APPRAISING THE CHALLENGES AND PROSPECTS OF COMPUTERIZATION OF ACCOUNTING INFORMATION SYSTEM ON BANK PERFORMANCE

1.0 Introduction

The most important development of the 20th century, which has significantly influenced business operations, is the emergence of the information Age. And this has dramatically turned around the banking sector as well as other sectors of the economy. Today’s business environment is undergoing rapid changes due to the globalization of business, technological innovations, social and political changes, increased awareness and demands from customers. These changes results in a tough competitive environment in which many organizations cannot survive. The major driving force of these changes is computerization, which is also at the centre of most of the innovations used by banks to succeed or even to survive.

The BOFID decree No.25 of 1991 defined a Bank as “A company duly incorporated in Nigeria and holds a valid banking license issued under the decree for banking business”. It went further to define banking business as “The business of receiving deposits on current account, savings account or other similar account, paying in or collecting cheques, drawn by or paid in by customers, provision of finance or such other business as the Govenor of the Central Bank may, by order as published in the Gazette, designate as banking business.

Computerization as a phenomenon in banking sector is a deviation from the traditional face to face banking. It entails the use of electronic encoded plastic cards in or outside a regular banking environment. The importance of high technology is to initiate, control and monitor banking operations. Competitive trends within the banking industry suggest the need for a more dynamic and innovative approach to the management of information system.

According to Jim Ovia (2002) “The digital revolution has drastically changed the way we offer financial products and services. The traditional ‘brick and mortar’ banking is gradually giving way to an ‘electronic – platform’, which enables the offering of financial services through the electronic media to various customers irrespective of place, time and distance.”

The essential functions performed by banks have remained relatively constant over the past several decades. And it is still characterized by long queues at banking halls, over stretched staff, inaccurate statement of accounts and inefficiency among others. The manual platform contributed immensely to the inefficiency of banks. With this, the Nigerian banks decide to embark on a major re-engineering exercise in line with the paradigm of employing technology as competitive leverage.

In effect, banks by the nature of their businesses are essential in distributing information. They have also noted the efficiency which computerization could bring to their operations. This is due to the tremendous growth on the application of sophisticated automation devices in the banking sector. As such, computer technology has come to be accepted as an indispensable innovation in the banking industry as other fields of human endeavours like Science, and education.

With the Nigerian customers becoming more demanding for the best standard of service and with the trend of competition, the banking industry has witnessed a rapid transformation in recent years. In order for the Nigerian banks to cope with these challenges, they are investing heavily on computers. The Nigerian banking sector has witnessed phenomenal changes, especially since the mid 1980’s and the 1990’s and this have manifested in terms of the volume, complexity of operations, increased innovation and variety in service delivery. The driving factors behind these changes are financial liberalization and regulation.

More Nigerian banks have changed to computerized banking in order to meet up with the increased challenges of the business environment and to effectively compete in the industry in order to gain or retain their market shares. The increased volume, complexity, competitiveness and globalization have given birth to a number of technological developments in the banking industry. This include: automated bank note processing system, MCR cheques, Electronic banking through ATM’s electronic cash/electronic wallet, a computer based system being introduced by the CBN for credit risk management, and the planned automation of the clearing system.

Computerization of banking service is a basic necessity and a survival strategy that enables a bank to maintain or enlarge its market. As a result of the development in automation, banking services, has improved. The above notwithstanding there is need for intensification in order for Nigerian banks to meet up with international standards and also some local needs.

1.1 Statement of the Problem

This study is undertaken to survey the influence of computerization on the efficiency of the banking industry. Recently the computing device has resulted in a lot of positive achievements ranging from greater productivity, profitability and efficiency. The emergence of modern electronic computer is partly to keep pace with modern techniques applicable to modern banking. The most important thing is that it is being used, as a competitive tool by banks. Undoubtedly, computers can enhance work efficiency in banks or I n other industry when used properly.

But it has been discovered that certain banks in the Nigerian banking system have not embraced the much electronic devices which guaranteed greater productivity and profitability. Banking industry like other organizations is profit oriented organisation. The environment for their operation is highly dynamic in nature, which calls for higher level of technology to suit their environment of operation.

Another problem faced by Nigerian banks is the increasing force of competition in the sub-sector. With 25 well-capitalized banks the sub-sector is witnessing intense competition, which has led to various banks seeking areas of competitive advantage, so as to out perform others and create dominance in the market.

A major problem that cannot be denied is the issue of risks associated with computerization, especially with the application of internet and on-ling Banking. These risks cannot be completely eliminated, but can be controlled and managed.

There is also the problem of lack of awareness, managerial challenges in sourcing for competent staff to manage information technology in the banking sub-sector of the economy.

Furthermore, it was discovered that the company error or any mistake in computerization is highly costly to correct. Therefore it has become great challenges on the sub-sector. How computerization can be adopted with minimal risk but with high administrative advantage and high profitability of the banking sector is hanging.

This study is designed to survey the impact of computerization in the banking industry and how it has created opportunities as well as threat to the Guarantee Trust Bank. Hence, the problem of the study remained, how can computerization errors be corrected or manage to reduce the administrative cost of the banking industry and what is the magnitude of computerization and banking performance using Guarantee Trust Banking as case study.

1.2 Objective of the Study

1. To achieve the purpose of this work, the objectives of the study are as follows:
2. To determine the extent of improvement in the performance of banks as a result of computerization.
3. To examine the problems associated with the application of computer in the Banking Industry (a case study of Guaranteed Trust Bank Plc).
4. To find out the prospects of computerization in the Nigeria banking industry.

1.3 Significance of the Study

The researcher is convinced that the study when completed will be of significance in the following ways:

1. It will expose the researcher to some of the factors that are hindering the banking sector from being fully automated.
2. Help us to identify the extent to which Nigerian banks have gone in improving their banking services and performances by introducing automation techniques in their banking services.
3. The study would help the bank to reduce the high incidence of frauds, forgeries and errors that has given the banking industry nightmares.
4. The study would be of immense significance to the researcher as a partial fulfillment for the award of a B.Sc. Degree in Banking and Finance.

1.4 Research Question

To properly evaluate the objectives of this study, it becomes pertinent to ask some relevant questions as follows:

1. What are the prospects of computerization in Nigerian banking industry?
2. Does a computerization bank have an edge over an un-computerized bank?
3. Has there been any remarkable improvement in the performance of bank as a result of computerization.
4. Does the application of computer in banking operation aid fraud in banks?

1.5 Statement of Hypotheses

The following hypotheses are formulated for testing in order to achieve the objectives of this study.

1. Ho: There is no significant relationship between computerization of banks services and the performance of banks.
   HI: There is a significant relationship between computerization of banks services and the performance of banks.
2. HO: There is no significant relationship between automation of banks and customers patronage.
   HI: There is a significant relationship between automation of banks and customers patronage.

1.6 Assumptions

1. It is assumed that the expected questionnaire will be filled and submitted.
2. It is assumed that the returned questionnaire is to true representation of the population.
3. It is assumed that the sample size used is accurate and adequate.

1.7 Scope and Limitation of the Study

This study is meant to cover the efficiency of computerization in banks. How its errors can be corrected and how to eliminate fraud. It also covers the area of financial intermediation and payment services, hence only electronic banking services are considered.

1.8 Limitations of the Study are as follows:

Financial Constraint:

Lack of funds on the part of the researcher posed a serious hindrance for a down to earth coverage of banking. Because transportation as an important component or data/information collection requires much financing.

Time Constraints:

The Limited time of one semester for the conduct of this research is too small. This therefore does not call for more coverage in the area specified.

Availability of Data:

To ensure the validity and reliability in data collection, the study was Limited to Guarantee Trust Bank one of the banks that have introduced computer services in its operations.

The study would be of immense significance to the researcher as a partial fulfillment for the award of a B.Sc. Degree in Banking and Finance.

1.8 Organisation of the Study

The project is divided into five (5) chapters. Chapter one is introductory chapter, consisting of Statement of the Problems, Objectives of the study, Research Questions, Hypotheses, Scope, Limitations, Significance of the Study, and organisation of the Study.

Chapter two deals with the review of related literature in the field of study. Chapter three deals with research methodology and design, population and sample size, method of data collection and method of data analysis as used in the study.

Chapter four deals with data presentation, analysis and interpretation of data collected. Finally, chapter five presents the summary of the study, conclusion and recommendations.

1.9 Definition of Terms

Computer:

A computer is an electronic device which can accept data in a prescribed form, store, process the data and supply the results of the processed data in a specified format as information or as signals, to control automatically some other machines or process (Umoh and Inyang 2003:1).

Computerization:

This is the term used to describe the use or application of computer system in the process of executing a task (Umoh 2003:4).

Bank:

Section 41(1) of the banking decree No. 1 of 1969 defined the terms as “any person who carries on banking business and includes a commercial bank, an acceptance house, discount house and financial institutions.

Banking Business:

Section 61 of BOFID defines “banking business “as “the business of receiving deposits on current account, saving account or other similar accounts, paying or collecting cheques drawn by or paid in by customers, provision of finance or such other publish in the gazette designated as banking business”.

Profitability:

This refers to gain or reward earn from the operation by the business organisation. In banking industries, profitability is measured in terms of profit margin which is interest income minus interest expenses (i.e. profit margin = interest income – interest expenses) (I. M. PANDEY 2005, 704).

Banking Industry:

These is the combination of two or more financial institution license under degree to carryout banking business and make available financial services in the economy. Their services are similar and interrelated to each other (E. S. Ekezie 2002, 69).

Electronic Banking:

This is a kind of banking that involves electronic form of a money transmission. It involved the use of computer network in dispensing cash and transferring of funds (CBN Bullion VOl. 24, 2005; 35).