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THE ROLE OF BANKS IN PROMOTING E-COMMERCE IN NIGERIA

BYJIM OVIA

GROUP MD/CEOZENITH BANK PLC

NIGERIA INTERNET GROUP SEMINAR

GOLDEN GATE RESTAURANT, IKOYI, LAGOS

Thursday May 22, 2008

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OutlineOutline IntroductionIntroduction E-commerce – What?E-commerce – What? E-commerce – Advent and DevelopmentE-commerce – Advent and Development Scope of E-commerceScope of E-commerce E-commerce and Banking in NigeriaE-commerce and Banking in Nigeria Gains from E-commerceGains from E-commerce Going ForwardGoing Forward E-commerce: Success StoriesE-commerce: Success Stories E-commerce: ChallengesE-commerce: Challenges ConclusionConclusion

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IntroductionIntroduction

“A fundamental new rule for business is that the Internet

changes everything. The Internet is becoming the

town square for the global village of tomorrow”

Bill GatesBill GatesChairman, MicrosoftChairman, Microsoft Corporation Corporation

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IntroductionIntroduction

Conduct of business has advanced from the Conduct of business has advanced from the ‘trade by barter’ days through the ‘trade by barter’ days through the ‘commodity money’ era to a ‘cashless or ‘commodity money’ era to a ‘cashless or digital’ epoch referred to as electronic digital’ epoch referred to as electronic commerce (e-commerce)commerce (e-commerce)

Advances in ICT and the emergence of the Advances in ICT and the emergence of the Internet have revolutionized business Internet have revolutionized business activities across the globeactivities across the globe

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E-commerce – What?E-commerce – What?

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E-commerce – What?E-commerce – What?

Electronic commerce (e-commerce) Electronic commerce (e-commerce) describes the process of buying, selling, describes the process of buying, selling, transferring, or exchanging products, transferring, or exchanging products, services, and/or information through services, and/or information through computer networks, principally the Internetcomputer networks, principally the Internet

It is simply the act of sharing business It is simply the act of sharing business information, maintaining business relation- information, maintaining business relation- ships, and conducting business transactions ships, and conducting business transactions by means of electronic networksby means of electronic networks

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E-commerce – Advent and developmentE-commerce – Advent and development

In the 1970s, e-commerce meant facilitation of In the 1970s, e-commerce meant facilitation of commercial transactions electronically, using commercial transactions electronically, using technology such as Electronic Data Interchange technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT)(EDI) and Electronic Funds Transfer (EFT)

These allowed businesses to send These allowed businesses to send commercial documents like purchase orders commercial documents like purchase orders or invoices electronicallyor invoices electronically

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In the 1980s, credit cards, automated teller In the 1980s, credit cards, automated teller machines (ATMs) and telephone banking machines (ATMs) and telephone banking became part of e-commercebecame part of e-commerce

From the 1990s onwards, enterprise resource From the 1990s onwards, enterprise resource planning systems (ERP), data mining and data planning systems (ERP), data mining and data warehousing became components of e-warehousing became components of e-commercecommerce

E-commerce – Advent and developmentE-commerce – Advent and development

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Scope of E-commerceScope of E-commerce

E-mail and messagingE-mail and messaging Documentation, spreadsheets, databaseDocumentation, spreadsheets, database Accounting and finance systemsAccounting and finance systems Orders and shipment informationOrders and shipment information Enterprise and customer information Enterprise and customer information

reportingreporting Domestic and international payment systemsDomestic and international payment systems AdvertisingAdvertising

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Scope of E-commerceScope of E-commerce

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E-commerce and Banking in NigeriaE-commerce and Banking in Nigeria

About a decade ago, Nigerian banks’ About a decade ago, Nigerian banks’ websites merely contained information websites merely contained information about their servicesabout their services

Today, banks’ service delivery are Today, banks’ service delivery are driven by ICT (e-commerce); and driven by ICT (e-commerce); and Nigerian banks now have transactional Nigerian banks now have transactional websites websites

These websites now offer services such These websites now offer services such as account balance inquiry, funds as account balance inquiry, funds transfer, etctransfer, etc

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E-commerce has made banking easy and E-commerce has made banking easy and convenient – from the comfort of the convenient – from the comfort of the bedroom, from remote places with your bedroom, from remote places with your computer or even mobile phonecomputer or even mobile phone

Identity verification is now easier, thereby Identity verification is now easier, thereby reducing fraudreducing fraud

E-commerce has made it possible for banks E-commerce has made it possible for banks to handle large volume of transactionto handle large volume of transaction

E-commerce and Banking in NigeriaE-commerce and Banking in Nigeria

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Number of Transactions on the Number of Transactions on the Interswitch NetworkInterswitch Network

303.7 % Growth303.7 % Growth

Year Number of Transactions

2004 13.6 million

2008 (April) 54.9 million

Source: InterswitchSource: Interswitch

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Total Number of POSs, ATMs and Total Number of POSs, ATMs and ATM Cards in NigeriaATM Cards in Nigeria

Year No. of POSs No. of ATMs No. of ATM Cards

2007 3,300 1,060 11 million

2008 8,000 4,939 21 million

Percentage Change 142.4% 365.9% 90.9%

Source: Interswitch

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Convenience: Banks’ websites and ATMs Convenience: Banks’ websites and ATMs are open 24 hours a day, 7 days a week – in are open 24 hours a day, 7 days a week – in effect, banks no longer closeeffect, banks no longer close

Lower transaction costsLower transaction costs

Improved service to customersImproved service to customers

Gains from E-commerceGains from E-commerce

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Gains from E-commerceGains from E-commerce

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Gains from E-commerceGains from E-commerce

Expanded marketExpanded market

Enhanced productivityEnhanced productivity

E-commerce is breaking down the barrier of E-commerce is breaking down the barrier of time, distance and space associated with time, distance and space associated with conventional bankingconventional banking

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Going ForwardGoing Forward

Voice Pay – Biometric payment scheme Voice Pay – Biometric payment scheme which enables people to authorize payment which enables people to authorize payment for online and cell phone-based purchases for online and cell phone-based purchases using only voiceusing only voice

Multi-lingual ATMs – For faster spread of Multi-lingual ATMs – For faster spread of cash dispensing technology to the hinterland – cash dispensing technology to the hinterland – to exploit opportunities provided by the huge to exploit opportunities provided by the huge population of semi-literates and illiteratespopulation of semi-literates and illiterates

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A new form of e-commerce which A new form of e-commerce which followed the rapid growth of wireless followed the rapid growth of wireless technology is mobile commerce (M-technology is mobile commerce (M-commerce); M-commerce is the buying commerce); M-commerce is the buying and selling of goods using mobile and selling of goods using mobile telephonestelephones

Going ForwardGoing Forward

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E-commerce: Success StoriesE-commerce: Success Stories

In the U.S. in 2007, total value of e-commerce In the U.S. in 2007, total value of e-commerce sales was estimated at $136.4 bnsales was estimated at $136.4 bn

E-commerce accounted for 3.4% of total retail E-commerce accounted for 3.4% of total retail sales in the U.S. in 2007sales in the U.S. in 2007

Value of e-commerce transaction in China was Value of e-commerce transaction in China was $127.5 bn in 2007$127.5 bn in 2007

Source: US Department of Commerce & www.chinadaily.com.cnSource: US Department of Commerce & www.chinadaily.com.cn

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Country Value of Transactions (US$’Bn)

United States 136.4

China 127.5

India 100

United Kingdom 78.6

Brazil 3.8

Nigeria 3.4

Source: E-commerce Journal, U.S. Department of Commerce & www.computing.co.uk

E-commerce: Success StoriesE-commerce: Success Stories

Selected Countries’ Value of E-commerce Transactions, 2007

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E-commerce: Challenges E-commerce: Challenges

Threat posed by Internet scammers (yahoo boys)Threat posed by Internet scammers (yahoo boys)

Number of electronic networks linking merchants to Number of electronic networks linking merchants to banks and payment switch centres still inadequatebanks and payment switch centres still inadequate

The payment system is still predominantly cash-basedThe payment system is still predominantly cash-based

Low tele-density (but impressive growth)Low tele-density (but impressive growth)

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Year Tele-density

2001 0.73

2002 1.89

2004 8.50

2005 16.27

2006 24.18

2007 29.98

2008 (March) 32.79

E-commerce: Challenges E-commerce: Challenges

Nigeria’s Tele-density

Source: NCC

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E-commerce: Challenges E-commerce: Challenges

eBAY

eBAY

eBayeBay

Amazon

Amazon

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E-commerce: ChallengesE-commerce: Challenges

People still prefer cheque/cash transactions People still prefer cheque/cash transactions despite abuses and inherent risksdespite abuses and inherent risks

Poor public perception of e-commerce due to Poor public perception of e-commerce due to illiteracy and ignoranceilliteracy and ignorance

Number of business outlets connected to Number of business outlets connected to payment switch centres is still grossly inadequatepayment switch centres is still grossly inadequate

Incidence of fraudIncidence of fraud

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E-commerce: ChallengesE-commerce: Challenges

Low internet penetration (8 million) out of a Low internet penetration (8 million) out of a population of 140 millionpopulation of 140 million

This a major challenge – e-commerce cannot This a major challenge – e-commerce cannot be maximised without access to the internetbe maximised without access to the internet

Lack of suitable legal framework and security Lack of suitable legal framework and security instrumentsinstruments

Poorly developed telecommunications Poorly developed telecommunications infrastructure, especially beyond urban areasinfrastructure, especially beyond urban areas

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ConclusionConclusion

“Electronic commerce on the Internet will, before the end of the century, profoundly

redefine many basics of business”

Peter Keen 

U.S.  Prof. of Business Mgt/Consultant

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THANK YOU

www.zenithbank.com

……in your best interestin your best interest