Cashless Policy Transitions and Currency Substitution: Nigeria’s 2012-2022 Evolution Compared with Sweden, China, South Korea, and US Instant Payments Via Fednow

Abstract

The study assesses whether digital payments result in long-term declines in cash use or hybrid payment systems. The findings reveal that although digital payments have grown, cash has persisted, especially in segments characterised by informality, transaction costs, and trust issues. Comparative findings suggest that transition trajectories vary among countries, with policy-, market- and infrastructure-dominated transition processes leading to different outcomes. The results show that the transition is characterised by currency substitution, rather than replacement. Consumers distribute transactions across instruments based on the situation, leading to the co-existence of cash and digital systems. The benefits of financial inclusion are not shared, with digital infrastructure not always leading to digital use. The research suggests the success of cashless policies hinges on the interplay between institutional, user, and technological contexts, rather than the growth in digital payments.