The Effect of Cashless Policy on the Profitability of Commercial Banks in Nigeria
Chapter One
Aims and objectives of the study
The main objective of the study would be to examine the impact of the cashless policy on the profitability of Nigerian banks. Other aims of the study would be to;
- To examine the relationship between the growth of commercial banks and the cashless policy in Nigeria.
- To determine the benefits of cashless policy to a developing economy like Nigeria.
- To examine the advantages of cashless to the banking sector of Nigeria.
- To recommend ways banks can profit more from the cashless policy in Nigeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
The evolution of conventional money has been well documented in economics literatures. However, recent developments in information and communication technology have influenced the role of money in economic activities. As a result, we can now talk of electronic money and hence electronic banking. Empirical studies have attempted an estimate of private and social costs of payment instruments (Humphrey and Berger, 1990; DeGrauwe et al 2000), patterns in the use of e-payment instruments (Humphrey et al 1996; Carrow and Staten, 2000), the cashless and monetary economy (Gali and Gambetti, 2009; Kriwoluzky and Stoltenbery, 2010), and the role of Central Bank in a cashless economy (Claudia and DeGrauwe, 2001; Marco and Bandiera, 2004). While there is an avalanche of studies on these different strands of the subject focusing on developed countries, it is however sad to note that empirical studies are yet to focus on developing countries of Africa. Only recently, Odior and Banuso (2012) attempted an evaluation of the implication of cashless banking in regards to monetary policy in Nigeria while Obumneke, et al (2014) looked at the effectiveness of cashless policy in attracting foreign direct investment in Nigeria. In this connection, more studies focusing on Africa in general and Nigeria in particular are warranted. Electronic banking is an important element in the Nigerian financial sector reforms. With the advent of electronic banking, not only has manual banking reduced drastically, but also, the culture of keeping ledgers and recording transactions by hand has reduced. Now, banking has become very fast, customers get their services more quickly and reliably, local and international transactions require little time as compared to before (Sana et al, 2011). According to Businessdictionary.com, electronic banking is the use of computers to carry out banking transactions, such as withdrawals through cash dispensers or transfer of funds at Point of Sales (POS). In other words, it is banking transactions conducted through computerized system, as electronic fund transfer by Automated Teller Machine, intended to speed operation and reduce cost. Electronic banking and cashless banking are closely related. Cashless banking is that banking system aimed at reducing, but not eliminating, the volume of physical cash circulating in the economy whilst encouraging more electronic based transactions. In other words, it is a combination of e-banking and cash-based system (Odior and Banuso, 2012). Ejiofor and Rosak (2013) see the cashless system as one with the ability to store money in an electronic purse on a card which is then used to purchase product at vending machine or at any point of sales terminal located within the business premises. Akhalumeh and Ohiokha (2012) see cashless economy as a system in which transactions are not done predominantly in exchange for actual cash. It is essentially a mobile payment system which allows users to make payment through GSM phones with or without internet facilities. This system increases convenience, create more service options, reduce cost of cash related crimes and provide cheaper access to credit (Okey, 2012; Obina, 2013).
Cashless Banking Channels
Some outstanding cashless banking channels known all over the world are mobile banking, internet banking, and telephone banking. They are explained below.
Mobile Banking
Mobile banking refers to the provision of banking and financial services with the help of mobile telecommunication devices. It is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such a mobile phone. It involves the use of mobile phone for settlement of financial transactions. Mobile banking is popular and exciting to the customers given the low infrastructure requirements and a rapidly increasing mobile phone penetration in Nigeria. Services covered by this product include account enquiry, funds transfer, phone vending, changing password, and bill payments (Siyanbola, 2013). Banks like First Bank, Ecobank, Guarantee Trust Bank, United Bank for Africa and others have begun using mobile banking to serve their customers.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the effect of cashless policy on profitability of commercial banks in Nigeria
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on the effect of cashless policy on profitability of commercial banks in Nigeria. 200 staff of Zenith in Enugu State was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the effect of cashless policy on profitability of commercial banks in Nigeria
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of cashless policy on profitability of commercial banks in Nigeria
Summary
This study was on the effect of cashless policy on profitability of commercial banks in Nigeria. Three objectives were raised which included: To examine the relationship between the growth of commercial banks and the cashless policy in Nigeria, to determine the benefits of cashless policy to a developing economy like Nigeria, to examine the advantages of cashless to the banking sector of Nigeria and to recommend ways banks can profit more from the cashless policy in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of zenith bank in Enugu State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up human resource managers, accountants, customer care officers and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The banking system transition to a cashless system will no doubt benefit the banking industry in many ways. Based on the findings, the following conclusions are drawn:
- The adoption and implementation of cashless policy will enhance banks’ efficiency by making them more productive and effective.
- The cost of operation in a cashless economy will reduce substantially, thereby resulting to an increase in income of banks.
- Cashless policy will make banking transactions easier by bringing services closer to the customers.
- The unbanked will become banked, thereby increasing the customer base of banks which will on the long run reduce the volume of cash in circulation. This will avail banks with more deposits to do their businesses which will increase their fortunes and domestic investments.
- The adoption of cashless policy will impact positively on banks’ profits
Recommendation
Banks should create a campaign of awareness among their clients to make sure that they are aware of the benefits if cashless system were introduced. The bank management should establish a training for their clients on the various use of cashless system and capacity building for Cogebanque staff. The study has shown that cashless system has a positive impact on the financial performance of the banks and therefore they should more targeted online services as well as come up with more technology based services that are easily reachable by customers
References
- Akhalumeh. P. B. and Ohiokha, F. (2012) Nigeria’s cashless economy: the imperatives, International Journal of Management and Business Studies, 2(2) 31-36
- Amaka, E. (2012) Prospects and challenges of mobile money in Nigerian economy, retrieved from http://www.thisdaylive.com/articles/prospects-and-challenges-of-mobile-money-onnigeria-economy/129273
- Central Bank of Nigeria (2011) New cash policy, Retrieved from www.cenbank.org
- Central Bank of Nigeria, (2012) Toward a cashless Nigeria: tool and strategies, Retrieved from www.ncs.org.ng/wpcontent/uploads/2012/08/cashless2012-4.pdf
- Claudia, C. and De-Grauwe, P. (2001) Monetary policy in a cashless society, Brussels, CEPR Discussion Study
- Corrow, K.A. and Staten, M.E. (2000) Plastic choices, consumer usage of bank cards Vs propriety credit cards, Working Study, April
- De-Grauwe, P., Buyst, E. and Rinaldi, L. (2000) The costs of cash and cards compared: the cases of Iceland and Belgium, mimeo, University of Leuven
- Ejiofor, V. E. and Rasika, J. O. (2012) Realizing the Benefits and Challenges of Cashless Economy in Nigeria: Its’ Perspective, International Journal of Advances in Computer Science and Technology, 1(1) 7-13 Retrieved from http://warse.org/pdfs/ijacst02112012.pdf
