Nigeria’s e-banking: An Assessment

Banks in Nigeria have certainly recognised the potential of Information Communication Technology (ICT) since the early 1980s when some of them blazed the trail by adopting the use of electronic means of banking.
Since then, most Nigerians have gradually embraced electronic banking (e-banking) services and the services have become a striking feature of the people’s everyday life.
Some of the e-banking services offered by most banks in the country at the moment include Automated Teller Machine (ATM) services, internet-banking services, telephone banking services, online banking services and credit card services, among others.
The integration of information technology into commercial activities gave rise to what is now known as electronic commerce or e-commerce.
E-commerce is made up of several subsystems, one of which is e-banking — a process in which a bank offers online banking services by integrating the operations of its branches to a central computer network.
To access a financial institution’s online banking facility, a customer must be a registered user of the facility and must have a password for customer authentication.
To access online banking services, the customer would have to log on to the financial institution’s website, and enter an online banking facility with the use of the user ID and password.
However, some financial institutions have adopted additional security steps for access but there is no uniformity in the approaches so far adopted.
Nowadays, each and every bank has provided e-banking facilities for its customers so as to encourage paperless banking.
This, to a large extent, has relieved a bank’s customer of certain restrictions associated with conventional banking which confine the customer to a particular branch where his or her records are domiciled.
In a nutshell, e-banking has also given birth to 24/7 banking, which was hitherto restricted to only banking hours.
With online services, customers are free to carry out banking transactions in any of the bank’s branches without regard for extraneous factors such as specific branch offices where their accounts are domiciled.
The transformation has made bank transactions more convenient, particularly for travelling bank customers like traders who hitherto had to convey large sums of money during business trips.
All the traders now have to do is to pay such monies into their financial balance in one area and conveniently pull back the funds in another area.
Similarly, on-line banking has made funds transfer less cumbersome; while payment into a customer’s account at a branch other than the branch where his or her account is domiciled is also acceptable.
Electronic banking has brought a lot of benefits to the financial sector and these advantages include convenience, flexibility, speed, efficiency and cost reduction in transactions.
All the same, observers insist that in spite of its remarkable advantages, electronic banking is still fraught with certain weaknesses and deficiencies.
They blame the slow development of e-banking in the country on absence of a legal framework, poor Internet services, absence of enabling infrastructure, dearth of qualified personnel and insecurity of electronic transactions.
The presentation of e-banking has elicited some concerns about the confidentiality and integrity of information, non-repudiation of transactions, authentication of users, access control and fraud as well as cash theft.
Some bank customers in separate interviews in Abuja, expressed divergent viewpoints on the advent of e-banking in the country.
They said that in spite of the attractions, benefits and gains of e-banking, the disadvantages were, nonetheless, alarming and should be looked into.
Mrs Agatha Elijah, a customer of First Bank Plc., said:  “There is no doubt that e-banking has done so much for our country’s banking sector today but  Nigerians are also suffering so much due to this improved technology.
“I had a terrible experience some weeks ago on my way from work when I was accosted by some armed hoodlums who threatened to kill me if I did not produce my ATM card.
“I had no choice than to bring out the card which they collected and made me go to an ATM with them; they emptied my account and then left me stranded.
“If it were in the olden days when we relied on the orthodox banking methods, it would have been a little more difficult for the robbers to achieve their purpose so easily.
“Nigeria is definitely advancing but we are not yet where we ought to be. A lot still needs to be done, especially in terms of improved infrastructure and security.
“If we had functional CCTV (closed-circuit television) cameras in locations where we have ATMs, it would deter these hoodlums from getting close, as they would not want to be caught and prosecuted,’’ she said.
Mr Ernest Kelechi, another customer, said that he recently lost his briefcase which contained his identity cards, several ATM cards, phones, driver’s licence and some cash.
Kelechi recalled that less than 48 hours after he lost his briefcase, he discovered that there was no more cash in his account because his ATM card had been used by a “faceless’’ thief to shop on-line.
“It was a very harrowing experience for me because my rent was due and the money which was stolen from my account was what I wanted to use for my rent.’’
Also narrating his experience, Mr Adakole Atoki, said he was attacked by some armed robbers at an ATM spot, where he was forced to withdraw money at gunpoint until he reached his maximum limits before the villains allowed him to go.
All the same, Miss Agnes Esan, another bank customer, alleged that many banks had been defrauding unsuspecting customers through e-banking services, citing debit alerts for transactions which the customers never solicited.
“When these debit alerts are received, customers, often times, do not know how to challenge the banks on the debits for unsolicited transactions. Millions of hapless Nigerians face this plight every day, while the banks rake in more money,’’ she said.
Another bank customer, Mr Albert Nwankwo, who said that he never encountered any problems with e-banking, however, called on banking regulatory agencies and the government, in particular, to address the security challenges facing the country.
Sharing similar sentiments, analysts underscore the need for banks’ regulators and supervisory agencies to play decisive roles in the management of electronic banking in the country.
They note that the Central Bank of Nigeria (CBN) and Nigerian Deposit Insurance Corporation (NDIC) are both saddled with the responsibility of promoting economic growth by stabilising monetary transactions and the integrity of the payment system.
They, therefore, urge the regulatory agencies to tackle issues relating to the security of transactions and liquidity problems.
However, that is not to suggest that the regulators have been idle in that regard. The NDIC has been collaborating with other safety net participants, mainly the CBN, to supervise the activities of deposit money banks, non-interest banks, micro-finance banks and primary mortgage banks across the country.
As e-banking gains momentum across the country, financial experts underscore the need to improve the extant regulations guiding this genre of banking services.
They say that the country’s commercial laws should be streamlined to recognise electronic documents and signatures as legitimate, while elevating electronic agreements to legally enforceable contracts, in line with global trends.
They add that this will further boost public confidence in electronic banking transactions.
Some of the experts said that commercial banks should be more innovative, while introducing fraud-proof financial instruments in order to stem fraudulent activities associated with e-banking.
They stressed that the introduction of fraud-proof financial instruments and methods would facilitate early detection of frauds, even those perpetrated by bank workers.
Prof. Sheriffdeen Tella of the Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, said that the CBN, Chartered Institute of Bankers and banks must join forces to initiate early fraud detection mechanisms.
“Prior to the advent of electronic banking, banks have been recording huge fraudulent activities, although the frauds, being recorded now, seem to be higher but we can argue that there could be under-reporting before.
“What is important now is that detection of fraud is equally high now and there is the need for continuous innovations in fraud detection and arrests with commensurate punishment,’’ he said.
Tella said that e-banking was the best thing to have happened to the financial world and developing countries, in particular, in spite of its perceptible shortcomings.
He said that e-banking had facilitated easy movement of funds across the globe, with attendant ease of doing business and payment system.
“Electronic banking has aided rapid growth in financial inclusion by encouraging banking habit among different strata of people in the society,’’ he said.
Tella noted that e-banking had facilitated the documentation of movement of funds to such an extent that it was now easy to trace illegal or illicit funds.
“But for electronic banking, the use of Bank Verification Number (BVN) and detecting money laundering would not have been possible,’’ he added.
Echoing a similar viewpoint, Mr Sola Oni, a chartered stockbroker and Chief Executive Officer, Sofunix Investment and Communications, said that introduction of e-banking had helped in putting a stop to the need for customers’ physical presence in banking halls for every bit of transaction.
He said that e-banking had become a global standard with its overriding benefits such as convenience, lower unit cost of operation and higher interest rate as well as efficient service delivery.
Oni stressed that the advantages of e-banking notwithstanding, its security concerns had been a sore point as “many bank customers have lost millions of naira to hackers’’.
He also noted that the cost of setting up any form of automated transaction by a new institution might be prohibitive.
Oni, however, called for the use of strong passwords in e-banking transactions, as against the ones that could be easily decoded, so as to protect bank customers from frauds associated with e-banking transactions.
He also underscored the need for security-based, multi-factor authentication and deployment of community knowledge, whereby banks shared information on fraudulent activities among themselves.
Mr Ibrahim Magu, the Acting Chairman of EFCC, said that the commission had received reports of internet banking fraud, adding that the commission would not relent it efforts to curb e-banking fraud.
He urged the citizens and the media to report cases of e-banking fraud to EFCC for investigation, assuring them that the culprits would be apprehended and prosecuted.