Revolutionary developments in marketing, information and communications technology continue to transform the banking and financial industry. Distribution of banking services through the Internet is an important part of this transformation. The objectives of this thesis are mainly to examine the role, which Internet banking can play as a new distribution channel of banking services for the benefit of both financial institutions and customers. The study explores the growth in on-line banking services and the ways in which financial institutions can take advantage of Internet technology to offer successful and cost-effective banking solutions. Moreover, this thesis addresses the key issues of concern to the banks regarding their strategic positioning and the products/services they offer or could offer on the Internet. Technology can help banks build an integrated delivery strategy for effective multi-channel management. Results identify the reasons why Nigeria banks use Internet banking and their effect and place an emphasis on the strategic impact of Internet technology as a core element of financial services. Nigeria banks want to expand their existing distribution channels using the Internet as another alternative channel. Internet banking in Nigeria is on its way to become the centerpiece of direct banking strategies.


The global credit system has undergone a process of reformation and reorientation, both at structural and organizational levels. The banking sector has been at the heart of this procedure. Phenomena of mergers and acquisitions, globalization and internationalization of services and products, changes in organizational structures, innovation policies and practices, are just some examples of the worldwide changes in the banking industry. 

Banks perform intermediation functions that are vital to a country’s economic growth and development. Banking services have evolved from an early emphasis on deposit taking (primarily demand deposits and savings accounts) and short-term loans into a much wider range of deposits and loans. Operating in a dynamic environment, banks need to intensify their approach towards service quality in an attempt to increase sales volume, market share and ultimately their profit. One of the strategies that have been offered for success in such a business is the delivery of high service quality. As banking clientele has become more financially sophisticated, so have bank operations that have expanded from traditional commercial banking services to investment services, fund management services, insurance brokerage and other financial services. Moreover, technological developments such as the use of computers and especially the Internet and the World Wide Web can facilitate these bank operations. 

Given the wealth of opportunities that the Internet creates for financial institutions, having a strong on-line presence is becoming a strategic necessity for most of them and raises the importance of the Internet as a strategic distribution channel for providing banking services. According to Mols (2001), there has been a considerable growth in the segment of consumers preferring Internet banking due to the increase in computer literacy, the availability of computers and the reduction in the costs of PCs and Internet access. This fact will change the optimal distribution structure for most banks and financial institutes.  

Due to changes in the Africa banking sector and expansion plans in the region, Nigeria banks are trying to strengthen their position in the market and improve their efficiency. Nigeria banks are trying to find new distribution channels and methods of providing their services in order to maintain and increase their share in the market. An appealing method of doing that is through the Internet because it can offer banking services at cheaper prices to more potential clients and the transactions can be carried out from anywhere in the world at any time of day or night. This means that by using Internet technology, financial institutions can establish a direct link to customers and improve their market shares while increasing their profits, without paying the high cost of building new branches.

Especially in Nigeria, although the use of Internet is not the expected one, Internet banking continues to increase because of Internet’s easiness in use, its low cost and the requirement from some public authorities to only receive online payments.