As this Covid-19 induced lockdown drags out globally, more businesses, as well as individuals, have gone cashless for reasons of convenience and safety in efforts to avoid spreading the coronavirus. Engaging in online commerce or using digital forms of currency to re-engineer societies around the world has been born out of necessity rather than just convenience.
Cards are germy but cash is scandalously worse, studies have shown that paper bills can contain bacteria that lead to the spread of viruses. Bills are designed to last up to 15 years giving them ample time to accumulate all sorts of germs. Experts say the virus does not spread by penetrating the skin on your hands but is transferred from the hand to parts like the mouth, nose, or eyes which is very possible after handling cash.
Cashless and contactless payments are preferred and recommended during this crisis but sticking to this could pose a threat as well because not washing hands after touching your phone, credit card, or a payment terminal makes one just as susceptible to potential infection.
The World Health Organization (WHO) released a statement on March 9th recommending that people turn to cashless transactions to fight the spread of Covid-19 resulting in a number of governments and retailers across the world taking action. China had thousands of banknotes destroyed or disinfected to eliminate the spread of the virus. South Korea followed suit, and in the US, the Federal Reserve started storing banknotes that came in from Asia before recirculating them back into the economy.
Many retailers banned the use of cash in their stores to keep employees and customers safe, opting for contactless payments instead. For those observing the lockdown, online shopping has become the safest option. Thankfully, we live in a time where some of the infrastructure required to complete online purchases is in place.
This pandemic is pushing for the number of digital transactions to soar more than physical cash transactions and this could be the push needed for some countries to become truly cashless. Doing this is how we can boost financial inclusion and support the most vulnerable in our societies.
The benefits of going cashless are limitless- digital payments are convenient and are increasingly necessary for the current circumstances as more and more individuals are able to open bank accounts online and transact digitally without ever having to enter a physical bank branch.
Regardless, we should note that the transition from cash to cashless is not all that straightforward. Online payments may seem easy enough, but they still remain a lack of standardization in the system that delays payments and creates friction.
Some time ago, it was estimated that smartphones would replace cash and cards altogether by 2020. Right on schedule, a growing number of businesses are adopting no-cash policies, including certain airlines, hotels, rental car companies, restaurants, and retail stores. In Sweden, even the homeless and churches accept digital cash.
Is Nigeria ready or even capable of fully going cashless?
For years, the Central Bank of Nigeria (CBN) urged citizens to limit the use of cash and patronize alternative payment channels. The apex bank introduced the cashless policy in 2011 which was to be relaunched in April 2020 according to reports from before the emergence of the public health crisis. Since the introduction, the rise in alternative digital modes of payment like NetPlusPay has gained popularity. This policy was introduced based on the Nigerian economy’s’ heavy reliance on cash in daily transactions and also the need to facilitate financial inclusion efforts served up the sturdy basis for the need to transition to a cashless society.
However, the innovation and operations of the policy are not without limitations:
- Poor infrastructural facilities.
- The digital divide resulting in a sizeable bit of the population being cut from the economy.
- Difficulty in imbibing the e-payment culture due to illiteracy.
- Widening urban-rural schism as a result of the cost of the internet in rural areas is still prohibitively expensive, making the divide unlikely to be overcome anytime soon.
These limitations cannot be sidelined especially as the pandemic persists, Nigeria is in a desperate position to boost the development of its payment system even with the rising use of digital cash/payments, a larger percentage of Nigerian rely on informal activity without access to digital banking.