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1.1       Background to the Study

The background of electronic payments can be traced back to the 1870’s when Western Union (WU) introduced Electronic Fund Transfer (ETF). EFT is a system of transferring money from one bank account directly to another without any paper money changing hands. One of the most widely-used EFT programs is Direct Deposit, in which payroll is deposited straight into an employee's bank account. However, EFT refers to any transfer of funds initiated through an electronic terminal, including credit or debit card, Automatic Teller Machine (ATM), Wire Transfer done via an international banking network such as SWIFT and Point-Of-Sale (POS) transactions. It is used for both credit transfers, such as payroll payments and for debit transfers,  

Despite WU’s revolutionary on ETF, the method of transferring money electronically remained unchanged for close to sixty years. Then, in 1918, the Federal Reserve Bank of America began transferring money via telegraph. With the advancement in technology, banks and consumers became more reliant on computers to conduct transactions. The advent of Internet has initiated an electronic revolution in the global banking sector. The dynamic and flexible nature of this communication channel as well as its ubiquitous reach has helped in leveraging a variety of banking activities.

Electronic payment, also known as EFT is simply the use of electronic means to transfer funds directly from one account to another, rather than by cheque or cash. In the Nigeria context, electronic -payment is effecting payments from one end to another and through the medium of the computer without manual intervention beyond inputting the payment data, it is the ability to pay the suppliers, vendors and staff salaries electronically at the touch of a computer button (Agba, 2010).

Electronic payment systems can be used to have your paycheck deposited directly into your bank  account, withdraw money from your checking account from an Automated Teller Machine with a Personal Identification Number (PIN), at your convenience day or night, instruct your bank to automatically pay certain monthly bills or debit a standing order from your account,  even auto loan or your mortgage payment can be done with electronic payment systems, have the bank  transfer funds each month from your checking account to your  pension or mutual fund account, have your government social security or e- dividend benefits check or your tax payment made directly into your account, buy groceries, gasoline and other purchases at the Point-Of-Sale (POS), using a debit  card rather than cash, credit or a personal check.

Use a smart card (credit card) with a prepaid amount of money embedded in it for use instead of cash, can also be used for expressway road toll, or on college campuses at the library's photocopy machine or bookstores, Use your computer and personal finance software to coordinate your total personal financial management process, integrating data and activities related to people across the globe utilize trending methods when they adopt a system of payment that they need and want. Innovation is the natural inclination to develop and use systems to accomplish pragmatic solutions for everyday task. The evolution of electronic payment systems follows available technology, which can accomplish the desirable outcome of accepting currency in exchange for goods and services.

The term electronic payment can be referred narrowly to e-commerce - a payment for buying and selling goods and services offered through the internet, or broadly to any type of  EFT (Massimo & Garcia 2008). Also the term electronic-payment covers both computer and telephone payment. It refers to the use of information and communication technology by financial institutions to provide services and manage customer relationship more quickly and most satisfactorily (Charity-Commission, 2003). Burr (1996) describes it as an electronic connection between the bank and the customer in order to prepare, manage and control financial transactions. Electronic payment according to Al-Abed (2003) is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick and-mortar institution. Lustsik (2004) describes electronic payment as a variety of the following platforms: Internet payment, telephone payment, mobile phone payment, and Personal Computer payment.

For the purpose of this research, electronic payment system is the carrying out of banking services and products through the use of electronic means irrespective of place, time, destination or distance. Such products and services can include cash withdrawal or, account management, the provision of financial advice, electronic bill payment, and the provision of other electronic payment products and services such as electronic money. The importance of this 21st century banking are numerous. The introduction electronic payment system will increase the potentials of business to attain greater productivity and profitability, as trading and transactions which would be carried out via communication networks, will be a lot faster and distance would no longer be barrier to effective transactions (Fagbuyi, 2003).

According to Sergeant (2000), the benefits of electronic banking are in manifold and are to be seen from the point view of the banks themselves. Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is also defined as the number of customers, or percentage of total customers, whose reported experience with a firm, its products or its services (ratings) exceeds specified satisfaction goals. Another definition of customer satisfaction is it refers to the extent to which customers are happy with the products and/or services provided by a business. Further definition of customer satisfaction is it is a term generally used to measure a customer's perception of a company's products and/or services. It's not a straight forward science however, as Customer satisfaction will vary from person to person, depending on a whole host of variables which may be both psychological and physical.

Generally, technology is making a tremendous impact on service companies and the financial services sector is no exception. The application of information and communication technology concepts, techniques, policies and implementation strategies to banking services has become a subject of fundamentals importance and concerns to all banks and indeed a prerequisite for local and global competitiveness in banking industry. As a result of this technological improvement business environment in financial sector is extremely dynamic and experience tremendous changes and demands banks to serve their customers electronically. Electronic payment started from the use of ATM. Finland is the first country in the world to have taken a lead in electronic payment. Electronic payment has been widely used in developed and developing countries – Nigeria inclusive. It is on this, the study focuses on the effect of electronic payment system on banks customers’ satisfaction in Nigeria.

1.2       Statement of the Problem

Technology forms the backbone for better results in offering banking services. This is articulated in the Hong Kong and Shanghai Banking Corporation (HSBC) report of 2000, which stated that benefits from technology are more than three times its cost. Banking transactions want continuous innovation in order to meet the yearnings and aspirations of the ever-demanding customers. Hence, banks need to roll out new products and services quickly and effectively, using latest cutting edge technology (Augusto, 2002).

The benefits banks derive from electronic payment products and services delivery is improved efficiency and effectiveness of their operations so that more transactions can be processed faster and most conveniently, which will undoubtedly impact significantly on the overall performance of the banks. The customers on the other hand, stand to enjoy the benefit of quick service delivery, reduced frequency of going to banks physically and reduced cash handling, which will give rise to higher volume of turnover. However, these developments in the Nigerian banking industry seem not to have achieved their aims. Queues are still seen in the banking halls, bank customers still handle too much cash, and hardly people talk about the electronic banking products that are available in Nigeria. The problem here is: how are these customers really enjoying the services? Related to the problem, empirical evidence implies that customers’ patronage for and reaction to a particular product depend on their level of understanding of what the product can do.

The advent of electronic payment in to the banking sector ought to bring flexibility; customer satisfaction thereby enhancing the banks’ profitability but the reverse is the case. People are generally afraid of use of ATM because of risk of failure, complexity, security, and lack of personalized service. It is revealed that 47% of banking customers that used electronic products and services are not satisfied with the quality of the products and efficiency of the delivery. The reasons are machines out of order, out of cash, no printing statements, cards get stocked in the machine, frequent breakdown of ATM service, lack of sufficient technicians in all banks to solve breakdown of ATM machine, lack of sufficient alternative system which substitute ATM service for the customers when temporary problem happen in the machine, lack of convenience of electronic service, lack of reliable mobile payment service, under-development of technological

Infrastructure, low level of relevant knowledge creation and innovation, interruption of network, lack of suitable and regulatory frame work , resistance to changes in technology among customers and service providers as a result of fear of risks.

The ATMs are also saddled with consistent breakdowns and the internet services to easily access are difficult as far as the ordinary customer is concerned. All these have almost negated the introduction of the electronic payment services in general. For the above-mentioned reasons, this study is undertaken to assess the effect of electronic payment system on banks customers’ satisfaction in Nigeria.

1.3       Objective of the Study

The main objective of the study is to assess the effect of electronic payment system on banks customers’ satisfaction in Nigeria. Specific objectives are to:

i.) Evaluate the effect of electronic payment system on banks operations in Nigeria

ii.) Examine the effect of electronic payment system on banks customer relationship

iii.) Assess the availability of electronic payment facilities to banks customers

vi.) Ascertain the knowledge and patronage of electronic payment products by banks customers.

v.) Examine the effectiveness of the usage of electronic payment facilities.

iv.) Analyze the challenges facing electronic payment system in Nigeria.

1.4       Statement of Research Questions

The questions below guided the research.

i) What is the effect of electronic payment systems on banks customers’ service delivery?

ii) What are the possible solutions to electronic payment system challenges in Nigeria?

iii) To what extent will electronic payment systems improve the profitability of banks in Nigeria?

iv) Are customers aware of the availability of all electronic payment systems facilities?

v) How effective are these facilities being put to use to benefit customers,

vi) In what ways does the level of customers understanding of electronic payment has                               reduced cycle time for customers transactions?

vii) What are the technical and operational challenges facing the adoption of electronic payment system in Nigeria?

1.5       Statement of Research Hypothesis

The hypothesis below was formulated and tested in this study

Ho: There is no significant relationship between electronic payment system and banks customers’ satisfaction in Nigeria

1.6       Significance of Study

First, the study could be useful to Nigerian deposit money banks in order to see the effect of electronic payment system on their customers’ satisfaction in comparison with the ordinary Mortar and brick banking system.

Secondly, it may help in understanding what attitude banks customers’ have towards electronic payment systems, what actions should the banks take in order to benefits from opportunities and how to overcome the challenges.

Thirdly, the study can be used by other researcher as a reference guide to study further in this or related areas or to serve as a reading material for anyone who is interested.

Fourthly, it could go a long way to help the banks achieve its stated objectives and in the long run increase shareholder’s wealth.

Lastly, this research could alert banking industry in Nigeria on the problems in electronic payments and proffer solutions in order to get intended customers satisfaction as electronic banking system services can be said to be at its infant stage in the Nigerian banking Industry.

1.7       Scope of the Study

The study examines the effect of electronic payment system on banks customers’ satisfaction in Nigeria as it relates to: - Electronic payment options used by bank customers as payment options for goods and services including POS, Debit cards, Credit cards transactions, internet banking, e-cheque, Tele banking, etc. The study covered the period 1997 to 2017 since advanced technologies in relation to banking business are springing up.

1.8       Definition of Key Terms

The key terms used in this study are briefly explained below:-

ATM: Automated Teller Machine (ATM) is a machine where cash withdrawal can be made over the machine without going in to the banking hall. It also be used to buy recharge cards, pay bills, make card less withdrawal and transfer funds. It can be accessed 24 hours/7 days with account balance enquiry, mini account statements.

Cards: These are the most common form of electronic payments. There are three types of cards: credit, debit and prepaid cards. They are typically made plastics and have magnetic stripe on the back of the card. The customer gives the merchant the card while shopping, and the merchant swipes the card through a terminal or puts the relevant information into the data base. This is then delivered to the credit cards company, who relays a confirmation message back to the merchant that purchase was completed. This process typically takes only few seconds to complete. Credit cards are popular form of electronic payment because you can use them almost anywhere for almost any kind of purchase without having to carry physical cash about. 

Customer Satisfaction: According to Hansemark and Albinsson, satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire. Oliver defined satisfaction as a judgment following a consumption experience-it is the consumer’s judgment that a product provided (or is providing) a pleasurable level of consumption-related fulfillment. Kotler defined satisfaction as a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations. Satisfaction can be associated with feelings of acceptance, happiness, relief, excitement, and delight. Most research confirms that the confirmation or disconfirmation of pre-consumption expectations is the essential determinant of satisfaction. This means consumption. During consumption, customers experience the product performance and compare it to their expected product performance level. Satisfaction judgments are then formed based on this comparison. The resulting judgment is labelled positive disconfirmation if the performance is better than expected, negative disconfirmation if it is worse than expected and simple confirmation if it is as expected. In short, customers evaluate product performance by comparing what they expected with what they believe they received

Debit Cards: Debit cards are also known as check cards. Debit cards look like credit cards or ATM (Automated teller machine) cards, but operate like cash or a personal check. Debit cards are different from credit cards. While a credit card is a way to "pay later," a debit card is a way to "pay now." When you use a debit card, your money is quickly deducted from your checking or savings account. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants.

E-Cheque: An e-Cheque is the electronic version or representation of paper cheque. The Information and Legal Framework on the E-Cheque is the same as that of the paper cheques. It can now be used in place of paper cheques to do any and all remote transactions. An E-cheque work the same way a cheque does, the cheque writer "writes"the e-Cheque using one of many types of electronic devices and "gives" the e- Cheque to the payee electronically. The payee "deposits" the Electronic Cheque receives credit, and the payee's bank "clears" the e-Cheque to the paying bank. The paying bank validates the e-Cheque and then "charges" the check writer's account for the check.

Electronic Money: A generic name for plastic money and other forms of e-payments such as: Smart Card/Valu cards: Smartcard is already operational in Nigeria under the brand name of Valucard. The company (Smartcard Nigeria Plc.) acts as settlement agent as well as Coordinate hardware and software supply. Smartcard transactions are not yet online.

Electronic Fund Transfer (EFT): This is an electronic oriented payment mechanism. It allows customers’ accounts to be credited electronically within 24 hours (Ugwu, et al, 1999). Mark (1975) classified the basic elements of ETF system into three: Clearing network characteristics, remote service or points of sales characteristics and pre authorized debit and/or credit characteristics.

i. Clearing network characteristics: This deal with automated clearing service and this manifest in the use of Magnetic Ink Character Reader (MICR) in Nigeria.

ii. The remote service or point of sale characteristics address the units of banking activities that transfer funds from one bank current or savings accounts to another bank current or savings account. The transfer is always authorized and the record is kept on file of that authorization. There is also a second generation remote service unit that is capable of electronically placing a third party into the customer-financial institution communication link. This is known as POS (Point Of Sale Terminals). POS terminals handle cheque verification, credit authorization, cash deposit and withdrawal, and cash payment. This enhances electronic fund transfer at the point of sale (EFT POS). EFTPOS enables a customer’s account to be debited immediately with the cost of purchase in an outlet such as a supermarket or petrol station (Ugwu, et al, 1999). The purchase price is debited on the buyer’s account and credited on the seller’s account.

iii. Pre-authorized debit and/or credit characteristics of the EFT manifest in the use of cards. Plastics cards are used to identify customers and pass same to machine to initiate a paper or electronic payment. Electronic cards are microchips that store electronic card, which is only cheque guaranteed (Ugwu, et al 1999). Financial institutions issue credit cards in order to provide credit facilities to their customer and debit cards to ease payment. Credit cards are used as means of borrowing or as a convenient method of payment. Debit card is a charge card designed as a convenient method of payment in place of cash or cheque.

File Transfer Protocol (FTP):  It is the standard protocol for carrying files from computer to computer on the internet.

Similar to Telnet, FIP allows you access to remote machines. The internet enables electronic banking through connections to the bank for a wide variety of services.

Internet Banking: Internet banking allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or society. It may include of any transactions related to online usage. Banks increasingly operate websites through which customers are able not only to inquire about account balances, interest and exchange rates but also to conduct a range of transactions. Unfortunately, data on Internet banking are scarce, and differences in definitions make cross-country comparisons difficult.

Mobile Banking: Mobile banking (also known as M-banking, ) is a term used for performing balance checks, account transactions, payments, credit applications and other banking transactions through a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered over SMS, a service known as SMS banking. Mobile banking is used in many parts of the world with little or no infrastructure, especially remote and rural areas. This aspect of mobile commerce is also popular in countries where most of their population is un-banked. In most of these places, banks can only be found in big cities, and customers have to travel hundreds of miles to the nearest bank. The scope of offered services may include facilities to conduct, Bank and stock market transactions, to administer accounts and to access customized information.

Mobile Payments: Although the number of transactions that can be carried out via a cell phone are limited, they can be used to facilitate some electronic transactions. Mobile phone manufacturers have enable their phones’ software to allow their customers to have a bank account on their cell phones numbers and can the funds in their accounts to carry out transactions.

Personal Computer (PC) Banking: PC banking   refers to use of computer hardware, software and telecommunications to enables retail customers’ access to both specific account and general information on Bank’s products and services through a personal computer.

POS: Point of sale (POS) also sometimes referred to as point of purchase (POP) or checkout is the location where a transaction occurs. A ‘checkout’ refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register. A POS terminal manages the selling process by a salesperson accessible interface. The same system allows the creation and printing of the receipt. POS systems record sales for business.

World Wide Web: This is the services in which anyone with information or goods to sell, advertise or gives away could place the information in a place called a ‘website’. Those in need for such information will then use special software called the “Browser” to link up with websites and read or download any information they want.

Tele Banking: The undertaking of a host of banking related services including financial transactions from the convenience of customers chosen place anywhere across the GLOBE and any time of date and night has now been made possible by introducing on-line Telebanking services. By dialing the given Telebanking number through a landline or a mobile from anywhere, the customer gets the following facilities:- Automatic balance voice out for the default account, Balance inquiry and transaction inquiry of all term deposit account statement of account by Fax, e-mail or ordinary mail Cheque book request and Stop payment which is on-line.

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