Cash limit: Kyari calls for incentives to encourage card usage

By Babajide Komolafe

There is need for government for offer incentives that would encourage usage of electronic payment card so as at enhance the effectiveness of the proposed cash limit policy and other efforts to reduce use of cash for transactions in the country, says outgoing Managing Director/Chief Executive, Valucard, Mr. Bukar Kyari

“I believe the government should offer some incentives in addition to the negative incentive or penalties that people talk about because by pushing us and by incentivising us, we can embrace it faster than if you just hope we would do it,” said Kyari who is the incoming Managing director/Chief Executive of Central Securities and Clearing Systems (CSCS).

In an interview with Vanguard last week, he cited the example of South Korea, where the government instituted incentive programs to encourage use and acceptance of payment cards.

He said, “Incentives can also come by way of giving discount on VAT to merchants, and the merchants would now become champions of e-payment. A similar thing has been done in South Korea, which has made the second most active cards country per capital, coming next to the United States.

And it was by government deliberately instituting an incentive program, by telling the merchants, if you accept cards you will get discount on your taxes, but if you accept cash you will still pay the ten per cent or five per cent.

And pretty soon everybody was embracing it. So, all the merchants and even small one man store were actually asking for its bank to provide him with a PoS terminal. So that is one incentive used that encouraged usage.

“The other thing they did was that during the Asian financial crises in the 1990s, they instituted a monthly lottery of about a million dollars or its equivalent. And those one million dollars was splinted into two or three bits, and you don’t buy a ticket to qualify, you just use your card.

You just use your Visa card or Mastercard or whatever you are entered, and every month the government draws from your transactions and it is only PoS transactions that will enter you. So the citizens also became encouraged. It is like I have already buy foods, or buy drinks, why don’t I use card so that I can have the chance to be a millionaire.

“So, that also incentivise the users. So the merchants on one hand have incentives for accepting transactions and the government also has incentive for the users, and the citizens also became heavy users. So that created a country that became more active than all other economies in the world except the United States”.

Emphasing the need to fast track migration of transactions from cash to cards, he said, “If we move away from cash it would be better for the economy. And why do I mean that? When you migrate only ten per cent of your transactions away from cash to card, some studies have been done around the world in similar economies; the GDP of that economy would grow by one per cent.

“I know that Dr. Ngozi Okonjo Iweala and the economic management team are looking at ten per cent or above GDP growth rate. Now here is a low hanging fruit, just institute policies that will migrate us away from cash, let us say by 20 or 25 per cent, that would add 2.0 to 2.5 per cent to the GDP growth. And to me that would bring in a lot of money into the banking system where onward lending could be added, additional investments could be added and help economic planners plan the economy.”