Have you heard about this new cashless policy that some countries and businesses are adopting? Going cashless means eliminating physical currency and relying on electronic payments for all transactions. It may seem strange at first, but a cashless system has some big advantages once you get used to it. No more fumbling with change or worrying about getting robbed at the ATM. On the other hand, some people argue that going cashless also has some downsides like privacy concerns or limiting access for some.
Some countries like Sweden, China, India, and Uk, are leading the charge into a cashless future. Whether or not your country or favorite stores adopt a cashless policy, it’s a good idea to understand what it means and how it might impact you. Read on to learn the pros and cons of the cashless policyso you can decide for yourself if it’s a change you want to embrace or avoid.
What Is the Cashless Policy?
The cashless policy refers to an economic system where cash transactions are discouragedin favor of electronic payments. That is businesses like stores, restaurants, and other venues no longer accept cash as a form of payment. Instead, they only take credit or debit cards, mobile payments, QR code payments, smart cards, Internet bankingor other electronic forms of payment. Debit/credit cards
A cashless society aims to reduce the circulation of physical currency and instead promote electronic transactions.
The move to a cashless system is gradual, but some countries have set targets, recognizing both the advantages of reduced cash dependence as well as the importance of inclusion. With the growth in digital payments, a cashless future seems inevitable, but cash likely won’t disappear completely anytime soon.
Cashless Policy in Nigeria
The cashless policy in Nigeria aims to reduce the number of naira notes used for business but not completely stop the use of cash for the benefits and growth of Nigerians and the financial system.
The Central Bank of Nigeria introduced the cashless policy in 2012 to drive the use of e-payments channels, like:
- Point of Sale (POS) terminals
- Automated Teller Machines (ATMs)
- Mobile banking
- Internet banking
- Wallets
In October 2022, the CBN once again announced that Nigeria would be pursing a cashless society, they introduced measures such as limits on cash withdrawal and new banknotes, thereby abstructly replacing the notes already in circulation. The policy sets limits on cash transactions and charges fees on large cash deposits and withdrawals to incentivize cashless payments.
The goal is to improve Nigeria’s payment system, reduce the cost of banking services, and drive economic growth. Many Nigerians still prefer cash, lack access to e-payment infrastructure, or face unreliable network connectivity. The fees on cash transactions also disproportionately impact lower-income groups.
What are the Advantages of Cashless Policy?
Cashless payments offer several advantages over cash transactions.
Convenience: Paying with cards or mobile wallets is simply more convenient than cash. You don’t have to worry about having exact change or small bills on hand. Cashless payments also speed up checkout times since transactions are processed instantly.
Security: Cashless payments are more secure since there is an electronic record of each transaction. If your card is lost or stolen, the card issuer can easily cancel it and refund unauthorized charges. With cash, once it’s gone, it’s gone.
Improved economic growth: A cashless society makes it easier for more people to access banking and payment systems, which boosts business activity.
Budgeting: Using bank and credit card statements makes it easy to track your spending by category like food, entertainment or travel. This can help you create a realistic budget and spot wasteful spending. Cash payments, on the other hand, are difficult to track and budget.
Global Access: Cashless payments give you access to funds anywhere in the world that accepts your card network. You can make purchases internationally without worrying about currency exchange rates or carrying large amounts of foreign cash.
Increased Tax Revenue Collection: Cashless Policy payments provide an electronic record that can simplify accounting and make it easier to calculate sales taxes or value added taxes where applicable. Cash transactions, on the other hand, can complicate tax reporting and increase the risk of errors or fraud.
Improved hygiene: Cash carries germs and viruses, so cashless payments are more sanitary, especially with health concerns like COVID-19.
What are the Disadvantages of Cashless Policy?
While a cashless society seems convenient, it also has some downsides you should be aware of:
Loss of financial privacy: Cash transactions are anonymous, digital are not. Your purchases and payments can be tracked, monitored and analyzed. Some see this as a loss of financial freedom and privacy.
Vulnerable to cybercrime: Digital payments mean more data online, which can be a target for hackers, scammers and cybercriminals. Fraud and theft are risks.
Exclusion of certain groups: Some people don’t have bank accounts or access to digital payments. A cashless society could marginalize lower income and rural populations.
Overspending risk: It may be easier to overspend when you’re not handing over physical cash. You don’t have a visual representation of how much you’re actually spending.
Power grid dependence: If the power is out, so are your digital payments. Cash provides a backup. Some fear too much dependence on technology that could fail or be disrupted.
Bank fees: Banks and payment providers charge fees for various transactions and services. Some argue a cashless society means more money in fees paid to the financial industry.
Job loss: Some jobs like cashiers and bank tellers could decrease or disappear, as less cash is handled and more self-service options exist. Though, other new jobs may emerge.
In summary, while a cashless future seems inevitable, we must consider how to address the potential downsides and inequalities that may come with it. Protecting privacy, security and access for all should remain top priorities. A balance of both cash and digital payments may be the best approach.
Why is Nigeria not Ripe For The cashless Policy?
Nigeria is not quite ready for a full cashless policy for several reasons:
Infrastructure Challenges
Nigeria lacks the necessary infrastructure to go completely cashless. Internet access is limited, especially in rural areas, and power outages are common. These issues make electronic payments difficult and unreliable for many.
Poverty and Illiteracy
A large portion of Nigerians live in extreme poverty and illiteracy rates remain high. These groups likely do not have bank accounts or access to electronic payments, relying solely on physical cash. A cashless policy risks further marginalizing vulnerable groups.
Security Concerns
Electronic fraud and scams are prevalent in Nigeria. Consumers and businesses may be hesitant to adopt cashless payments due to security and privacy concerns. Stronger consumer protections and anti-fraud measures are needed before transitioning to a cashless system.
Cultural Preferences
Cash is deeply embedded in Nigerian culture and commerce. The informal economy, including small businesses, street vendors and markets have long relied on cash transactions. Pushing these groups into electronic payments too quickly could disrupt long-standing cultural and economic practices.
While a cashless policy could benefit Nigeria in the long run, more needs to be done to address infrastructure, poverty, security issues and cultural preferences before implementation. A gradual transition with incentives and consumer education may ease the country into a cashless system, but Nigeria’s diversity means no one-size-fits-all approach will do. With the right investments and policies, Nigeria can overcome these challenges to build an inclusive cashless economy.
Examples of Cashless Policies Around the World
Several countries have implemented cashless payment policies to varying degrees. Here are a few examples:
Sweden
Sweden is pushing to become the world’s first completely cashless society. Most Swedes use cards or mobile payments for even small purchases. Only about 1% of Sweden’s economy involves cash transactions. The government believes eliminating cash will reduce crime and make the economy more efficient.
China
China’s mobile payments market is the largest in the world. Platforms like WeChat Pay and Alipay are commonly used for everything from buying groceries to paying rent. The Chinese government sees mobile payments as a way to track citizen spending and encourage a cashless society. However, cash is still used for many small purchases, especially in rural areas.
India
India launched a demonetization policy in 2016 to curb corruption and push citizens toward digital payments. The policy banned large currency bills, so Indians adopted mobile wallets, cards, and bank transfers. However, cash remains important for small businesses and in rural communities with limited internet access. The government continues promoting cashless transactions to formalize more of India’s large informal economy.
United Kingdom
The UK government has not banned cash but wants to make electronic payments more attractive. Fees for ATM withdrawals were recently eliminated, and retailers can pass along surcharges to customers paying in cash. However, cash remains the second most used payment method after debit cards, especially for small transactions. Any move to a fully cashless UK economy will take time.
As you can see, there are many examples of how countries are transitioning to cashless societies at different paces. While some aim to eliminate cash completely, others are promoting digital payments while still keeping cash accessible, especially for small purchases and in rural communities. The shift to cashless is a complex issue with many factors to consider for each country and economy.Overall, cash and cashless payments will likely co-exist for the foreseeable future.
Conclusion
So there you have it. A cashless policy can bring some promising benefits like reduced costs, increased convenience, and tightened security. At the same time, it poses risks around privacy, financial exclusion, and overspending. As with any policy, there are two sides to the coin. The key is finding the right balance between efficiency and ethics.
If implemented responsibly, a cashless system can take us to the next level of financial freedom and security. But we must proceed with caution. People and principles, not just profits, should be the compass guiding us to a cashless future. How do you feel about living in a cashless world? Cash or card, the choice is ours.