BACKGROUND OF THE STUDY
The rapidly unfolding development within the information technology in recent times has led to resurgent calls for monies towards an effective cash management through Electronic banking (i.e. E-Banking). In the last few years, within the banking industry in Nigeria several commercial products were designed by banks to improve the qualities of services provided to customer. These products were also designed to meet the increasingly sophisticated needs of finance managers in a cross section or organizations operating in different sectors of the economy.
In recent years, these have been an evolution from paper transfer system and ordinary procedural cash management to an electronic transfer system and more secured and sophisticated cash management. There has been introduced, an increased sophistication in computer applications to cash management and in electronic funds transfer.
It is the responsibility of the finance manager to ensure proper management of a company’s account receivable and payable amongst other tasks. Improper management of these two important variables could result in losses arising from inability to take interest because of too early payments. Overdraft and loan interest charges could be incurred because of unnecessary working capital borrowings. The task faced with the finance manager is accelerating collections and showing a disbursement which is increasingly being done electronically.
The advert of financial innovations such as electronic transfer in the payment system and more recently, the launching of internet banking have transformed the worlds into a global village linked with electronic impulses. Companies are usually offered discounts if payments for certain goods and services are made within a specified period according to the terms of credit.
Similarly, no discount is been attracted when companies pay outside this period and this discount loss can cost the company substantial income when aggregated over an annual period. Companies also have to collect proceeds of sales quickly within the allowed time frame to provide working capital. Failure to do so can lead to working capital shortages prompting the company to borrow from banks at high interest rates to fill the gap between sales and collection of proceeds.
Between 1989 and 1995, several banks have acquired the means to make payment very quickly and transfer funds very quickly to cities in Nigeria within a few minutes of the request. However, the concept of electronic money was introduced in 1996 when the Federal Government through CBN gave approval to All States Trust Bank Ltd. To offer a financial product known as the ESCA smart card, an electronic purse. Subsequently, others followed. These innovations, which are still at a relatively early stage of development have the potential to challenge the predominant role of cash for making small value payments and makes retail transactions easier and cheaper for finance managers. This is an invaluable tool of it provides an enhanced cash management capability and use of electronic funds transfer has resulted in greater economization of money balances.
In an attempt to elucidate on the use of Electronic Banking in cash management, this write-up traces the history of commercial banks and origin of Electronic Banking, provides an in-depth treatise of conventional banking. It goes further to examine the role of Electronic banking in cash management, the advantages and obvious concerns about security of funds.