STUDY ON SOCIETAL AND CULTURAL FACTORS AFFECTING THE TRANSITION TO A CASH-FREE ECONOMY

SOCIETAL AND CULTURAL FACTORS AFFECTING THE TRANSITION TO A CASH-FREE ECONOMY

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SOCIETAL AND CULTURAL FACTORS AFFECTING THE TRANSITION TO A CASH-FREE ECONOMY

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The global financial system has undergone significant transformation with the increasing adoption of digital payment systems and the gradual transition toward a cash-free economy. A cash-free economy refers to an economic system where financial transactions are conducted primarily through electronic means such as debit cards, mobile banking, online transfers, and digital wallets, rather than physical cash (Humphrey et al., 2016). This transition is driven by advancements in information and communication technology, the need for financial inclusion, transparency, efficiency, and reduction of transaction costs (Akinwale & Ayo, 2021).

In Nigeria, the Central Bank of Nigeria (CBN) introduced the cashless policy to modernize the payment system, reduce the cost of cash management, curb corruption, and enhance economic growth (CBN, 2019). While the policy has recorded some success in urban areas, its adoption has been uneven across different regions and population groups. One of the major factors influencing this uneven adoption is the role of societal and cultural practices embedded in people’s daily economic activities (Okoye & Ezejiofor, 2013).

Socio-cultural factors such as trust in financial institutions, literacy levels, religious beliefs, traditional trading practices, social norms, and attitudes toward technology significantly affect individuals’ willingness to adopt cashless payment systems (Ajayi & Ojo, 2020). In many communities, cash transactions are deeply rooted in cultural practices, informal economies, and interpersonal trust systems, making the transition to electronic payments challenging (Oyewole et al., 2021). Understanding these societal and cultural influences is therefore essential for the effective implementation and sustainability of a cash-free economy.

1.2 Statement of the Problem

Despite the increasing availability of digital payment platforms in Nigeria, the transition to a cash-free economy remains slow and inconsistent. Many individuals and small business operators continue to rely heavily on cash transactions due to cultural preferences, fear of fraud, lack of trust in digital systems, and limited digital literacy (Eze & Nwagwu, 2018). These challenges undermine the objectives of the cashless policy and limit its overall effectiveness.

Furthermore, cultural attachment to physical cash, informal savings practices, and resistance to change have contributed to low adoption rates, especially among rural dwellers, elderly populations, and informal sector participants (Adeyemi & Adebayo, 2019). Societal perceptions that electronic transactions are complex, insecure, or incompatible with traditional business practices further exacerbate the problem. Without adequately addressing these socio-cultural barriers, efforts to promote a cash-free economy may continue to face resistance and limited acceptance.

1.3 Objectives of the Study

The main objective of this study is to examine societal and cultural factors affecting the transition to a cash-free economy. The specific objectives are to:

Identify key societal and cultural factors influencing the adoption of cashless payment systems.

Examine the level of public awareness and perception of the cash-free economy.

Assess how cultural practices affect the use of electronic payment methods.

Determine challenges associated with socio-cultural resistance to cashless transactions.

Propose strategies for improving acceptance of a cash-free economy in society.

1.4 Research Questions

The study seeks to provide answers to the following research questions:

What societal and cultural factors influence the adoption of a cash-free economy?

How do cultural beliefs and social norms affect the use of electronic payment systems?

What challenges hinder societal acceptance of cashless transactions?

How does public perception influence the transition to a cash-free economy?

What measures can enhance the adoption of cashless payment systems within society?

1.5 Significance of the Study

This study is significant to several stakeholders. Policymakers and financial regulators, particularly the Central Bank of Nigeria, will benefit from insights into socio-cultural barriers affecting cashless policy implementation, enabling the design of more inclusive strategies (CBN, 2019). Financial institutions and fintech companies can use the findings to tailor products that align with cultural values and societal needs.

Academically, the study contributes to literature on digital finance, socio-economic development, and behavioral economics by highlighting the influence of cultural and societal dynamics on technological adoption (Ajayi & Ojo, 2020). The study is also beneficial to the general public by increasing awareness of the importance and benefits of a cash-free economy.

1.6 Scope of the Study

The study focuses on societal and cultural factors influencing the transition to a cash-free economy, with emphasis on attitudes, beliefs, norms, and practices affecting electronic payment adoption. The research is limited to Nigeria and examines the experiences of individuals, traders, and small business operators within the socio-cultural context of the country.

1.7 Operational Definition of Terms

Cash-Free Economy: An economic system where financial transactions are predominantly conducted through electronic payment channels rather than physical cash (Humphrey et al., 2016).

Socio-Cultural Factors: Social norms, beliefs, traditions, values, and practices that influence individuals’ behaviors and attitudes toward technology and financial systems (Ajayi & Ojo, 2020).

Electronic Payment Systems: Digital platforms that facilitate cashless transactions, including mobile banking, POS terminals, online transfers, and digital wallets (CBN, 2019).

Cultural Practices: Established patterns of behavior and traditional methods of conducting economic activities within a society (Oyewole et al., 2021).

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