1.1 Background to the study
One of the prerequisites for the development of national economy according to (Ajayi, 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, 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 businesses. 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. MobileBanking 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 (TiwariandBuse, 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.
1.2 Statement of the problem
The Central Bank of Nigeria (CBN) introduced the Point of Sale (POS) system in 2012 to further drive home its cashless policy aimed at enhancing Nigeria’s payment system. The initiative since its introduction has recorded remarkable success, with the total value of transactions rising to N99.6 million, while the deployment of POS terminals rose from5,000 to 153,167 in April, 2014 (NIBSS, 2015). Despite the numerous advantages that come with the invention and popular acceptance of POS in Nigeria,Ogbomosho, like several other rural areas,seems to be a town so shy of its adoption as noticeable in the constant usage of cash in making day to day transactions.
One of the problems of adoption of POS services in Ogbomosho, being a rural settlement, is lack of technological knowledge about POS. It is a well-known fact that majority of the residents of Ogbomosho are not “on the know” about a number of the technological advances in the 21st century, POS services inclusive, hence a cause of non-adoption by Small Scale Business (SSB) owners in this part of the world. A considerable number of SSB owners are not aware of the benefits and advantages that could be derived from using the POS services but rather focus on the possible problems they could face in the course of its usage. This, among many others, discourages them from adopting this service.
Secondly, we have the challenge of customer non-adoption of cashless policy. The existing system of hand to hand cash exchange has become so difficult to be foregone as most intended users have a tendency to resist any form of change in the system. This has made the adoption of POS, like other cashless policy instruments, become an innovation so hard to adopt.
Also,there is the problem of customer-seller transaction balance. The issue of trust in a new system, which is glaring in the reluctant behaviour of customers to accept the usage of POS in making transactions, poses a significant threat to any possible chances of getting the system adopted among residents of Ogbomosho. Several assurances need to be given such as a promise to repay the money if lost online and so on.
The research work is set out to answer the following questions:
- To what extent does POS solve problems of cash handling in Small Scale Businesses in Ogbomosho?
- To what extent are small scale business owners educated about POS usage in Ogbomosho?
iii. What are the challenges confronting customer-seller transaction activities?
- What is the extent of customer-seller cashless policy adoption?
1.4 Objectives of the study
The broad objective of the study is to determine the level of acceptability and adoption of POS in Ogbomosho. The specific objectives are as follows:
i. To determine the level of acceptability and adoption of the CBNs cashless policy in Ogbomosho.
ii. To find out the advantages, benefits and implications of accepting and adoption of the CBN’s cashless policy in Ogbomosho.
iii. To Determine the challenges facing the use of internet and mobile banking services/POS and the disadvantages of CBN’s cashless policy in Ogbomosho.
iv. To find out the factors that can improve the level of acceptability and adoption of the CBN’s cashless policy in Ogbomosho.
1.5 Research Hypothesis
The following hypotheses were formulated to guide the study and were tested at
Ho: The people of Ogbomosho have not significantly accepted and adopted the CBNs cashless policy.
Hi: The people of Ogbomosho have 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 (POS) in Ogbomosho, 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 of the study
In ascertaining the level of adoption of the CBNs cashless policy among small scale businesses, most especially POS services, this study will cover the Ogbomosho North local government area of Ogbomosho town, Oyo state.
1.8 Limitations of the study
Limitations experienced in the course of this study are basically centered on problems relating to:
i. 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.
ii. 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 (questionnaire and interview).
iii. 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.
1.9 Operational 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.