Effect of Information Technology on the Operations

Abstract

The advent of Information Technology (IT) is rapidly changing the banking industry. In this study, the impact of IT on the banking industry in Nigeria is described.

A questionnaire was employed to collect data from customers at five major banks in Nigeria on the extent to which customers believe that IT exerts an impact on banking services. The results of the study clearly indicate that IT has contributed immensely to the growth of the banking industry in Nigeria.

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Introduction

A powerful force drives the world towards a converging commonality, and that force is technology (Levitt, 1992). From the beginning of the human era, technology has been one of the most essential and most important factors for the development of mankind (Coombs et al. , 1987).

During the last two hundred years, technological changes have often been related to economic growth in the form of new types of goods and services. Smith (1776) first wrote about technical changes in the form of new machines as one of the three important causes of increasing incomes more than 200 years ago. Information Technology (IT) can be defined as the modern handling of information by electronic means, which involves its access, storage, processing, transportation or transfer and delivery (Ige 1995). Research shows that IT affects financial institutions by easing enquiry, saving time, and improving service delivery (Alu, 2002).

IT also provides solutions to the needs of modern societies in health care delivery, library services, education, and communication networks within organizations, etc. Some available telecommunication and information technologies which are presently being used in the banking industry in Nigeria are telephone, facsimile, wireless radiophone, very small aperture terminal satellite (VSAT), telegraphy, and computer systems (Ugwu, 1999). According to Alu (2002), some banks in Nigeria have LANs (Local Area Network) in most of their branches but none of the banks have deployed home banking applications. .

Banking in Nigeria

As a result of the increased demand for customer deposits, Nigerian banks, especially the new generation banks, have realized the imperative of good and prompt customer service. Also, due to the fact that some customers lost their deposits in the erstwhile technically-insolvent or distressed banks, customers have now become wiser, more discerning, alert and sophisticated with regards to The Electronic Journal on Information Systems in Developing Countries, http://www. ejisdc. org EJISDC (2002) 10, 2, 1-8 2 hoosing where it is safe to put their money, and where they would be served promptly, preferably in a pleasant, courteous and friendly environment. Thus, they have started looking at the level of service and professionalism of the banks before depositing their funds. Proximity to the bank is no longer the issue: safety and the level of service, with regard to quality, speed and efficiency has become the major imperative. On the part of the banks, they have realized that one way in which they can provide quality service is through the use of technology.

Hence, there is a growing rate of adopting new technologies in Nigerian banking operations. Moreover, there is growing evidence that customers have started associating quality of service in a bank with the bank’s possession of an online, real-time system. In fact, possession of such a system is now judged to be the sine qua non of a high quality banking service in Nigeria. So, for a bank to be perceived as providing high quality service, that bank has to have an IT system, which it uses to deliver services to customers in a more timely, friendly and considerate manner, at no extra cost to the customers.

Despite the fact that many of the new generation banks base their marketing strategy on the possession of supposedly on line, real-time systems, they find that their systems’ links are down for about 50 percent of the time. Many customers feel cheated by this reality and complain about the incessant ‘downtimes’. They were promised an online, real-time system, only to find out that the banks’ systems are down at least half the time, and that the national carrier, NITEL (Nigeria Telecommunication), is to blame.

Whilst the responsibility of NITEL cannot be denied, many customers still feel that it is the responsibility of the affected banks to take care of these problems, and that they should be given the nationwide, online, real-time banking service they were promised. Faced with this dilemma, many banks in the country are resorting to alternative personal solutions by using the Very Small Aperture Terminal (VSAT) satellite systems, for long distance electronic communication. For short distances, the MDS (Metropolitan Digital Services) system is often used.

The problem here is that all the banks are trying to procure appropriate VSATs independent of one another. In other words, there is no collaboration between the banks in sourcing this very expensive technology and thereby providing a cost-effective solution to the problem. It would also be fair to say that Nigerian banks are generally imbued with an overly competitive mind -set, which tends to foreclose the benefits of synergy or collaboration in solving most of their common problems.

Research Methodology

In order to assess the perceptions of banking customers in Nigeria with respect to the quality of banking services, a questionnaire survey was conducted. A ‘grab sampling’ technique was used to select the customers from the banks. Five commercial banks in Nigeria - Wema Bank Plc, Union Bank of Nigeria Plc, Omega Bank Plc, Cooperative Bank Plc, and Access Bank Plc. – were selected for this sampling on the basis that they have branches in almost all the states in Nigeria and they make use of computers in almost all their branches.

The researchers visited the banks during working hours and the questionnaires were given to the customers as they visited the banks. A total of 500 questionnaires were distributed in this way. 260 questionnaires were returned to the researchers, a response rate of 52%. The survey instrument can be found in the Appendix. In addition, the researchers conducted personal interviews with five bank managers and fifteen IT staff in order to gain an appreciation of what types of IT systems and electronic application services The Electronic Journal on Information Systems in Developing Countries, http://www. jisdc. org EJISDC (2002) 10, 2, 1-8 3 were available in the selected banks. The responses were measured with a fivepoint Likert-type rating scale, where Strongly Agree (SA) = 4; Agree (A) = 3; Strongly Disagree (SD) = 2; Disagree (D) = 1; and Neutral (N) = 0, while the scores f r o negative items were reversed.

Results and Discussion

Table 1 shows the IT systems that are being used in the selected banks. Telephone, Facsimile, Local Area Network, computer system, MICR (Magnetic Ink Character Recognition), were used in all the banks.

Also Wema, Omega and Access banks used Very Small Aperture Terminal (VSAT), Electronic Funds Transfer (EFT), and wireless radiophone. The researchers were able to identify IT devices available in the selected banks from personal interview conducted with the 5 branch managers and 15 IT staff in the banks.

Effect of IT on Banking Services

The effect of IT on an enquiry on a customer’s state of account, and services enjoyed by the customers from the banks as perceived by the banks’ customers, are shown in Table 2. Out of the 260 respondents, 86. 2% agreed that IT was really helping the bank they patronized, while 90. 8% agreed that IT made the enquiry about the state of their accounts faster. Also, 83. 1% agreed that IT had a great positive impact on the services rendered by the banks.

The means of 3. 12, 3. 29 and 3. 07 respectively for the selected banks' respondents confirmed that IT has a positive effect on the enquiry of customers’ state of account and services enjoyed by the customers from the selected banks. Generally, the effects of IT on the enquiry of the customer’s state of account and services enjoyed by the customers from the banks have an appreciable influence on any bank. The use of a LAN and computer systems have ensured quick and improved services delivery to customers by the banks.

But it may be important to state that the use and application of these electronic devices are hampered by the inadequacy of infrastructural facilities like power supply.

Effects of IT on Customer Services

These affect the growth of the banking industry in Nigeria positively because customers can now collect money from any branches of their bank. Also customers do not need to move about with large sums of money, and customers are being attended to within a short period of time. The study also revealed that telephones, computer systems, LANs, and Facsimile services are available in nearly all the banks making using of IT in Nigeria while WANs (Wide Area Network), Electronic File Transfer, and wireless phones are available in some of the banks. This finding confirms Alu’s (2002) claims on the IT devices available in Nigerian banks.

Conclusion

Research has shown also that IT is really helping these banks, so other banks in Nigeria that are not making use of the IT are encouraged to do so. From the study, the major hindrance to the use of IT in the banking industry in Nigeria is inadequate electric power supply. Electricity supply is not regular because of the limitation of the machine that is supplying electricity to Nigeria. Furthermore, the Nigerian government is finding it difficult to equip the NEPA (National Electric Power Authority) while the demand for electricity is increasing daily.

Therefore, the situation will continue to worsen until the Nigerian government funds NEPA appropriately. So, for this nation to be effective in the use of IT in the banking industry and to make the banking industry grow in an appropriate way, there is a need for the Nigerian government to find a solution to the epileptic supply of electricity throughout the country, since NEPA is owned by Nigerian government and there is no private company in Nigeria that provides electricity. The Electronic Journal on Information Systems in Developing Countries,

References

1. Alu, A. O. (2000) Effects of Information Technology on Customer Services in the Banking Industry in Nigeria, M.
2. B. A. Thesis in Management and Accounting, Obafemi Awolowo University, Nigeria. Coombs, R. , Saviotti, P. and Walsh, V. (1987) Economics and Technological Change, Macmillan: London.
3. Ige, O. (1995) Information Technology in a De-regulated Telecommunications Environment, Keynote address, INFOTECH 95. First International Conference on Information Technology Management, Lagos, November 16-17.
4. Levitt, T. (1992) The Globalization of Markets, in: Transnational Management: Text, Cases and Readings in Cross-Border Management.
5. Richard D. Irwin. Smith, Adam (1776): The Wealth of Nations Ugwu, L. O. (1999): Assessment of Impacts of Information Technology on Selected Service Industries in South Western Nigeria, MSc. Thesis in technology Management, Obafemi Awolowo University, Nigeria.

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