Conceptualizing a Cashless System for the Retail Banking Sector of an Emerging Economy: Policy Implications for the Nigerian Apex Bank

Abstract

Though the disadvantages of a cash-based economy have led to a massive rollout of electronic systems of payment in many countries of the world; there are some academic evidences suggesting that the adoption and usage of electronic systems of transactions are still below expectations despite its acclaimed advantages. Although the Central Bank of Nigeria (CBN) joined other leading countries as they announced the cashless policy in 2011 and has subsequently introduced more stringent measures to implement the policy to date, there are doubts that the policy is for the good of all. Based on the insights obtained from innovation theory and cross-country comparison therefore, this paper investigated why the Nigerian economy is still far from being ready for a national rollout of the cashless policy. Findings show that the age distribution, income and educational level of an economy will likely shape the antecedents of consumers’ acceptance and usage of electronic transaction systems. The proposed conceptual model shows that the Nigerian economy is unready for a national rollout of the cashless policy. It was also predicted that a national rollout of the cashless policy will generate some labyrinths that may likely spell short-run difficulties for retail banking activities in Nigeria. Policy implications for the CBN and other emerging economies that hope to embark on similar policy were put forward.

Key Words: cashless policy, trust, risk perception, transaction security, education age and income distribution, electronic payment system, customer inertia, innovation acceptance, innovation theories