On
July 1, 2014
the cashless policy introduced by the Central Bank of Nigeria (CBN)
became operational in all thirty-six Nigerian states and Abuja.
Hitherto, the cashless policy was already in operation in about eight
locations, distributed in business zones around the country. The
cashless policy in Nigeria aims to engender financial inclusion by
limiting the volume of cash transactions. The policy stipulates a "cash handling charge" on daily cash withdrawals or cash deposits
that exceed N500,000 (about US$3,030) for individuals and N3,000,000
(approximately US$18,190) for corporate bodies. The new policy on
cash-based transactions (both withdrawals and deposits) in banks aims
at reducing the amount of physical cash (coins and notes) circulating
in the economy, and encouraging more electronic-based transactions in
payments for goods, services, and transfers, among others.
An Ecobank client uses an ATM. Photo credit: Oluwatayo Tade & Oluwatosin Adeniyi |
In
designing the policy, the CBN envisioned it as a means of curbing
negative consequences that arise from the heavy usage of cash in the
economy such as: the high costs of printing, handling, transporting,
and storing cash; the high risk of using cash (such as robberies and
other cash-related crimes); the circulation of money outside of the
formal economy; and inefficiency and corruption, both of which are
more easily facilitated with cash. On the basis of the forgoing
observations about the use of cash, the deployment of e-banking and e-payments platforms has been touted by the CBN as a veritable "way out of the
woods." Setting daily limits on automated teller
machine (ATM) withdrawals is an integral part of the CBN’s cashless
policy. However, banking and finance technologies such as
ATMs are also associated with instances of fraud. Despite this, the victims' perspectives that would allow policymakers to make informed
decisions and address emerging challenges associated with
crime-related problems stemming from the cashless policy are rarely
documented. The problem is phenomenal when considering the number of clients who use ATMs.
ATM
cardholders do not usually have just one card. The possession of ATM
cards for different banks is a rational attempt to avoid the charges
placed by banks on clients from another bank using their machines.
Until it was stopped by the former CBN governor, Sanusi Lamido
Sanusi, the charge was N100 (about US$0.63) for every transaction.
Clients therefore reported that they were conscripted not only to
obtain ATM cards for their accounts, but also to use their bank’s own ATMs as they were charge-free. Most cardholders obtained their cards due to coercion, particularly through imposition of charges on manual
withdrawals, while others obtained the card voluntarily.
As
a banking and payments technology under the cashless policy, clients use ATMs to
check account balances, transfer money, withdraw cash, recharge
phones, and pay for utilities such as electricity and digital
satellite television services, among others. We found that knowledge
of this technology influenced the extent to which it could be
explored. Despite this, participants in our study reported that their primary
motivation for using ATMs was that they more easily facilitate access
to cash.
Sensitive
to the potential security challenges in using this platform, the study participants altered their routine activities to a "safe period" of the day before using the ATM. The time of day that participants preferred for withdrawals was related to ease of access and security.
For instance, withdrawing money very early in the morning was a
rational decision because foot traffic would be
lower and participants would have easier access to ATMs. Moreover, very few participants--except those needing money to execute
transactions--opted to withdraw cash during the day owing to network
problems and long queues. Withdrawing at night had significant
security challenges as ATM cardholders risked being robbed or
otherwise dispossessed of their cash.
Clients using ATMs at a non-bank location. Photo credit: Oluwatayo Tade & Oluwatosin Adeniyi |
At
the functional level, ATM usage has reduced long hours of queues in
the banking halls emblematic of the pre-cashless policy era, while it
has influenced the spending culture of users. With respect to usage,
the challenges listed by participants included: cash dispensing
errors; infrastructural problems associated with the ATM network, which often deny clients access to their money when they need it; and ATM fraud. Despite these challenges, the availability of
money within any locality where ATM machines are located seems to be
endearing users to e-payments systems in Nigeria. This
development has potential for fostering financial inclusion.
You can read Oluwatayo Tade and Oluwatosin Adeniyi's full report here.