The Role of Digital Banks in the Success of the Nigerian Cashless Policy

The Nigerian digital banks have played a significant role in helping the Central Bank of Nigeria (CBN) implement its cashless policy.

While the CBN planned to reduce the amount of money in circulation through its currency redesign, it failed to understand that traditional banks can’t enforce the policy.

As cash became scarce, the pressure on the banks to deliver effective online banking services intensified. Unfortunately, most banks crumbled under pressure as there were many failed transfers, declined POS transactions, and poor or no network in most conventional banks’ systems.

However, the digital banks rescued Nigerians and helped the CBN enforce the cashless policy to an extent. This article discusses the role of digital banks in helping the CBN implement Nigeria’s cashless policy.

How Digital Banks are Promoting Cashless Transactions in Nigeria

Here are the ways digital banks are promoting cashless transactions in Nigeria:

Encouraging the Use of Electronic Payments

Digital banks have made it easy for people to carry out electronic transactions such as money transfers, bill payments, and online shopping. With the ease of making these electronic transactions, the need for cash has been significantly reduced as you can do almost everything online.

The recent cash scarcity before the general elections in Nigeria proved how prepared the digital banks were to enhance cashless transactions. While conventional banks struggled to handle the influx of failed transaction complaints, digital banks received accolades for the rate of online transaction successes on their platforms.

Providing Innovative Payment Solutions

Innovative payment solutions like virtual cards, e-wallets, etc., have improved electronic payments and enabled people to transact without cash. This is an area most conventional banks still need to catch up with. But thanks to digital banks, people can easily make electronic payments on local and international platforms. Banks like Mintyn have virtual Gift cards that customers can use to make purchases on online stores without needing their debit cards.

Improving Financial Inclusion

Digital banks have made it possible for people who do not have access to traditional banking services to participate in the financial system. There are many areas in Nigeria with no banks, and the people resort to other means of saving and investing their money.

But with the help of digital banks, these people in remote places now have access to banking services. They can make savings, invest in financial assets and transact among themselves without needing cash.

Reducing the Cost of Banking

Thanks to digital banks, people now enjoy low-cost banking services. There’s no need to pay card maintenance fees, SMS charges, and other unnecessary charges that traditional banks use to make banking expensive for people.

With the way digital banks have made banking affordable with low charges and cashless transactions, more people are opening bank accounts, increasing the success chances of the cashless policy.

Enhancing Security

Digital banks have invested heavily in financial security systems to protect customers’ funds and data. You can now monitor every transaction in your account and easily detect when something is missing. This is made possible with digital banking tools and security measures to secure your account from online scams.

The boost in confidence people now have to make electronic payments due to improved security has contributed to the success of the Nigerian cashless policy.

Advantages of Digital Banks in Promoting the Nigerian Cashless Policy

There are many advantages the digital banks have offered Nigerians while playing their role in the success of the Nigerian cashless policy. Here are some of them:

Convenience

Technological advancement involves all aspects of the economy, and the banking sector isn’t left behind. While traditional banks struggle to make banking seamless and convenient for their customers, digital banks gain customers from their inefficiencies.

People want to perform almost all banking transactions without leaving their homes, offices, or wherever they are. Digital banks discovered this need and went on to provide it. Now, you can make transfers, online payments, and international remittances from anywhere without going to the bank or touching cash.

Imagine what happens when you need to send money to a relative in another part of the country or world for an urgent need. And the only way you can do that is to go into the banking hall. That’s quite an inconvenience. Now, with a digital bank account, you can wire transfers to people in other parts of the world without visiting your bank.

Faster Transactions

At the peak of the cash scarcity during the Nigerian general elections in 2023, most traditional banks failed their customers woefully. It was already bad that people had insufficient cash to perform basic daily transactions. But worse, most traditional banking apps failed to function effectively.

One of the significant reasons people carry cash is to avoid being disappointed by failed or delayed transfers at the point of payment. These were the cases at the peak of the cash scarcity in February and March 2023. Transfers didn’t go through, POS payments were declined, and the banks’ apps and other channels were out of network to perform even light transactions. People were stranded and disappointed as there was no cash nor working banking apps for them to carry out transactions.

However, digital banks like Mintyn, Opay, Kuda, V bank, etc., came to the rescue of Nigerians. Most transactions with these banks were fast and successful, and many people had to open online bank accounts.

Cost-effectiveness

Besides offering more convenient and faster banking services, digital banks offer more affordable banking services than conventional banks. This is one of its major roles in promoting the cashless policy in Nigeria.

Digital banks have made it more convenient and affordable to perform financial transactions online than with cash. Why stay long in a queue to withdraw cash from the bank when you can perform most of your transactions without cash and at more affordable rates?

With most online banking accounts, you can make transfers, online payments, and POS transactions without incurring the usual charges it costs to use conventional banks’ apps.

Improved Security

Every person who runs interstate businesses will tell you that carrying cash around is risky. In many cases, traders who go to the northern, southern, or eastern part of Nigeria from other zones to buy goods have been robbed on the road, and their cash taken away. In some cases, it can be an issue of misplacing a purse or wallet that contains cash meant for a transaction.

These are problems the digital banks have helped solve by improving the security of their banking systems. People are now more confident in carrying out transactions using their bank apps.

Conclusion

The naira scarcity and failure of traditional banks to rise to the occasion prompted digital banks to seize the moment as Nigerians sought a means to perform their day-to-day transactions. The cashless policy will take a while to be fully implemented. But the Nigerian fintech industry has shown how possible it is.