The Effectiveness of New Financial Products in Nigeria Commercial Banks
According to Adekanye F.A. (1990) innovations in the financial system is a direct response of the banks to the changing environment triggered off seriously because of the quest for deposits by banks as they form the raw materials for their operations.As noted above, Banking in Nigeria has become so competitive that several new devices have had to be employed by banks to remain in business, some of these innovations have been directed towards improvement and this according to Orjih J. (1999) includes:-
(i) Introduction of computers to cope with the phenomenal increase in the volume of transactions, product development, credit – rise management and business re-engineering.
(ii) Introduction of magnetic ink character recognition (MICR) which is automated system for sorting cheques and other payment instruments.
(iii) The use of automated teller machine and smart cards.
(iv) The planned automation of the clearing system.
(v) The use of automated bank notes processing system by C.B.N.
(vi) New product development.
In service delivery to customers new product development to attract more deposit and meeting the CBN requirement to avoid penalties guidelines.
Some of these innovations are discussed below:-
A: NEW PRODUCT DEVELOPMENT
A logical element of the marketing efforts of Banks is the development of new products and services. By a new product we mean a product that is either new in the market place, or which has such qualities as would include fulfilling existing needs better, cheaper or more simpler or effectively satisfying needs. In addition, it must possess a new or additional intrinsic value as would make attractive to the target market. The introduction of such new products has also generally been accompanied by a wide publicity of which media advertisement are usually made to promote these products, for instance the system of electronic banking involving direct-online and real time electronic transfer of money for a client form one city to another is being promoted by a couple of banks and other example of introducing real ones.
According to First Bank Business and Economic report (July 1993) by exploiting new technologically based techniques and innovative approaches including and innovative interpretation of existing laws and regulations, most banks are expanding into new geographical markets as well as widening their products offerings.
WEEKEND BANKING SERVICES
This is another area of response to the new economic environment, a number of commercial banks has introduced weekend banking, this is partly in an attempt to create specialized product perhaps in response to an observed demand by the public. While in some case, the responses of the financial institution have brought changes in competitive environment.
In other cases, they have been changes in the regulation environment, these are responses from an increasing barrier to regulations form the regulatory authorities requiring them to form:-
(a) Open rural branches
(b) Increase their paid up capital
(c) Pay interest on demand deposit etc.
The banking industry presently is deregulated, this has engendered keen competition among banks as well as bankable projects. The issue now would be low the banks is been able to achieve their objectives through these innovation and to what extent do the customers of those banks benefits from these innovations. The most effective way to achieve innovation aim by firms Bee Yanaw and Geeta. B. (1998) The most effective way in which a firm acquire technological capability is to make continuous incremental modifications that adopts new technologies to fit specific situations or production conditions.
The other new products are arranged below according to banks.
UNION BANK FARMERS GUIDE TO AGRICULTURAL LENDING
With the renewed emphasis on self-sufficiency in food production, the federal government of Nigeria made it compulsory for financial institutions to lend a certain percentage of their loan profitable to the Agricultural sector. This finally culminated in 1977 in the formation of agricultural credit guarantee scheme fund managed by the CBN.
This however motivated the union Bank of Nigeria Plc into expanding it’s already stabled agricultural lending scheme, in order to effectively channel funds to this sector and assist participants in the agricultural sector. This serve as a guide and is expected to be useful to individuals or corporate bodies that intend to go into full time or part-time small and medium scale farming.
Union Bank Plc under this scheme give both short and medium term, and long term loans, which includes fixed capital and working capital loans. Everybody in Nigeria is qualified to apply for agricultural loan from the bank, the applicant should submit a loan application to the manager of the union Bank branch holding his/her account, it is always best to go to a union branch nearest to the applicants farm. This makes loan disbursement and project monitory easier, with the application equity contribution.
SECURITY FOR LOAN
Securities, which may be offered for the purpose of the loan, include.
(i) A charge on land in which the borrower holds interest or a right to farm.
(ii) A charge on the assets on the land including fixed assets, crops and / or live stocks.
(iii) A charge on the moveable or immovable assets of the borrower.
(iv) Shares and stocks etc.
(v) CBN guarantee under Agricultural Credit guarantee scheme fund (ACGSF) etc UBN (1997).
UNION BANK EXPRESS AND VIGO MONEY TRANSFER
These two products involves international money transfer services between Nigeria and any part of the world, it involves three giant corporation in the world’s finance industry namely, union Bank of Nigeria PLc, RIA express incorporation and Vigo money transfer both of New York, United states of America.
Under any of these money transfer schemes, a remitter of funds to Nigeria forwards his or her funds through any office, faculty or location of either Vigo Remittance corporation or RIA express incorporated.
The fund will immediately be transferred through union Bank international department branch in Nigeria nearest to the recipient, following the transfer instruction given by the remitter, the contact will either be made through telephone or personal visit.
The beneficiary is expected to confirm ownership through Quoting a sectoral code number earlier converted to him or her by the remitter or identify himself herself with an international passport, driving license. Payment will be done either in Nigerian currently or foreign currency at the nearest branch either in cash or bank draft or certified cheque, according to the dictates of the recipient.
FIRST BANK WESTERN UNION MONEY TRANSFER SYSTEM.
The western union global money transfer services, which took off in February 1996, has been adjudged very fast, convenient, reliable and secured way or receiving money by relatives and friends.
The system works through telecommunication network and passes information about a transfer within minutes.
FIRST BANK VALUE CARD
This is an electronic purse, which serves as an alternative to cash and other payment instruments. It enables companies and individuals carry money conveniently from location to another for settlement of bills and other transactions without physical cash, cheques, or draft. This card is loaded with value, cashable at first bank branches, the card is secured with a personal identification number of the card holders, which is known, only to him or her. It can be used at any merchant (vendor) location where a point of sale equipment has bee installed, merchant or a business outlet, which accepts first Bank value for payment of goods and services.
The post terminal is capable for detecting fraudulent card and rendering them useable, it is also capable of fraudulent card and rendering them useable, it is also capable for frustrating unauthorized, use of stolen or lost cards. It is used by inserting the card into post reader ad it will confirm genuineness of the card, identify of the holder, (PIN) to effect payment, card holder inserts pin to the pos and value is transferred to merchants card, the holders removes his card subsequent use and obtain transaction statement FBN (1998).
SMART CARD
The smart card is essentially a plastic card, embedded with a micro-processor chip which gives to capacity to store information, in the other way, the brand name for smart card in Nigeria is called value card which has been explained above FBN (1992).
UBA MONEY GRAM
United Bank for Africa Introduced this money gram in addition to other numerous ones in circulation, this new product was introduced early 1998 and was designed to facilitate the transfer of funds from anywhere in the world to Nigeria within minutes, UBA (1996).
UBA EASY CARD
This bank introduced the online scheme and this is one of the most important and secured among all the new financial product introduced by the bank in the recent times. UBA (1998).
This product is aimed at facilitating the card holder’s daily transaction by allowing them do payment for their purchases at a wide range or ideal outlets with their card and cheques at place display the easy card accepted here signed by issuing a cheque. It is been operated with a current account serviceable in any UBA branch throughout the country, with an available limits per cheque leaf N1, 000, N2,500, N5000, N100,000, is highly personalized with a photography of the card holder scanned on the card, the card contains loc graphic security features amount chargeable for obtaining the cheque value per transaction and the account attracts no (cot) UBA (1998).
UBA SAVE FOR SCHOOL
This scheme is aimed at promotion savings culture while giving savers the opportunity to obtain educational financial assistance for anybody so desired. It enables savings account customer who maintain a minimum daily balance of N10,000 is a quarter to qualify for a quarterly bursary award nomination of N40,000 per recipient. This award would be paid over four years at per year and requires that the beneficiary must be a student of any Nigeria secondary school or Higher institution.
Simply open a savings account at any UBA branch with two (2) passports, minimum deposit of N2000 (Two thousand naira) as a means of identification. UBA (1997).
Effectiveness of the above explained new financial products depends on the performance of the banking system and it is measured not only by the number and variety of services provided. But more importantly of the speed, efficiency and safety with which these services are provides Orjih (1998).
Banks world wide changes account because they offers savings of up to 91% cash with drawal and 84% of the cost processing cheque and this simply means that banks makes a higher profit on international debt cards (Ayuso (1999).
FIRST EDUCATION SAVING SCHEME (FESS)
FIRST TARIET SAVING SCHEME (FTSS)
FIRST RETIREMENT SAVINGS SCHEME (FRSS)
These schemes were introduced in June 2001 and were designed to shift the focus of its services delivery effort from meeting the traditional needs of customers to anticipating and stimulating their needs through the development and provision of relevant financial products and services.
The three new products are all open to new existing account holders and allow the lodgment of dividend warrants drawn in the account holder’s name. Deposits in any of the three accounts can be used as security or collateral for credit facilities requested from the bank. In addition, fees attract 1% above the prevailing savings interest rate there is a 100% insurance cover of account balance up to N2 million in case of permanent disability or death through accident.
Four times in a year, 25 account holders (or their children / wards) will receive ten thousand naira (N10,000) education subsidy each.
First target savings scheme (FTSS) account holders can save for a specific project like a business venture, festivity, wedding, holiday travel or pilgrimage. The account attracts 0.5% or 2% above prevailing savings interest rate. This depends on tenor and amount.
First Retirement saving scheme (FRSS) attracts 2% above prevailing interest rate like first education savings scheme (FESS), it also attracts a 100%. Insurance cover of account balance up to a ceiling of N2 million. In case of permanent disability of death through accident, the account attracts a 200% insurance cover of account balance subject to a maximum of N5 million (FBN 2001)
THE DEGREE OF RESPONSIVENESS OF DEPOSITORS OF THESE PRODUCTS.
The banking industry has undoubtedly been the fasted growing industry in the country since the deregulation of the financial system, from a total number of 26 in 1980. In economics it is a common saying that numbers beget competition. Thus the increase in the number of banks portends greater competition for banking industry. This development is perceived to be in the long run interest of the industry as banks respond innovatively to maintain and increase their market shares.
The significant degree of responsiveness of the customers to these products are very high which according the research tends to be 47% of the overall responsiveness.
A number of techniques exists to assist bankers develop ideals for new products among which are brain storming sessions, synectics, attributes listing, forced relationships and interviewing techniques. However, general rule to follow is to involved as many people as possible in the development of new products ideals both customers and employees. Obviously the optimum number of individuals to include in this effort will vary with the bank. The ideas should be on the focus not feasibility to increase the number of responsiveness of depositors on these new financial products.
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This article was extracted from a Project Research Work Topic
“AN EVALUATION OF THE EFFECTIVENESS OF NEW FINANCIAL PRODUCTS IN NIGERIAN COMMERCIAL BANKS”
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