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Are there Really Cashless Economies?

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By Yvonne-Faith Elaigwu, Head of Operations and Governance, OnePipe

‘Cashless’ has probably become one of the most popular words in Nigeria in the last few months. While it can be defined in different ways, it has one universal meaning and is characterised by the exchange of funds for goods and services by methods other than the use of cash.

This little or no dependence on cash is not forced by an inability to queue for hours at an ATM or an unwillingness to pay an exorbitant fee to a PoS or mobile money agent. No, this little dependence on cash is because of the ability to meet financial obligations without necessarily needing to handle cash.

You are probably thinking about the western world and the level of development that makes this their reality but some very solid examples of cashless economies also exist in Africa.

One of the easiest ways to identify a Nigerian in Kenya for example (excluding the Naija-ness) is by how they transact. As a Nigerian visitor, you are very likely to pay in cash when you buy food, shop at a neighbourhood market, buy things from the roadside or visit a tourist centre. This alone – paying in cash everywhere – is more likely to scream “foreigner” than if you had worn a green-white-green Ankara at that time.

When the M-Pesa platform marked its 15 year anniversary last year, it had grown to more than 51 million customers, 465,000 businesses, 600,000 agents, and 42,000 developers across Kenya, Tanzania, Mozambique, the Democratic Republic of Congo, Lesotho, Ghana, and Egypt, as reported by Business Insider.

Ghana, our neighbours, digitised their economy with Mobile Money. The Bank of Ghana in its payment systems annual report for 2021, reported that its volume of Mobile Money transactions increased to 4.25 billion in 2021, representing a 47.1 percent growth, compared to 2020. Similarly, the total value of transactions increased to GH¢ 978.32 billion in 2021, from GH¢ 571.80 billion in 2020.

In dollar terms, the value of transactions in 2021 was $75 billion (based on current exchange rates). For perspective, Ghana’s GDP was $77.59 billion that same year. This essentially shows us mobile money transactions could cover the entire economic activities in Ghana (when currency devaluation over the past year is factored in).

The Carnegie endowment for international peace also referencing a BOG report, said in recent years, Ghana has been identified as one of the biggest mobile money markets and the fastest-growing one in Africa with 40.9 million accounts as at February 2021. Again, for context; the population of Ghana is 32.8 million. A Business Day report in 2019, noted that in Ghana, the utilisation of Mobile Money has become so ubiquitous, that it no longer has a wow effect, and is just a part of their everyday life. The average Ghanaian can go about his or her day and be productive without ever needing to transact with cash, just like their peers in Kenya and other countries where cash is increasingly less important.

Somalia’s journey to a cashless economy is perhaps the most inspiring. It is recorded that between 1990 and 2013, Somalia received no foreign direct investment, and the monetary system broke down with the collapse of the Somali Central Bank. The Somali government installed its first ATM in 2014, but the progress of its wider digital economy has been astonishing. The Somali Central Bank introduced a central payments system in August 2021 which connects the nation’s 13 lenders, and formalises digital payments, making payments easier for people across the country.

According to a report by the World Bank published in 2018, almost three-quarters of the Somali population aged 16 and older use Mobile Money. Somalia’s Gross Domestic Product, grew by an estimated 2.9 percent in 2019 and by 3.2 percent and 3.5 percent in 2020 and 2021 respectively. Eight years after the installation of their first ATM, Somalia is now recognized globally as a cashless economy.

Today, in its urban centres, Mobile Money penetration is over 80 percent. Even in rural areas, it has become the currency of choice, with a penetration rate of 55 percent.

Need we add examples of the western world? Maybe just a few.

In 2022, Merchant Machine ranked Norway on the list of 10 countries closest to a completely cashless society, with cash accounting for only 2 percent of all payments in Norway, 100 percent of its population owning a bank account, and 71 percent also owning a credit card.

It was followed by Finland with the same small percentage of cash-based payments ( 2 percent) and none of its citizens going without a bank account, then New Zealand also having two percent cash-based payments but a very slightly higher unbanked population of one percent.

The UK ranks lower at number eight due to a slightly smaller percentage of credit card users (65 percent) and higher percentage of unbanked population (3 percent). However, it sees less cash-based payments overall, with just 1 percent of all payments being made with notes and coins.

Now imagine a scenario where you navigate the city of Lagos without worrying about “change”, or whether the cash in your hand is not counterfeit or too worn out. Imagine not worrying about making any payments, not because you are a Dangote or because Otedola is your daddy, but because you have various payment options in your pocket or at your disposal; cards, phone, apps, USSD codes etc. More importantly, imagine that your transactions are happening within the banking ecosystem, your bank therefore has visibility into your spending patterns and is able to adequately profile you to access credit. Despite the promising future a cashless economy offers, the experiment in India has offered the rest of the world some lessons on how not to go about it. The Economic Times of India for instance, noted that after invalidating 86 percent of the currency in circulation (the 500 and 100 notes), the government started scrambling to promote digital payments, yet, only about half of Indian adults had bank accounts, and only about a quarter had internet access. Mobile payments were rare and even if everyone had wanted to go digital, they couldn’t have.

The lesson? Before going cashless, alternatives should not only be in place, but reliable too. India’s move towards going cashless has not been a complete failure but it came at huge human and economic loss.

An article on The Balance Money describes a cashless society as one where all transactions are electronic, using debit or credit cards or payment services like PayPal, Zelle, Venmo, and Apple Pay. In Nigeria, we have companies like OnePipe, offering technologies that digitise and simplify payment processing to downplay the dependence on cash.

Although not a lot of societies are truly cashless, many economists believe that consumer preferences, competitive pressures on businesses, profit seeking by banks, and government policies designed to facilitate cashless transactions will soon lead to more cashless societies which eventually lead to economic growth.


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Ugo Onwuaso is an ICT enthusiast. He believes technology should be used for general good. He holds a Master of Public Administration (MPA) degree from the Lagos state University. Dear Reader, Your support matters. But we believe that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world. That is why, we have devoted our energy to independent reportage of technology and finance and how they affect lives. Our incisive and analytical view of how technology news affects the daily life help individuals and organizations make up their minds. Quality journalism costs money. Today, we're asking that you support us to do more. Kindly support our effort to deliver technology and finance journalism to everyone in the world. Donate as little as N1,000. Bank transfers can be made to: UBA Plc 1017156876 Communication Week Media Ltd

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How to Prevent Late Payments from Crippling Your Business

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No matter the size of the business/company you run (whether an SME, a startup, or a multinational company), keeping your cash flow running is one of the most critical things you can do.

Unfortunately, sometimes that’s easier said than done!

Statistics show that 80% of MSME businesses in Africa fail within their first five years of operation due to cash flow issues. So, how can you save time and avoid late fees to keep your business running smoothly?  The answer is recurring payments.

Avoid Late Payments With Recurring Payments

Late payments from customers can create cash flow issues and negatively impact your business operations. By implementing recurring payment options for customers, your business can proactively address this challenge and ensure timely and consistent revenue streams.

The benefits are enormous.

Recurring payments enable you to automate billing processes and collect payments on a predetermined schedule, minimising the risk of late or missed payments. It also provides a predictable cash flow.

How Recurring Payments Prevent Costly Delays

Creating invoices and processing payments manually is an inefficient way to run your business. Apart from consuming most of your time, there’s also the risk of costly errors which can negatively affect your business and customer relationships.

As such, utilising an automated process which efficiently saves time, reduces the risk of human errors and increases the efficiency of your payment process should be your obvious preference.

Enhancing Customer Relationships

A crucial benefit of recurring payments is that it also helps to strengthen customer relationships and loyalty. This payment method reduces friction points and reduces the payment burden on customers, so payment is streamlined and seamless. By offering a convenient and flexible payment option, such as recurring payments, you enhance your customer’s overall payment experience and reaffirm your commitment to their satisfaction and convenience. This ultimately helps to foster goodwill, loyalty, and trust with your customers.

Tips for Maximising the Benefits of Recurring Payments

To optimise the impact of recurring payments, here are a few strategies that you should implement.

  • Offer tiered pricing

A tiered pricing strategy means you’re providing your customers with different product packages with specific benefits at different price points. This is an effective way to cater to the preferences and budgets of your different customers. This allows them to choose a pricing tier within their budget and a payment plan that’s convenient for them. You can also leverage customer data and analytics to personalise payment options and tailor offerings to individual preferences.

  • Introduce proactive management

Taking proactive measures, such as updating customers about the expiry date on their credit card and other potential issues will effectively help avoid errors that can lead to late payment and disturb your cash flow. Proactive actions take away potential issues before they pop up, ensuring that the payment process remains unhindered. Also, ensuring your customer support is proactive in dealing with concerns or questions that customers may have helps to further improve the customer’s trust and confidence.

  • Streamline the payment process

Streamline your payment process and make it seamless for customers. Ensure there are minimal steps in the checkout process and that the experience is as seamless as possible.

Conclusion

Forecast revenue and plan your expenditures easily by establishing regular payment cycles with SeerBit’s recurring payments solution.

The best part?

You significantly enhance your financial stability and business resilience.

 


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Pan-Atlantic University Partners with Cesel and University of Lincoln to Revolutionise Biogas Production in Nigeria

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Pan-Atlantic University is proud to announce its partnership with CESEL and the University of Lincoln, UK, on a groundbreaking project funded by a £219,000 Innovate UK grant.

This collaborative effort aims to develop and implement advanced biodigesters at a large-scale poultry farm in Aikun, Osun State, Nigeria.

By converting poultry waste into renewable biogas, this project will address Nigeria’s energy challenges while promoting environmental sustainability.

The innovative biodigesters will replace traditional, unsystematic models, significantly improving efficiency, safety, and the overall impact of biogas production.

Dr. Patrick Tolani, CEO of CESEL, highlighted the project’s potential, stating, “This grant provides a unique opportunity to showcase a pathway toward environmental sustainability in Nigeria’s agricultural and renewable energy sectors.

“With Nigeria’s potential to generate 25,000 megawatts of electricity from biogas, as per the Nigeria National Petroleum Company Limited (NNPCL), this project can contribute significantly to addressing the nation’s energy deficit and fostering economic growth.”

Dr. Norbert Edomah, Associate Professor (Reader) in Energy Systems & Policy at School of Science and Technology, Pan-Atlantic University, highlighted the project’s potential to empower local communities, promote sustainable energy practices, and address energy challenges in rural areas.

“Thanks to the support from Innovate UK, this knowledge transfer partnership aims at developing local competencies and innovative solutions that addresses local energy needs through production of biogas from agricultural and animal waste for diverse use in the farms, including electricity generation”

Pan-Atlantic University will serve as the initial site for prototyping the biodigester, with plans to scale up the technology at the Osun State farm. Real-time monitoring sensors will be integrated to optimize performance and set new standards for energy innovation in Nigeria.

This partnership between Pan-Atlantic University, CESEL, and the University of Lincoln demonstrates a commitment to sustainable development and technological advancement. By driving innovation in renewable energy, this project will contribute to a greener and more prosperous future for Nigeria.


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NBC Knocks EFCC over Invasion Urban RadioFM in Enugu

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National Broadcasting Commission (NBC) has expressed disappointment over the recent invasion of Urban Radio 94.5 FM in Enugu by the officials of the Economic and Financial Crime Commission (EFCC).

NBC Knocks EFCC over Invasion Urban RadioFM in Enugu

NBC in a statement signed by Susan Obi, director, Public Affairs, said the action is regrettable, considering the impact of the broadcast media on the Society.

The Commission said that the invasion of the radio station by the EFCC is viewed as a violation of the professional ethics of Broadcasting especially on a live Broadcast.

The statement reads: “The National Broadcasting Commission received with dismay the invasion of Urban Radio 94.5 FM, Enugu, on Monday, October 14, 2024, by the operatives of the Economic and Financial Crimes Commission, (EFCC) during a live Radio show, titled, PRIME TIME.

“The incursion, which was purportedly to arrest the programme’s presenter, Favour Ekoh, is viewed as a violation of the professional ethics of Broadcasting especially on a live Broadcast.

The approach for which the arrest was carried out is improper.

“This action is regrettable, considering the impact of the broadcast media on the Society.

While the NBC appreciates the efforts of the Economic and Financial Crimes Commission, in sanitising the country of financial crimes, NBC differs with the manner of approach deployed by the anti-graft agency which could have led to public disorder, disturbance, aggravated mass panic, and hysteria.

“The NBC, hereby, expresses heartfelt apologies to the listening public, the people of Enugu State, and the entire Broadcast Industry for the incident. NBC implores the general public, at this point, to be law-abiding, while the law takes its course.

“Media professionals are, also, enjoined to continue upholding ethical standards, while discharging their responsibility”.


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