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The quest for global relevance and sustainable development had led to wide exploitation of the benefits of cashless banking in payments 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 as 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 profitability of Nigerian banks. Recommendations were made among which are that banks should provide a 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.










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 imprint 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 new series of reformations as there is evolution of technology in global trend 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 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.

The importance of managing the economy efficiently cannot be over emphasized. The monetary authorities, by controlling the supply of money, maintain price stability and influence economic activities especially when combined with appropriate fiscal measures.

The banking system remains the major channel for monetary control by the Central Bank of Nigeria (CBN) and the monetary authorities in general. Unfortunately, it is estimated that about 65% of the cash in circulation in the Nigerian economy is outside of the banking system, thus severely limiting the impact of the CBN’s efforts at price and economic stabilization (CBN 2011). Consequently, the amount of money in the form of deposits available to banks for the creation of more money is reduced. The profitability of the banks, which to a large extent depends on the amount of money at their disposal for lending, is therefore affected by the large size of this informal sector.

Apart from the above mentioned, the breakthrough in Information Communication Technology (ICT) has revolutionized human society in terms of communication, efficiency in processes, general exchange of information, and in the exchange of goods and services.

Within seconds, businesses are carried out online across different geographical location making it impossible for physical cash to be used as a medium of such exchanges. Indeed, the world has become a global village and the economic competiveness depends largely on the effectiveness of economic agents to adopt technologies for their activities and service delivery.


Changes will definitely continue to occur in response to social and technological advancements. This has led to a shift from the old cash handling system to cashless society, which is in vogue worldwide. To this end, the world has witnessed an upsurge of electronic payment instruments meant to facilitate trade and simplify payments.

Before the introduction of electronic payment into the Nigerian banking system, customers had to walk into banking halls to carry out transactions of all kinds. They had to queue up and spend hours waiting to talk to a teller and/or make their transactions. The inconveniences caused by these long queues discouraged most customers who sometimes renegade from the queues in annoyance.

This research seeks to find out whether or not there has been increase in banks’ profitability in the cashless system resultant from the changes made by CBN.

Noteworthy, was the stopping of charges on customers using their ATM. The fee (which was N100) served as a source of income to these banks. But this was stopped by CBN. Can we say for instance that this has an adverse effect on banks profitability?

Also, Banks use to charge their customers a fine of N10.00 for services rendered to them which was a source of income to the banks. The CBN however reduced this amount to N3.00.

Can it be said that this policy has impacted positively or negatively on the profitability of these banks? These are grey areas which were not captured by previous related studies in Nigeria. This research therefore seeks to find out the profitability of banks through the return on investment on these cashless products and their daily usage.


  1. To examine the impact of the cashless policy on bank’s profitability
  2. To examine the impact of the Automated Teller Machine on bank’s profitability.
  3. To examine the impact of web based transaction on bank’s profitability.


The banking institutions (in particular) as major players in the process of financial intermediation, and important economic agents in the payment system, must be strongly equipped with the relevant information technology that would encourage trade, commerce and in dustry while promoting globalization by easing global access to fund without any barrier. Customers in recent time demand more than the traditional role of safe-keeping their money. They require their banks to meet financial obligations for E-transaction almost on real time basis. But in reality, not all Nigerians have access to E-banking services. According to (Microfinance Information Exchange, 2012) in (Thisday, 2013), Nigeria and the Democratic Republic of Congo have the largest gaps between populations living in poverty and those with access to financial services–80 million in Nigeria and 48 million in the Congo.

The Central Bank of Nigeria (CBN) in collaboration with the Bankers Committee, introduced the cashless policy designed to provide mobile payment services that aim to breakdown traditional barriers hindering the financial inclusion of millions of Nigerians, secure and make convenient financial services to urban, semi-urban and rural areas across the country.

However, implementing the cashless policy requires that the banks make huge investments on ICT and other technologies that would enhance the proper implementation of the cashless system.

For banks that barely survived recapitalization, and several others forced into a merger and acquisition, this policy may affect their performances positively or negatively depending on the strength of the individual banks. Therefore, this study seeks to analyze the impact of this policy on Nigerian commercial banks in relation to their profitability.


  1. Ho: Cashless policy has no significant impact on bank profitability
  2. Ho: Web based transactions has no significant impact on bank’s profitability


In pursuance of the objective of the study; attention shall be focused on electronic banking among other electronic commerce implementation. In order to conduct an empirical investigation into the adoption of Electronic banking in Nigeria, the study will also examine the nature of electronic banking operations from the CBN bulletin from 2008-2014.


This study on the effect of cashless policy on commercial banks’ profitability in Nigeria will not cover the test for unit root because the data available for this research is not an economic variable. Therefore, it is not necessary to run a unit root test in the model. Another limitation to this study is that the study solely will consider only the effect of the electronic payment method in commercial bank’s profitability.



ATM Card – An ATM card (also known as a bank card, client card, key card, or cash card) is a payment card provided by a financial institution to its customers which enables the customer to use an automated teller machine (ATM) for transactions such as: deposits, cash withdrawals, obtaining account information, and other types of banking transactions, often through interbank networks.

CBN – Central Bank of Nigeria

Electronic Money – Monetary value measured in currency units stored in electronic form on an electronic device in the consumer’s possession. This electronic value can be purchased and held on the device until reduced through purchase or transfer.

Internet Banking- This is a product that enables the Bank leverage on the Internet

Banking System Module in-built on the new Banking Application (BANKS) implemented by the Bank to serve the Internet Banking needs of the Bank’s customers.

Mobile Banking – This is a product that offers Customers of a Bank to access services as you go. Customer can make their transactions anywhere such as account balance, transaction enquiries, stop checks, and other customer’s service instructions, Balance Inquiry, Account Verification, Bill Payment, Electronic fund transfer, Account Balances, updates and history, Customer service via mobile, Transfer between accounts etc.

Payment System – A financial system that establishes that means for transferring money between suppliers and of fund, usually by exchanging debits or Credits between financial institutions.

Point Of Sale (POS) Machine – A Point-of-Sale machine is the payment device that allows credit/debit cardholders make payments at sales/purchase outlets. It allowed customers to perform the following services Retail Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Vending, Loyalty Redemption, Printing mini statement etc.


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