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The Effect Of Technological Innovation On The Performance Of Money Deposit Banks. A Case Study Of Uba, Enugu State.

Abstract

This study was on the effect of technological innovation on the performance of money deposit banks. The total population for the study is 200 staff of UBA, Enugu state was selected randomly. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up human resource managers, accountants, customer care officers and marketers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies.

Chapter one

Introduction

  • Background of the study

Innovation is an important phenomenon in any modern economy and it allows firms to adopt a new and better process of performing their operations. In the financial service industry, innovation is viewed as the act of creating and popularizing new or reformed financial instruments, technologies, institutions and markets which facilitate access to information, trading and means of payment (Sloan, 2003). Innovation generally is critical for development of firms and individuals portraying new ideas, quality and convenience. According to Nofie (2011) innovation in the financial sector is the arrival of a new or better product and or process that lower the cost of producing existing financial services or transaction. Financial innovations are used by banks as formidable strategic variables to outstrip the competition and have become an essential means for the bank to improve its performance, growth and to maintain its effectiveness on the market (Batiz-Lazo & Woldesenbet, 2006). In a highly turbulent environment, a successful innovation, creating a unique competitive position can give a bank a competitive advantage and lead to a superior financial performance (Roberts &Amit, 2003).

Patronage and usage of financial innovation (adoption) is more determined by customer’s acceptance than by the seller offerings. Customers will want to examine the level of their risk exposure, actual and implied transactional costs, the ‘carrot’ (financial incentives) and associated benefits attached to each financial innovation product before deciding to use it or not. In other words, fraud risks, financial incentives, turnaround time and transactional costs are taken into consideration before customers decide to adopt. In the view of Abubarka and Tasmin (2012), it was the issues of increasing demand to meet customers’ expectation for customer service delivery, trustworthiness of the information system and competition in financial services that spur innovation revolution. Woldie, Hinson, Iddrisu & Boateng (2008) observed that it is one thing to innovate, but entirely another for the innovation to be accepted by consumers. Customer dissatisfaction with branch banking because of long queuing and poor customer service is an important reason for the rapid movement to electronic delivery (Karjaluoto, Mattila & Pento, 2002). It is quite evident from these studies that enhancing innovation for qualitative prompt service delivery in the banking industry is a must in a rapidly changing market place.

World trade liberation and globalization have impacts on banking product development and improved qualitative service delivery. It spurred the development of various financial innovation and emerging financial instruments. There has been different type of innovations in the banking industry, such as securitization, derivatives, margin loans etc. None of these has far reaching implication in Nigeria, like technological innovation. Akamavi (2005) posits that innovation in the financial services sector was consequence of recent fundamental banking reforms which include: deregulation, recapitalization, proliferation, increasing competition and commercial growth all over the world. Financial Innovation in this study is therefore defined as the use of technology to communicate instructions and receive information from a financial institution where an account is held. Financial innovation is the provision of banking services to customers through telecommunication technology (Ovia, 2005). This service includes the system that enables financial institution customers; individuals or business to access their accounts, transact, or obtain information on financial products and services through a public or private network (Pradhah & Mishra, 2008). These facilities are mainly; ATM, POS, EFT, MB and IB. Currently, financial innovation in Nigeria has changed the way services are delivered by the banking sectors to their customers. It has lowered operating costs, improve customer service delivery, help to retain customer, reduce branch traffics, and downsize the number of branch staff (Parisa, 2006).The rapid pace of technological innovation coupled with merger and acquisition in the financial service industry brought about more sophisticated and more demanding customers (Adeoti, 2008). The wide spread of ICT gadgets, systems and process has enabled and underpinned the implementation and adoption of financial innovation products which prove timely for the National economic and financial development and market sophistication in Nigeria.

Statement of the problem

The fast-changing competitive environment, globalization, economic changes, regulation, privatization and the likes, demand that commercial banks are run efficiently and effectively by continuously engaging in financial innovations (Auta, 2010). In Nigeria, emergence of new technologies, products, processes, markets and competition places demand on any deposit money bank to apply skills and technology necessary to remain competitive and achieve competitive advantage, by winning more customers while retaining old ones. Though it is undeniable that innovation is important in expanding financial inclusion and deepening (Bamidele, 2006), the customers seems not to be enthusiastic about using it therefore, the level and rate of financial innovation 9 adoption has not being encouraging in Nigeria, very low (Agboola, 2006), despite various financial incentives to entice old customers and attract new customers to embrace and use financial innovation thereby causing low financial returns, poor growth rate and concern in academic, finance, commerce and economic circles. In Nigeria, long lines, transaction errors, queuing, insecurity and network failures have been said to be the most frequent problems in using innovative banking services and consequent associated loss of time and money constitute fraud and security risk. This highly lower customer’s perception on the quality of service offered and hence reduces the customers’ patronage and financial innovations adoption (Onaolapo, Salami & Oyedokum, 2011). It is obvious that many consumers are not willing to use innovative banking services in spite of the banks’ investments and efforts in this domain. This has made it clear to some researchers like Lawrence (2010) and Agbemabiese, Patrick and Joseph (2015) that recognizing effective factors on adoption and usage of these products is really important, to strategize for bailout, justify huge resources committed and guarantee growth of the banks. In order to encourage further financial innovation adoption in developing countries, a better understanding of the barriers and drivers of financial innovation adoption is crucial (Zhao, 2008). By gaining an in-depth understanding of the factors and conditions that influence developing country’s ability to fully adopt and realize its benefits, strategic options can be generated for the researchers and practitioners regarding how to promote the growth of banks and financial innovation in the developing countries. Also despite the recognized importance of financial innovations and an extensive descriptive literature, there have been surprisingly few empirical studies in Nigeria. This situation has denied the banks the much needed information (Soludo, 2008). According to Ndlovu and Siyavora (2014), financial innovation has had a positive impact on bank efficiency but its magnitude of adoption by users has been relatively low, denying banks of good timely returns on their investment. While financial innovation services are numerous in number, there is not enough evidence of consumer acceptance and their stance towards the adoption of the services (Muniruddeen, 2007). In order to accept that 10 financial innovation has fully gained prominence in Nigeria, customer’s acceptance, confidence and adoption of the system need to be empirically validated. This study therefore intends to determine drivers and barriers of financial innovations so that appropriate remedial action could be taken where needed to boost financial innovation adoption that is currently considered at lower ebb among the customers of Deposit Money Banks in Nigeria.

Objective of the study

The objectives of the study are;

  1. To determine effect of financial incentives on technological innovation adoption in Deposit money Banks in Nigeria
  2. To explore the extent to which fraud risk affect technological innovation adoption in Deposit Money Banks in Nigeria
  3. To determine the effect of turnaround time on technological innovation adoption in Deposit Money Banks in Nigeria.
  4. To appraise influence of transaction cost on technological innovation adoption in Deposit Money Banks in Nigeria.

Research hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0:   there is no effect of financial incentives on technological innovation adoption in Deposit money Banks in Nigeria.

H1: there is effect of financial incentives on technological innovation adoption in Deposit money Banks in Nigeria.

H02: there is no influence of transaction cost on technological innovation adoption in Deposit Money Banks in Nigeria.

H2: there is influence of transaction cost on technological innovation adoption in Deposit Money Banks in Nigeria

Significance of the study

The research work becomes important in view of the recent trend in global financial sector where technology culture is in vogue and various governments are embarking on financial reformative processes. The study appraised the patronage and utilization of financial innovation in Nigeria Deposit Money Banks within the last 10 years by the customers. This becomes important in view of the government involvement and interest in financial deepening and inclusion; more so the level of resources commitment by banks to enhance customers’ satisfaction, sharpen their competitive edge and the growth of e-commerce that is dwindling (Agboola, 2006; Soludo, 2008; Onaolapo, et al, 2011.). The study is also relevant to the following stakeholders; Researchers, Practitioners and Policy makers.

 Scope and limitation of the study

The scope of the study covers the effect of technological innovation on the performance of money deposit banks. The researcher encounters some constrain which limited the scope of the study;

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS

Technological innovation: A technological innovation is a new or improved product or process whose technological characteristics are significantly different from before.

Implemented technological product innovations are new products (product innovations) or processes in application (process innovations) that have been brought to market.

Money deposit: A deposit is a financial term that means money held at a bank. A deposit is a transaction involving a transfer of money to another party for safekeeping. However, a deposit can refer to a portion of money used as security or collateral for the delivery of a good

Performance: Bank performance’ may be defined as the reflection of the way in which the resources of a bank are used in a form which enables it to achieve its objectives.

 

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