ABSTRACT
Before the introduction of the cashless policy by the Central Bank of Nigeria in on1st January, 2012, the economy of Nigeria was heavily based on cash transactions with its problems. This study examined comparative analysis of marketing performances of Deposit money banks in the pre and posts cashless policy periods in Nigeria. The study adopted ex-post facto research design to compare the marketing performance of the sampled banks proxied by market share, customer deposits and bank cash deposits. Data for the study were generated from secondary sources from available published annual reports from the selected Deposit money banks from 2004 – 2019 divided into two periods 2004 – 2011 pre cashless period and 2012 – 2019 post cashless period. In order to realize the specific objectives of the study, data collected were analyzed using pooled paired sample t – test model technique to compare the two differences sampled mean pre and post the cashless policy periods based on SPSS Version 21. The study shows that the bank cash deposits, customer deposits and market share of banks increased after the introduction of the cashless policy compared to pre-cashless policy period. However, this was not as a result of marketing oriented strategies but government legal driven policies. Based on the findings, it was recommended that the cashless policy implementation in Nigeria should be market oriented based on the features that have direct benefit to the customers rather than curbing of corruption, revenue leakages and cash related crimes that tend to focus on government. Again, efforts should be made to reduce the high taxes such as Value Added Tax (VAT); SMS Alert Charges and Transfer Charges among others that are associated with the implementation of the cashless policy as a way of spurring the market to greater acceptance. Some problems such as unavailability of some set of data such as market share of banks, bank deposits of the selected banks as well as customer base were encountered during the course of carrying out this study. Despite the problems encountered in collecting data in the course of carrying out this work from 2003 – 2020 that informed the researcher’s study period 2004 – 2019. Enough data were gathered for analysis, and the basis of which inferences, and conclusions were made because the limitations were not substantial enough to significantly affect the outcome of the study.
TABLE OF CONTENTS
PAGE
Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables viii
List of Figures ix
Abstract x
CHAPTER 1: INTRODUCTION
1.1 Background of the Study 1
1.2 Statements of the Problem 5
1.3 Objectives of the Study 5
1.4 Research Questions 6
1.5 Research Hypotheses 6
1.6 Significance of the Study 7
1.7 Scope of the Study 8
1.8 Limitations of the Study 8
1.9 Definition of Operational Term 9
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual Review 10 2.1.1 Cashless policy 10 2.1.2 Rationale for policy shift and cashless system in Nigeria 12
2.1.3 Challenges of cashless system implementation in Nigeria 15
2.1.4 Implementations of cashless society in Nigeria economic development 16 2.1.5 Payment channels of financial institutions in Nigeria 17
2.1.6 Benefits of electronic payment platform in Nigeria 21 2.1.7 Disadvantages of electronic platforms in Nigeria 24
2.1.8 Marketing performance 25
2.1.9 Effect of cashless system on marketing performance 26 2.1.10 Importance of marketing performance measurement 28 2.1.11 Marketing performance indices 29 2.1.12 Some common key marketing performance indicators 29
2.1.12.1 Effects of cashless policy payment channels on market share 30
2.1.12.2 Effects of cashless system payment channels on bank deposits 33
2.1.12.3 Effects of cashless system payment channels on customer base of
Deposit money bank 35
2.2 Theoretical Review 38
2.2.1 Diffusion of innovation theory 38
2.2.2 Bank-led theory 39
2.2.3 Technology acceptance model theory 40
2.3 Empirical Review 41
2.4 Gaps in the Existing Literature 81
CHAPTER 3: METHODOLOGY
3.1 Research Design 83
3.2 Population of the Stud y 83
3.3 Sample and Sampling Technique 83
3.4 Source of Data Collection 85
3.5 Method of Data Analysis 85
3.6 Model Specification 86
3.7 Decision Rule 87
CHAPTER 4: RESULTS AND DISCUSSION
4.1 Analyses of Secondary Data – period Performances 88
4.1.2 Selected commercial bank performances between pre and post cashless
policy periods 89
4.3 Test of Hypotheses 90
4.3.1 Test of hypotheses 1 92
4.3.2 Test of hypotheses 2 93
4.3.3 Test of hypotheses 3 93
4.4 Findings 94
4.4.1 Discussion of findings 95
4.4.2 Profit justification 96
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings 99
5.2 Conclusion 100
5.3 Recommendations 101
5.4 Suggested Area for Further Study 102
5.5 Contributions to Knowledge 102
References 104
Appendices 111
LIST OF TABLES
3.1 Classification of Deposit money banks in Nigeria 84
3.2 Competitive warfare/market positions 85
4.1 Pre cashless policy period 2004 – 2011 89
4.2 Posts-cashless policy period (2012 – 2019) 89
4.3 Pooled test – One sample statistics 91
4.4 One sample test 92
LIST OF FIGURES
2.1 Framework showing consequences of cash based transactions in Nigeria
before the commencement of the cashless system 12
2.2 Six processes of electronic payment systems implementation model
framework 14
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
From the pre-colonial era till now, the Nigerian financial sector has undergone notable organisational changes that have reasonably affected its operations and service delivery. Differential forms of payment systems have been introduced, from trade by barter system to the use of coins and paper money with their attendant hitches, hence the need to bring in an alternative payment options without encumbrances in the financial sector became important (Obodo, 2012) cited in (Adu, 2016). The future of all businesses particularly those in the services industry lie in information technology. The recent emergence of Information and Communication Technology has influenced every aspect of live, transforming subsistence organisations into modernised organisations (Obodo, 2012) cited in (Adu, 2016). The introduction of this technology into the financial sector has reshaped banking operations and has resulted into banks to rely heavily on doing banking transactions electronically in that electronic banking has the advantage of increasing productivity, reducing average costs and increasing the accessibility of customers to banking products as well as increasing the number of coverage of customers (Berger, 2003) cited in (Nimoh, 2016), supporting (Hunjra, Ali and Anwar (2012) cited in (Emenuga, (2018) opined that electronic banking covers many banking activities that banks offered electronically. Hence undeveloped countries like Nigeria are on the move from a pure cash economy to a cashless society for developmental purposes. This is the core of the Central Bank of Nigeria’s (CBN) recent cashless policy.
The introduction of cashless policy is aimed at reducing the problems inherent with cash transactions in the economy mostly with the view of achieving a situation where increasing proportion of business activities are carried out through electronic payments in line with the global trend (Obodo, 2012) cited in (Adu, 2016).
Internet banking policy is seen to be an innovative service delivery system that offers different financial services like cash withdrawals, money transfer, cash deposits, payment of services and card bills and other banking enquiries (Onyedimekwu & Oruan, 2013) as cited in (Hassan, Aliyu, & Faruok, 2013). Similarly, Imiefoh, (2012) cited in (Hassan, et al., 2013) sees internet banking as an integral term for the process by which a customer may perform financial transactions electronically without visiting the physical banking institution.
A cashless option of payment is expected to increase deposit in the bank due to the confidence and satisfaction accrued from the functional system. It has huge impact on the performance of banks as cashless banking assist in financial inclusion by deepening bank deposits, hence increasing money availability and accessibility for banking transactions (Abaenewe, Ogbulu, & Ndugbu, 2013).
According to Central Bank of Nigeria (2012), financial inclusion is a situation when adults have easy access to a large range of formal financial services including but not limited to payments, savings, credit and insurance. To this end, banks deployed more new ideas and technology by creating more channels with the aim of increasing customer base and increased bank deposits. This can be seen in the increasing number of bank accounts in Nigeria. Accordingly, NIBBS 2018 Report cited in (Enoruwa, Ezuem, & Nwali, 2019), stated that as at December 31, 2018, there were about 118 million accounts in Nigeria Banks. This number has grown to 120 million as at February 28, 201(Enoruwa, et al., 2019). Cashless transaction affects the way people see money and their purchase behaviour. When the credit card based payment is used, the cash of products purchased increases. Mobile phone payments are gaining consumer acceptance due to high spreading of mobile phone technology (Herzberg, 2003). Soman, (2001) said that the use of card creates a mental “decoupling” where the effect of paying is not all that felt because the tangibility of cash changes the way people see money at the point of purchase; the physicality of cash heightens the worth of the thing exchanged. This decoupling places the feeling at farness. He further said that the physicality of cash causes increased consciousness of the exact cost. Therefore, cash increases the agony of paying. The physical cash creates awareness that something of worthiness is being exchanged and this transforms to an immediate feeling of the amount spent. Under the mobile phone payment method, the consumer may not mentally at that specific point subject his or her mind to the real amount of money being disbursed. It is the usage of mobile phone transactions that made customers to spend more with ease, where credit card is applied, cash for each transaction increases.
Slozko & Pello, (2015), stated that electronic payment system has revolutionalised developments in economic activities in the financial institution and in the whole global corporate operations by enhancing organisational performance. Both whole and retail transaction payments are embracing the e-payment services which are faster, more convenient and efficient which in turn is a sign of customer purchase intentions, customer loyalty, and these cumulatively lead to increase customer base, market share and increase in bank deposits (Kung, 2018).
Indeed, cashless policy and its proxies is a move from the cash based economy to electronic payment channels, which principally includes e-payment, use of Cheques, Point of sales (POS) terminals, Automated teller machine (ATM), internet banking, mobile money among others.
In an assertion of Omotunde, Sunday, & John-Dewole, (2013), cashless economy is an economy where marketing transactions can be done without necessarily carrying physical cash as a means of exchange. Supporting this Edet, (2008), opined that the cashless policy provides a financial environment that minimises the use of physical cash by providing alternative channels like ATM, POS terminals, Mobile phones, Internet for making payments, and Umeano, (2013), concludes that the cashless policy of Central Bank of Nigeria (CBN) is not against people carrying cash at all, but they must pay for the charges if they do. The cashless policy of the CBN is made to provide the mobile payment services that breakdown the traditional barriers delaying financial inclusion of millions of Nigerians and bringing down the cost of transaction as well, secure convenient financial benefits to urban, semi-urban and rural services across the country. He further pointed out that such economic policy will help bring down financial crime, reduce the volume of money in circulation, encourage e-banking, e-commerce, reduce time wasted in queuing in the banking hall, and go a long way to provide for Nigeria the platform it required to reach the vision 2020 goal in Nigeria.
Several studies have examined the effect of cashless systems on business success (Odior & Banuso, 2013), (Akhalumeh & Ohiokha, 2011), (Muyiwa, Tunmibi & John-Dewole, 2013), (Oyewole, Abba, Gambo, & Arikpo, 2013); but these works have paid little or no consideration on a relative research of marketing performance of commercial banks in Nigeria: pre and post cashless policy periods spanning from 2004 2019. To broaden the curiosity, this study identifies four major electronic payment platforms, which include ATM, POS, internet banking and mobile phone banking. Banks can increase performance and minimise risk exposure by encouraging the adoption of electronic payment platforms, especially ATM, POS, internet banking and mobile phone banking activities. The reason being that these platforms are cheap and have extensive coverage compared to other electronic payment platforms in Nigeria such as Cheques. Again, the capability of these platforms to include the excluded citizens is highly important and the inherent cost
effectiveness is high. Hence, this work on “Marketing performance of Deposit money banks in the pre and post cashless policy periods in Nigeria from 2004 – 2019”.
1.2 STATEMENT OF THE PROBLEM
Literature on the role of the cashless system on economic growth and development from the civilised countries of the world revealed that the policy has significantly contributed to customer satisfaction, hence corporate customer base, market share expansion, bank deposits also customer loyalty. Central Bank of Nigeria (CBN) noted that Nigeria is cash based economy hence the need for the commencement of the cashless policy in the country. It equally noted that using electronic system payment will result to a most recent studies in Nigeria centered their researches on the impact of cashless policy on financial performance of Deposit money banks proxied by Net income margin (NIM), Return on equity (ROE), Return on assets(ROA), Earning per share (EPS) and Gross domestic product (GDP). A few of them such as Jumba et al., (2019), Zainab, et al., (2019), Uvaneswaran, et al., (2017), Nweze, et al., (2017) and Ordu, et al., (2016) who tried to do comparative study of the pre and post cashless policy also limited their studies to financial performance indices. This topic marketing performance of Deposit money banks in the pre and post cashless policy periods in Nigeria is focused on comparing marketing performance of Deposit money banks in Nigeria: pre and post cashless policy periods with emphasizes on market share, bank deposits and customer base of Deposit money banks to ascertain if there is a significant difference between the two periods.
1.3 OBJECTIVES OF THE STUDY
This study marketing performance for Deposit money banks has its principal objective as comparing the performance of Deposit money banks in Nigeria: pre and post cashless policy periods.
To accomplish this, the research aims at achieving the following specific objectives to:
1. ascertain the difference in market share of deposit money banks between the pre and post cashless policy periods in Nigeria.
2. ascertain the difference in bank deposits of deposit money banks between the pre and post cashless policy periods in Nigeria.
3. determine the difference in customer base of deposit money banks between the pre and post cashless policy periods in Nigeria.
1.4 RESEARCH QUESTIONS
In this research, attempt was made to provide answers to the following research questions:
1 To what extent do market share of Deposit money banks differ between the pre and post cashless policy periods in Nigeria?
2 What is the Bank Deposits of Deposit money bank in the pre and post cashless policy periods in Nigeria?
3 To what extent do customer base of Deposit money banks differ between the pre and post cashless policy periods in Nigeria?
1.5 RESEARCH HYPOTHESES
Three specific hypotheses in relation to the objectives of the study are:
H01: there is no significant difference in market share of deposit money banks between the pre and post cashless policy periods in Nigeria.
H02: there is no significant difference in bank deposits of deposit money banks between the pre and post cashless policy periods in Nigeria.
H03: there is no significant difference in customer base of deposit money banks between the pre and post cashless policy periods in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
This research is considered important in the following areas:
To Deposit money banks
The technological alteration will bring several gains to the financial institutions in Nigeria.
Deposit money banks will be able to understand banking in a new dimension. Some of these can be identified as convenience to banking, enhanced customer access and awareness, speedy or faster process and transmission of information and reduction of fraud levels. Other benefits are global compliance that is, adopting trends to provide seamless and standardised services worldwide, reduced cost of operations and increased banking penetration and constructively enhanced corporate marketing performance.
To the Government
Payments to government agencies like custom duties will now be made electronically and directly to the government account, thereby reducing leakages and other fraudulent incidents, among other transactions, using mobile phone devices.
The government will enjoy increased tax collection, greater financial inclusion, and improved regulatory services; reduce cost of currency administration and management, increased economic development, improved regulatory services, adequate budgeting and taxation (Ashike, 2011).
To customers
The of commencement of cashless system in the financial sector will make customers of the various Deposit money banks to enjoy increased convenience, more service options, reduce risk of cash related crimes, and cheaper access to (out of branch) bank services.
To Researchers
This study is an improvement on existing works with variations in choice of independent variables, period covered and methodology which prospective researchers will work on.
1.7 SCOPE OF THE RESEARCH
The scope of this research was in two phases dimensional, the content and the geographical scope.
The content scope
At the content level, the study looks holistically at the cashless system which is the independent variable proxied by POS terminals, ATM, Mobile phone banking, and Electronic banking, while market share (MS); bank deposits (BD); and customer base (CD), are the dependent variables.
Geographical scope
The geographical scope covered ten (10) listed Deposit money banks in Nigeria comprising both old and new generational Deposit money banks for a period of Eight (8) years pre and Eight (8) years post cashless policy periods in Nigeria in 2012 from 2004 to 2019 divided into two periods from 2004 – 2011 pre cashless policy period and 2012 – 2019 post cashless policy period. ATM, POS, Electronic banking and Mobile phone banking represent factors for cashless policy basis.
1.8 LIMITATIONS OF THE STUDY
Some problems were encountered in the course of carrying out this study. The problems relate mainly to data collection.
Firstly, the research set out to study longer period of time, starting from 2003 – 2020 but was impeded by unavailability of some set of data such as market share, bank deposits, and customer base of Deposit money banks which were unavailable in Nigeria before 2003. Similarly, most of the data were also not available for 2020 hence the choice of the study period from 2004 – 2019.
Secondly, secondary data extracted from official government publications and assumes that such data collected were error free. But the fact remains that there may be error of measurement which may have been committed by the primary data collecting agency which the researcher has no knowledge about and that is not taken into consideration in this study.
Despite all these, enough data were gathered for analysis, and on the basis of which inferences and conclusions were made.
In other words, the limitations were not substantial enough to significantly affect the outcome of the study.
1.9 DEFINITION OF OPERATIONAL TERMS
1. Mental decoupling. Mental decoupling is where the effect of payment is not all that felt. Decoupling places the feeling at farness. The physical cash creates awareness that something of worthiness is being exchanged and this transforms to an immediate feeling of the amount spent. Under the mobile phone payment method, the consumer may not mentally at that specific point subject his mind to the real amount of money being disbursed.
2. Deposit money banks. Deposit money banks comprise of commercial banks and other financial institutions that accept transferable deposits, such as demand deposits.
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