CHAPTER ONE

1.1 Background of the Study

The global banking landscape has changed rapidly due to advances in financial technology. One major development is the introduction of electronic payment systems. These systems allow customers to carry out financial transactions through digital platforms. They include internet banking, mobile banking, automated teller machines, and point of sale services. As these systems continue to expand, banks rely on them to improve service delivery and strengthen customer relationships. Researchers agree that digital payment systems have transformed the banking industry and improved customer experience across many countries (Mallat, 2017).

Customer retention has become a strategic priority for deposit money banks. The banking sector in Nigeria is competitive. Customers can switch from one bank to another when they feel dissatisfied. Therefore, banks must deliver reliable and user friendly services to retain their customers. Electronic payment systems support this goal. These systems make transactions faster, easier, and more convenient. When customers enjoy smooth services, they feel satisfied. As satisfaction increases, their loyalty to the bank improves (Ayo, Oni and Adewoye, 2010).

Nigeria has witnessed rapid growth in electronic banking adoption. Many customers prefer digital platforms because they save time and reduce the need to visit bank branches. Banks also benefit because electronic channels reduce operational costs. In addition, digital platforms help banks reach a wider audience, including young and technology driven customers. Through these systems, banks can monitor customer behaviour and provide personalised services. These features strengthen retention and improve long term relationships with customers.

Although electronic payment systems offer many benefits, challenges exist. Some customers experience service failures. They face network issues, delayed transactions, and system downtime. These problems reduce trust and create dissatisfaction. In addition, cyber security threats remain a major concern. Customers fear losing their funds through fraud or identity theft. As a result, their willingness to rely on electronic payment systems becomes affected. Therefore, banks must ensure security and reliability to build customer confidence (Olatokun and Igbinedion, 2009).

Several studies have examined the adoption of electronic banking. Others have investigated customer satisfaction or service quality. However, limited studies focus directly on how electronic payment systems influence customer retention in deposit money banks, especially in Nigeria. Because customer behaviour differs across regions, more evidence is needed to understand this relationship. This study seeks to fill this gap by assessing how electronic payment systems impact customer retention.

1.2 Statement of the Problem

Despite the growth of electronic payment systems, customer retention remains a challenge for many banks. Some customers enjoy the convenience that digital platforms offer. However, others experience frequent service disruptions. When electronic transactions fail, customers lose confidence. They may switch to other banks that offer more reliable services.

Security concerns also affect customer retention. Many cases of electronic fraud have been reported in Nigeria. These incidents create fear among users. As a result, customers may limit their use of digital platforms or abandon them completely. When this happens, the effectiveness of electronic payment systems in strengthening loyalty becomes reduced.

Another issue relates to user experience. Some customers find electronic platforms difficult to use. Others complain about hidden charges and poor customer support. These challenges reduce satisfaction and weaken loyalty. Although electronic banking has received research attention, the link between electronic payment systems and customer retention still requires further investigation. Therefore, this study aims to examine how electronic payment systems influence customer retention in deposit money banks.

1.3 Objectives of the Study

The main objective of this study is to examine the impact of electronic payment systems on customer retention in deposit money banks.

The specific objectives are to:

1. Identify the key electronic payment systems used by deposit money banks.

2. Examine the relationship between system reliability and customer retention.

3. Determine how convenience influences customer retention.

4. Assess the effect of security features on customer retention.

1.4 Research Questions

The study will address the following questions:

1. What are the major electronic payment systems used by deposit money banks.

2. How does system reliability affect customer retention.

3. In what ways does convenience influence customer retention.

4. How do security features affect customer retention.

1.5 Research Hypotheses

The study will test the following hypotheses:

1. There is no significant relationship between system reliability and customer retention.

2. Convenience has no significant effect on customer retention.

3. Security features do not significantly influence customer retention.

1.6 Significance of the Study

This study will provide benefits to several groups. First, banks will gain insight into how electronic payment systems influence customer loyalty. This understanding will help them improve system quality and increase retention. Second, customers will benefit because the results will identify areas where banks must improve service delivery. Third, policymakers such as the Central Bank of Nigeria will find the study useful. The findings will help strengthen regulations that support secure and efficient electronic transactions. Lastly, the study will be valuable to researchers. It will contribute to existing literature and promote further academic discussions on digital banking and customer behaviour.

1.7 Scope of the Study

The study will focus on deposit money banks in Nigeria. It will examine major electronic payment systems such as mobile banking, internet banking, automated teller machines, and point of sale services. The study will analyse how reliability, convenience, and security influence customer retention. Data will be collected from customers of selected banks to ensure accuracy and relevance.

1.8 Operational Definition of Terms

Electronic Payment Systems: Digital platforms that allow customers to carry out financial transactions.
Customer Retention: The ability of a bank to keep its customers over a long period.
System Reliability: The ability of an electronic platform to function consistently and without errors.
Convenience: The ease and speed with which customers complete transactions.
Security: Measures used to protect financial information and prevent fraud.