THE IMPACT OF INFORMATION TECHNOLOGY ON BANKING OPERATIONS

ABSTRACT

The importance of the banking industry to every economy cannot be ignored. A bank is a place where all the financial transactions of an economy impinge. On the other hand, the impact of computers in alleviating some of the problems encountered by banks cannot be over-emphasised. The computer, seen as one of the most needed tools for improving banking transactions, has still not been fully adopted by all banks in the Nigerian economy. Some banks see it merely as a means of upgrading their cheque clearing, transactions and record-keeping for customers seeking loans, advances and other services. Banks that have gone into computerisation have generally observed that its positive prospects surpass its negative ones. This research project therefore aims at showing the actual contributions of the computer to banking industry operations and the negative effects experienced by banks that are yet to computerise fully. In examining these prospects and problems, the researcher relied on both primary and secondary data, together with other related literature on the topic; being a case study, the research also drew its sample from First Bank of Nigeria Plc., specifically from the accounts and computer departments. The recommendations and conclusions are directed at encouraging banks and other financial institutions to expand their use of computers in their transactions. A general summary shows that the contribution of computerisation has indeed led to development in the industry, and that computer use has increased the efficiency and effectiveness of banking operations.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

In recent times, Information Technology (IT), which involves the use of electronic gadgets, especially computers, for storing, analysing and distributing data, has had a dramatic influence on almost every aspect of individual life and of the national economy, the banking sector inclusive. The increasing use of IT has allowed for the integration of different economic units in a way that was previously unimaginable. This phenomenon is not peculiar to Nigeria; it is observable in other economies of the world as well, though the pace and depth of adoption differ from one country to another. In Nigeria, IT usage in the banking sector has continued to deepen rapidly in the years following the COVID-19 pandemic, even though the country still lags behind advanced economies in some respects (Ohiani, 2021; Ajao, Ayenigba & Aborisade, 2024).

The use of IT in the banking sector became of interest to this study because of the significant role it plays in the economy. Digital financial services help stimulate economic growth by directing funds to economic agents that need them for productive activities, a function that is vital for any economy seeking meaningful growth, since it brings borrowers and lenders of financial resources together more efficiently than would be possible if they had to relate directly with one another (Kolawole, Muritala, Akande & Adekunle, 2024). In essence, the banking sector acts as a bridge connecting savers and investors in the economy, hence the continuing interest of the Central Bank of Nigeria (CBN) in driving further reforms around digital financial inclusion (Chinoda & Kapingura, 2023).

The banking industry remains one of the most critical sectors of the economy, and its contribution to the pace of development and economic growth can hardly be fully quantified. Changes in today's world reveal that natural factors alone can no longer equip the banking sector to grapple with the exigencies of global competition. Information, flexibility and fast response continue to be key factors for coping with global competition, and information and communication technology plays a critical role in these areas for quality enhancement (Ajao, Ayenigba & Aborisade, 2024). In their regression-based study of Nigerian commercial banks, Ajao et al. (2024) found that the adoption of core IT tools was significantly and positively associated with measures of bank performance, lending strong empirical support to the view that information has become as important a factor of production for banks as land, labour and capital traditionally have been.

The significance of IT to today's successful organisation cannot be underestimated. It plays a major role in the success of an organisation in a highly competitive environment by providing easy and fast means of collecting, storing, retrieving, processing, transmitting and distributing information. A firm may pursue several strategies on its path to success, but fast and easy access to information through IT is important because it influences virtually every other success factor, and competitive strategies can hardly be implemented without its support. This is particularly true of financial institutions, including commercial banks, which are highly information-intensive; the use of IT by such institutions for the collection, storage, retrieval, processing, transmission and distribution of information should therefore have an extensive bearing on their overall performance (Kolawole et al., 2024).

The evolution and recent developments in information and communication technology have reshaped the way organisations operate and do business. The emergence of the internet and mobile telephony has been the driving force behind this development, so much so that manual and traditional forms of doing business have continued to give way to sophisticated technology based on automation and the interconnection of computers and other electronic devices. Ledger books, paper invoices, printed materials and physical business trips are steadily being replaced with online billing and payments, elaborate websites carrying product information, and real-time virtual conferencing across continents and time zones.

This shift was considerably accelerated by the COVID-19 pandemic. Following the lockdowns and movement restrictions imposed by government from 2020, Nigerian banks were compelled to lean more heavily on electronic payment channels in order to keep serving customers who could no longer visit banking halls freely. Akingbade (2023) found that the national lockdown had a significant, though disruptive, effect on the operational performance of deposit money banks in Nigeria, while Akobundu, Oboreh and Jeroh (2021) similarly reported that the pandemic significantly influenced the managerial efficiency of a sample of Nigerian commercial banks. These pandemic-era findings reinforce the view that the more a bank leans on information technology, the better positioned it tends to be to sustain operations under conditions, such as a pandemic, that make physical banking difficult; they also illustrate why an understanding of the impact of IT on banking operations has become even more pressing since 2020 than it was in earlier decades.

Information technology, in this sense, is the automation of processes, controls and information production using computers, telecommunications, software and ancillary equipment such as automated teller machines, point-of-sale terminals and debit or credit cards; it broadly covers the harnessing of electronic technology for the information needs of a business at every level.

Nigerian banks have, since the turn of the millennium, generally invested more in IT personnel and infrastructure than most other sectors of the Nigerian economy, a trend that has only deepened in the years since. Ohiani (2021), reviewing technology innovation within the Nigerian banking system, observes that Nigerian banks have made considerable progress in deploying mobile banking, internet banking and agency banking channels, but notes that inadequate infrastructure, epileptic power supply, low digital literacy among some categories of customers, and cybersecurity concerns remain significant challenges standing in the way of full-scale IT adoption across the industry.

Information and communication technology (ICT) may be understood as the modern handling of information by electronic means, involving its access, storage, processing, transportation, transfer and delivery. It refers to the convergence of computing and telecommunication systems in a seamless flow of information around the world, and its use in banking has continued to expand into areas such as internet banking, mobile applications, agency banking and, more recently, application programming interfaces (APIs) that allow banks to connect directly with fintech companies and other third-party service providers (Kolawole et al., 2024). Communication technology, in turn, comprises the physical devices and software that link various computer hardware components and transfer data from one physical location to another; connectivity of this kind has considerably reduced the extent to which distance and geographical location act as barriers to financial transactions.

It should be noted, however, that the expansion of IT in Nigerian banking has not been without its costs. As digital channels have multiplied, so too have the opportunities for cybercrime. Amshi (2025) found that the increasing adoption of digital banking in Nigeria has been accompanied by significant cybersecurity consequences, including financial losses, system downtime, reputational damage and reduced customer trust, despite banks' investment in firewalls, encryption, intrusion detection systems and two-factor authentication. Young (2025) similarly documented a rising trend of ransomware attacks, phishing schemes and insider threats within Nigeria's financial sector, and called for stronger technological safeguards alongside continuous staff and customer training. These findings are consistent with the present study's interest in weighing the positive prospects of computerisation in banking against the problems that persist in banks that are yet to embrace it fully, or that have embraced it without adequate safeguards.

1.2 Statement of the Problem

The advent of information technology in the operations of commercial banks in Nigeria, among other sectors, has brought about several noticeable developments, but at the same time it has brought its own attendant problems. The paradox behind the productivity of information technology makes many managers believe that the huge investment required does not always commensurate with the increase in productivity actually realised.

Empirical findings on this question remain somewhat mixed. While Ajao, Ayenigba and Aborisade (2024) found a significant positive relationship between the adoption of core IT tools and measures of bank performance in Nigeria, other researchers examining the COVID-19 period found that the volume of electronic payment transactions did not always translate into a statistically significant improvement in operational efficiency during the period under review. Ohiani (2021) further notes that infrastructural deficits, inconsistent power supply and the cost of maintaining IT systems continue to limit the extent to which Nigerian banks can realise the full benefits of their IT investment. This inconsistency in findings makes it necessary to further interrogate, at the level of an individual bank, the actual contribution of information technology to banking operations.

Given the high level of financial stakes involved, the investigation of the impact of information technology on organisational and employee performance has been, and continues to be, a major research concern for both academics and practitioners; it is against this background that the present study examines the impact of information technology on the operations of First Bank of Nigeria Plc.

1.3 Research Objectives

This project work is, therefore, aimed at examining how the adoption of information technology affects the operations of commercial banks in Nigeria. The specific objectives are to:

1. examine the prospects that computerisation holds for the operations of the banking industry;

2. identify the uses to which computers are put by banks, with a view to maximising the efficiency and effectiveness of bank operations;

3. review computer applications in the numerous services rendered by banks as an electronic storage facility;

4. identify the various factors hindering the adoption of computers in banking operations; and

5. highlight the public's misconceptions about computers, and how such misconceptions can be corrected.

1.4 Research Questions

1. What prospects does computerisation hold for the operations of the banking industry?

2. What uses are computers put to by banks in maximising the efficiency and effectiveness of bank operations?

3. What is the overview of computer application to the numerous services rendered by banks as an electronic storage facility?

4. What are the various factors hindering the adoption of computers in banking operations?

5. What are the public's misconceptions about computers, and how can these misconceptions be corrected?

1.5 Significance of the Study

At the end of this research, it is expected that both the researcher and the reader will better appreciate the actual contribution of information technology to banking operations, and the findings should be of value to academics and practitioners alike in their own research and decision-making.

It will also become clearer that banking institutions today require robust IT infrastructure for effective and efficient operations. As Kolawole et al. (2024) found in their study of quoted commercial banks in Nigeria, the extent of a bank's digital financial service offering has a measurable bearing on its overall performance, underscoring why the present study's focus on First Bank Plc. is of more than academic interest alone.

The study should also be of value to bank management in weighing the benefits of further IT investment against the operational and cybersecurity risks documented by recent researchers such as Amshi (2025) and Young (2025), so that any additional investment in computerisation is undertaken with adequate safeguards in place.

Finally, it is hoped that the study will serve as a useful reference for students, academic institutions and other researchers with an interest in the continuing evolution of information technology within the Nigerian banking sector.

1.6 Justification of the Study

The dominant role that the banking industry plays in the Nigerian economy cannot be over-emphasised. Government agencies, statutory corporations, corporate bodies, businessmen and civil servants all depend on banks for the transaction of one form of business or another. The banking system is required as a catalyst for the rapid macroeconomic development of other sectors of the economy; hence its stability should remain a priority for government, particularly given the sector's history of episodic distress and reform.

Public confidence in the banking sector has, at various points, been shaken by periods of instability, and rebuilding and sustaining that confidence continues to depend, in part, on how reliably and securely banks are able to deliver services to their customers. Recent research on the sector's performance during and after the COVID-19 pandemic (Akingbade, 2023; Akobundu, Oboreh & Jeroh, 2021) suggests that banks which had invested more heavily in digital infrastructure before the pandemic were better able to sustain operations and public confidence when physical banking became difficult, underlining the practical value of continued investment in information technology.

The quest for globalisation and commercialisation has brought about far-reaching innovations in technology. The digital age, and the potential threat posed by non-traditional, technology-driven competitors such as fintech companies, has made it necessary for Nigerian commercial banks to keep improving their operations as they face an increasingly sophisticated customer base that expects tomorrow what only the most innovative institutions can offer today (Chinoda & Kapingura, 2023). Banks have had to move from being purely profit-minded institutions to becoming more consciously customer-centred ones.

This research will enable banks to identify ways of remaining competitive in the global and domestic financial industry. It should also help prepare banks for repositioning towards meeting the challenges imposed by global banking trends, including the growing role of digital financial services in overall bank performance (Kolawole et al., 2024).

It is also expected that the work will contribute to banks' future projections regarding strategies for attracting depositors' funds, reducing queues in the banking hall, and shaping management policy generally.

Finally, this research work is intended to contribute to knowledge in the academic field and to serve as a source of reference for researchers who may wish to carry out similar studies in the future.

1.7 Scope and Limitation of the Study

This study focuses on the impact of information technology on banking operations in Nigeria, with particular emphasis on activities within First Bank of Nigeria Plc.

The extent of this research is, however, limited by time constraints, the demands of concurrent academic coursework, and the nature of the exercise as an undergraduate research project; these factors necessarily limit its scope and intensity.

1.8 Definition of Terms

Computer: Chambers Universal Learners' Dictionary, edited by Kirkpatrick (2001), defines a computer as a large electronic machine capable of storing large amounts of information and performing calculations. The Oxford Advanced Learner's Dictionary similarly describes a computer as an electronic machine that can store, organise and control information or other machines, while the American Heritage Dictionary of the English Language defines it as a device that performs high-speed mathematical and logical calculations, or that assembles, stores, processes or prints information derived from coded data in accordance with a predetermined program. Taken together, these definitions imply that, although a computer has no brain of its own with which to reason as human beings do, it is capable of completing complex mathematical and logical operations far faster than the human brain.

Information Technology (IT): Building on the dictionary definitions above, Ohiani (2021) describes information technology, in the specific context of banking, as the totality of computer-based hardware, software and telecommunications infrastructure that banks deploy to automate the processing, storage, transmission and retrieval of financial information, including through channels such as internet banking, mobile banking and agency banking.

Computerise: A process whereby computers are employed to carry out certain operations which might otherwise have been performed manually by human beings. Such operations include the collection of data, the analysis of the data, and the conversion of the data into information which can be used in banking and many other relevant fields.

Banking: The Oxford Advanced Learner's Dictionary defines banking as the business of receiving money from outside sources as deposits, irrespective of the payment of interest, and of granting money and loans, the acceptance of cheques, the purchase of bills and cheques, the sale of securities for the account of others, or the carrying of an obligation to acquire claims in respect of debts prior to their maturity. In an operational sense, any person, group, organisation, corporate body or government agency that carries out banking business as defined above may properly be called a bank.

Electronic Banking (E-Banking): The use of electronic and telecommunications networks to deliver a range of value-added products and services to bank customers; this includes automated teller machine (ATM) transactions, internet banking, mobile banking and point-of-sale (POS) transactions (Chukwu, Ubah & Ezeaku, 2021).

Financial Technology (Fintech): Technology-enabled innovation in financial services that can result in new business models, applications, processes or products, with an associated material effect on the provision of financial services; fintech companies increasingly compete and collaborate with traditional deposit money banks in the provision of digital financial services (Kolawole, Muritala, Akande & Adekunle, 2024).

Cybersecurity: The body of technologies, processes and practices designed to protect networks, computers, programs and data from attack, damage or unauthorised access; in banking, this includes measures such as firewalls, encryption, intrusion detection systems and two-factor authentication (Amshi, 2025).

Hardware: This refers to the actual physical components that make up a computer installation; it comprises the external, tangible parts of a computer system.

Software: A general term for the programs, instructions and supplementary materials used to direct a computer's operations.

Data: Unprocessed items or raw facts that carry no meaning on their own until they are processed; examples in a banking context include a customer's date of account opening, name, address and account number. Ajao, Ayenigba and Aborisade (2024) similarly treat data, in their study of Nigerian banks, as the raw input that IT systems process into the management information that bank staff subsequently use for decision-making.

REFERENCES

Ajao, O. M., Ayenigba, A. A., & Aborisade, J. F. (2024). Regression analysis to evaluate the impact of information technologies tools on the performance of banks in Nigeria. Asian Multidisciplinary Research Journal of Economy and Learning, 1(6), 1–11.

Akingbade, W. A. (2023). Emergence of Covid-19 pandemic, its measurement and the operations of deposit money banks from Nigeria perspectives. Annals of “Dunărea de Jos” University of Galați. Fascicle I. Economics and Applied Informatics, 29(3), 23–27.

Akobundu, E. G., Oboreh, J., & Jeroh, E. (2021). Assessing banks managerial efficiency during the Covid-19 pandemic: Evidence from selected Nigerian banks. International Journal of Management and Administrative Sciences, 10(3), 69–78.

American Heritage dictionary of the English language (5th ed.). (2011). Houghton Mifflin Harcourt.

Amshi, H. A. (2025). Impact of cyber insecurity on digital banking in Nigeria. International Journal of Informatics and Data Science Research.

Chinoda, T., & Kapingura, F. M. (2023). The impact of digital financial inclusion and bank competition on bank stability in sub-Saharan Africa. Economies, 11(1), 15.

Chukwu, K. O., Ubah, C. B., & Ezeaku, C. N. (2021). Electronic payment system and customer satisfaction in Nigerian banking system. International Journal of Scientific and Management Research, 4(5), 30–48.

Kirkpatrick, E. M. (Ed.). (2001). Chambers universal learners' dictionary. Chambers Harrap.

Kolawole, O., Muritala, T. A., Akande, J. O., & Adekunle, A. O. (2024). Digital financial services and the performance of the quoted commercial banks in Nigeria. International Journal of Professional Business Review, 9(6), e04150.

Ohiani, A. S. (2021). Technology innovation in the Nigerian banking system: Prospects and challenges. Rajagiri Management Journal, 7(1), 56–69.

Oxford advanced learner's dictionary (6th ed.). (2000). Oxford University Press.

Young, D. (2025). Analysis of emerging cybersecurity threats in Nigeria's financial sector: Trends, impacts, and mitigation strategies. International Journal of Research and Innovation in Social Science, 9(7), 1094–1103.