AN ASSESSMENT OF CUSTOMER PROTECTION AND THE CHALLENGES OF A CASH-LESS ECONOMY

CHAPTER   ONE

INTRODUCTION 1.1 BACKGROUND TO THE STUDY: 

The Nigerian Bankers Committee commissioned a study (2000) to

identify cost drivers and possibility of proffering lasting solutions. Results of the study indicated among others, high cash intensity in the economy and its impact on high cost structure in the financial value chain. On average 30% of branch physical space and employees are devoted to cash logistics, handling and storage- the total cash management costs (excluding cost of production, distribution, processing and destruction by (CBN) was projected to exceed N192billion by end of 2012. The study also showed that only 10% of customers were responsible for cash transactions above N150,000 in banks daily. This implies that the cost of cash for the 10% customers that make high volume cash transaction was subsidized by the mass public (90%) of banking customers. (Umeano C. David Head , Shared Services Office , (CBN June 2012)

In view of the findings of the study, CBN introduced thecash policyon cash based transactions which stipulate a cash service charge on daily cash withdrawal or cash deposits that exceed N500,000 for individuals and N3,000,000 for corporate bodies. The new policy on cash based transactions (withdrawal and deposits) in banks, aims at reducing and not eliminating the amount of physical cash circulating in the economy, and encouraging more electronic based transaction (payment for goods, services, transfer, etc)  through electronic devices as ATM , POS, Mobile and Internet Banking CBN believe this policy will have a direct impact onbanking industry’s efficiency and cost structure. It is expected to reduce the cost of cash to the financial system, which will result in significant savings that can be passed onto customers in form of reduced cost of banking services and lower lending rate to customers. Against this background. This study intends to analyze the challenges of E-Banking or electronic based system with Unity Bank as reference study.   

1.2 STATEMENT OF THE PROBLEM

The world is evolving new systems and policies every day. Gone are the days when communication was limited to face to face, signals or by postages. Today, communication can take place between two or more people from any distance in the world through telephone or internet or other technological means. But the technological world is not stopping at that rather new innovations are coming out making life easier and of course more sophisticated. However, quite a number of problems are associated with this policy including power failures long queue associated with danger of attack by robbers on notice of huge withdrawal at ATM station. There are also problem of illiteracy among users on how to use ATM or credit cards to carry on their transaction.  Services of either bank staff or others will be called for and hence secrecy of account balance no longer exist in rural areas, stationing ATM are even more dangerous.   

As they come, these innovations have had significant impact on the way things are being done all over the world and whatever is dictated as the new trend by the technology power house becomes the target of every nation. Thus the trend of e-payment that began in the United States of America some decades ago has become the next big thing for developing countries, including Nigeria.   

1To what extent is Nigeria’s drive to development and modernization of e- payment system in line with Nigeria’ vision 2020 goal of being amongst the top 20 economies of the world.

2       How can the cost of e-banking services (including cost of credit) be reduced and drive financial inclusion by providing more efficient transaction options and greater research.

3       To what extent is Nigeria drive to development and modernization of e- payment system in line with Nigeria’ vision 2020 goal of being amongst the top 20 economies of the world.

4       How can the cost of e-banking services (including cost of credit) be reduced and drive financial inclusion by providing more efficient transaction options and greater research.

1.3 OBJECTIVE OF THE STUDY:

The main objective of this research work is to examine the impact of cashless or e-payment system in Nigeria banking system. 

1       To evaluate the prospect of e-payment system on Unity bank plc.

2       To evaluate the impact of e-payment system on unity bank plc

3       To examine whether e-payment system has improved the fortune of the bank.

4       To examine customers resistance due to prevailing culture, and to offer useful recommendation for improved performance of banks in line with cash-less policy.

1.4 SCOPE AND LIMITATIONS OF THE STUDY:

The research is an assessment of how is to promote and entrench electronic payments, as the channel for payment and settlement. In order to conduct an empirical investigation into the adoption of e-payment system in Nigeria and will examine the nature of e-payment system in unity bank plc   and the challenges of the new policy on the customer period covered 2007 to 2013.  

Just like it was in the early days of GSM, pessimism, fear and despondency have been the reaction from some quarters. Several questions being asked are e.g Can this work in a society that is largely informal in many regards? Can Nigeria achieve success of a cash less society in the present state of infrastructure? How about security of transaction and who takes responsibility in the case of fraud.  Information gathered is limited to those accesses and made available by the available by the respondents and also gathered from end users. However, the impacts of this limitation will be reduced to the barest minimum.

1.5   SIGNIFICANCE OF THE STUDY: 

This study is expected to be significant in a number of ways.

Firstly, this study is expected to enable bank executive and policy makers to be aware of how the cash less policy would have a direct impact on banking industry efficiency and cost structure. 

Secondly, It is expected also to reduce the cost of cash to the financial system, which will result in significant savings that can be passed onto customer in form of reduced of banking services and lower lending rate to the borrowers.

Thirdly, the research is also significant because it is expected to outline and

analyze how cash less policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy.