An Analysis of the Impact of Cashless Policy on Customer Patronage of Small and Medium Enterprises in the Federal Capital Territory, Abuja

Abstract

The global shift toward cashless economies, driven by technological advancements, has transformed how Small and Medium Enterprises (SMEs) attract and retain customers. In Nigeria, the Central Bank of Nigeria (CBN) introduced a cashless policy in 2012 to modernize payment systems, reduce cash reliance, and enhance financial inclusion. This study examines the impact of cashless policy adoption, specifically through online banking and QR code payments, on customer patronage of SMEs in the Federal Capital Territory (FCT), Abuja. A survey research design was employed, collecting data from 309 SMEs, selected via simple random sampling from a population of 22,861 registered SMEs (SMEDAN, 2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) was used for analysis. Results show that online banking significantly enhances customer patronage (path coefficient = 0.756, p = 0.000), driven by improved transaction efficiency and trust-building features. Conversely, QR code payments show no significant impact (path coefficient = 0.066, p = 0.051), likely due to low trust and infrastructural barriers. Recommendations include enhancing online banking with SME-tailored features like instant payment notifications and loyalty programs, and promoting QR code adoption through awareness campaigns and improved digital infrastructure to boost customer loyalty and retention.