The Impact of Information and Communication Technology (Ict) on Profitability in the Nigeria Banking Industry: Focus on Some Selected Banks

Topics: Bank, Online banking, Banking Pages: 12 (4022 words) Published: September 1, 2011



AUGUST, 2011

Commercial banks—assaulted by the pressures of globalization, competition from non-banking financial institutions, and volatile market dynamics—are constantly seeking new ways to add value to their services. The question “What drives performance?” is at the top of the minds of managers and policy makers alike, as the first step in understanding superior performance and, hence, striving for it. Substantial research efforts have gone into addressing this question, starting from the strategic level and going down to operational details. This paper seeks to explore the contribution of Information and Communication Technology (ICT) on Profitability in the Nigerian Banking Industry. It focuses specifically on Union Bank Nigeria Plc (UBN), First Bank Plc(FBN) and United Bank for Africa(UBA) which are among the few banks that have transformed from total manual banking to the present ICT driven Banking. Seven (7) year profit/loss before tax of these banks is used as the main data for this study. Comparative analysis of profit/loss for the years in view is carried out and significant changes point to the fact that Information and Communication Technology have impacted positively on profitability. It is therefore recommended that banks should pay serious attention to changes in Information and Communication Technology and apply same as it relates to their industry.

In recent time, Information and Communication Technology (ICT), which basically involves the use of electronic gadgets especially computers for storing, analyzing and distributing data, is having a dramatic influence on almost all aspects of individual lives and that of the national economy including the banking sector. The increasing use of ICT has allowed for integration of different economic units in a spectacular way. This phenomenon is not only applicable to Nigeria but other economies of the world, though the levels of their usage differ. In Nigeria, ICT usage especially in the banking sector has considerably improved, even though it may not have been as high as those observed for advanced countries (Adeoti, 2005; Adeyemi, 2006). Today’s business environment is very dynamic and has undergone rapid changes as a result of technological innovation, increased awareness and demands from customers. Business organizations especially the banking industry of the 21st century operates in a complex and competitive environment characterized by these changing conditions and highly unpredictable economic climate. Information and Communication Technology (ICT) is at the centre of this global change curve. Laudon and Laudon, (1991) contend that managers cannot ignore Information Systems because they play a critical role in contemporary organization. The application of information and communication technology concepts, techniques, policies and implementation strategies to banking services has become a subject of fundamental importance and concern to all banks and indeed a prerequisite for local and global competitiveness. ICT directly affects how managers decide, how they plan and what products and services are offered in the banking industry. It has continued to change the way banks and their corporate relationships are organized worldwide and the variety of innovative devices available to enhance the speed and quality of service delivery. Harold and Jeff (1995) contend that financial service providers should modify their traditional operating practices to remain viable in the 1990s and the decades that follow. They claim that the most significant shortcoming in the banking industry today is a wide spread failure on the part of senior management in...

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