Effect of Cashless Policy on Bank Efficiency in Ondo North Senatorial District, Ondo State, Nigeria

Abstract

Background to the StudyCashless policy is a policy where transaction can be done without necessarily carrying physical cash as a means of exchange of transaction but rather with the use of credit or debit card payment for goods and services (Roth, 2010). Despite the undeniable benefits of cashless policy on bank efficiency emanating from empirical or theoretical literature it has attracted the attention of a variety of groups; scholars, investors, public, entrepreneur, banks management, traders, governments and so on in Ondo North Senatorial District of Ondo State, Nigeria. The cashless policy has brought confusion among the populace as many misconceived the term to be a policy where there is no more cash in the circulation but card and other instruments. Many still believe that, the cash limit set by Central Bank of Nigeria (CBN) in respect to cashless policy is too low and query on how the Central Bank of Nigeria arrived at the bench-mark. Notwithstanding the fact that the cashless policy come with enormous benefits; there are also some missing links that confronted the policy such as financial constraints, infrastructure, deficit, literally levels, fraudulent activities and poor power supply in Nigeria. As more payment systems have been introduced, analysts have predicted the emergence of a 'cashless society'. Today, we still pay with cash and cheques, but several other payment instruments, such as credit and debit cards, are widely used. The use of paper money is declining, but at a rather slow pace. As it were, Nigeria is a country heavily dominated by cash and there are some factors that negatively affect the choice of cash over non-cash instruments. Some of these include time spent in counting and verifying cash, susceptibility to loss, time spent in the banking halls, amongst others (Nader, 2011).The potential benefits of cashless policy have become a debate about whether and how their adoption improves bank efficiency. Several attempts have been made to investigate the impact of cashless policy on bank efficiency. Kariuki (2015) established that banks with high profit growth are more likely to be using cashless tools like; ATMs, POS and mobile terminal. Oshikoya (2017) suggested that the use of and investment in cashless policy requires complementary investments in skills, introduction and improvement on customer deposits service, investment and change entails risks and costs which might reduce bank profits in shorter term. Hence there is need to use some non-financial efficiency measures such as efficiency and effectiveness to assess the impact of cashless policy investment on banking efficiency. Also, the study seeks to establish whether cashless policy influence return on total assets of commercial banks in Ondo