1.1 Background of the Study
The rate of rapid development at international level has been so vibrant that it touches all facets of human endeavor (Latifat and Alhassan 2015). Policymakers and development practitioners recognize the leading function of information and communication technologies (ICTs) for development (Dutta and Mia, 2009). Today, the world is becoming a global village, provided the growing complexity of business portfolios and expansion of business groups, and the increase in decentralization in response to these changes (Tasmin. Abubakar & Josu, 2012). Therefore, cashless policy services have been gaining ground around the world. This offers banking industry a new leading edge of opportunities and obstacles in the international banking market. Thus, the success of cashless economy services depends on the rate at which the new technology is embraced by the small and medium scale enterprises.
Consequently, the factors that influence the small and medium scale enterprises will definitely be of issue to both bankers and policy makers (Shaukat and Zafarullah, 2010). The fast changes in business operations in contemporary times in the form of technological improvement need banks in Nigeria to serve the small and medium scale enterprises. Electronic payments are increasingly gaining ground as lots of small and medium scale enterprises get them as panacea to problems of poor service delivery that has been bedevilling several financial institutions for a very long time (Dogarawa, 2005). Nevertheless, experts posit that the rate at which Nigerians approve the products is far below assumption.
E-payment systems for trading can be categorized into two unique parts; wholesale and retail payment systems. Wholesale payment include corporate transaction, while retail payment system consists of little product quantity transactions including consumers through the use of such payment medium like smart cards, credit and debit cards along with online payment mediums and so on.
Most SMEs in Nigeria die within their first five years of establishment, a smaller percentage goes into extinction between the sixth and tenth year while just about five to ten percent survive, thrive and expand to maturity (Aremu and Adeyemi 2011). White (2005) and Marlow (2005) likewise suggested that venturing into small business is really dangerous and that the rate of small businesses collapse in developing nations such as Nigeria is extremely high. Sandberg, Vinberg and Pan (2002) as mentioned in Akinruwa T, Awolusi O, and Ibojo (2013) explained performance of SMEs as their capacity to contribute to job and wealth creation through Business startup, survival and growth. SMEs performance can be described to be the firm's success in the market, which might have different results and can be described as the focal phenomenon in Enterprises studies which invariably can be identified as the firm's capability to create acceptable outcomes and actions.
According to Gatuhu, (2014) credit management is just one of the most important activities in any firm and cannot be neglected by any economic enterprise engaged in credit regardless of its business nature. Deteriorating credit quality is one of the most constant reasons for poor financial performance and condition. Financial management is the among the main cause of SMEs failure as confirmed by results from different researches from scholars. A few of that includes Agwu and Emeti (2014), Mbonyane (2006), and Akinruwa, Awolusi and Ibojo (2013). Tang (2014) also established company gains less profitability when it supplies trade credit. The costs connected with supplying trade credit excess the benefits. The cashless banking payment system can help SMEs handle their sales and credit collection.
Nevertheless, these researches have paid little or no attention on the impact of cashless system on SMEs performance in Nigeria. Thus, the objective of this study is to investigate the impact of cashless system adoption on SMEs financial performance in Uyo metropolis. Point of sale terminals (POS) and Mobile banking will be used to measure cashless policy implementation; while profitability and sales volume will be used to measure SMEs performance.
1.2 Statement of the Problem
All financial institutions compete with each other to attract their clients in various ways by offering convenient, accessible and acceptable services or/and products to their customers. One of the most essential of these services is cashless economy (electronic payments) which have added considerably to reduction in the distance between costumers and the financial institutions (Kannabira & Narayan, 2005). Today's banking situation needs constant innovation in order to meet the yearnings and goals of the ever-demanding customers. Thus, banks have to roll out new services and products promptly and efficiently, using latest advanced technology (Augusto, 2002). Cashless policy allows financial institutions to improve their service delivery, decongest queues in the banking halls, allow clients withdraw money 24/7, help international payments and remittances, track individual banking transactions, request for online statements, and even transfer deposits to a third-party account. Those services will certainly influence substantially on the overall performance of small and medium scale enterprises. The small and medium scale enterprises on the other hand, stand to enjoy the benefit of fast service delivery, minimized frequency of going to banks physically and minimized cash handling, which will generate greater volume of turnover (Fagbuyi, 2003). Nevertheless, these developments in the Nigerian banking sector appear not to have achieved their objectives. In spite of the effort of banks to make sure that customers reap the benefits of as regards, online theft and scams, non-availability of financial services, payment of hidden cost of electronic banking like Short Message Services (SMS), for sending alert, compulsory acquisition of ATM cards, non-acceptability of Nigerian cards for international transaction, malfunctioning Automated Teller Machines (ATMs) and network downtime. Other issues observed that are connected with Nigerian's cash-based economy, which include: delays in financial transactions which can be caused by queue in the bank or ATM to collect cash, lack of network which impact mobile banking and Internet, banking Spread of bacteria via handling physical money, high rate of crime, terrorism and corruption. People are always confronted with the difficulties of violent crimes (insecurity) such as, bank and ATM robberies (Okafor, 2012). Based on the foregoing, the study investigates electronic payments and Small and Medium Scale financial performance in Nigeria Uyo, Akwa Ibom State, Nigeria.
1.3 Objectives of the Study
The main purpose of this study is to investigate electronic payments and Small and Medium Scale financial performance in Nigeria Uyo, Akwa Ibom State, Nigeria. The specific objectives include:
a) To determine the effects of electronic payments on the financial performance of Small and Medium Scale Enterprises in Uyo.
b) To assess the impact of electronic payments on customer retention of Small and Medium Scale Enterprises in Uyo.
c) To ascertain the influence of mobile banking on the economic performance of Small and Medium Scale Enterprises in Uyo
1.4 Research Questions
In lines with the objectives of the study, the following research questions were raised to guide the study:
a) What are the effects of electronic payments on the financial performance of Small and Medium Scale Enterprises in Uyo?
b) Do electronic payments have any impact on customer retention of Small and Medium Scale Enterprises in Uyo?
c) How does mobile banking influence the economic performance of Small and Medium Scale Enterprises in Uyo?
1.5 Research Hypotheses
The following hypotheses were formulated to guide the study and strengthen the analysis:
a) Electronic payments do not have any effect on the financial performance of Small and Medium Scale Enterprises in Uyo.
b) Electronic payments do not have any impact on customer retention of Small and Medium Scale Enterprises in Uyo.
c) Mobile banking does have influence on the economic performance of Small and Medium Scale Enterprises in Uyo.
1.6 Significance of the Study
This study will add to the existing stock of literature thereby expanding the frontiers of knowledge in the area of study. On the other hand, the empirical significance of the study stems from the fact that different categories of people will actually benefit from the findings. Those that will benefit include but not limited to the management of the banks who would be sufficiently enlightened on how to make the system more efficient; the operators of small and medium scale enterprises (SMEs) who would be given insight on how they can make effective use of the services and the students/researchers who will find the report very useful for starting further studies in the area.
1.7 Scope of the Study
The study took place in Uyo, Akwa Ibom State, Nigeria covering the small and medium scale enterprises (SMEs) in the state. The variable scope is the effect of electronic payments and Small and Medium Scale financial performance, using cashless policy delivery channels like (Automate Teller Machine (ATM), Mobile Banking (MB) and Internet/Online Banking (OB) as determinants of electronic payments.