AN ASSESSMENT OF THE EFFECTS OF MULTIPLE BANK CHARGES ON THE CUSTOMER'S BANKING DECISION

CHAPTER ONE

INTRODUCTION

Background of the Study

The selection of a banking institution may be impacted by various factors. Cost may or may not be the key determinant in making a decision; but, it is likely to be of significant relevance. The financial industry plays a crucial role in the global economy, providing essential services that facilitate economic growth and stability. Banks, as key players in this industry, offer various financial products and services to individuals and businesses. Furthermore,the banking business in Nigeria has undergone significant changes over the years, particularly after the consolidation reforms implemented in the early 2000s. These reforms were intended to strengthen the financial system and make it more robust (Saint, 2020). Although these reforms have been implemented, the arrangement of charges imposed by commercial banks continues to be a controversial matter. Several Nigerian commercial bank customers have expressed grievances regarding the indiscriminate and exorbitant fees levied on their bank accounts. Oladeinde (2019) found that the imposition of high and unreasonable fees on bank clients, particularly those connected to withdrawal constraints, discourages consumers, especially those with low incomes, from using the financial services offered by banks. However, the banking services are also characterized by the imposition of various charges and fees on customers for these services. 

Historically, bank multiple charges have been a significant part of the banking model, helping financial institutions to cover operational costs and generate revenue. Initially, these charges were straightforward, including charges for account maintenance, overdrafts, and loan processing. Over time, as banking services diversified with the advent of digital banking, mobile banking, and global transactions, the types and frequency of bank charges increased (Adeoye & Adeoye, 2019). The modern banking landscape features a plethora of charges, such as ATM withdrawal fees, service fees, transaction fees, and more complex charges like foreign transaction fees and inactivity fees (Levitin, 2009). Furthermore, numerous studies have highlighted that high or unexpected bank fees lead to customer dissatisfaction and attrition (Olokoyo, 2013). Customers tend to perceive high bank charges as unfair, especially when they are not clearly communicated or justified by the value of services received. This perception often drive customers to switch banks or seek alternative financial services that offer lower or more transparent fee structures (Devlin, 2018).

Nevertheless,  the continued existence of banks relies on the development of a strong connection between clients and banks, which includes clear and open information about bank fees. Alternatively, customers may endeavour to transition to an alternative financial institution. Therefore, a survey will be conducted in order to assess the effects of multiple bank charges on the customer's banking decision.

Statement of the Problem

Research has indicated that undisclosed or unforeseen fees might undermine confidence in financial establishments, leading clients to explore other options or reduce their involvement with the banking system (Adeoye, 2018). The existence of several bank charges might have a considerable impact on these aspects, resulting in various client reactions. According to Ogunleye (2020), exorbitant charges lead to a decline in client loyalty, a rise in complaints, and a shift towards alternative financial services including fintech solutions and microfinance institutions.

Furthermore, the way people perceive bank charges is also influenced by the degree of transparency and communication exhibited by the banks. Transparent and explicit disclosure of prices can alleviate unfavourable views, whereas concealed or inadequately communicated fees might intensify customer dissatisfaction (Igbinovia, 2017). Moreover, the importance of financial literacy should not be underestimated, as clients who have a comprehensive understanding of banking services are more likely to efficiently manage charges and make well-informed decisions. Hence, it is in the light of these that the study seeks to assess the effects of multiple bank charges on the customer's banking decision.

 1.3  Objectives of the Study

The main purpose of this study is to assess the effects of multiple bank charges on the customer's banking decision.  Specifically, the study will;

Evaluate the frequency of multiple bank charges impost on customers.

Evaluate the various multiple bank charges impost on customers by Nigerian banks.

3. Evaluate the effect of multiple bank charges on customers’ banking behavior.

4. Evaluate the influence of multiple bank charges on customers’ satisfaction with banking services in Nigeria.

1.4  Research Questions

The following questions have been prepared for the study:

How frequently are multiple bank charges imposed on customers?

What are the various multiple bank charges imposed on customers by Nigerian banks?

What is the effect of multiple bank charges on customers’ banking behavior?

How does multiple bank charges influence customers’ satisfaction with banking services in Nigeria?

1.5 Research Hypotheses

H0: Multiple bank charges have no significant influence on customer's banking decision.

Ha: Multiple bank charges have a significant influence on customer's banking decision.

1.6 Significance of the Study

The study findings will help banks and financial institutions in designing better products and services and also identify potential areas of dissatisfaction that could lead to customer attrition. Additionally, consumer rights organizations will use the findings to advocate for fairer banking practices. Furthermore, subsequent researchers will use it as a literature review. Build on the findings to explore further aspects of the effects of multiple charges, contributing to the academic body of knowledge.

1.7 Scope of the study   

The scope of this study is boarded on the effects of multiple bank charges on the customer's banking decision. Empirically, this study will evaluate the various multiple bank charges impost on customers, the frequency of multiple bank charges impost on customers, the effect of multiple bank charges on customers’ banking behavior and the influence of multiple bank charges on customers’ satisfaction with banking services in Nigeria.

Geographically, the study will be delimited to some selected banks in Ogun state.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Bank charge: Refers to the charge required of a bank customer to access a service from the bank. 

Transaction costs: The charges incurred by a customer in a commercial bank for initiating and in need of a banking transaction.