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The Nigerian banking sector, which plays the intermediation role between the surplus and deficit sectors of the economy, propels the development and growth of the economy. Soludo (2004), proposes the reform of the banking sector with the sole objective of moving the economy forward and to re-position the banking system to a sound and reliable catalyst of development and to compete favorably with its counterpart globally.

Prior to the 2005 banking reforms in Nigeria, congestion and long queues were the order of the day in the banks, leaving the banking hall stuffy, untidy and choking as the air conditioners are rendered ineffective. Most times, the queue extends outside the banking hall. Most of the banks have realized the negative effects of this and have worked on them by developing products and services that reduce the inflow of people into the banks, expanding the banking halls and opening up new branches all over the country. This congestion also has to do with the parking spaces of some banks prior to consolidation. Some banks‟ buildings were more or less cubicles or cash centers where customers cannot conveniently park their vehicles or motorcycles to walk in and do transactions, but the recapitalized banks have drastically ensured that the banking premises is such that existing and prospective customers have access to park their vehicles.

Service innovation has been described as something which is carried into practice. These innovations usually have an impact of the customers perception of the organization and the service based on the satisfaction they derive from it (Schumpeter, 1947). There have been considerable changes in banking in recent years so as to become competitive. The development of information innovation and the use of the computer have changed the nature of clerical operations. The posting of ledger accounts and customers statements by hand are now almost forgotten tasks. The pace of change is likely to continue (Patel, 1995; Shoemaker, 1995; Perez et.al, 1988; Lall, 2001; Nelson; 1993). Loyal customers are valuable to abusinesses (Kaganzi, 2003; Agwu et.al, 2008; Hall, 2005; Lundvall, 1992). Therefore creating and maintaining loyalty should be a major goal for businesses. Banks should continuously engage in creating products and services that meet the requirements of their clients to ensure retention of their customers.

Satisfying the ever changing customer needs has become a major concern for most organizations due to the liberalization of the market. Organizations therefore are looking for innovative ways to satisfy customer needs in order to retain them and to maintain competitive advantage. The business environment in which Nigerian firms operate became turbulent in the 1900s due to unfamiliar changes that exerted heavy pressure on the organization (Mulaa, 2004). Some of the changes include the accelerated implementation of economic reforms, the liberalization of the economy, discontinuation of price controls, privatization and commercialization of public sector and increased competition. In this changing environment, organizations have constantly adapted their activities and internal configuration to reflect the new external realities. Failure to do this may put the future success of the organization in jeopardy (Murage, 2001).

 The demand for better-quality services, competitiveness, cost reduction and flexibility seems to be faced by Nigerian banks. The Nigeria Banking Industry has witnessed an amazing growth in terms of number of branches, total asset, deposit base and volume of loans and advances, especially since the deregulation of the sector in the recent past years. In a relatively new delivery channel application with the platforms geared towards overcoming challenges in the traditional banking system. In the Nigerian banking industry today, only sixteen commercial banks meet up with the central banks directives. Therefore these sixteen branches are operating in Asaba, Delta State excluding the micro finance banks.

While addressing these demands, banks seem to be experiencing unprecedented advances in innovation, a changing population workforce, new skills requirements, enhanced capabilities for partnerships and new lines of communication. As a result, these banks have been involved in a fundamental restructuring. The banking sector has already begun implementing new approaches to doing business. They appear to have devised alternative means of service delivery. As a matter of fact, vital lessons could be learned from their experiences.

Riding on the bank of the ever evolving technological advancements to address these services challenges, banks developed and adopted the use of electronic service delivery channels for efficient delivery of their various services. Mwangi (2007), stated that alternative service delivery is changing the way companies work. It seems to open up a vast array of new solutions to service delivery issues. By using electronic service delivery channels, business organizations especially banks appear to be realizing the benefits of focusing their businesses on the things they do best while allowing other firms to deliver other activities and functions they could not do best. Electronic service delivery channels could be a way in which the organizations achieve their objectives of business renewal and providing effective and efficient services. According to Ovum Analyst Findings (2013), alternative service delivery could also be a means of continuing to provide some services or products, which have been provided traditionally by the other firms through or in partnership with organizations outside the organization. These products or services may be provided either to the public or to users within the organization. The banking business in Nigeria today has gone beyond armchair banking era where the customers had to look for the banker to transact business. It is now the era of highly competitive business among banks. It is against this backdrop that the study is conducted, to assess the impact of banking reforms on service delivery after the reform exercise using variables such as customers‟ deposits, profitability, productivity and viability of service, time taken to open accounts, speed of withdrawal and depositing money, quality and quantity of products as indicators of services measured among others. Therefore, this study focus on the Effects of innovation towards meeting customer satisfaction in Nigeria Banking sector.


All the banks in Nigeria have realized that their market environment is rapidly changing and so are the customer needs, tastes and preferences. The quality of the service the banks render is one of the few variables that distinguish them from the competition (Gavigan et. al, 2001). If the customers do not derive maximum utility from the service rendered they will not be satisfied. The customer is regarded as the most important factor in the banking industry and other industries in the economy. Lall, (2001), report that successful organizations are obsessed by service quality. This has become a critically important factor in the buying decision of the customer. An organizations strategy can be described as its overall plan or policy to achieve its goals, amongst them being to satisfy customers, (Georgantzas et. al, 1995).

Service innovation is among the many strategies organizations use to achieve customer satisfaction, retention and increased sales. Innovation has been attributed to the dynamic changes in customer needs and has been attributed as one of the key factors in the success of companies as it involves conversion of an idea into a product or a service (Georgehiou et. al, 2006).

A service cannot be seen, touched, tested or smelled, nor can it be possessed. The intangible process characteristics that define services such as reliability, personal care, attentiveness of staff and their friendliness can only be verified once a service has been bought and consumed. People do not always perform consistently and thus variations from one service to another within the same organization (Dattakumar et. al, 2003).

Organizations can attempt to reduce their inconsistencies through standardization and training, (Kemmis et.al, 1988). Schumpeter (2002) describes service innovation as a service product or service process that is based on some innovation or systematic method that is carried into practice to provide benefit to its developer. Service innovations can for instance be new solutions in the customer interface, new distribution methods, application of innovation in the service process, new forms of operation with the supply chain or new ways to organize and manage services.

The attitude of the staff of the banks towards the customers is also an important measure of service deliverables. The fact remains that no bank can expect to meet global service delivery standard unless it has the best human capital and promotes its competent staff to pivotal positions. Staffing in most banks before the reforms was inadequate and, often times, a staff may be over-loaded with jobs meant for three staff or more. This becomes so obvious when the same staff is called upon to attend to a customer at a point of delivering a service on another product to a different customer. Closely related to the inadequate staff situation was the shortage of experienced staff as most banks preferred cheap labor in the name of “contract staff”. As a result, the quality of their job output in terms of service delivery is sub-standard and customers‟ expectations are not met.


The study is tailored towards the achievement of three main objectives, namely:

1.  Evaluate the innovations used by banks in Lagos metropolis and thereby determine its effect on bank performances pre and post consolidation.

2.        Identify the possible reasons for increase in demand for banking services in Lagos metropolis and high chase for the “new generation banking” services

3.        Recommend appropriate strategies for continue improvement of banking services in the Banking Industry.

4.        Assemblage of storage document authentic enough for scholars and researchers for reference for the ultimate aim of improvement of customer satisfaction in order to increase profitability.


(a)         Which are the most important preferences of customers in order of merit?

(b)        Do innovations in banks in these areas affect demand for banking services?

(c)         Do innovative services by various banks account to reasons for customer preference?

(d)        Does accessibility to this bank branches influence customers‟ preference for their services in Lagos and Abuja. Is response time to customers‟ inquiries and transaction important factor?


1.         Ho:  Customers do not have services preference in major cities Ha: Customers have services preference

2.         Ho:  Customers preferences for services are not continuously increasing Ha:  Customers preferences for services are continuously increasing

3.         Ho:  Response time to customers‟ inquiries and transaction is not an Attraction.

Ha: Response time to customers‟ inquiries and transaction is an Attraction.

4.         Ho:  Innovation is not an important factor-affecting customers‟ Preference for service

Ho: Innovation is an important factor-affecting customers‟ preference for Service


This research study is useful to the banks and banking scholars as a means of identifying and utilizing effectively the factors affecting innovations in relation to customers‟ preference in their demand for the services.

The research therefore aims at assisting management of banks in determining their product package, pricing, promotion and customer relation policies in order to attract and sustain customers that will ultimately lead to higher profitability.


This study is restricted to Lagos (Lagos Mainland and Lagos Island) banking business environment, and the Federal capital city, Abuja. The reasons for chosen these cities are as follows because:

i.     The Head offices of about 95 percent of banks are in Lagos.

ii.  The Bank that does not have their Head Office in Lagos; will probably have it in Abuja and a regional office or head office annexes in these cities.

iii.   Lagos is the nation‟s most industrialized state. Over 70% of the industrial base of the nation is in Lagos and that has led to high demand for banking services.

However, due to economic and time constraints in terms of the huge amount involved in carrying out the study extensively, plus the time frame for submission, the study has been limited to Wema Bank Plc, First Bank Nig. Plc and Guaranty Trust Bank Plc, Diamond Bank Plc, and Oceanic International Bank.

The project was also limited by the constraint of servicing premium data from the public sector/conglomerates attitude of some respondents who had to be persuaded to complete and return questionnaires on time.

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