Cashless policy reducing trust in banks – Fintech Association

The Fintech Association of Nigeria has stated that challenges with the implementation of the country’s cashless policy could erode customer confidence in the banking system.

It said growing merchant demand for cash payments despite empty ATMs is putting overwhelming pressure on digital channels and causing PoS charges to approach 50 percent.

According to the association, a cashless policy should provide greater simplicity and convenience in payments, not what materializes in the country.

It stated: “Execution challenges could erode confidence in the banking system, with merchants asking for cash payments despite empty ATMs, digital channels becoming increasingly overwhelmed, and POS fees approaching 50 percent.”

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, deepen financial inclusion by driving digital payments, reduce fraud and curb cash-backed crimes such as terrorism financing, kidnapping, extortion, extortion and so on.

“Currently, the maximum weekly withdrawal limits for individuals and businesses across all channels are N500,000 and N5,000,000 respectively. In a case where cash withdrawals exceed these limits, a processing fee of three per cent and five per cent will be incurred respectively for individuals and businesses In addition, third party checks 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 payment trend knows that a cashless world is looming and that it is only a matter of time before hard notes become obsolete or close enough.”

Citing a Bain and Company report, FintechNGR revealed that 67 percent of global payments will go digital by 2025.

It stated that the current rise of digital banking (neo-banking) and contactless payments using smartphones and super-fast networks indicate that the use of cash as a medium of exchange has been gradually declining for years.

It further said that while the pursuit of a cashless economy at all costs by the CBN was strategic, its execution and results had been described by many as suicidal.

Comparing what happened with the CBN’s policy to 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, weakened confidence in it Indian government and an overall negative economic effect.

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 the form of a larger consumer base, a wider range of services offered, and revenue growth as Nigeria transitions to a cashless economy.