EFFECT OF COMPUTERISATION IN THE PERFORMANCE OF BANKING SECTOR

Head of Flexcube Functional Support, Branch Operations Coordination, Union Bank of Nigeria Plc, Nigeria

ABSTRACT

This study is aimed at examining The Effect of computerization in the Performance of Banking Industry. Implying that the introduction of Information and Communication Technology in banking services has a positive effect in the development and growth of the organization. Also, to indicate that customers are their asset and the best possible way to satisfy them is to give them the best services. Based on the result, it was observed that information and communication technology leads to efficient and effective performance of banks and information and communication technology leads to competitive advantage over others and thus increases banks profitability.

KEYWORDS: Smart Cards, Telephone Banking, Internet Banking, Electronic Funds Transfer, ATM, Banking,

Networked Organization

INTRODUCTION

Information has always been an integral part of every organization operation and manager job, its importance and the need to manager it continue to grow at a nominal rate. A powerful force that is driving the world towards converging commonality is technology from beginning of the human era, technology has been one of the most essential and most important factors for the development of mankind. During the last two hundred years, technology changes have often related to economic growth in the form of new types of goods and services. Information Technology can therefore be defined as the modern handling of information by electronic means which involve access storage, processing of electronic technology in its various forms in order to improve the operations and profitability of the business as a whole. The growing importance of information technology stem down from increasing complexity of organization environments and the ever growing complexity of information created by that complexity. For information to be useful to a manager it must be accurate as it should provide a valid and reliable reflection of reality, it has to be timely sources it has to be available on time for appropriate managerial duties. Information must also be complete as it provides the manager with all of the fact and details he/she needs. Information also has to be relevant as this assures the managers that the information is useful to them in their particular circumstances for the particular need. kind of job and new wealth within the economy, we still have no record that all those that lost their jobs were given new jobs.

Risks of Swallowing Core Banking Business

There is the risk that information technology precedent over core business of banking. In the long run, it may permanently impair the factor competitiveness of Nigeria banks. Consequently the solution to this may according to Will Locks (2002) be computer (IT) out sourcing as practiced by common-wealth bank of Australia, Xerox etc. According to well and Broad Bent (1998) IT out sourcing is the handing over to third party, the management and operations of IT assets and activities this can later lead to greater strategic loses. They may include:

· Lower return on assets;

· Significant increase in information system staff turnover.

· Longer time to market new products

System Operation Risks

As noted earlier, Etim (2003) posit that computerization of bank services rest on computer and telecommunication, which could be susceptible, to system failure, internet manipulations and inconsistent regulatory policies. This risks include:

· Scanning Automated system

· False data entry

· Virus

· Fraudster logging into telecommunication Network

· Inconsistent regulatory system

Implication for Information and Communication Technology for Customer Service for Bank

In the new competitive arena, it is not the possession of IT that will determine how successful banks will be but

the success will be calibrated by the risk management experts in IT development. And managing these risks is a better understanding of the implication of computerization of services on the following:

· Customer/Staff Interaction with Information Technology: Effective and efficient information technology of

service must think about the customers and staff, not how bank deploy IT to foster only mechanical service delivery

of bank customers Davenport (2001) called this a human centered approach to IT, which contrasts with the standard

IT view. This approach recognize that:

· Information evolves in many directions, taking on multiple meanings.

· People don’t share information easily.

Job Shredding: This is an inevitable adjust to service information technology implementation. Job cut should be preceded with retraining and resettlement activities to make those displaced by IT development add more wealth to the industry or outside it.

· Core Banking and Information Technology: Bank must always ensure the IT services core-banking activities and not core-banking fitting into IT legacy. We have several evidence that tend to indicate that over-bloating the importance of information technology usually end in computerization replacing core-banking activities which it ought to serve. Although most organizations tend to practicalise this by out-sourcing IT to third party, this has to be pursued with caution.

· System Operation Risk and Information Technology: System failure and other associated operational risks are

those which cannot be ruled out in banks that embrace computerization of customers service. Furthermore, system

manipulation, bugs wire tapping and unauthorized access are crime that go hand in hand with information

technology. However, banks must weigh the types of system and operations that pose greater risk to information

security. In order to minimize such risk, dynamic technology controls in respect of information security should be put in place, including the following:

· Encryption

· Message authentication

· Security software

· Data retention

THEORETICAL FRAMEWORK

Computer Network Technology

The ability to access those geographically outside the reach of data users would have been impossible without the

emergence of computer data network. Advance computer technology and telecommunications made it possible from

computers within a geographically disperse area or city with the help of high-speed telecommunication infrastructure are involved in the Wide Area Network. And within a single location, it was possible to build a local Area Network (LAN). With the availability of these networks, effective data carrier platforms for customer service delivery could be affected. It is possible for customers whose accounts are not domicile in a particular branch to be served. Because data networks enable quick validation of their transactions. High speed LANs also makes it possible for many tellers to concurrently share the same customer information base. With this level of advancement, the old telex message system between banks and amongst branches, of the same bank are now being phased out by the new network driven electronic funds transfer and clearing system.

Electronic Funds Transfer

Baker and Brandel (2001) define electronic funds transfer as any transfer of fund which is initiated through an

electronic terminal, telephone instrument or computer or magnetic tape so as to order or authorize a financial institution to debit or credit an account, the system allow an hours anywhere in the country. It provides a more suitable and cost effective way of transferring funds. IT does not mean money in the true sense of it. But rather its only link with money is through the units in which the debits are denominated in real money units. Electronic funds transfer systems are connected with the primary management of information between banks and the resulting changes that affect bank records.

Telephone Banking

Tele-banking can be considered as a form of remote or virtual banking which is essentially the delivery of

financial services via telecommunication devices which can perform retail banking transactions such as checking account balance, funds transfer between current, savings and credit card accounts, stop cheques orders and payment of due bills too.

Telephone banking services are on four level:

· Accessing of account balances

· Transfers of staff

· Transfers to third party

· E-Commerce payment

It is easy to use and above all, it does not demand users complex information technology knowledge.

Internet Banking

The emergence of internet banking has brought about unimaginable possibilities in the area of cost reductions,

creation of new services and personalization of customer relations. In addition, it has challenged banks “marketing

Automated Teller Machine (ATM)

Another area which information technology has been deployed is the automated teller machine. It is a cash

dispenser which is designed to enable customers enjoy banking services without coming into contact with bank tellers. It also contains the problem of overcrowding in banks. It is now run 24-hours by some banks.

Smart Cards

Smart cards which made it debut on Nigerian market in 1999 utilize micro processor and some limited memory

capable of storing between eight to ten thousand characters. Banks in Nigeria have ventures into smart card business

because it would enable them retain their customers by providing new services. Moreover, smart cards provide safety net that help banks stay ahead of fraud.

ENABLING TECHNOLOGY

Bank information technology rest on computers, computer components and telecommunication and aims principally at two targets:

· The automation of all routine task;

· Speed up to data processing activities and complete elimination of paper work.

Computers were first applied commercially in batch processing systems. This required the capture of activities as

they occur while actual processing was later effected. In many instances computer centers, where the processing are done were located physically away from where the data were captured.

The advances in the integration of telecommunications and computer technology gave opportunities for multibranch

banks to connect their remote data capture terminals to data stations. With the birth of this, came a new culture

called on-line, real time processing and it became possible for customer’s transactions to be processed instantaneously, removing the constraints imposed by batched processing and geographical limitations. This advantage was further enhanced with the arrival of mini-computers, micro-computers and their peripherals, because of their enhanced processing capacity. Most branches of banks have a stand-alone or networked computers with the interconnectivity of computer system and compatibility of branches are able to consolidate information at their head office without physically moving out to the branches.

Two major approaches are used by the banking sector in Nigeria to computerize their operations. These

approaches are;

· Front Office Automation

· Back office Automation

Front Office Automation

This approach involves the computerization of service that relates directly to customers, such costumer service

include withdrawals, inquiries, request for account balance etc. The objective of this approach is to provide customers with prompt efficient and higher of quality services. Most banks are currently focused on this approach.

Bank Office Automation

This approach involves the computerization of bank office operations. These include processing of vouchers,

cheques, loans, foreign exchange transactions etc. The objective of this approach is to automate the internal process of the organization.

CONCLUSIONS

Banking service delivery using information and communication technology has become inevitable, customers are

now pressing hand deep for extra value that meet their specification. As it is, traditional banking services must be

reformed fast enough to fill the gap through information and communication technology.

However, it has been noted that information and communication technology enables banks to improve on the

services delivered to their customers, given them competitive advantages and reduce customer waiting time in the bank through prompt service delivery occasioned by the use of computer.

Also, bank staff attitude to work and customer has improved as a result of easy handling of work caused by information and communication technology. Customer’s interest and patronage has also increased because of the unabridged access to their account and other benefits like online banking, Smart cards, ATM’s and so on. And also there have been reduction in the risk of unexpected occurrence.

RECOMMENDATIONS

Based on the above findings, I hereby recommend the following:

· That bank must appreciate their staff’s efforts and in turn ensure that their staff appreciate that customers are

assets and as such they must be attended to in time and with care through the use of information and

communication technology facilities.

· Information and communication technology should be managed in such a way that they do not alienate both

customer and bank staff and also to prevent enormous risk that is associated with information and communication technology.

· Staff must be subjected to regular training so as to meet the standard and specification of customer through up  to date technology.

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