INNOVATIONS AS COMPETITIVE TOOLS IN BANKING SERVICES

ABSTRACT

Innovations in banks have been the antidote the mess that befalls banks in Nigeria due to fraud. Many people lost confidence in banks and started reverting to the old systems of holding money in assets, which draws us back to the Stone Age. Hence with the emergence of innovations that shift attention from the bank to the customer, patronage has greatly increased, and many banks are busy evolving one system or the other to satisfy their customers across the globe.

This study has looked into such innovations. Questionnaires are distributed to bankers of the cadre of: Managers, supervisors and clerks.

Oral interview as well as direct observations helped in collating data. These formed the primary data while secondary data comprised the written views of people that are relevant to the topic under study.

After the analysis of data, it was discovered that innovations help banks in ensuring patronage and customer satisfaction. Hypotheses were analyzed using simply proportion statistic.

Amongst others, it is recommended therefore, that banks should:

i.      Embrace  further  every  data,  of  information  technology  which  would  help  in ensuring patronage.

ii.      Recruit computer literate personnel only.

iii.     Innovate  on  value  cards  to  further  ensure  constant  customer  satisfaction  and convenience.

iv.      Interbank relations should be computerized.

CHAPTER ONE

INTRODUCTION

1.0       INTRODUCTION

Comparatively recent phenomena in innovations are the banking profession in Nigeria. It is a development of the electronic banking that really has taken the attention of the country banking industry. It processes data by the strategic combination of most recent employers. It aims at increasing the pace of data, processing which has being the problem of Nigeria’s banking sector since the inception of the country. Each sector of the bank involved in on-line banking is deeply  connected  to  the  complex  computer  network  such  that  the  account  number  of  any customer appears on the computer of any branch. This is meant to facilitate depositing and withdrawing.

A customer can draw a cheque on any branch of the same bank any here in the country being connected by computer network. As he approaches the bank, his particulars anywhere appear  through  the  connection  of  computers  so  that  he  cashes  his  money to  go  about  his business. Because he can do this anytime, it is called on-line real-time banking. Due to the extensive nature of customer connection, any bank which practices on-line real-time banking has the ability to combine commercial and merchant banking as is obtainable in most part of the advanced Western World. Nigeria is still new to the system expect with the new generation banks, some of which we have chosen for a closer study of the work: Diamond Bank and Zenith Bank

DEVELOPMENT OF ON-LINE BANKING

Apart from the enhancement of internal operations, control and management, the modern information revolution has contributed in interactions with the environment in two broad ways. This is aside potential areas for future development which will be realized in no distant future. The two areas are funds transfer and telephone banking.

FUNDS TRANSFERS:

i.      Domestic Funds Transfer

ii.      International Funds Transfer iii.     Domestic Funds Transfers:

The bank could fashion out means of inter-city transfers. The mode of service makes it convenient for “cash friendly” customers like traders to move large sums from one area to another. Also with the high rate of armed robbery, it is the most convenient service for suck customer.

For companies, particularly oil companies and pharmaceutical companies, such facilities would make it convenient for them to pool funds from their various up-country locations.

Some banks have gone a bit further by introducing “fund cards” like the Credit and debit cards. These are effective marketing techniques to satisfy customer needs.

INTERNATIONAL FUNDS TRANSFER Under this service, the bank could offer:

i.      An integrated on-line real banking system which enables it to effect customer payment instructions of various parts of the world within 24 hours.

ii.      In addition to (i) the bank would offer competitive market rates of interest payable from the value dates and in line with those obtainable offshore to the currency of deposit.

iii.     Effective application of hard currency deposits towards the funding of customers’ documentary credit books, journals, equipment, raw materials, etc.

iv.      Immediate conversion and credit of naira value to customers.

TELEPHONE BANKING

Telephone banking operations going on in the industry showed that Nigeria is rising to the challenges of today’s global financial services industry by operating in an environment of extraordinary information liquidity. Goaded by the quest to decongest their banking ha11 and provide more  precise,  and  timely financial  information  to  customers  without  their physical

presence. Nigerian banks are increasingly taking to telephone banking. This is not only intended to change customers’ banking habits over time, but also their expectations.

Although it is not clear which bank pioneered it in Nigeria, tele-banking is also a function of banking software technology adopted by individual banks. The concept is spreading like bush fire.

The clamor for tele-banking is because it allows the customers access to banking services from the comfort of their bedrooms, office armchairs or with their cars in motion just by dialing a designated number of a particular bank.

Specifically the service allows the customers to check their account balances, transfer money between their own accounts in same bank and check details of transactions on their accounts. It also enables them to order for new cheque books, confirm or stop cheques and change their pass codes.

Aside the intention of saving customers’ time and effort of visiting a branch, telephone banking is also brightening customer expectations, greater efficiency and instant response to their needs. This is in addition to their electronic communication network and computing power which is growing with rapidly declining costs, showing more sophisticated changes in banking technology.

All that a customer needs to enlist for any of the services and get a fire tele-banking card is to fill out a form indicating his name and account number after which he/she would be issued with a pin number and account activated within 24 hours.

At Diamond Bank, the brand name is Diamond Dial Account (DIAI,). Customer relations manager, Mrs. Angela Olisah-Okonmah traced the dial account to the bank’s concept of the shortest service turnaround times which was why when Diamond Bank started. It made no provisions for seats for customers. But over the years, the bank’s customer base has widened with the result that more customers are increasingly seen in the banking halls. She said that studies showed that many of the customers came to the banking hall to queue just to obtain their account balances before they can issue cheques. She said that it was to reduce the frequency of customers to  banking  hall  and  reduce  dissatisfaction  inherent  in  such  frequent  visits  that  the  bank

introduced the Dial Account so that those who want new cheque books and balances of their account so that those who want new cheque books and balances of their account could use the tele-banking  service.  Specifically,  she  argued  that  Dial  Account  is  intended  to  offer  the customers security, low transaction, personal safety, confidentiality, control, convenience, speed and courteous service. The Dial Account which is also used for transfer between accounts, stop cheque payment order, and utility payment, reduces and most times, eliminates customers spending equal time at branches.

Similarly,  at  Equatorial  Trust  bank,  telephone  ban  king  dates  back  to  the  bank’s installation of a Compaq Proliant 7000, a faster and higher capacity server and the upgrade in application software fro111 Globus 7.2 to 9.2 and switch from At & T, Unix to UnixWare 7.1 operating system which reduced its end of day processing and improved in service turnaround time.

The bank followed this upgrade by enhancing its voice and data connectivity system at the cost of N100 million. This helped to establish the bank’s remote electronic banking system which allows customers to conduct their banking transactions from the comfort of their homes and offices 24 hours a day, seven days a week with the aid of a computer or a telephone. The bank’s acquisition of Aperts REB., a leading product in remote electronic banking software also helped it. Xpert Red consists of two parts- Xpert red PC bank and Xpert red tele-bank for PC and telephone access respectively. With the tele-bank, customers from any part of the world log on to their accounts and download information- account, cheque details among others.

Apart  from  that,  through  tele-banking,  customers  are  able  to  access  their  accounts through telephone and obtain the needed information either by voice or their fax machines anywhere anytime.

ETB markets its tele-banking with the brand name of ETB WorldNet. Tele-banking is essentially about reducing costs through efficiency, through the ability to attend to customers who phone in instructions. Every naira saved by use of telephone rather than going to the banking hall means an extra naira for the customer.

HURDLES TO ELECTRONIC BANKING

The constraints inhibiting Nigerian banks from translating the seamless opportunities of the information technology (IT) revolution into competitive advantage in the emerging global electronic banking (e-banking) order have been identified to include:

i.      Lack of investment capital;

ii.      Lack of knowledge of how to develop system internally;

iii.     Lack of internal maintenance skills or culture;

iv.      Lack of IT management knowledge;

v.      The absence of I?’ strategies;

vi.      Systems downtimes; and vii.     The gimmick of vendors.

Other militating factors are absence of basic infrastructure and facilities for information exchange, unhelpful government action, reluctance among banks to collaborate and absence of maintenance culture in Nigerian public networks.

On the inability of the banks to develop IT systems internally and their maintenance culture short-comings, it was noted that “in all the banks, most of the systems in use were developed externally or are off-the-shelf banking applications. “There is a need to turn the IT departments of banks into proper computer departments by embarking upon the development of some of their system in-house and training their IT personnel. There is too much reliance on external consultants for the maintenance of the systems in Nigerian banks. In a situation where most of these banks are already suffering from lack of funds, this is unfortunate. They would save on expenditure and enhance local expertise if they embrace the do-it-yourself practice”, Wolherem said.

According  to  him,  lack  of  maintenance  of  the  public  networks  has  often  led  to breakdowns in most of the equipment required for information exchange-even as he identified some government policies and decrees to be “counter-productive to the development of certain key private telecommunications projects”.

As a strategic option of moving the banking industry forward and over the inhibitive factors in areas of communication problems and challenges, he canvassed a face point agenda which must urgently implemented by the government and the stakeholders in the industry. These include that:

i.      Government should be sanitized about the need to formulate policies that allow for long-term investments in the telecommunications industry; and

ii.    Emphasis should be placed on the importance of maintaining existing infrastructure and equipment.

iii.     Other recommendations canvassed by the expert are, a reduction in import duties, tax and the time it takes IT equipment to be cleared at the customs and the need to increase awareness among the banks and the public on the advantages of IT and communications.

1.1       BACKGROUND OF THE STUDY

Banking profession started in Nigeria as far back as 1892 with the business acumen of Elder Dempter who was a harbinger to it. His work and connection crystallized to the formation of international Bank for British West Africa, the present day first bank of Nigeria. This bank monopolized banking services in the country until 1917 when the present Union Bank was established. Many literate Nigerian started itching for a truly African Bank capitalized from African inputs. ‘Thus in 1925 LadipoSholanke said: “with words profound and heartfelt to the yeaning of my fellow country for their own bank, I make haste to submit that it was timely to think of having a truly Nigerian Bank with full participation of Nigerians which only serves as the only avenue to buttress the fact that the future of Nigeria to gain political and economic freedom is in the hands of Nigerians themselves”.

As if he was prophesying, the first true indigenous bank-National Bank of Nigeria – NBN was established in 1932. From then, precisely between 1932 and 1947, horde of indigenous banks flooded into theeconomic of Nigeria. Speaking at the inauguration of National Bank

ofNigeria, Ernest Ikoh (1932), observed that nobody was expecting the bank to tally with first bank and Union Bank having stayed in the business for many decades before then, but noted that with time, at least two decades from then, it was being expected that they would catch up in technicality and board banking expertise with the colonial banks. According to Hezekiah Daries (1939),  Nigerians  would  greatly  gain  by the  emergence  of  indigenous  banks  as  they were directed to the exclusive development of the national economy, especially, the banking sector.

Be that as it may, the proliferation of indigenous banks never developed the economy as fast as it was made to be believed. Commenting on that, NnamdiAzikiwe (1948), reminded Nigerian of the need for well articulated banking sector to be able to wage the financial war as envisaged by Nigerians. He noted that insecurity, low capital base, inferiority complex as well as unsupportive government policies were some of the sea of bedeviling problems facing local bankers. Recalling that National Bank of Nigeria had not yet found its foot after nearly two decades of operation, he stated that the Britons were technically squeezing the local banks by obnoxious banking policies that stifled the vibrant activities of the local banks.

Talking further, he said that African continental Bank – ACB was meant to compliment the efforts of National Bank as very many of other indigenous banks had fallen. He observed that it was the duty of the government to monetize the economy, but since the colonial masters were not in any way committed to doing that, it was evident that the concerned nationals would augment the lapses, hence the emergence of ACB, he concluded.

Hence over, the years the quest for balking has been on the increase, but what has remained unsolved has been the policies which have not been friendly. To make matters worse, the crisis in banks has meant that most people have been disenchanted on the duties of banks, especially, those bordering on protection of deposits.

Speaking on the failure of banks, Craig U.J. (1993: 56) observed that it was the rate of bank fraud attributable to many that made the banks to collapse. Pointing out the factors, he said that illogical loan administration amongst others were source of banks’ liquidation. He pointed out that ACB and Cooperative and Commence Bank – CCB were giving out loans without due recourse to the ability of the borrower and his business stance, coupled with nepotism. In fact, he identified the later to be the outstanding reason for the banks’ failure,

To MuohaOtanka, (1995: 18) banks failed because of incapable loan administrators including the fact that the borrowers were particularly connected to the top echelon of the management of most banks, a reason he said, overruled all others in the bank’s loan policy. He noted that the development did not augured well with the country’s banking sector noting that no success was recorded in the whole era of’ first indigenous banking owing to the same reason.

To Jenny J. (1982:12) most banks are going computerized in the country, and unless the era of computerized banking was embraced by our bankers, they would be out of service. She noted that a time was approaching for on-time-real banking to take the place of traditional banking adding that customers were getting tired on long queues that had been the portion of banks in Nigeria since the colonial times.

These new generation banks according to Paul Ogwuma (1996), are meant to lead other banks in the macro-economic management of the country.

According to him, it was bad to think that the colonial banks had an edge over the full computerized banks of the new generation cadre, maintaining that it was the same reason that led to Nigerians licensing the new generation banks to curb the excesses of the colonial banks. He noted that there were complaints here and there that the functions of those old banks were too boring, but added that it was so for any bank that was still in the old system. He identified computerization as the key to solving the problem, hence the new generation banks.

He said that on-line-real-banking now a customer oriented programme meant to shift emphasis on the banks to customers. It would energize banks to operate twenty-four hours, soliciting for customers round the globe who are really willing to invest in the country and its crannies.

1.2       THE STATEMENT OF’ THE PROBLEM

Innovations in banking are very ideal and relevant in any society in the modern banking. It is a situation that lays emphasis on the consumer of the banking service, thereby shifting emphasis from the bank to the customer. It enables the customer have full control on the services

rendered by the banks, using computers for every operation, thereby encouraging versatile trade both locally and internationally.

Ironically, much as the benefits of consumer-oriented services cannot be gainsaid in any society hungry for development, its impacts have not been quite experienced in Nigeria. This study shall unmask such bottlenecks to the ideal banking in Nigeria: traditional banking culture, government and Central Banks of Nigeria (CBN) policies on banking, environmental influences on banking on banking, substandard infrastructural facilities for its full implementation, bank fraud and un-employment.

1.3       THE OBJECTIVES OF STUDY

The objectives of the study are:

1.3.1    To know the impact of on-line-real-time banking on bank customers.

1.3.2    To evaluate how on-line-real-time banking helps to solve the problems of the traditional banking system that is perceived as not being customer-oriented.

1.3.3    To study how innovations in banking brings efficient communication network to consumers of the banking services.

1.3.4    To examine the way innovations banking alleviate the problem of the consumers of banking services by checking bank fraud.

1.3.5    To  evaluate  how  innovations  in  banking  help  the  customers  engaged  in international businesses.

1.3.6    To critically look into how innovations in ban king help to solve the societal unemployment problem.

1.4       THE RESEARCH QUESTIONS

1.4.1    How does on-line-real-time banking affect bank customers?

1.4.2    To  what  extent  does  on-line-real-time  banking  solve  the  problems  of  the traditional banking system of non-customers oriented?

1.4.3    What impact has innovations in banking system helped efficient communication network on consumers of banking services

1.4.4    How do innovations in banking encourage customers by checking bank fraud?

1.4.5    In what ways do innovations in banking help customers engaged in international businesses?

1.4.6    What   contributions   do   innovations   in   banking   make   towards   solving unemployment in Nigeria?

1.5        RESEARCH HYPOTHESES (NULL)

1.5.1	Ho1:	Innovations in banking have no impact on customers’ satisfaction
1.5.2	Ho2:	by banks.     Innovations in banking have not increased patronage in Nigeria.
1.5.3	H03:	Innovation in banking system does not check bank fraud.

1.6       THE SIGNIFICANCE 0F THE STUDY

A work of this kind needs proper articulation since the world is going nuclear in information technology. Banking is one area that heavily holds the economy of any country. Nigeria, a developing country needs the comfort of the banking profession to articulate effective macroeconomic policies that will yield positive results. To be well guard, one will find out that it is the country that suffers at long last of the country’s banking sector collapse must have been

said in our economy concerning the nature of banking, however it is pertinent to observe that the economy is picking after a protracted duel on the bank saga. Speaking on the failed banks, Elendu C. (1 994: 105), observed that one needed to be well assured that the banks were in good condition before depositing his money. Regrettably, lie said, no banks have been healthy enough to attract foreign investors. He analyzed that the input of foreign banks into the country is a clear sign that the economy was picking up contrary to the views of people. It was this that made the CBN dish out laws governing the minimum balance of banks wishing registration.

On area that on-line-real banking was going to hold on this in the area of clearing the air of  uncertainty  existing  amongst  customers  due  to  the  issue  of  over-blown  insistence  on traditional method of banking. An approach to our banks would reveal the extent we have been backward in our banking profession. Customers line up in their many tens of hundreds for work that should be done by a computer to lessen it. The traditional idea thoroughly checking the accounts to eliminate frauds is riot there since the frauds still exist with the insistence on the old traditional  methods.  Suffice it  to  say that  on-line-real-time banking is  the only antidote to eliminate the laxity existing between the bank services and the customers. Most consumers of the banking services are disenchanted due to the catalogue of assignments given them by the banks in trying to be through in their back activities. Much of the work would have been done by the computer. This is the area on-line-real-time comes into play.

It is not really computer-oriented system of banking purse, but a situation whereby the banks saw the need to see emphasize much boring manual checking and cross-checking of customers accounts. More than that, it involves using one account to really do businesses in all other areas of the country.

To this effect, businessmen would find this system of banking very useful. Many people will discover that on-line-real-time banking is all that is needed to spur people to action to really undertake their businesses in our area no matter how remote without having to border on the issue of carrying cash. It assures the businessman that no multiple accounts are necessary to help him out anywhere he may need help in the course of his business. He may be in anywhere, having only one account and doing his business in any part of the country so far as there is a branch of the bank there. No customer of the bank opens an account twice. It works like a magic, but it is real. Most businessmen, especially, the international type would discover that on-line-

real-time banking was the only avenue to make their international businesses worth engaging. At the international level such facilities like the E-mail international money order and telex are easily facilitated and in most cases short circuited by the presence of on-line-real-time banking.

The mere fact that it shifts attention from the bank to the customer goes a long way to stress its importance in our time where much international trade is being done. The guideline as enunciated  by  the  dictates  of  on-line-real-time  banking  issue  that  a  modern  banker  would discover that it has no substitute in discovering seal time-tested customers that would boast the image of the bank internationally. Really on-line-real-time banking is one area that one will be interested to read and discover that it is the in-thing anywhere in the world. The activities of most firms everywhere in the world were going computerized and the banks are in such positions to attract people. So, on-line-real-time banking will quite benefit the bankers themselves. The customers will discover that no room is left for laziness by the traditional bankers to delay their time. This will encourage the colonial bankers to change and embrace new ideas that will change them for good. This is the teaching of on-line-real-time banking.

The international business community will discover that what is necessary to inculcate the idea to the banking practices of the third world. Big time firms which are multilateral will discover the practices of on-line-real-time banking very important. Besides, most foreign customers would discover that the only opportunity to be prompt in the dealings is to embrace wholly the idea of on-line-real-time banking.

Government of developing countries by evolving policies of banking will discover that on-line-real-time banking is one area that calls for serious attention if the economy is to be revitalized. Life in Nigeria where the consumers of banking services are already fed up with the level of delay in the attention given to them, on-line-real-time banking has to be embraced in other to fully articulate the services offered by banks in the right proportion.

Central Bank of Nigeria in fashioning out acceptable banking policies, will find on-line- real banking very interesting in making the banks obedient. It is one area that makes the banks scant for customers everywhere instead of the other way round. Central Bank of Nigeria in particular wants to curb excesses in banks and map excess cash in the economy, and bring the economy to  a sound  footing.  The principle of  on-line-real-time is  such  an  area that  needs

thorough harnessing considering the enormous presence it is enjoying from the populace. Here, the need to change is vital. On-line-real-time banking makes it possible for the monetary authorities to formulate easily liable policies that reflect the yearnings of the customers.

The idea of shifting attention to the customer is a landmark that most governments should herald in the guidelines for banks.

1.7        DEFINITION OF TERMS

ACCOUNT

An account is a record of all financial transactions that are related to an asset, individual, transaction or any organization. It is a major term in the field of accountancy and is conventionally denoted by the A/c. It can also be defined as a transaction between a buyer and a seller about payments and dues which develop creditor-debtor relations.

ACCOUNT AGGREGATION

An online facility that is made available by some banks or financial organizations, in which all the transactions related to the bank account, credit facilities, debts and investments can be handled and operated with the help of a single interface or account. Account aggregation is a form of Internet banking, provided for ease of transaction.

ACCOUNT BALANCE

The total amount of money in a particular bank account, along with the debit and credit amounts, the net amount is also termed as the account balance.

ACCOUNT RECONCILIATION

Account reconciliation is a process with the help of which the account balance can be easily

verified. Account reconciliation is usually done at the end of a week, month, financial year or at the end of any financial period. It is usually done with the help of receipts, ATM notes, bank statements etc.

AUTOMATED CLEARING HOUSE (ACH)

An automatic clearing house is a nationwide electronic clearing housethat monitors and administers the process of check and fund clearance between banks. The ACH is an electronic system and thus minimizes the human work in the process of clearance. It distributes credit and debit balances automatically.

AUTOMATED TELLER MACHINES

Automated   teller  machines   are  basically  used   to   conduct   transactions   with   the  bank, electronically. The automated teller machine is an excellent example of integration of computers and electronics into the field of banking.

AUTOMATIC STAY

The automatic stay is an injunction that automatically becomes effective, after any person or organization files for bankruptcy. The automatic stay basically precludes the creditors from taking the debtor or the property of the debtor.

E-Cash

e-cash  is  a  technology  where  the  banking  organizations  resort  to  the  use  of  electronics, computers and other networks to execute transactions and transfer funds.

ELECTRONIC FILING

Electronic filing is the method of filing of tax returns and tax forms on the Internet.

INTEREST

Interest is a charge that is paid by any borrower or debtor for the use of money, which is calculated on the basis of the rate of interest, time period of the debt and the principal amount that was borrowed. Interest is, sometimes, also titled as the ‘cost of credit.

INTERNET BANKING

Internet  banking is  a system  wherein  customers  can  conduct  their transactions  through  the

Internet. This kind of banking is also known as e-banking or online banking. To know more about the topic you can refer to Internet Banking.

ONLINE BANKING

The accessing of bank  information, accounts and transactions with the help of a computer through the financial institution’s website on the Internet is called online banking. It is also called Internet banking or e-banking

OFFLINE DEBIT CARD

This refers to a card which is issued by a bank and has a VISA or MasterCard logo on it. It can be issued, either instead of or along with an ATM card.

OPEN END CREDIT

Open end credit means a line of credit that can be used a number of times, up to a certain limit. Another name for this type of credit is charge account or revolving credit.

PERSONAL IDENTIFICATION NUMBER (PIN)

Personal identification  number or PIN  is a secret  code of numbers  and alphabets  given  to customers to perform transactions through an automatic teller machine or an ATM.

POINT OF SALE (POS)

Point of sale is a terminal where cash registers are replaced by computerized systems.

SMART CARDS

Unlike debit and credit cards (with magnetic stripes), smart cards possess a computer chip, which is used for data storage, processing and identification.

ZERO BALANCE ACCOUNT

A bank account which does not require any minimum balance is termed as a zero balance account.

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