AN EXAMINATION OF THE EFFECTS OF DIGITALITION ON THE PERFORMANCE OF BANKING INSTITUTIONS IN BUEA

    CHAPTER ONE

INTRODUCTION

• Background of the Study

In the past few years there has been constant rate in which the state of development have been taking place, the global financial and banking sector has undertaken radical changes and improvements (Gartner, 2016). The process of technology adoption have brought banking industry new various business models, areas of improvements and development concepts as a result of internet banking to monetary transactions (Schumann & Tittmann, 2015).

Emerging implementations to financial sector needs the employees to know of the dynamics relating to work environment in addition to overall state of change in the financial sector. Digitalization is among the main turbulence that is causing a change in the banking business to the foreseeable future and with bad management, the implications can be having a long lasting effect (Schinkel, 2010)

. Globally the financial and banking sectors are growing faster than previously and hence digitalization is at a vital position on how to acquire a gain on market advantage against the rivaling banks (Gartner, 2016). Considering the neo age of technology adoption in banking sector, the daily operations are becoming easier for customers to use; faster and cheaper hence every bank is grasping to adjust their own operations to fit the needs of a demanding customer (Olanrewaju, Smaje & Willmott, 2014).

In the 1980’s when computers were introduced, this was said to be the start of the digitalization in the consumer markets. This opened new channels to the consumers to become more communal and aware of civil democratic issues than previously (Gartner, 2016). Currently technology and digitalization have extracted hindrances of the modern society, this includes aspects such as; involvement, time, data acquirement and space which grants consumers more freedom to have interactions with various parties regardless of space or even time (Koiranen, Räsänen & Södergård, 2010).

Also the process of digitalization is a business gap for the banks to step up their business activities. As a result of digitalization and advancement in technology the interaction between banks and official authorities towards the consumers and citizens has also been intensified and have made new ways of reaching to one another. This can be seen easily in the commercial banking sector, where digitalization has given the banks additional ways to reaching out to potential customers and also at the same time to give them a hand to improve their services (Gartner, 2016).

The Internet and mobile banking has become the single largest channel at the moment for reaching customers and for customers to handle their bank transactions (Deutsche Bank, 2016). As shown in the statistics by Deutsche Bank in 2016, almost 20% of customers of international banks use internet banking daily and 10% of customers use mobile banks on a daily basis, whereas only 4% use branch services on a daily basis and almost 37% of customers say that they rarely or never use the call centers.

Equally, as illustrated by the Statistics in Finland for the year 2015 in Finland 98% of the young people aged between 25-34 years indicated to have used internet for purpose of internet banking which this was the largest age group to do so. On the other hand the lowest group was made up of people aged between 75-89 year olds of which only 26% indicated to have used the internet for various bank transactions in a period of past three months.

In accordance to the same research 95% of the working population in Finland indicated to have used internet banking services for the last three months (Statistics Finland, 2015). Through studying these statistics it becomes a clear observation that via mobile banking services and internet banks are reaching the majority of the people.

Due to digitalization, the daily banking sector is daily. The banks up-to-date means of reaching out to their customers are becoming affordable for them and easier than the previous older ways. The number of specific bank branches is reducing and additional services shifting to be on online form, more so to the daily banking services, such as investment negotiations and loans processing (Pohjola 2015).

This may cause difficulties for elderly people or even those who have lagged on digitalization process as the older services are assuming to be inferior due to them becoming more outdated for the major population that is in control of the banks market and therefore more expensive to the banks (Koiranen, 2010). Also digitalization has coined new opportunities towards service providers giving them fresh business models, such as the banks who don’t have any physical branches but rather work on a mobile platform.

Take an example, Atom Bank which is a bank based on United Kingdom, the bank only works on a mobile platform. Atom Bank lacks any physical branches for customers to visit but all its operations are doing their tasks on a mobile phone and one can open a bank account using a mobile phone (Atom Bank, 2016).

In Africa continent the digitalization impacts on the financial sector can easily be attributed to the amount of people using internet banking for settling their bills because it is the major factor for the average people banking errands (Pohjola 2015). Like other industries, commercial banks and financial sector are increasingly molding to new shape this is because of the rapid improvements to digitalization and technology. The trail of digitalization in commercial banking and financial sector in Africa is heavily impacting towards cost-saving potential and also creating fresh revenue sources (Olanrewaju, 2014).

The advancements that digitalization has had on financial sector so far are mainly to daily banking services and to no-knowledge-intensive services, such as payments solutions and internet banking. These services were no big deal to standardize and according to big banks, these solutions lowered the customer’s frequent visit to banks.

According to Barclays Bank Africa, which was one of the pioneer banks to see the potential in digitalization and digital banks, after they shifted to online and mobile banks, their customers now visit the bank’s branches two times a month on average, and the rest of the days they use services of mobile banking 18 times per month (Deutsche Bank, 2016).

The presence of the mobile phone based technology has resulted in banks investing largely in their Information and Communication Technology (ICT) platforms in order to remain competitive. Intensive ICT platforms have contributed largely towards financial institutions acting towards the demand needs of the increasing middle class population through provision of electronic based banking services taking an example of internet banking and mobile banking.

Supervisory authorities include COBAC and MINFI with BEAC being the main supervisory authority of 5 African state i.e the Central bank and Commercial banks in Cameroon include AFRILAND FIRST BANK, ATLANTIC BANK CAMEROON,BIECE, BGF BANK,SCB BANK, CITI BANK, ECO BANK, COMMERCIAL BANK OF CAMEROON, NFC BANK, SGBC, UBC, UBA, ASCA.

• Problem Statement

• Background of the Study

In the past few years there has been constant rate in which the state of development have been taking place, the global financial and banking sector has undertaken radical changes and improvements (Gartner, 2016). The process of technology adoption have brought banking industry new various business models, areas of improvements and development concepts as a result of internet banking to monetary transactions (Schumann & Tittmann, 2015).

Emerging implementations to financial sector needs the employees to know of the dynamics relating to work environment in addition to overall state of change in the financial sector. Digitalization is among the main turbulence that is causing a change in the banking business to the foreseeable future and with bad management, the implications can be having a long lasting effect (Schinkel, 2010).

Globally the financial and banking sectors are growing faster than previously and hence digitalization is at a vital position on how to acquire a gain on market advantage against the rivaling banks (Gartner, 2016). Considering the neo age of technology adoption in banking sector, the daily operations are becoming easier for customers to use; faster and cheaper hence every bank is grasping to adjust their own operations to fit the needs of a demanding customer (Olanrewaju, Smaje & Willmott, 2014).

In the 1980’s when computers were introduced, this was said to be the start of the digitalization in the consumer markets. This opened new channels to the consumers to become more communal and aware of civil democratic issues than previously (Gartner, 2016). Currently technology and digitalization have extracted hindrances of the modern society, this includes aspects such as; involvement, time, data acquirement and space which grants consumers more freedom to have interactions with various parties regardless of space or even time (Koiranen, Räsänen & Södergård, 2010).

Also the process of digitalization is a business gap for the banks to step up their business activities. As a result of digitalization and advancement in technology the interaction between banks and official authorities towards the consumers and citizens has also been intensified and have made new ways of reaching to one another. This can be seen easily in the commercial banking sector, where digitalization has given the banks additional ways to reaching out to potential customers and also at the same time to give them a hand to improve their services (Gartner, 2016).

The Internet and mobile banking has become the single largest channel at the moment for reaching customers and for customers to handle their bank transactions (Deutsche Bank, 2016). As shown in the statistics by Deutsche Bank in 2016, almost 20% of customers of international banks use internet banking daily and 10% of customers use mobile banks on a daily basis, whereas only 4% use branch services on a daily basis and almost 37% of customers say that they rarely or never use the call centers.

Equally, as illustrated by the Statistics in Finland for the year 2015 in Finland 98% of the young people aged between 25-34 years indicated to have used internet for purpose of internet banking which this was the largest age group to do so. On the other hand the lowest group was made up of people aged between 75-89 year olds of which only 26% indicated to have used the internet for various bank transactions in a period of past three months. In accordance to the same research 95% of the working population in Finland indicated to have used internet banking services for the last three months (Statistics Finland, 2015).

Through studying these statistics it becomes a clear observation that via mobile banking services and internet banks are reaching the majority of the people.

Due to digitalization, the daily banking sector is daily. The banks up-to-date means of reaching out to their customers are becoming affordable for them and easier than the previous older ways. The number of specific bank branches is reducing and additional services shifting to be on online form, more so to the daily banking services, such as investment negotiations and loans processing (Pohjola 2015).

This may cause difficulties for elderly people or even those who have lagged on digitalization process as the older services are assuming to be inferior due to them becoming more outdated for the major population that is in control of the banks market and therefore more expensive to the banks (Koiranen, 2010). Also digitalization has coined new opportunities towards service providers giving them fresh business models, such as the banks who don’t have any physical branches but rather work on a mobile platform. Take an example, Atom Bank which is a bank based on United Kingdom, the bank only works on a mobile platform.

Atom Bank lacks any physical branches for customers to visit but all its operations are doing their tasks on a mobile phone and one can open a bank account using a mobile phone (Atom Bank, 2016).

In Africa continent the digitalization impacts on the financial sector can easily be attributed to the amount of people using internet banking for settling their bills because it is the major factor for the average people banking errands (Pohjola 2015). Like other industries, commercial banks and financial sector are increasingly molding to new shape this is because of the rapid improvements to digitalization and technology. The trail of digitalization in commercial banking and financial sector in Africa is heavily impacting towards cost-saving potential and also creating fresh revenue sources (Olanrewaju, 2014).

The advancements that digitalization has had on financial sector so far are mainly to daily banking services and to no-knowledge-intensive services, such as payments solutions and internet banking. These services were no big deal to standardize and according to big banks, these solutions lowered the customer’s frequent visit to banks. According to Barclays Bank Africa, which was one of the pioneer banks to see the potential in digitalization and digital banks, after they shifted to online and mobile banks, their customers now visit the bank’s branches two times a month on average, and the rest of the days they use services of mobile banking 18 times per month (Deutsche Bank, 2016).

The presence of the mobile phone based technology has resulted in banks investing largely in their Information and Communication Technology (ICT) platforms in order to remain competitive. Intensive ICT platforms have contributed largely towards financial institutions acting towards the demand needs of the increasing middle class population through provision of electronic based banking services taking an example of internet banking and mobile banking. Supervisory authorities include COBAC and MINFI with BEAC being the main supervisory authority of 5 African state i.e the Central bank and Commercial banks in Cameroon include AFRILAND FIRST BANK, ATLANTIC BANK CAMEROON,BIECE, BGF BANK,SCB BANK, CITI BANK, ECO BANK, COMMERCIAL BANK OF CAMEROON, NFC BANK, SGBC, UBC, UBA, ASCA.

• Problem Statement