Effect of Cashless Policy on Commercial Bank’s Profitability in Nigeria

Filed in Articles by on November 19, 2022

 – Effect of Cashless Policy on Commercial Bank’s Profitability in Nigeria –

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The quest for global relevance and sustainable development had led to wide exploitation of the benefits of cashless banking in the payment system of Nigerian banks. The study examines the impact of cashless banking on the profitability of banks in Nigeria.

The study used proxies for cashless banking such as Automated teller machine (ATM), Point of sale (POS), and web-based transaction (EB) to examine its impact on the aggregate return on equity (ROE) of deposit money banks in Nigeria, through an ordinary least square (OLS) multiple regression method of analysis.

The result showed that ATM and POS are positively related to ROE, while EB related negatively to ROE. This is a result of high rates of bank charges on online deposits and as a result, most customers do not patronize the product.

Non-usage of the EB for online deposits had created a negative impact on the profitability of Nigerian banks.

Recommendations were made among which are that banks should provide sufficient standby generators that could be used in case of electricity failure, provide adequate ICT infrastructure and management framework, and enlighten the public on the importance of using ICT banking products.


1.1  Background of the Study

The global trend of unpredictable technological advancement evolution of ideas in the corporate world and continuous progressive changes in socio-economic transactions within the modern society have imperatively imprinted upon the human minds the search for better ways of addressing economic activities and interaction in the modern world.

In this view, the Central Bank of Nigeria (CBN) has engaged in a new series of reformations as there is the evolution of technology in global trends in recent times. Although some of these measures took time to implement but it came out with success.

The payment system plays a very crucial role in any economy. The banking system is the channel through which financial resources flow from one segment of the economy to another.

It, therefore, represents the major foundation of the modern market economy (CBN, 2011). In today’s world, many people across the globe make payments electronically rather than in person or cash.

It can then be said that the recent financial system is the product of centuries of innovation. This financial system started as a barter economy and has moved through various incarnations in response to limitations inherent in the evolving systems. Ajayi, S.I, and Ojo, O.O. (2006).

For instance, the barter system had the problem of divisibility and the double coincidence of wants and hence phased out with the use of physical cash (money), whereas the use of money (i.e physical cash) is gradually been replaced with the cashless method of transaction.


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