THE global financial landscape is undergoing a significant transformation, with cash rapidly losing its dominance as a preferred payment method.
Data from Financial Derivatives Company Limited shows that by 2025, the world is expected to have over 2 billion active credit cards but only about 3 million Automated Teller Machines (ATMs), signaling a shift toward digital and cashless economies. While developed nations continue to lead this change, Nigeria and Africa at large lag behind, grappling with infrastructural challenges, low financial inclusion, and policy hurdles.
In recent years, Nigeria has made strides in adopting cashless payment systems, spurred by the Central Bank of Nigeria’s (CBN) cashless policy. However, as the world moves deeper into the digital era, the pace of Nigeria’s progress remains slow compared to global benchmarks.
Globally, the rise of digital wallets, contactless payments, and mobile banking platforms has fueled the decline of cash usage.
Credit cards have become a staple of modern financial transactions, offering convenience, security, and integration with online platforms. In contrast, ATMs, once the backbone of financial access, are now diminishing in importance as people turn to digital alternatives and roadside Point of Sale terminals.
In countries like Sweden and South Korea, the move toward cashless societies has been accelerated by government policies and private sector innovations.
These nations have robust digital infrastructures, enabling seamless adoption of electronic payments. The COVID-19 pandemic further expedited this trend, as contactless payments became a safer alternative to handling physical cash.
It should be recalled that Nigeria introduced its cashless policy in 2012 to reduce the reliance on cash transactions, curb corruption, and improve financial inclusion. The policy encouraged the use of Point of Sale (PoS) terminals, mobile money, and online banking. Over the years, the adoption of PoS devices has grown exponentially. According to the Nigeria Inter-Bank Settlement System (NIBSS), the country recorded over 1 billion PoS transactions in 2023, marking a significant shift toward digital payments.
However, this growth is uneven. Urban centers like Lagos, Abuja, and Port Harcourt have seen widespread adoption of PoS systems, with merchants and consumers increasingly embracing cashless transactions. Meanwhile, rural areas remain heavily reliant on cash due to poor network connectivity, lack of financial literacy, and limited access to banking services.
Despite progress, Nigeria’s journey toward a cashless society faces numerous challenges. One major issue is the inadequacy of digital infrastructure. Frequent network failures and transaction errors often frustrate users, discouraging trust in cashless systems. For example, during peak periods, PoS terminals frequently fail to connect, leaving customers stranded.
Another hurdle is the low penetration of credit cards. Unlike developed economies, where credit cards are a primary payment tool, Nigerians rely more on debit cards and mobile money platforms. The high cost of credit, coupled with limited financial literacy, has stifled the growth of credit card usage in the country.
Additionally, cash remains deeply entrenched in Nigeria’s informal economy, which accounts for a significant portion of economic activity. Many small-scale traders and artisans still prefer cash transactions, citing distrust of banks and high transaction fees as key reasons.
Stakeholders are therefore worried that across Africa, the story is similar. While mobile money platforms like M-Pesa in Kenya have revolutionized digital payments, the continent remains largely cash-dependent. Limited infrastructure, regulatory bottlenecks, and socio-economic disparities hinder the adoption of cashless systems.
In contrast, developed regions are already preparing for a future dominated by digital payments. For example, Europe is witnessing a sharp decline in ATM numbers as cash usage plummets. In the United States, the rise of Buy Now, Pay Later (BNPL) services and cryptocurrency integration into payment systems further signals the diminishing role of cash.
For Nigeria to bridge the gap, analysts say deliberate efforts are needed. The CBN must intensify its financial literacy campaigns to educate citizens on the benefits of cashless payments. Investments in digital infrastructure, particularly in rural areas, are crucial to ensuring seamless transactions. Moreover, financial institutions should introduce affordable credit card options tailored to the needs of Nigerians.
Collaboration between the government and the private sector can also drive innovation. For example, fintech companies like Flutterwave and Paystack have already made significant contributions to Nigeria’s digital payment ecosystem. Encouraging such innovations while addressing regulatory bottlenecks will be key to accelerating the transition to a cashless economy according to expert.
As the world continues to phase out cash, Nigeria and Africa must adapt swiftly to avoid being left behind. While the journey to a cashless future is fraught with challenges, it also presents immense opportunities to foster financial inclusion, drive economic growth, and position the continent as a competitive player in the global digital economy.
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