the banking industry in Nigeria.
- To discover major impact of telecommunication on banking industry in Nigeria.
- To find out the challenges banking industry face adopting telecommunication in banking transactions
i. What is the relationship between telecommunication and the banking industry in Nigeria?
ii. What is impact of telecommunication on banking industry in Nigeria?
iii. What are challenges banking industry face adopting telecommunication in banking transactions?
Ho1 There is no relationship between telecommunication and banking industry in Nigeria.
Ho2There is no significant impact of telecommunication on banking industry in Nigeria.
Significance of the Study
The study may be used to help banks policy makers in Nigeria and world at large to identify areas of co-operation with telecommunication network providers as well as to make necessary policies aimed at mitigation of negative effects of the adoption and use of mobile money services on their businesses. It will contribute to the growth in scholarly understanding and knowledge on the effect of provision of mobile money services of telecommunication on the performance of banking institutions as well as recommend areas of further research in mobile money services.
Scope of the Study
The scope of the study covers telecommunication and the banking industry in Nigeria with emphasis on two banks regarded as tier one banks in the banking industry of ranking. These banks are Zenith bank and GTB. The customers and staffs of the banks shall be used during administration of questionnaire. The geographical location is limited to Abraka since the two banks have their branches in Abraka. Also, the period for this study shall be one year; which start from January to December 2018.
Definition of Terms
Telecommunication: Telecommunication is an industry specialized in providing internet network for mobile phone, personal computer and commercial banks.
Banking Industry: This is refers to financial industry that receives deposits from customers and make investments for the stability of the country financially. Here we have regulatory body (CBN), commercial banks, developments banks, Mortgage banks, Bank of industry e.t,c
Commercial bank: This type of bank in the financial industry that stands as intermediary bank. Its function in the banking industry and to the economy of Nigeria is important.
Customers: These are the consumers of the commercial bank products. The customers of the bank make banking transaction through telecommunication and other devices.
Efficiency: This is the stage at which an organization’s performance is relatively high and accepted against set standard. It also mean doing thing right.