CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The background of electronic payments can be traced back to the 1870’s when Western Union (WU) introduced Electronic Fund Transfer (ETF). EFT is a system of transferring money from one bank account directly to another without any paper money changing hands. One of the most widely-used EFT programs is Direct Deposit, in which payroll is deposited straight into an employee’s bank account. However, EFT refers to any transfer of funds initiated through an electronic terminal, including credit or debit card, Automatic Teller Machine (ATM), Wire Transfer done via an international banking network such as SWIFT and Point-Of-Sale (POS) transactions. It is used for both credit transfers, such as payroll payments and for debit transfers,
Despite WU’s revolutionary on ETF, the method of transferring money electronically remained unchanged for close to sixty years. Then, in 1918, the Federal Reserve Bank of America began transferring money via telegraph. With the advancement in technology, banks and consumers became more reliant on computers to conduct transactions. The advent of Internet has initiated an electronic revolution in the global banking sector. The dynamic and flexible nature of this communication channel as well as its ubiquitous reach has helped in leveraging a variety of banking activities.
Electronic payment, also known as EFT is simply the use of electronic means to transfer funds directly from one account to another, rather than by cheque or cash. In the Nigeria context, electronic -payment is effecting payments from one end to another and through the medium of the computer without manual intervention beyond inputting the payment data, it is the ability to pay the suppliers, vendors and staff salaries electronically at the touch of a computer button (Agba, 2010).
Electronic payment systems can be used to have your paycheck deposited directly into your bank account, withdraw money from your checking account from an Automated Teller Machine with a Personal Identification Number (PIN), at your convenience day or night, instruct your bank to automatically pay certain monthly bills or debit a standing order from your account, even auto loan or your mortgage payment can be done with electronic payment systems, have the bank transfer funds each month from your checking account to your pension or mutual fund account, have your government social security or e- dividend benefits check or your tax payment made directly into your account, buy groceries, gasoline and other purchases at the Point-Of-Sale (POS), using a debit card rather than cash, credit or a personal check.
Use a smart card (credit card) with a prepaid amount of money embedded in it for use instead of cash, can also be used for expressway road toll, or on college campuses at the library’s photocopy machine or bookstores, Use your computer and personal finance software to coordinate your total personal financial management process, integrating data and activities related to people across the globe utilize trending methods when they adopt a system of payment that they need and want. Innovation is the natural inclination to develop and use systems to accomplish pragmatic solutions for everyday task. The evolution of electronic payment systems follows available technology, which can accomplish the desirable outcome of accepting currency in exchange for goods and services.
The term electronic payment can be referred narrowly to e-commerce – a payment for buying and selling goods and services offered through the internet, or broadly to any type of EFT (Massimo & Garcia 2008). Also the term electronic-payment covers both computer and telephone payment. It refers to the use of information and communication technology by financial institutions to provide services and manage customer relationship more quickly and most satisfactorily (Charity-Commission, 2003). Burr (1996) describes it as an electronic connection between the bank and the customer in order to prepare, manage and control financial transactions. Electronic payment according to Al-Abed (2003) is an umbrella term for the process by which a customer may perform banking transactions electronically without visiting a brick and-mortar institution. Lustsik (2004) describes electronic payment as a variety of the following platforms: Internet payment, telephone payment, mobile phone payment, and Personal Computer payment.
For the purpose of this research, electronic payment system is the carrying out of banking services and products through the use of electronic means irrespective of place, time, destination or distance. Such products and services can include cash withdrawal or, account management, the provision of financial advice, electronic bill payment, and the provision of other electronic payment products and services such as electronic money. The importance of this 21st century banking are numerous. The introduction electronic payment system will increase the potentials of business to attain greater productivity and profitability, as trading and transactions which would be carried out via communication networks, will be a lot faster and distance would no longer be barrier to effective transactions (Fagbuyi, 2003).
