ABSTRACT
This study is
aimed at ascertaining the impact of internet banking services expenditure on
the profitability of commercial banks in Nigeria; with the focus on Zenith Bank
Plc. Internet technology holds the potential to fundamentally change banks and
the banking industry. Its objective is to examine the relationship between
mobile banking service expenditure and the profitability of Zenith bank plc.It
helps to know whether or not there is a significant relationship between mobile
banking service expenditure and the profitability of commercial
banks.Information for this study is gathered from the annual reports of the Zenith Banks from the year 2005-2017.The design for
the study is ex-post-factor research design.A regression analysis was prepared
and data obtained.The result reveals that there exists a positive and
significant relationship between the log of internet banking services expenses
and the return on assets.Based on the following findings of this study,the following
policy recommendations are suggested: The empirical results of the study have
revealed significant relationship
between the log of internet banking services expenses(IBSE) and return
on asset (ROA).We therefore, advocate for more ATM facilities which should be
placed at strategic location for easy access.
CHAPTER
ONE
INTRODUCTION
1.1 Background to the Study
The coming into existence of the internet
has helped to greatly improve the operations of commercial banks in Nigeria.
The delivering of electronic services to businesses and consumers has been
going on for years now. The internet is a fast spreading service that allows
customers to use computers or any of their internet enabled devices to access
account-specific information and possibly conduct transactions from remote
location such as at home quickly and successfully. Debit cards, credit cards,
ATM cards seem to make life very easy because without them, today’s life will
be full of misery. In this recent time, retail banks are now offering their
services mostly through their internet branches. Internet banking is simply an
electronic payment system which helps customers of any financial institution or
bank to conduct any transaction.
The introduction of these internet enabled
devices brought increased enabled devices for competition in the banking
industry, which has gone a long way
to reducing customers waiting time for
banking transactions. In Nigeria, this networking began with LAN (Local Area
Network), MAN (Metropolitan Area Network) and later the WAN (Wider Area
Network).The coming into existence of the internet banking has made transaction
and data processing very accessible for quick management decision making. The
rate of wholesale and retail banking services has been increased through
internet banking.The prospects of reducing the cost of operations revenue
actually is seen as a motivator in the investment in internet banking by banks
according to Simpson, J. (2002). However,on the other hand the adoption of
internet banking has also brought notable challenge to the industries in terms
of exposure of risk. Since the introduction of this system, it has been noticed
that the volume of deposits has increased,and also the fraudulent practices in
Nigerian banks.That is the reason why Ovia, J. (2001) stated in the mid 1990s
Nigeria’s banking scene has witnessed phenomenal changes which can be seen in
the enormous volume and complexity in service delivery or product
liberalization of finance and process re-engineering in business.
In the recent time, it has been observed
that a large number of literature have totally ignored the internet banking and
compare electronic money with substitution of currency through electronic
gadgets such as a virtual currency and smart cards. Internet banking is simply
when devices are being used. For example, Freedman (2000) proposes that
electronic money and internet banking is made up of three devices; access
cards, stored value cards and network money. Electronic money is the sum of
network money and stored value cards. The most fascinating about this view is
that electronic money and internet banking are no longer processes but devices,
Shy and Tarkka (2002),Santomero and Seater(1996) have presented models that
identify conditions which alternative electronic payments substitute for cash.
Banks, since the inception of the use of internet banking product in the late
1980’s, have not made their presence to be felt much.
However, not many studies have been done
on the profitability of commercial banks in Nigeria. The fact still remains the
reality of using IT in banks is necessitated by the huge amount of information
being handled by these banks on a daily basis.The softwarae used by banks is
usually renewed on short term basis which incurs huge financial costs on banks.
Capital providers expect that they would gain tremendous returns which may
accrue from the project as information technology driven by the internet is
adopted. Since the introduction of internet banking, Nigerian banks have been
forced to invest more in assets in order to meet up its competitive
positioning. Much earnings have been retained to meet up with this obligation
which led to the denial of dividend for shareholders with expectation that the
future dividend will be fatter. According to Basel committee on banking
supervision, internet banking is defined to include the provision of retail and
small value banking product and services through electronic channels as well as
large value electronic payment and other wholesale banking services delivered
electronically.
1.2 Statement of the Problem
Internet
technology holds the potential to fundamentally change banks and the banking
industry.An extreme view speculates that the internet will destroy old models
of how bank services are developed and delivered DeYoung (2001).The widespread
availability of internet banking is expected to affect the mixture of financial
services produced by these banks. In addition, industry analysis outlining the
potential impact of internet banking on cost savings,revenue growth and risk
profile of the banks have also generated considerable interest and speculation
about the impact of the information technology on the banking industry.
However the fact that internet banking is
fast gaining acceptance in Nigerian banking sector does not assuredly signify
improved banks performance nor would conspicuous use of internet as a delivery
channel make it economically viable,productive or profitable.This study sought
to fill the exist research gap by answering the following research
questions:does internet banking affect profitability of commercial banks in
Nigeria?
1.3
Objectives of the Study
The main
objective of this study is to examine the impact of internet banking on
profitability of commercial banks in Nigeria, using Zenith bank PLC as a case
study. Other objectives are:
i.To examine the
relationship between mobile banking service expenditure and the profitability
of Zenith bank PLC.
ii. To examine
the relationship between Automated Teller Machine service expenditure installed
and the profitability of Zenith Bank PLC.
iii. To examine
the relationship between credit or debit card issued to customers service
expenditure and the profitability of Zenith Bank PLC.
1.4 Research questions
In the light of the objectives of the
research, the following research questions were considered pertinent:
i.What is the relationship that exists between
mobile banking service expenditure and the profitability of Zenith Bank PLC?
ii. What is the relationship that exists
between Automated Teller Machine service expenditure and the profitability of
Zenith Bank PLC?
iii. What is the relationship that exists
between credit or debit cards to consumers service expenditure and the
profitability of Zenith Bank PLC?
1.5 Research Hypothesis
i. Ho: There is no significant
relationship between mobile banking service expenditure and the profitability of
commercial banks.
. H1: There is a significant
relationship between mobile banking service expenditure and the profitability of commercial banks.
ii. Ho: There is no significant
relationship between Automated Teller Machine service expenditure and the
profitability of commercial banks
H1: There is a relationship between Automated
Teller Machine service
expenditure and the profitability of commercial banks.
iii. Ho: There is no significant
relationship between credit or debit bank issue service expenditure and the
profitability of commercial banks.
H1: There is a significant relationship between credit or debit bank
issue service expenditure and the profitability of commercial banks.
1.6 Significance
of the study
With this study, commercial banks are able
to understand banking in a new dimension. It will help to highlight the various
importance of cashless banking and increase profitability if these measures are
properly taken care of. This study has helped to introduce a new model for
commercial banks to adopt-the customer convenient model. This model will help
the commercial banks in gaining more money, enlighten managers of commercial
banks on how to serve customers and also better loyalty from customers.
1.7 Scope of the study
This study is going to cover the POS
(Point of Sale) and ATM channels which is in the internet banking investment
and profit after tax on Zenith Bank PLC from 2005-2017. Other banks could not
be covered due to their inadequate disclosure on internet banking investment.
1.8 Definition of terms.
Internet
banking: This can also be
known as on-line banking, virtual banking and e-banking. It is an electronic
payment system that enables customer of a bank to conduct a range of financial
transactions through the financial institutions website.
ATM(Automated
Teller Machine): An ATM
combines a computer terminal, record keeping system and cash vault in one unit,
permitting customer to enter a financial firms book keeping system with either
a plastic card containing a Personal Identification Number(PIN) or by punching
a special code number into a computer terminal linked to a financial firms
computerized records 24hours a day.
POS(Point
Of Sale);is the time and
place where a retail transaction is completed.
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