The crux of this study is on the adoption of E-payment system in Nigeria: Its economic benefits and challenges.
The arrival of the internet has taken electronic payments and transactions to an exponential growth level.
Consumers could purchase goods and services from the internet and send unencrypted credit card numbers across the network, which did not provide much security and privacy. But a wide variety of new secure network payment schemes have been developed as consumers became more aware of their privacy and security. The benefits of e-payment are unquantifiable in that it would galvanize Nigeria into a cashless society and elimination of fear of the unknown. Though e-payment is faced with challenges, like public acceptability, lack of uniform platform being, operated by the banks, lack of adequate infrastructure and issues of security, with the proper use of e-payment system, corruption which is a cancer in government arena will be holistically addressed.
1.1 Background Of The Study
The payment system is an operational network governed by laws, rules and standards that links bank accounts and provides the functionality of monetary exchange using bank deposits (Summers, 2012). The payment system is the infrastructure consisting of institutions, instruments, rules, procedures, standards and technical means established to effect the transfer of monetary value between parties discharging mutual obligations. Its technical efficiency determines the efficiency with which transaction money is used in the economy and risk associated with its use (Biago & Massimo, 2001).
What makes it a “system” is that it employs cash substitutes with the use of electronic money and other ICT related equipment in its operations. Traditional payment systems are negotiable instruments such as draft cheques and documentary credits such as letter of credits. With the advent of computers and electronic communications a large number of alternative electronic payment systems have emerged. These include debit cards, credit cards, electronic funds transfers, direct credits, direct debits, internet banking and e-commerce payment systems. Some payments include credit mechanisms, but that is essentially a different aspect of payment. Payment systems are used in lieu of tendering cash in domestic and international transactions and consist of a major service provided by banks and other financial institutions.
Payment systems may be physical or electronic and each has its own procedures and protocols.
Standardization has allowed some of these systems and networks to grow at global scale, but there are still many countries and product- specific systems. Examples of payment systems that have become globally available are credit card and automated teller machine networks. Specific forms of payment systems are also used to settle financial transactions for products in the equity markets, bond markets, currency markets, futures markets, derivatives, option markets and to transfer fund between financial institutions both domestically using clearing and Real Time Gross Settlement (RTGS) Systems and internationally using the SWIFT network.
Electronic Payment Systems (EPS) apart from their convenience and safety also have a significant number of economic benefits which include mobilising savings and ensuring most of the cash available in the country are with banks. This will make funds available to borrowers both businesses and individuals.
Furthermore, an electronic payment system has the ability to track individual spending; to facilitate the design of products by the banks. This information is also useful to the government when making decisions. EPS also have the ability to reduce cash handling and printing costs. According to Moody’s Analytics (2010) real global GDP grew an extra 0.2% a year on average beyond what it would have without card usage. Simply put card usage increases a country’s GDP by 0.2% annually.
Moving from a society where 90% of cash is held outside of the banks to a cashless society is a big change. It is therefore an enormous challenge for the government, financial institutions, individuals and other stakeholders responsible for making this system achieve its economic benefits. There are likely to be operational, financial, economic and marketing changes that need to be managed properly (Delali, 2010).
Since the overcoming of barter in the history of mankind, trade usually involve the exchange of goods and services and an equivalent abstract value such as money. Asaolu, Ayoola & Akinkoye (2011) noted that since money was invented as an abstract way of representing value, system for making payments have been in place. In the course of time, new and increasingly abstract representations of value were introduced. A corresponding progression of value transfer systems, starting from barter, through bank notes, payment orders, cheques and credit cards has finally culminated in electronic payment system. As the transition to electronic payment systems take place, the stock of currency hold outside the banking system which constitutes a potential source of unproductive economic resources because they are not available for credit expansion is integrated into it thereby expanding the deposit base of the money system.
Nigeria payment system has been predominantly cash-based for both positive and negative reasons positive because of its instant convertibility to other forms of value without intermediation of any financial institution and negative because of its anonymity and untraceability in unethical electronic payment was introduced because government was inundated with allegations of corruption in the Federal Civil Service. The Federal Government through its treasury circular reference NO TRY/A8 & B8/2008 of 22nd October 2008 directed that payments from all funds from it be made electronically as from 1st January, 2009. The policy has been condemned by all and sundry for lack of planning, inefficiencies and delay in the payment for goods and services (Asaolu, Ayoola & Akinkoye, 2011; Ogedebe & Babatunde, 2012).
1.2 Statement Of The Problem
Payment services are the essential within the banking industry and they account for a significant portion of operational costs and revenues. Besides, they are equally related to an augmented market share of banks and other busineses, especially through credit provision (Creyghton, Storz, Rutstein, Mohr, & Grealish, 2009). Hasan et al. (2012) contend that robust payment services are necessary in assisting the banks in establishing enduring relationships with their clients.
In Nigeria, the banking industry exhibits smaller market orientation and has a penchant of fulfilling customer needs with little consideration to their interests. Consumers in Nigeria experience long queues, transaction errors, and insecurity as well as network failures (Joseph, Mcclure, & Joseph, 1999). These concerns have greatly lowered the perception of the consumers on the quality of the service rendered by the banks, hence reducing their credibility, which in turn impacts on profitability. The emergence of new technologies and competitors put a demand on the banks to align themselves with the skills necessary to keep them relevant and competitive in the market (Joseph et al., 1999).
There are several studies carried out both globally and locally relating to consumption of electronic retail payment services. According to Berger (2003) the technological advancements within the banking system, entails online payments and electronic as well as information exchanges, have augmented productivity and activity in the market. In their analysis, Hasan et al. (2012) scrutinised the connection between service provision and performance in the EU market and established that banks do well in the markets with advanced retail payment infrastructures. Locally, Ngumi (2013) examined the adoption of electronic exchange systems by the Nigerian banks and notes that the new methods of transactions made possible by adopting e-commerce have made it easier to reach many clients and tailor products with the end result being high revenue stream for the banks. Okiro (2013) explored the influences of Mobile banking and the Internet as well on the overall financial performance, hence concluded that both enhanced financial performance for banks.
There is evidence that several studies have been conducted on retail payments, however most of them have concentrated on retail payment equipment as opposed to retail payment services with few studies focussing on the payment systems. Consequently this research aims at closing the gap by determining the relationship between the overall performance of Nigeria Commercial Banks as well as the electronic retail payments services.
1.3 Aims and Objectives Of The Study
The aim of this study is to determine the relationship between the manual and automated electronic payment system in National Open university of Nigeria Oshogbo Osun State Branch in relation to business and it student.
Other objectives include;
a) To establish extent to which e-commerce payment systems were adopted by commercial banks in Nigeria.
b) To establish the benefits that accrued to banks from adoption of electronic payment systems.
c) To determine the drivers of e-payment systems adoption by commercial banks in Nigeria.
d) To determine the challenges that surrounded adoption and use of these electronic payment systems by commercial banks in Nigeria.
1.4 Significance Of The Study
This research work would help the management and students of National Open university of Nigeria Oshogbo Osun State Branch in relation to business and it student to have a better knowledge of operating on the method of automated electronic payment system and how this can be effective through practical aspect of the device.
It is obvious that the manual system is slow in operation and also ineffective in service. The in-convenience brought about by the manual system could be over-whelmed by the use of more effective and advanced system. In other words, an automated system minimizes time delay procedures during student’s fee payment.
1.5 Scope Of The Study This study is restricted National Open university of Nigeria Oshogbo Osun State Branch in relation to business and it student and no other firm. Data used for the study were gotten from the case study only. It focused on electronic payment only.