Benefits of a Cashless Policy

1. It has significantly improved the speed at which banking services are rendered.
2. It has reduced exposure to bacteria from the handling of naira notes from one individual to another.
3. There has been a significant increase in sales and purchases since the purchases are no longer determined by the amount of cash a customer has in their wallet but rather based on how much funds they have in their accounts at the time.
4 The cashless system offers Nigerians a number of top-up options including use of credit and debit cards, reduction in payroll, etc. thereby reducing the use of cash and the related security risks
5. Managing staff entitlements is a lot easier since it can be easily programmed into the card payroll system and frequently updated to ensure that staff gets their salaries in the right amounts and in due time.
6. The reduction of cash in circulation also reduces the risk of armed robberies and other cash-related crimes in Nigerian society as most people no longer carry physical cash with them or keep it in their homes.
7. E-banking improves the time within which transactions are settled both locally and internationally.
8. Customers can now transact their banking businesses at any place and at any time with the use of the various alternatives provided in the cashless society rather than going to the bank branch where their accounts are domicile.
9. Since robbers are attracted by large volume cash movements by banks, the use of alternative electronic payment system has reduced the need for cash movement.
10. Payments to government agencies like customs duties are now made electronically and directly to the government account, thereby reducing leakages and other fraudulent incidents.
11. Lastly, with the implementation of the cashless policy, CBN has reduced costs associated with cash management.

Benefits to the Stakeholders

The various stakeholders will enjoy different benefits from embracing cashless policy;

i. Consumers: it provides consumers increased convenience when they are making transactions, more options to suit their individual needs, access to their bank accounts on non-working days, reduction in exposure to the risk of cash-related crimes etc.
ii. Corporations: it provides the corporation’s access to funds when needed. It reduces the risk of both internal and external theft and also reduces the cost of cash handling.
iii. Banks: it drastically improves the efficiency of Nigerian banks, it reduces the number of people that come to the banking halls thereby reducing the number of staff that the bank needs and their cost of operations. It also increases banking penetration (Oyetade and Ofoelue, 2012).
Iv. The Nigerian Economy: it provides the populace with the means to easily make their daily payments like paying utility bills, air tickets, school fees etc. thereby improving their standard of living.
v. Government: it makes for easier tax collection, improves financial inclusion and economic development in Nigeria. The government will also benefit in the area of adequate budgeting, improved regulatory services, improved administrative processes (automation), and reduced cost of currency administration and management. (Ashike, 2011).

A cashless system cultured to use e-payment increases the profitability of companies (for large, small and Medium-sized Enterprises) through the following:

i. Convenience – payments are made from any location by using the e-payment options, without having to physically visit the bank.
ii. Immediacy –payments using e-payment options are designed to be instant.
iii. Improved cash flow –instant payment helps improve the cash flow situation of the companies and reduces the pressure from waiting for cheques to clear and 30 day invoicing.
iv. Growth– it helped to foster industry growth and inspired innovations leading to more payment channels such as phone, internet, etc, thereby increasing customer base.
v. Competitive advantages – it gives firms an edge over some of their competitors and improves their ability to compete favorably with bigger competitors.

Challenges of Cashless Policy in Nigeria

Despite the numerous advantages of the cashless policy, it also has its own challenges, such as:

1. Nigerians, especially the elderly and uneducated population is already accustomed to cash transactions.
2. Some of the Nigerian banks are as conservative as their customers; they are slow to embrace innovative products.
3. The security issue is a major challenge in the development of cashless policy in Nigeria
4. Internet network issues due to the developing telecommunication infrastructure impede its effectiveness.
5. Nigeria’s current laws neither recognize nor accommodate electronic contracts and signatures.
6. There is an inadequate banking system in Nigeria. This is bound to hamper the cashless policy
7. Political instability in Nigeria from the different aggrieved groups disturb the smooth operations of a business.
8. The state of power generation in Nigeria cannot accommodate the smooth operations of financial activities.
9. Nigeria does not have the adequate financial infrastructure needed to effectively run a cashless society. The cashless options like Automated Teller Machines (ATMs), Point-of-Sales (POS) terminals, mobile banking and other mediums should reach at least 40% of the Nigerian population.
10. The epileptic power supply in Nigeria and the developing telecommunication links significantly and negatively affect e-banking infrastructures
11. One other major deterrents of cashless policy are the frequent system/internet downtime in banks which make it difficult for customers to access their account.
12. Most Nigerian banks would rather use outdated e-banking equipment than bear the cost of procuring the more modern ones.

Negative Effects of Cashless Policy in Nigeria

1. It has increased unemployment by reducing the number of staff necessary.
2. Bank charges on E-transactions are high, thereby discouraging customer from using it
3. Many customers, especially the less-educated, have been duped by fraudsters via their ATM cards.
4. Customers are discouraged to use ATMs as it takes a long time to reverse a wrong debit entry into their accounts. At times, it ends up not resolved and the customer has to physically go to the banking halls.
5. Most ATM locations in Nigeria are not secured and the cameras on the ATM machines do not work, leaving fraudsters to successfully carry out their illegal activities without any arrest.
6. The use of ATM cards discourages thrift savings among Nigerians; customers can use their ATM cards to make withdrawals up to N150, 000 in a day, even on weekends and public holidays.

Fears of Cashless Economy in Nigeria

For the successful implementation of a cashless economy in Nigeria, it is necessary to address the issue of inadequate infrastructure, the issue of insecurity is also worrisome; as is the exposure of fraudsters and other cyber-related crimes. These issues form the basis of the skepticism surrounding Nigeria’s readiness for a cashless economy. These issues can be summed up in the following statements:

1. What facilities does Nigeria have to aid to carry out the implementation of a cashless economy?
2. What is the literacy level of the Nigerian population and their knowledge of ICT?
3. What percentage of the Nigerian population can use electronic banking services?
4. How and when will Nigerians vulnerability to fraud be resolved?
5. Is the system sophisticated enough to withstand cyber-attacks that can end the whole cashless system?

Source: Researchleap