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The use of computer networking in nigerian banking sectors

Abstract Times have changed, and so it is with every facet of life including banking. There are now electronic markets e-marketselectronic governments e-governmentselectronic library e-libraryelectronic Banking e-bankingetc.

Modern banks now realise that only those that overhaul their payment service delivery and operations are likely to survive and prosper in the 21st century. This is due to the pressure of globalisation, consolidation, privatisation, deregulation and rapidly changing technology. In order to properly place themselves in favourable positions for competition and be reckoned with in the new millennium, banks are making use of the internet to execute banking services.

Many banks have installed modern computer interconnectivity as the backbone that would enable them achieve communication of data and multimedia over internets and extranets.

The adoption of ICT in banking has a lot of advantages but not without challenges. This article discusses the application of ICT in the banking industry in Nigeria, examines the challenges faced in the process draws a number of conclusions, and suggests possible ways to stem the tide. Introduction The wonders of modern computer technology have enabled banks to lower costs of banking transactions through having the customer interact with electronic machines rather than human beings.

Business organisations, especially the banking industry of the 21st century, operate in a complex and competitive environment characterised by changing factors and highly unpredictable climate. ICT is at the centre of this global curve as an absorber and provider of cooling effect. Banking cannot ignore information system because it plays a critical role in their competitive edge both locally and globally.

  1. Design that will make the interaction between the computers in the network arrangement smooth should be properly worked out. At no time and under no pressure or persuasion should bank customers release or expose their ATM cards, PINs, account numbers or any other bank documents to anybody, group of persons or even co-customers, no matter how close the relationship might be.
  2. Technovation, Elsevier Science Ltd. Figure 3 and Figure Telephone banking is a form of remote or virtual banking, 4 show Skye Bank PLC and LIoyds TSB Internet banking which is essentially the delivery of branch financial services web page where Customers can type in user name and via telecommunication devices where the bank customers password to access Internet Banking respectively.
  3. A long time ago, people charged with the duty of collection and disbursements of tax were encountering problems in calculations. The banks may need to adopt the use of ATM to reduce the number of customers that come into the banking hall for services.

The development of inexpensive computers and the spread of the internet now make it cheaper to pay electronically. This does not only save the cost of the stamp, but paying bills becomes almost a pleasure, requiring little effort.

Further development in electronic payment systems provided by banks even spare you the step of logging on to pay bills. Instead, recurring bills such as electricity bills, water bills, etc. Thus, electronic payment is becoming far more common these days. This is because it directly affects the management decisions, plans, and products and services to be offered by banks.

The internet and, indeed, the e-banking have continued to change the way banks and their corporate relationships are organised worldwide and the variety of innovations in service delivery. He advises that bank should re-examine their services and delivery systems in order to properly position themselves within the framework of ICT.

ICT has provided self-service facilities called automated customer service machine from where prospective customers can complete their account opening directly online. It assists customers to validate their account numbers and receive their cheque books, credit and debit cards. In order to effectively compete in the 21st century, the Nigerian banking industry has adopted the services of e-banking in its operations and service delivery systems.

There are a lot of benefits accruing from e-banking even though challenges also exist. The main thrust of this article is to critically examine these challenges and proffer ways of overcoming them. He thus defines depository institutions as: Financial intermediaries that accept deposits from individuals and institutions and make loans.

These financial intermediaries raise funds primarily by issuing checkable deposits deposits on which cheques can be writtensavings deposits deposits that are payable on demand but do not allow their owners to write chequestime deposits deposits with fixed terms to maturity. The business of receiving deposits on current accounts, savings deposits, or other similar accounts, paying or collecting cheques drawn by or paid in by customers; provision of financial services or such other business as the governor may by order publish in the Gazette.

The Chambers Concise Dictionary defines bank as: It performs functions which are essentially to borrow and lend money. The borrowing takes the form of deposits from current, savings and fixed deposit accounts; they provide money to those who are in need by granting them overdrafts or fixed loans by discounting bills, exchange or promissory notes. By providing these functions effectively, Shekhar and Shekhar 1998, p.

Commercial bank renders very valuable services to the community by increasing the productive capacity of the country and thereby accelerating the pace of economic development. What is Electronic Banking? A means whereby banking business is transacted using automated processes and electronic devices such as personal computers, telephones, internet, card payments and electronic channels. It further states that some banks practise electronic banking for informational purpose, some for simple transactions such as checking account balance as well as transmission of information, while others facilitate funds transfer and other financial transactions.

Many systems involve a combination of these capabilities. With the drop in the cost of telecommunications, banks have developed another financial innovation, the home banking. The advantage for customers is the convenience of home banking, while banks find that the cost of transactions is substantially less than having the customer come to the bank. The e-banking thus, takes banking one step further, enabling the customer to have a full set of banking services at home 24 hours a day.

Products and Services offered by Electronic Banking The development of ICT has enabled banks to develop a number of products and services which the Nigerian banks have adopted and offer to their customers. Electronic payments technology can substitute not only for cheques, but also for cash in the form of electronic money e-money.

E-money is money that exists only in electronic form. The form of e-money, according to Mishkin, is debit cards. Thus, at supermarkets, for example, one can swipe his debit card through the card reader at the check station, press a button, and the amount of your purchase is deducted from your bank account.

E-money is used on the internet to purchase goods and services. A customer gets an e-money the use of computer networking in nigerian banking sectors setting up an account with a bank that has links to the internet and then have the e-cash transferred to his personal computer PC. The merchant can then have the funds transferred from my bank account to his before the goods are shipped to me.

Credit cards have been around well before World War II. Mishkin 2009 states that many individual stores have institutionalised charge accounts by providing customers with credit cards that allow them to make purchases at these stores without cash. ND It is a payment card issued to users as a system of payment. Debit cards often look just like credit cards and can be used to make purchases in an identical fashion.

According to Mishkin 2009: One important form of an e-banking facility that is most widely used in Nigeria is the ATM; an electronic machine that allows customers to get cash, make deposit, transfer funds from one account to another, check balances, recharge phones, and pay bills.

The ATM has the advantage that it does not have to be paid overtime and never sleeps, thus being available for use 24 hours for the seven days of the week. ATMs are put at locations other than a bank or its branches, further increasing customer convenience. It is also easy to get local currency from an ATM when a customer is travelling abroad. It is an electronic banking facility. Home or mobile banking refers to the provision and availability of banking and financial services with the help of mobile telecommunication devices.

The scope of offered services the use of computer networking in nigerian banking sectors include facilities to conduct bank and stock market transactions, to administer account and to access customised information.

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Now bank customers can conduct many of their bank transactions without ever leaving the comfort of their homes. The advantage for the customer is the convenience of home banking, while the banks find that the cost of transactions is substantially less than having them come to the bank. With the decline in the price of personal computers and their increasing presence in the homes, we have seen a further innovation in the home banking area, the appearance of a new banking institution, the Virtual Bank.

Virtual bank offers an array of banking services on the internet — accepting chequeing account and savings deposits, selling certificate of deposits, issuing ATM cards, providing bill-paying facilities and so on.

The virtual bank thus, takes home banking one step further, enabling the customer to have a full set of banking services at home 24 hours a day.

Given the discussion under 3. Challenges of Electronic Banking in Nigeria The litany of benefits of e-banking notwithstanding, the technology is fraught with a plethora of problems and challenges. E-banking indeed has several disturbing challenges which we considered here below: The growth of electronic commerce has increased the concern about the use of electronic medium to launder money.


These activities pose a great deal of fear in e-banking. The high exposure of the system to fraudsters, hackers and other criminally minded persons who could access, retrieve and utilise confidential information from the system if security measures are weak is another serious challenge to the banking industry in Nigeria.

As Akwaja 2007 aptly observes, Since the introduction of electronic payment e-payment system into the banking industry and its widespread acceptance by customers, the question of how secure the Nigerian e-payment system is from the activities of fraudsters and hackers has remained in the front burner.

Besides, frauds and forgeries are increasing in the banking system, especially since the advent of electronic cards for settlement of transactions.

It is feared that the next threat to the Nigerian banking industry will arise from internet based crimes. The cost of IT acquisition, information, security, cost of software development and maintenance, manageability of multiple application complexity and vulnerability to attack are very serious challenges to the banking industry.

This can happen because as much as 60 per cent of corporate data resides unprotected on desktop PCs and laptops. There is the risk of IT taking precedent over core business of banking. Another challenge in e-banking has to do with SMS. In this regard, Eromosele 2008: SMS use is not without its challenges. Limited text entry however turns out to be the greatest challenge in using SMS. So, any person who would want to keep any SMS the use of computer networking in nigerian banking sectors for posterity will need additional software to do it.

The use of SMS for transaction alert where network services are unsteady leaves much to be desired. And he further points out, the bank may want to alert a customer of a transaction at the time there is no service on the GSM phone. With the kind of fluctuating network services, the intention of customer alert services is not fully realised. The use of ATM is inherent with so many challenges. It must be noted that the continued absence of service network at the internet or ATM is very frustrating.

The administrative delays involved in sorting out this anomaly are very frustrating and inconveniencing. There are also complaints that sometimes ATM gives wrong balances.

Worse still, it is disheartening to observe that some banks and bank branches do not have ATM the use of computer networking in nigerian banking sectors, or have those that are not functional. Again, the expected elimination of long queues at banks is not realised as long queues, sometimes crowds are found waiting to access ATM.

In addition to these problems, it is also observed that some ATM terminals are open and expose the users to the danger of criminals and evil spectators. This exposes them to danger of armed robbery attacks. This also no doubt leaves much to be desired. There is increased worry by customers about the security of their online transactions and whether their transactions will truly be kept private.

Traditional banks are noted as being more secure and trustworthy in terms of releasing private information. E-banking has run into technical problems such as server crashes, slow connections over phone lines, mistakes in conducting transactions. These erode the trust and confidence of the customer in the e-banking system.