Poorly implemented cashless policy may erode customers’ trust in the banking system, the Fintech Association of Nigeria (FAN) has alerted Abuja.
FAN cited merchants’ demand for cash payment despite empty ATMs, putting overwhelming pressure on digital channels and causing Point of Sale (PoS) charges to rise close to 50 per cent.
A cashless policy should facilitate greater ease and convenience of payments, not squeeze economic activities as currently obtains, FAN argued.
“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.”
FAN advanced its view in its Thought Leadership Series titled “Cashless Economy on Steroids: Strategic or Suicidal?”
“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,” it said.
“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.”
Rise in digital payments
FAN said the current rise of digital-only banks (neo-banks) and contactless payments with the help of smartphones and super-fast networks shows the use of cash as a medium of exchange has been declining gradually for years.
The drive for a cashless economy at all costs by the CBN is strategic but its execution and results have been described by many as suicidal, it added, via The PUNCH.
FAN compared what is happening with the CBN policy with what happened in India in November 2016 and noted that the policy makes it almost impossible for Indians to access their money for a long time, resulting in many controversies, deflated trust in the Indian government, and produced an overarching negative economic impact.
India’s cashless policy was not successful, it added, because the challenges and concerns of the people such as preferences, economic development, and technological advancement, were not adequately addressed.
“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.
“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.”