The Fintech Association of Nigeria has stated that challenges with the execution of the country’s cashless policy may erode customers’ trust in the banking system.
It said increasing merchants’ demand for cash payment despite empty ATMs, putting overwhelming pressure on digital channels and causing PoS charges to inch closer to 50 per cent.
According to the association, a cashless policy should bring about greater ease and convenience of payments, not what is materialising in the country.
It stated, “Challenges with execution may be leading to the erosion of trust in the banking system, with merchants asking for cash payments despite empty ATMs, digital channels increasingly overwhelmed, and POS charges inching towards 50 per cent.”
The national fintech body stated this in its ‘Thought Leadership Series’ titled ‘Cashless Economy on Steroids: Strategic or Suicidal?’
Explaining the history of cashless policy in the country, it said, “The Central Bank of Nigeria first issued the framework for its cashless policy in 2012, to reduce the amount of physical cash in circulation, deepening financial inclusion by driving digital payments, reducing fraud and curbing cash-aided crimes such as terrorism financing, kidnapping, extortion, blackmail, and so on.
Today, the maximum weekly withdrawal limits for individuals and corporates across all channels are N500,000 and N5,000,000 respectively. In an event where cash withdrawal exceeds these limits, a processing fee of three per cent and five per cent will be incurred for individuals and corporates, respectively. In addition, third-party cheques exceeding the sum of N100,000 are not eligible for over-the-counter payment.
On the surface, a cashless economy in itself does not seem like a bad policy. Anyone who has been paying attention to the global payments trend knows that a cashless world looms and that it is only a matter of time till hard notes become obsolete or close enough.”
Quoting a Bain and Company report, FintechNGR revealed that 67 per cent of global payments will become digital by 2025.
It stated that current the rise of digital-only banks (neo-banks) and contactless payments with the help of smartphones and super-fast networks indicates that the use of cash as a medium of exchange has been declining gradually for years.
It further said that while the drive for a cashless economy at all cost by the CBN was strategic, its execution and results had been described by many as suicidal.
Comparing what was happening with the CBN’s policy with what happened in India in November 2016, the association noted that the policy made it almost impossible for Indians to access their money for a long time, resulting in many controversies, deflated trust in the Indian government and an overarching negative economic impact.
It stated that India’s cashless policy was not successful because the challenges and concerns of the people such as preferences, economic development, and technological advancement, were not adequately addressed.
The fintech association said, “One thing is clear. When adopting a cashless policy (or any other policy for that matter), it is more important to have a customer-centric approach rather than a technical one. The success of a cashless policy is directly linked to the incentives offered to encourage mainstream adoption.”
It added that great prospects lie ahead for payment service providers in terms of a larger consumer base, a wider range of services offered, and revenue growth as Nigeria transitions into a cashless economy.