CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
TO THE STUDY
One of the prerequisites for the
development of national economy according to Ajayi et al, 2006 is by
encouraging a payment system that is secured, convenient, and affordable. The
world today is moving away from paper payment system to electronic means,
especially payment cards (Humphrey, 2004). In most countries, for instance, it
is possible to pay for a snack through vending machine by simply dialing a
number on one’s phone bill. In Nigeria, like most developing countries, cash is
the main mode of payment and a large percentage of the populations are unbanked
(Ajayi et al., 2006) thus making the Nigerian economy to be heavily cash-based.
Recently, the Central Bank of Nigeria
(CBN, 2011) revealed that the direct cost of cash management is estimated to
reach a staggering sum of one hundred and ninety two billion naira (N192bn) in
2012. Other challenges resulting from high-cash usage among others include:
armed robberies and cash-related crime, revenue leakage arising from too much
of cash handling, inefficient treasury management due to nature of cash
processing, high subsidy, high inflation etc (Akpan, 2009). Against these
backdrops, the CBN introduced the cashless policy in April 2011 with the
objective of promoting the use of electronic payment channels instead of cash.
This no doubt led the CBN into conducting a pilot scheme of the cashless policy
in Lagos in January 1st 2012. So far, implementation of the policy in Lagos has
not gained expected reaction. Hence a rollout across the country has been
substituted with phase implementation in Port Harcourt, Kano, Abia and the
Federal Capital Territory (CBN, 2012).
A cashless economy is one where
purchases and transactions are done mainly by electronic means and seldom by
cash. The policy, introduced by the CBN in April 2011, states that individual
and corporate customers are restricted to a daily cash withdrawal and lodgment
of N500000 and N3m respectively. By implication, individuals, who make cash
withdrawals above the limit will be charged N100 on every N1000 while a
corporate organization that exceeds the limit will be charged N200 on every
N1000 (Ezio, 2008).
According to the CBN and the Bankers
Committee, the economy will be better off with the policy. For instance, it
will reduce the dominance of cash in the system, thereby reducing cases of
armed robbery and cash related crimes. It will moderate the cost of cash
management; encourage the use of electronic payment channels and reduce lending
rates to further make credit accessible to big and small business. The
committee’s findings showed that running a cashless economy could save the CBN about
N192bn, which is the projected direct cost of managing cash for 2012. While
Nigerians could not deny the need to prevent too much cash in circulation among
other benefits of the scheme; many still believe that the cash limit is too low
and query how the CBN arrived at the benchmark. Some also express the need for
a gradual transition to the new policy order; while others think that Nigeria
is not even ripe for it. As laudable as the cashless idea is, an assessment of
the usual inconsistencies in the operation of the Automated Teller Machine
(ATM) leaves many stakeholders wondering if the same system could produce a
better result. Realizing this potential threat, the CBN recently directed banks
and independent service providers to deploy more ATMs and ensure their
efficiency to ensure a smooth implementation of the policy. The most
outstanding cashless banking channels world over according to Siyanbola (2013)
are Mobile banking; Internet banking; Telephone banking; Electronic card
implants; POS terminals, and ATMs.
The word mobile is related to mobile
business which connotes the possibilities of having access to business
activities anywhere and anytime in the world and which is managed by computer
mediated network. The facility makes service availability location possible.
Mobile
Banking involves the use of mobile
phone in carrying out financial transactions. This is more or less fund
transfer process between customers with immediate availability of funds for the
beneficiary. According to Siyanbola (2013), it uses card infrastructure for
movement of payment instructions as well as secured SMS messaging for
confirmation of receipts to the beneficiary. It is very popular and exciting to
the customers given the low infrastructure requirements and a rapidly increasing
mobile phone penetration in the country. In the banking industry, services that
are finance-related which involves mobile telecommunication technologies are
known as Mobile financial services. These services are therefore categorized
into mobile payment and mobile banking (Alex, 2010). Services covered by this
product include account enquiry; funds transfer; recharge phones; changing
password and bill payments (Tiwari & Buse, 2007).
Internet banking involves conducting
banking transactions on the internet (www) using electronic tools such as the
computer without a customer having to visit the banking hall. Internet or
electronic banking is also a system by which transactions are settled
electronically with the use of electronic gadgets
such as ATMs, POS terminals, GSM phones, V-cards etc, handled by e-holders,
bank customers and other stakeholders (Edet, 2008). These innovations in the
banking system no doubt have greatly facilitated e-commerce mostly in effecting
payments. Internet banking, like mobile banking, also uses the electronic card
infrastructure for executing payment instructions and final settlement of goods
and services over the internet between the merchants and the customers.
Commonly used internet banking transactions in Nigeria are settlement of
commercial bills and purchase of air tickets through the websites of the
merchants or service providers.
Electronic card on the
other hand is a physical plastic card that uniquely identifies the holder used
in transacting business on the internet, automated teller machine (ATM) and
point of sales (POS) terminals (Carow and Staten, 2000). This includes debit
and credit cards with debit cards linked to local bank accounts and offer
immediate confirmation of payment while credit card can be used for assessing
local and international networks. As credit cards are widely accepted in most
countries, the underlying infrastructures and operational rules are often
provided by global trust scheme (such as visa and master card) in addition to
local lines.
Debit cards are the
dominant cards in Nigeria, otherwise known as ATM cards and their usage is
wider than POS transactions given the current limited deployment of POS
terminals.
Point of Sale (POS) or
Point of Purchase (POP) terminals is the location where a transaction occurs. A
POS or POP is generally referred to the hardware and software used to check
out, the equivalent of an electronic cash register. A POS manages the selling
process by a salesperson as an accessible interface while allowing the creation
and printing of receipts.
Automated Teller Machine is
a computerized device that provides the customers of a financial institution
with access to financial transactions in a public place without a need for
assistance from bank teller or any bank official (Migdadi, 2008). It is the
commonest form of electronic banking which has gained popularity among
Nigerians including the illiterate bank customers.
Notwithstanding the
benefits posited by cashless economy from the foregoing, these alternative
payment channels are still faced with enormous challenges. According to Wales
(2013), challenge is a general term referring to things that are imbued with
difficulty and victory. Thus, there are many difficulties associated with the
actualization of the cashless economic policy among the Nigerian populace
especially the illiterate family members; those living mostly in rural areas
and the unemployed as well.
The Port Harcourt community is among the elite class of the
Nigerian society who by virtue of their positions are bound to embrace the
cashless policy, giving the presence of commercial banks available at their
disposal. To this effect, the study would determine the acceptability and
adoption of the cashless policy in Port Harcourt.
1.2 STATEMENT
OF THE PROBLEM
According
to the Global FINDEX Survey in 2011, around one-third of Brazilians and South
Africans with debit cards use e-payments, compared with one in ten Nigerians:
the 2% of Nigerian adults who currently make e-payments represent a small
fraction of the 19% holding debit cards (which is used as a proxy for a type of
account more likely to provide e-payment functionality). Similarly, data from
EFInA’s Access to Financial Services in Nigeria 2012 survey (A2F, 2012)
highlight Nigerians’ limited acceptance and adoption of electronic payments and
services to date, with 0.7% of banked adults using POS terminals, 0.8% of
banked adults using the internet, and less than 2.5% using mobile phones for
banking transactions. The policy has since been affected by many factors namely
ineffective sensitization campaign exercise; inadequate protection of the
interest of merchants and people in the informal sector; non availability of
Point-of-Sale (POS) terminals as well as other technological challenges. Thus,
these challenges have seriously affected the implementation of the policy. It
is therefore the belief that the move is too idealistic in a country like
Nigeria where a larger percentage of their population has low level of
functional literacy skills and resides in rural areas where compelling them to
travel long distances in order to use these services. It therefore becomes
pertinent to examine the level of acceptability and adoption of the cashless
economic policy in Nigeria.
1.3 OBJECTIVES
OF THE STUDY
The
broad object of the study is to determine the level of acceptability and
adoption of the CBNs cashless policy in Port Harcourt metropolis. The specific
objectives are as follow.
1. To determine the level of acceptability
and adoption of the CBNs cashless policy in Port Harcourt.
2. To find out the advantages, benefits
and implications of accepting and adoption of the CBN’s cashless policy in Port
Harcourt
3. To Determine the challenges facing the
use of internet and mobile banking services/POS and the disadvantages of CBN’s
cashless policy in Port Harcourt
4. To find out the factors that can
improve the level of acceptability and adoption of the CBN’s cashless policy in
Port Harcourt.
1.4 RESEARCH
QUESTION
1. What is the level of acceptability and
adoption of the CBNs cashless policy in Port Harcourt?
2. What are the advantages, benefits and
implications of accepting and adoption of CBN’s cashless policy in Port
Harcourt?
3. What are the challenges facing the use
of internet and mobile banking services/POS and the disadvantages of CBN’s
cashless policy in Port Harcourt?
4. What are the factors that can improve
the level of acceptability and adoption of the CBN’s cashless policy in Port
Harcourt?
1.5 HYPOTHESIS
The following hypotheses were
formulated to guide the study and were tested at level of significance of 0.05.
Ho: The people of Port Harcourt has not
significantly accepted and adopted the CBNs
cashless policy
HA: The people of Port
Harcourt has significantly accepted and adopted the CBNs cashless policy
1.6
SIGNIFICANCE OF THE STUDY
This study is targeted at determining
the level of acceptability and adoption of the CBNs cashless policy in Port
Harcourt considering the factors and challenges facing the use and the
acceptability and adoption of the policy, therefore this study will educate the
general public on the need for the acceptance and adoption of the cashless
policy educating the general public of the advantages of the policy.
Furthermore, this study will also educate stakeholders in the financial sector
on ways to solve the problems limiting the acceptance and adoption of the CBNs
cashless policy.
Lastly, the outcome of this study will increase the volume of the
literature in the area of acceptability and adoption of the CBNs cashless
policy.
1.7 SCOPE
AND LIMITATION OF THE STUDY
In ascertaining the level of
acceptability and adoption of the CBNs cashless policy, this study will cover
all the Local Government area in the city of Port Harcourt.
LIMITATIONS OF STUDY
Limitations experienced in the course
of this study are basically centered on problems relating to:
1. Difficulty in generating reasonable,
adequate and reliable information from respondents- Respondents tend to provide
information which they feel the researcher would be pleased to get, which may
not be the right information.
2. Financial constraint- Insufficient fund
tends to impede the efficiency of the researcher in sourcing for the relevant
materials, literature or information and in the process of data collection
(internet, questionnaire and interview).
3. Time constraint- The researcher will
simultaneously engage in this study with other academic work. This consequently
will cut down on the time devoted for the research work.
1.8
DEFINITION OF TERMS
Payment- the action or process of paying
someone or something or of being paid
Economy- the state of a country or region in
terms of the production and consumption of goods and services and the supply of
money.
Transactions- an instance of buying or selling
something.
Cash- money in coins or notes, as distinct
from cheques, money orders, or credit.
Internet- a global computer network providing a
variety of information and communication facilities, consisting of
interconnected networks using standardized communication protocols