THE EFFECT OF ELECTRONIC CARD UTILIZATION ON BANK PERFORMANCE IN NIGERIA (A CASE STUDY OF FIRST BANK PLC)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The recent consolidation exercise in Nigerian banking sector has drawn the attention of many banks to application of various technological devices in promoting better customer service delivery that guarantee customer satisfaction, and which translates into increased profitability and higher returns on investment. Timothy (2012) buttressed that 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. This has led to more sophisticated products, such as Automated Teller Machines (ATMs), Point-of-Sale (POS) as well as internet and mobile banking offerings.

The changing environment of bank management in Nigeria has impacted much on the number of services and risk which Nigerian banks face. Electronic banking, which is the use of electronic and telecommunication networks to deliver a wide range of value added products and services to bank customers (Steven, 2002).The dynamism of the present day business environment brings with it rapid changes as a result of innovations, technological changes, increased awareness and demands from customers. Thus, business organizations, especially the banking industry of 21st century, operate in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate, with ICT at the center of this global change curve.

Nowadays, banking operations have metamorphosed from manual-based to high automated services, largely driven by ICT. Timothy (2012) posits that three or four decades ago, banking was a simple business; consumers saved their money with and received their financial services from banks. 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.  The banking industry has moved into an era of menu-driven ultra-robust specialized software programmes called banking applications. These applications can carry out virtually all banking functions relying heavily on information collection, storage, transfer and processing 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).

As a result of globalization and the quest for international competitiveness, Nigerian banks have had 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).  Electronic banking services have afforded banks the opportunities to impress customers which encourage them to keep coming back. Thus, this study investigates the effect of electronic card utilization on banks’ performance in Nigeria.

 1.2 STATEMENT OF PROBLEM 

Over the years, banks in Nigeria had engaged in the traditional cash withdrawal at the counter in the baking hall, which has created untold delay, disappointment, ineffectiveness and/or inefficiency on the part of the bankers. The early stages of banking in Nigeria encountered limitations as regards meeting the changing needs of their customer. Innovation seemed to elude the fact that customers to the banks had no easy access to their accounts statements. Time wasted in banks as people line in queue waiting for service, errors as a result of manual work and fraud related cases was common.

Today, there has been marked improvement in the service offerings of banks, owing to emerging innovations and breakthroughs in ICT. However, most of the electronic-based services such as the use of ATMs, POS as well as internet banking transactions depend on electronic cards, which are mainly debit and credit cards. With the consolidation of the banking industry, there has been increasing use of electronic cards as well as increase in the use of card-based services. But the extent to which the utilization of electronic cards has enhanced banks’ performance is still very uncertain. Whether the use of electronic card has necessitated effective and efficient delivery of service in banks or not is not yet clear.

More so, most literatures have focused on electronic banking offerings, such as ATMs, POS, etc., but little or none seem to examine the effect of card utilization on banks’ performance. It is in the light of this that a study which focuses on the examination of card utilization becomes very necessary. This study is therefore poised to explore the relationship between the utilization of electronic cards and the performance of banks in Nigeria, with a focus on First Bank of Nigeria Plc.

1.3 OBJECTIVES OF THE STUDY 

The purpose of this research was to examine impact of electronic card utilization on banks’ performance in Nigeria. However, the specific objectives of the study include:

1.) To examine the effect of number of electronic card issued on banks’ profitability.

2.) To examine the effect of electronic card transactions on banks’ profitability.

3.) To identify possible areas of weaknesses of the electronic card utilization in Nigeria.

1.4 RESEARCH QUESTIONS

For this research work, the questions raised include:

1.) To examine the effect of number of electronic card issued on banks’ profitability.

2.)  To examine the effect of electronic card transactions on banks’ profitability.

3.) To identify possible areas of weaknesses of the electronic card utilization in Nigeria.

1.5   RESEARCH HYPOTHESES

The following hypotheses were formulated in this study.

H01:       There is no significant relationship between electronic card issued and banks’ profitability.

H02:       There is no significant relationship between electronic card transactions and banks’ profitability.

1.6 SIGNIFICANCE OF THE STUDY

This work is of practical and academic significant. The practical significance is the fact that the findings will-enable banks to improve their service delivery to customers to improve banking requirements of Central Bank of Nigeria, an electronic significance is that this research will educate and sharpen the intellect of scholars.

1.7 SCOPE AND LIMITATIONS OF THE STUDY

The scope of this study is strictly on the card utilization in First Bank PLC in Nigeria. For the purpose of this Thesis, the research will be Limited to five chapters.

The unwillingness and un-cooperative attitude of bankers to discuss freely and fairly as well as respond objectively to questionnaire constituted another problem in this research. Financial constraints also posed a limit to fully gather information related to this study. There were hardly enough time to properly execute the tedious responsibility.

1.8 ORGANIZATION OF THE STUDY

Chapter one examines the research problem, purpose of the study objectives and limitation of the study and anticipated contribution.

Chapter two provides intensive review of literature on effect of electronic card utilization on banks performance in Nigeria.

Chapter three attempt to describe the research design, source of data, data analyses technique and model specification.

Chapter four deal data analyses and presentation of findings

Chapter five is about summary, conclusion and recommendation.

1.9 DEFINITION OF TERMS

Bank: A bank as any person licensed under the decree for the purpose of carrying on banking business.

Cheque: This can be defined as an unconditional order in writing, signed by the drawer, requiring the drawee bank to pay on demands a stated sum or the order.

Electronic Card: This is an electronic card entitling its holder to buy goods and services based on the holders promise to pay for those goods and services.

Performance: This is simply an evaluation of employees strengths and weaknesses.