CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

The importance of Information and Communication Technology (ICT) and Innovations in banking system cannot be over emphasized. An ICT innovation has become an indispensable tool to improve the human lives and connect the nations of the world. The last decade has seen ICT dramatically transforming the world, enabling Banking performances and productivity increases; connecting people and communities; improving standards of living and creating employment opportunities across the globe. Information and Communication Technology has become global tool for any Banking system to reach global markets. Thus every Banking system must be ICT compliance in order to survive in global competitive environment. The introduction of ICT has changed manual and traditional forms of doing business. The use of sophisticated technology based on automation and interconnection of computers and other electronic devices are becoming the norm rather than exception. For instance, ledger books, paper invoice, printed materials and business trips are being replaced with online billing and payments, elaborate website with product information and real-time teleconferencing across continents and time zones (Ojokuku and Sajuyigbe, 2012). Ovia (2001) observes that the Banking system has moved into an era of menu-driven ultra-robust specialized software programmes called Banking system applications and these applications can carry out virtually all Banking system functions relying heavily on information collection, storage, processing and transfer. Similarly, Woherem and Adeogri (2000) rightly says that only banking systems that overhaul the whole of their payment and delivery systems and apply Information Communication Technology (ICT) to their operations are likely to survive and prosper in the new millennium. Banking system should therefore re-examine their service and delivery systems in order to properly position themselves within the framework of the dictates of the dynamism of information and communication technology. The advancement in ICT has played an important role in improving service delivery standards in the financial system like the banking industry (Abubakar and Rasmaini 2012). This has allowed for Banking performance and financial innovation. Banking performance is the unanticipated improvement in the array of Banking products and instruments that are stimulated by unexpected change in customer needs and preferences, tax policy, technology and regulatory impulses (Bhattacharyya & Nanda, 2000). The developments in the Banking sector have not only led to the increase in the number of Banking institutions, but also the development in level of sophistication with new payment systems and asset alternatives to holding money. This has resulted mainly from technological advancement and increase in competition as the number of institutions increase. Developments in payment systems have started to create close substitutes for hard currency, thus affecting a core part of banking. Financial innovation in the banking industry has been spurred on by the forces described by Noyer (2007) particularly in terms of new distribution channel systems, such as internet and mobile banking. As the industry has provided more ways for consumers to access their accounts, they have added significant costs to each institution. Banks are therefore considering new ways to drive revenue through their distribution system among which is the drive to increase the customer share of wallet. The share of wallet is the portion of a customer’s entire Banking relationship that any particular bank has with the customer. Akin to ICT is the concept of globalization. The world is seen as a global village which turned the markets and economies in like manner. Globalization has caused intense competition in the banking industry, worldwide (Nzotta and Okereke, 2009 and Thiel, 2001). The phenomenon called globalization has significantly intensified competition in the banking sector in three particular aspects viz: banks face pressures from a wide and diverse range of competitors; the regulatory environment has become less protective of the banking sector; and competition has become global in nature (Abdulsalam, 2006).

1. STATEMENT OF THE PROBLEM

In order to tap the potential benefits of ICT and Banking performance, Banks deploy ICT based banking products and services such as automated teller machine (ATM), internet banking, mobile banking solutions, point of sale terminals, computerized Banking accounting and reporting, human resources solution among others. In spite of these, there is a debate about whether and how the ICT adoption improves commercial banks performance especially in Nigeria.

1.3 AIM AND OBJECTIVES OF THE STUDY

The study seeks to determine the effect of information communication technology (ICT) on the performance of the banking sector in Nigeria. The objectives of the study are:

1. To determine the relationship between ICT and the performance of the banking sector in Nigeria
2. To determine the effect of ICT on employees productivity in the banking sector in Nigeria
3. To examine whether ICT has effect on customer patronage of banking products in Nigeria
4. To determine the factors affecting ICT and the performance of the Nigeria banking sector
5. To recommend ways to improve the use of ICT and performance of the banking sector in Nigeria

1.4 RESEARCH QUESTIONS

The following research questions guide the objectives of the study:

1. What is the relationship between ICT and the performance of the banking sector in Nigeria?
2. What is the effect of ICT on employees productivity in the banking sector in Nigeria?
3. Does ICT has effect on customer patronage of banking products in Nigeria?
4. What are the factors affecting ICT and the performance of the Nigeria banking sector?
5. What are the ways to improve the use of ICT and performance of the banking sector in Nigeria?

1.5 STATEMENT OF THE HYPOTHESIS

H0: there is no significant relationship between ICT and the performance of the banking sector in Nigeria

H1: there is significant relationship between ICT and the performance of the banking sector in Nigeria

1.6 SIGNIFICANCE OF THE STUDY

The study on the effect of information communication technology (ICT) on the performance of the banking sector in Nigeria will be of immense help to commercial banks in Nigeria and other corporate bodies towards the importance of ICT. The study findings of the study will also establish a correlation between ICT and the performance of the banking sector in Nigeria. The study will also serve as a source of information to the Nigeria banking sector and contribute to the body of the existing literature on the effect of information communication technology (ICT) on the performance of the banking sector in Nigeria

1.7 SCOPE OF THE STUDY

The study covers on the effect of information communication technology (ICT) on the performance of the banking sector in Nigeria with focus on commercial banks in Nigeria.

1.8 LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.9 DEFINITION OF TERMS

ICT: Information and communications technology (ICT) is an extensional term for information technology (IT) that stresses the role of unified communications and the integration of telecommunications (telephone lines and wireless signals) and computers, as well as necessary enterprise software, middleware, storage and manipulate information

PROFIT: Profit, in accounting, is an income distributed to the owner in a profitable market production process. Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use

COMMERCIAL BANK: A commercial bank is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit.