CHAPTER ONE
INTRODUCTION
1.1 Background To the Study
A cashless economy is an environment in which money is spent without being physically carried from one place to another. Electronic devices as means of information that reveal how much a person has deposited and has spent are needed. Information technology plays an important role in bringing about sustainable development in every nation. Without an optimal use of information technology, no country can attain a speedy social- economic growth and development. The future of all business particularly those in the services industry lies in information technology, in fact, information technology has been changing the ways companies and banks compete. Information technology is more than computers, it encompasses the data a business creates and uses as well as a wide spectrum of increasing convergent and linked technologies that process such data. Information technology thus relates to the application of technical processes in the communication of data. It is no doubt that information technology can help to reduce transaction costs for banks, which will translate to lower prices for services to customers. Information technology for banks takes different forms which include: computerization of customers’ accounts and information storage and retrieval, deposit and withdrawal through Automated Teller Machine and networking to facilitate access to accounts from any branch of the bank. Other forms include bio-metrics used in finger- printing and identification which should dispense the use of passwords or personal identification by customers. The use of internet and websites to bundle a host of services that go beyond transactional financial services which is increasing among banks.
The financial sector has undergone many organizational changes over time in order to facilitate easy production and trade of products and services.
However, with accelerating development of the financial systems as a result of deregulation, globalization and new information system, new ways of handling money appeared among banks and their customers. The use of e-card, internet banking facilitates the ease and convenience in handling transactions. E- banking customers have possibility to access online or electronic banking for 24 hours which allows them to view historical banking transactions, transfer money between accounts, make savings, perform other operations at everywhere. Moreover increase in knowledge and ability to manage internet banking, banks and ATMs have resulted in more independent bank customers no longer requiring bank staff. The shift in bank customers’ behavior and attitude towards cash services offered at the banks gave birth to cashless policy. This means banking is entirely relying on monetary transactions that use electronic means rather than cash. The cashless policy was conceptualized by the apex bank to migrate Nigeria’s economy from cash based economy to a cashless one through electronic payment system, not only to enable Nigeria monetary system be in line with international best practices or discourage movement of cash manually, but at the same time increase the proficiency of Nigeria’s payment system which will in turn improve the quality of service being offered to the banking public. Cashless policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including high cost of cash, high risk of using cash, high subsidy , informal economy, inefficiency and corruption (CBN,2011).The introduction of the policy in Nigeria therefore brings up issues that touch on security, privacy, crime and computerization. According to David (2012), Nigeria did not embrace electronic banking when compared to developed countries. Nigeria adopted electronic banking system in early 2000s.
Electronic banking is defined as the use of computer to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. Cashless policy started in Lagos, pilot state. The apex bank pegged withdrawal by individual and corporate accounts at N500,000 and N3million respectively. Processing (charges) fees for withdrawals above the limits for individual customers is 3% while that of corporate bodies is 5%. Charges for lodgements for individuals and corporate accounts are 2% and 3% respectively. However, ministries, departments, agencies, specialized banks, diplomatic missions, embassies, multilateral and donor agencies have been exempted from charges emanating from this policy.
The cashless policy will potentially result in an extensive application of computer technology in the financial system which places the computer Professional Registration Council at the centre of control and regulation of the emerging in the Nigerian economy. The Central Bank of Nigeria has in recent times engaged in series of reformations aimed at both making the Nigerian financial system formidable and enhancing the overall economic performance of Nigeria so as to place it on the right path in tune with global trends. Recently, the CBN came out with two laudable agenda- the Islamic banking (non-interest banking) and the cashless economy(e-payment system)(Babalola,2008). Some of these policy measures came with tremendous success despite the initial skepticisms of Nigerians. For instance, when the CBN in July 2004 set December 31st ,2005 deadline for N25billion minimum capitalization, it was agreed with considerable criticism when the programme was completed , the banking landscape was transformed out of a system dominated mainly by “fringe banks to one made up of largely “mega banks” (Adeyemi,2006).
The product of the exercise was to ensure a diversified, strong and reliable banking industry where there is safety of depositors’ fund, and reposition of the banks to play active developmental roles in the Nigerian economy” (Adegbaju and Olokoyo, 2008). This remark sums up the assessment of analysis about the outcome of the reform agenda. In recent years, Nigeria has been experiencing growth and the condition seems right for launching unto a path of sustained and rapid growth, justifying its ranking amongst the 11 countries as identified by Goldman Sachs to have the potential for attaining global competitiveness based on their economic and demographic settings and the foundation for reforms already laid. Constraints to the achievement of Nigeria’s ambition to be among the top 20 economies of the world by year 2020 is the fact that the Nigerian economy is too heavily cash oriented in transaction of goods and services which is not in line with global trends. In its efforts to rescue the Nigerian economy from the brinks of total collapse; the CBN in collaboration with the Bankers’ Committee, the cashless policy was designed to provide mobile payment services, breakdown the traditional barriers hindering the financial inclusion of millions of Nigerians and bring low-cost, secure and convenient financial services to urban , semi-urban and rural areas across the economy. The cashless policy initiated by the CBN led by its former Governor, SanusiLamido was introduced first in Lagos state, with the aim of achieving an environment where a higher and increasing proportion of transactions are carried out through cheque and electronic payments in line with the global trend (Obodo,2012).
1.2 Statement of the Problem
In Nigeria, customers of banks today are no longer about safety of their funds and increase returns on their investments only. Customers demand efficient, fast and convenient services customers want a bank that will offer them services that will meet their particular needs (personalized banking) and support their business goals for instance; businessmen want to travel without carryout cash for security reasons. They want to be able to check their balance online, find out if a cheque is cleared, transfer funds among accounts and event want to download transaction records into their own computer at work or home. Customers want a preferential treatment and full attention by their choice bank. All these are only achievable through electronic banking. In line with rendering qualities and acceptable services that most bank in Nigeria are gearing toward and investing large sum of money in information and communication technology, expected such banks services have been improved United Bank for Africa (UBA), Zenith Bank, CitiBank (to mention few) are in the forefront in the use of ATM rendering services to their customers (The Guardian Newspaper April 18, 2008 p 21), It also seeks the challenges involved in electronic banking and best industrial practice and the approach of implementing them in Nigeria Banking System
