Impact of Electronic banking on customer satisfaction in commercial banks/Money Deposit Banks in Nigeria.

Introduction

Electronic commerce is now thought to hold the promise of a new commercial revolution by offering an inexpensive and direct way to exchange information and to sell or buy products and services. This revolution in the market place has set in motion a revolution in the banking sector for the provision of a payment system that is compatible with the demands of the electronic marketplace.

Electronic-commerce in Nigeria is in an embryonic stage. However, one area of electronic-commerce that has proven successful in Nigeria is electronic banking (Ebanking). The term "electronic banking" or "e-banking" covers both computer and telephone banking. It refers to the use of information and communication technology by banks to provide services and manage customer relationship more quickly and most satisfactorily (Charity-Commission, 2003).

Burr (1996) describes it as an electronic connection between the bank and the customer in order to prepare, manage and control financial transactions. Electronic banking according to Al-Abed (2003) is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brickand-mortar institution. Lustsik (2004) describes electronic banking as a variety of the following platforms: Internet banking, telephone banking, TV-based banking, mobile phone banking, and PC banking.

For the purpose of this research, we define electronic banking as the delivery of banking services and products through the use of electronic means irrespective of place, time and distance. Such products and services can include deposit-taking, lending, account management, the provision of financial advice, electronic bill payment, and the provision of other electronic payment products and services such as electronic money.

The benefits of this 21st century banking are numerous. Its introduction would increase the potential of business to attain greater productivity and profitability, as trading and transactions, which would be carried out via communication networks, would be a lot faster and distance would no longer be barrier to effective transactions (Fagbuyi, 2003).

According to Sergeant (2000), the benefits of E-banking are manifold and are to be seen from the point view of the banks themselves, customers and even the regulators. According to him, for banks, E-banking brings different and arguably lower barriers to entry; opportunities for significant cost reduction; the capacity to rapidly reengineer business processes; and greater opportunities to sell cross border. For customers, the potential benefits are: more choice; greater competition and better value for money; more information; better tools to manage and compare information; and faster service.

In the past few years, Nigerian banks and generally the financial services industry embraced electronic banking, which has been made possible by the advancements in information technology (IT).

According to Sanusi (2002), the introduction of such e-payment products in Nigeria commenced in 1996 when the CBN granted Allstates Trust Bank approval to introduce a closed system electronic purse called ESCA. This was followed in February 1997, with the introduction of a similar product called “Paycard”, by Diamond Bank. The card based e-money products assumed an open platform with the authorisation in February 1998, of Smartcard Nigeria Plc, a company floated by a consortium of 19 banks to produce and manage cards called valucard and issued by the member banks.

Many banks therefore launched their websites between 1998 and 2000 with a view to starting Internet banking. A consortium of more than 20 banks under the auspices of Gemcard Nigeria Limited obtained CBN approval in November 1999 to introduce the “Smartpay” scheme. The CBN has additionally granted approval to a number of banks to introduce international money transfer products, telephone banking and on-line banking via the Internet, though on a limited scale (Abdulhakeem, 2002).

Many more sophisticated electronic banking products were thereafter, introduced to improve service delivery and customer satisfaction. CBN (2003) reports that Automated Teller Machines (ATM), Cards, Telephone Banking, Personal Computer Banking and Internet Banking are now available in the banking system.

Thus, Nigerian banks today are seriously into new electronic delivery channels for banking products and services with a view to delivering better services and satisfying customers the more. Banks that cannot offer these services are increasingly losing their customers.

Meaning of E-Banking

The concept of electronic banking has been defined in many ways; Daniel defines electronic banking as the delivery of banks’ information and services by banks to customers via different delivery plat forms that can be used with different terminal devices such as personal computers and mobile phone with browser or desktop software, telephone or digital television.

According to Abid and Noreen electronic banking defined as any use of information and communication technology and electronic means by a bank to conduct transactions and have interaction with stakeholders.

Stan also defined electronic payment as a system of payment whereby transaction takes place electronically without the use of cash. Magembe BAS and Shemi AP defined electronic banking (e-banking) is nothing but e-business in banking industry. E-banking is a generic term for delivery of banking services and products through electronic channels, such as the telephone, the internet, the cell phone, etc. The concept and scope of e-banking is still evolving. It facilitates an effective payment and accounting system thereby enhancing the speed of delivery of banking services considerably. Ovia argues that electronic banking is a product of e-commerce in the field of banking and financial services. In what can be describe as business to consumer domain for balance enquiry request for cheque books recording stop payment instruction balance transfer instruction account opening and other forms of traditional banking service. Banks are also offering payment services on behalf of their customer who shop indifferent e-shops.

Saleh M Nsouli and Andrea Schaechter also defined electronic banking as per the following chart concluding that e-banking is providing banking products and services through electronic delivery channels.

In simple words, e-banking implies provision of banking products and services through electronic delivery channels. Electronic banking has been around for quite some time in the form of automatic teller machines (ATMs) and telephone transactions. In more recent times, it has been transformed by the internet –a new delivery channel that has facilitated banking transactions for both customers and banks.

Types of E-banking

There are many electronic banking delivery channels to provide banking service to customers. Among them ATM, POS, mobile banking and internet banking are the most widely used and discussed below.

ATM: Automated Teller Machine (ATM) is a machine where cash withdrawal can be made over the machine without going in to the banking hall. It also sells recharge cards and transfer funds; it can be accessed 24 hours/7 days with account balance enquiry.

Internet banking: Internet banking allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or society. It may include of any transactions related to online usage. Banks increasingly operate websites through which customers are able not only to inquire about account balances, interest and exchange rates but also to conduct a range of transactions. Unfortunately, data on Internet banking are scarce, and differences in definitions make cross-country comparisons difficult.

POS: Point of sale (POS) also sometimes referred to as point of purchase (POP) or checkout is the location where a transaction occurs. A ‘checkout’ refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt. Because of the expense involved with a POS system, the eBay guide recommends that if annual revenue exceeds the threshold of $700,000, investment in a POS system will be advantageous. POS systems record sales for business and tax purposes. Illegal software dubbed ‘zappers’ is increasingly used on them to falsify these records with a view to evading the payment of taxes.

Mobile banking: Mobile banking (also known as M-banking,) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS, a service known as SMS banking. Mobile banking is used in many parts of the world with little or no infrastructure, especially remote and rural areas. This aspect of mobile commerce is also popular in countries where most of their population is un-banked. In most of these places, banks can only be found in big cities, and customers have to travel hundreds of miles to the nearest bank. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information.

Customer Satisfaction

According to Hansemark and Albinsson, satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire. Oliver defined satisfaction as a judgment following a consumption experience-it is the consumer’s judgment that a product provided (or is providing) a pleasurable level of consumption-related fulfilment. Kotler defined satisfaction as a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations. Satisfaction can be associated with feelings of acceptance, happiness, relief, excitement, and delight. Most research confirms that the confirmation or disconfirmation of pre-consumption expectations is the essential determinant of satisfaction. This means that customers have a certain predicted product performance in mind prior to consumption. During consumption, customers experience the product performance and compare it to their expected product performance level. Satisfaction judgments are then formed based on this comparison. The resulting judgment is labelled positive disconfirmation if the performance is better than expected, negative disconfirmation if it is worse than expected and simple confirmation if it is as expected. In short, customers evaluate product performance by comparing what they expected with what they believe they received.

Determinants of customer satisfaction

Consumer satisfaction can be determined by a number of factors that is to say customer expectations, fees and charges, quality, customer care and many others as discussed below.

Product perceived performance and expectations

If the performance falls short of the expectations, the customer is dissatisfied. And when the performance exceeds expectations, the customer is highly satisfied or delighted (Ulrich 1999). Many companies are aiming for a high satisfaction because customers who are just satisfied still find it easy to switch when a better offer come in. Customer’s satisfaction does not only result from providing excellent service, but from customers perceiving that a company delivers a service that is unique. Achieving this quality of service takes a serious commitment from every employee in the organization through providing excellent services that exceed customers expectations to the extent that they are willing to tell others about their experience. Oliver (1980) found that disconfirmation can affect customer’s satisfaction. Positive disconfirmation (perceived performance above the expectation) increased consumer satisfaction and while negative disconfirmation (perceived performance below expectation) decrease consumer satisfaction.

Customer service

Employment should answer the phone with a smile. A smile can be “heard” in someone’s voice. Nothing frustrates customers more than being served by an employee who feels the customer is a waste of their time. According to Craig c (2003) improving an organization customer service requires commitment and consistence effort from everyone in the organization. Thy advanced 10 fundamentals that will help create a culture of continuous service improvement. Companies need to define success for everyone in the organization as continually improving everything everyone. Customer service improvement is the cumulative effect of thousand small improvement made daily at every level in the organization.

It often requires changing the culture from one that accepts the status quo to one that is excited about change and constant improvement. Listening is the foundation of all good relationship and pre- requisite to business success, but surprisingly, few companies systematically listen to customers, suppliers, employees, and competitors. The radical service improvement needed to sustain a competitive advantage, require better customer’s information system. The more the organization known about customers business and needs, the easier for it to form strategic partnership with in them.

 Service quality

Service quality or perceived service quality is a determinant of customer satisfaction. Some researchers state that services quality and satisfaction measures the same underlying concept and therefore is the same. Other authors argue that satisfaction with a specific transaction precedes the perception of the overall quality of the firm and therefore is the antecedent of perceived quality.

Finally others suggest that the concept of satisfaction and quality are different and that it is the perceived services quality that will affect customer satisfaction. Fornell (1992) finds that as a general psychological phenomenon, satisfaction is primarily a function of customer’s quality, the higher the level of customer’s satisfaction.

Needs and desire of the customers.

 This is one of the determinants of customer satisfaction (Grigouis 2010). In order for a business to meet the needs and desire of customers, the business must know the needs and desires of the customers. This information is vital not only for successful business but also for understanding and improving customer’s satisfaction. This important component helps to satisfaction from the perspective of the consumer.

Value of products and services

According to swaminathanJ & Ananth A (2010) perceived value of the product is one of the determinants of customer satisfaction. Customer satisfaction depends greatly upon receiving a quality product with the expected value attached and service at a competitive price. Not only is the customer looking for the right product or service, he is looking for someone who is knowledgeable about the product or service as well.

Fees and charges

  Service quality attributes in e-banking industry are important since human- internet interaction is the main service delivery and communication channel. Offering high quality services to satisfy consumers’ needs, at lower costs, are potential competitive advantages of e banking.

Some studies show that e- banking has successfully reduced operating and administrative costs (speece 2003). Cost savings have helped e-based banks offer lower or no service fees, and offer higher interest rate on interest accounts than traditional banks (Gerlach et al 2000). Therefore, it is hypothesized that fees and charges have positive impact on customer satisfaction. 

Electronic banking and customer satisfaction in commercial banks/Money Deposit Banks.

Electronic banking is linked to customer satisfaction through globalization. He explains that this has not only brought the world loser together, but it has allowed the world’s economy to become a single interdependent system. This means that local and international business can easily share information quickly and efficiently.

Lenart. s.(2012) argue that customers satisfaction for financial instructions and banking website display positive growth in 2010 and nearly two thirds of online financial customers now use bill pay across, credit cards and third party website.

Electronic banking has drawn attention of many banks to application of various technology devices in promoting or achieving better customer services delivery that guaranteed customer satisfaction that translates into increased profitability and higher return on investment. Electronic banking services and customer satisfaction have a positive relationship, which has afforded banks the opportunities to impress customers, which eventually encourage them to keep coming back. Today it would be difficult to see any bank in the country that does not render one form of electronic banking services or the other, even banks in the most remote parts of the world.

Vaidya (2011) argue that emerging technology would enable to create new ways of lead generation, prospecting as well as developing deep customer relationship and electronic banking would achieve superior customer experience with bi-directional communications. In his view ascertains that access to basic financial services, ability to save, transfer and also invest small amounts of money can make a huge difference to people around the world.

The other linkage between electronic banking and customer satisfaction as revealed by (Barney 2006) is cost effectiveness. He explains that information technology has helped to computerize the business process thus streaming businesses to make extremely cost effective money- making machines. Barney (2000) also adds on the fact that electronic banking has created more time for businesses. This is so in that electronic banking has it possible for business to open 24/7 all over the globe. This means that a business can be opened any time anywhere, making purchase from different countries easier and more convenient. It also means that you can have your goods delivered right to your doorstep with having to move a single muscle.

Challenges and opportunities of e-banking

The changing financial landscape has brought with it new challenges for bank management and regulatory and supervisory authorities. The major ones stem from increased cross-border transactions resulting from drastically lower transaction costs and the greater ease of banking activities, and from the reliance on technology to provide banking services with the necessary security. While electronic banking can provide a number of benefits for customers and new business opportunities for banks, it exacerbates traditional banking risks. Even though considerable work has been done in some countries in adapting banking and supervision regulations, continuous vigilance and revisions will be essential as the scope of e-banking increases. In particular, there is still a need to establish greater harmonization and coordination at the international level. Moreover, the ease with which capital can potentially be moved between banks and across borders in an electronic environment creates a greater sensitivity to economic policy management. To understand the impact of e-banking on the conduct of economic policy, policymakers need a solid analytical foundation. Without one, the markets will provide the answer, possibly at a high economic cost. Further research on policy-related issues in the period ahead is therefore critical.

The primary challenge for banks is to provide consistent service to customers irrespective of the kind of channel they use. The more a bank relies on electronic delivery channels, the greater the potential for reputation risks. There are some serious implications of international e-banking. It is a common argument that low transaction costs potentially make it much easier to conduct cross-border banking electronically. For many banks, cross-border operations offer an opportunity to reap economies of scale. But cross-border finance also needs a higher degree of cross-border supervision. Such cooperation may need to extend to similar supervisory rules and disclosure requirements (for efficiency and to avoid regulatory arbitrage) and some harmonizing of legal, accounting and taxation arrangements.

Major concerns of electronic transactions are the issues of security and privacy. In the developed countries like France, 3 out of 40 purchases are on line and the remaining 37 are reluctant to use on line services and the reason is security and privacy which is the major threats to perform online business. It is not only the duty of industry but also the duty of government assuring people to perform secure electronic transactions.

Low level of financial literacy of the public, level of readiness and capacity of financial institutions to provide service, infrastructure, insufficient cash flow in rural areas limited potential agents, and presence of a few branches in rural areas are some of the challenges facing the country. Legal and related issues, the importance of looking in to the role of newly emerging third party technical providers, reconsidering pre-paid balance requirements and widening the scope of mobile banking service are also critical.

Abraham described in Nigeria, among the known common problems which are related to electronic banking few of them are listed below.

• Lack of banking services through the web or other electronic means such as using mobile phone.

• Data and network security and privacy.

• Lack and limitation of government policies, regulations and e-commerce laws, as well as legislation to protect workers and to make the Internet secure.

• Weak telecommunications.

• Broken and slow Internet connections.

• Lack of Internet awareness.

Banking in Nigeria faces numerous challenges to fully adopt and adopt e-banking application and seize the opportunities presented by ICT applications in general. Key challenges of for e-banking applications are: Low level of internet penetration and poorly developed telecommunication infrastructure, lack of infrastructure for telecommunications, internet and online payments impede smooth development and improvements of e-commerce in Nigeria. Lack of suitable legal and regulatory framework for e-commerce and e-payment: Nigeria current laws don’t accommodate electronic contracts and signature.

Nigeria has not yet enacted legislation that deals with e-commerce concerns including enforceability of the validity of electronic contracts, digital signatures and restricts the use of encryption technologies. High rate of illiteracy: low literacy rate is a serious impediment for the adoption of e-banking in Nigeria as it hinders the accessibility of banking services. For citizens to fully enjoy the benefits of E-banking, they should not know only how to read and write but also possess basic ICT literacy. High cost of internet: The cost of internet access relatively to per capita income is a critical factor. Compared to the developed countries, there is higher cost of entry into e-commerce market in Nigeria. These include high start-up investment costs of computers and telecommunication and licensing requirements. Absences of financial networks that link different banks, frequent power interruption: lack of reliable power supply is a key challenge for smoothly running e-banking in Nigeria. Resistance to changes in technology among customers and staff due to lack of awareness on the benefits of new technologies, fear of risk, lack of trained personnel in key areas, tendency to be content with the existing structures and people may be resistance to new payment systems.

Conclusion

E-banking has improved customer satisfaction than ordinary banking, enabled customers to control their account better than the ordinary banking, there is high opportunity in expanding the services.  E-banking service highly reduced the visits of bank hall, waiting time for service, there are customers who do not know the existence of fee charged for being e-banking users though they are being charged and there are also customers who do not know what e-banking means and the banks except providing the card have not given any organized training for customers in order to create awareness about e-banking. Customers’ knowledge about e-banking, availability of the service 24/7 and improvement of customers in controlling their account are more sensitive variable which determine customer satisfaction in e-banking. To put it in a net shell e-banking has impact in improving customer satisfaction, impact in reducing waiting time for customers to get bank service and impact in improving customers to control their account movements.

Electronic banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of a mouse offers bank customers services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. No country today has a choice-whether to implement E-banking or not given the global and competitive nature of the economy. Banks have to upgrade and constantly think of new innovative customized packages and services to remain competitive. The invasion of banking by technology has created an information age and rendered banking services more appealing.