Technology innovation in the Nigerian banking system: prospects and challenges

Adeku Salihu Ohiani

doi:10.1108/ramj-05-2020-0018

Abstract

PurposeThe banking system in Nigeria is gradually moving away from transactions “across the counter” to the fingertips of the customers with the adoption of modern technology. However, every development comes with its “pros and cons” because as technology innovation has improved service delivery and profitability of banks in Nigeria, crimes are also at a high side. To activating the minds of bank operators about the importance of technology adoption and its shortcomings, this paper aims to examine the prospects and challenges of technology innovation in the Nigerian banking system.Design/methodology/approachSecondary data were retrieved from the annual reports of Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) from 2013 to 2017 to know the interaction between e-banking platforms and performance of banks in Nigeria. The study administered a questionnaire to the bank customers in Lagos Island, Nigeria to understand their perception towards e-banking. This study is anchored on prospect theory to ascertain the risk orientation of the Nigerian banks regarding how they adopt technology and reasoned action theory to understand the intention of bank customers in using the opportunities of e-banking copiously.FindingsThe findings of this study reveal the migration from cheques to electronic related transactions. It further indicates a high rate of fraud committed through those channels. The analysis of primary data shows that innovation adoption, service quality, cybercrime have significant relationship with the competitiveness of banks, the intention of bank customers, and perception of customers towards online services. However, the rate of frauds does not have significant relationship with the usage of mobile banking products which further studies can critically examine.Originality/valueThis study has revealed available huge potentials in the e-banking that are yet to be used in Nigeria. However, consumer orientation needs to be worked on, because, customers still have the fear that cybercrime is mostly committed via e-banking platforms. Unlike in developed countries whereby quite good numbers of customers make use of e-banking platforms, majority of bank customers in Nigeria still prefer using manual methods and the world is already on the verge of moving into 5 G from 4 G.

Highlights

Technology has virtually taken over business activities in the 21st century, and banking sector that plays a major role in the economic development of a nation is not an exemption of the innovation orchestrated by this phenomenon
Discussion of findings and conclusion Innovation adoption has greatly influenced the competitiveness of banks in Nigeria with the rate at which e-banking transactions have taken over manual transactions as evidenced in the Central Bank of Nigeria (CBN) reports (2013-2017)
One of the arguments of this study is based on prospect theory with the assumption that bank operators may decide not to take the risk of spending huge costs on technology adoption, while bank customers may decide to use bank services that are less risky

Summary

Introduction

Technology has virtually taken over business activities in the 21st century, and banking sector that plays a major role in the economic development of a nation is not an exemption of the innovation orchestrated by this phenomenon. It is evident in the literature that technology innovation has created enormous opportunities for banks in advanced countries and in developing nations like Nigeria. The challenges this development has caused in the banking sector cannot be swept under the carpet because they are useful for policy and decision-making. Technology innovation is disruptive in nature; it creates opportunities and challenges for future opportunities and challenges. Firms are bound to benefit from the opportunities inherent in the new technology and as well contend with the pending challenges irrespective of the sector (Schiavi and Behr, 2018; Tongur and Engwall, 2014)

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Conclusion