When Cash Becomes the Infrastructure
In an ideal financial ecosystem, money should move efficiently. A customer pays a supplier electronically. The supplier receives confirmation. The transaction is recorded. Goods or services are delivered. The business continues. But where electronic banking infrastructure is unreliable, internet connectivity is unstable, point-of-sale systems frequently fail, and digital transactions are sometimes delayed, cash becomes the dependable alternative.
The problem is that cash is not free. Someone has to withdraw it. Someone has to transport it. Someone has to count it. Someone has to secure it. Someone has to reconcile it. And someone bears the risk of theft, loss, fraud or error.
Consequently, what should have been a simple ₦100,000 (NGN) transaction can become a chain of additional costs.
You may pay:
- A withdrawal or transaction charge.
- Transport costs to access cash.
- Banking or agent fees.
- Staff time spent collecting or depositing cash.
- Security costs.
- Reconciliation and administrative costs.
- The opportunity cost of time spent waiting in queues.
The money may not have changed in value, but the cost of accessing it has increased. That is buying money with money.
The Paradox of Financial Inclusion
There has been significant progress in digital financial inclusion across developing economies. The World Bank reports that digital payments among adults in developing economies increased from 35% in 2014 to 57% in 2021. Yet millions of adults continue to make or receive everyday payments in cash. (World Bank)
This creates an important distinction: Having a bank account is not the same as having a reliable banking system. A person may have a bank account, debit card and mobile banking application, but if the network is unavailable when payment is needed, the practical value of those tools is immediately reduced. This is particularly important for small businesses.
A trader cannot tell a supplier, “Please wait until the network comes back.”
A customer cannot always tell a transport operator, “The payment is pending.”
A supplier cannot always accept “I have initiated the transfer” as payment.
Commerce requires certainty. And when digital systems cannot consistently provide that certainty, people revert to cash.
The Cost Is Bigger Than the Transaction Fee
One of the biggest mistakes we make is measuring the cost of cash only by visible charges. Suppose a business needs ₦500,000 (NGN) in cash. The obvious question is: “How much did the bank charge me?” The better question is: “What was the total cost of obtaining and managing that cash?”
Consider:
Cost Possible Impact
Bank/agent charges Direct financial cost
Transport Additional expense
Staff time Lost productive hours
Queuing Lost opportunity
Security Increased operational risk
Cash handling Administrative burden
Errors Reconciliation and financial losses
Theft Potentially significant loss
Delayed payments Supplier/customer disruption
The transaction fee might be only a few hundred naira (NGN). But the economic cost could be thousands of naira (NGN) or considerably more.
This is why an economy can appear to have inexpensive banking transactions while businesses and households are actually paying a substantial hidden cash tax.
Cash Creates a Productivity Problem
Cash does not merely create financial costs; it consumes time. Imagine a business owner spending two hours travelling to withdraw money, another hour waiting, and additional time transporting and reconciling the cash. Those three or four hours could have been spent:
- Meeting customers.
- Negotiating contracts.
- Managing employees.
- Developing the business.
- Finding new markets.
- Improving operations.
Therefore, unreliable financial infrastructure imposes a productivity penalty on society. The issue is not simply: “Can I transfer the money?” It is: “Can I move money reliably, securely, quickly and affordably?” That is the standard a modern economy should aspire to.
The SME Suffers the Most
Large corporations often have multiple banking relationships, treasury departments, alternative payment channels and sophisticated financial systems. Small businesses usually do not. The informal trader, small retailer, contractor, farmer, artisan and emerging entrepreneur are much more exposed to the weaknesses of a cash-driven system.
This is particularly significant because digital payments can do more than simply replace cash. They can create transaction records that help businesses demonstrate cash flow and potentially improve access to credit.
Recent World Bank research involving firms across 101 economies found that firms receiving electronic payments were significantly less likely to be credit constrained, particularly in environments where information and financial infrastructure are weak. (World Bank Blogs)
This means that moving away from cash can potentially create a virtuous cycle:
Digital payments → transaction records → greater financial visibility → better access to finance → business growth.
But We Must Not Blame the Consumer
It is tempting to ask: “Why don't people simply use digital payments?” The answer is more complicated. People use what works. If a merchant has experienced failed transfers, delayed confirmations, reversed transactions or network outages, cash becomes rational.
Interestingly, the World Bank's 2025 Global Findex data for Nigeria found that among surveyed respondents who used cash only for in-store merchant payments, 44.9% cited being accustomed to cash, while 21.3% said merchants only accepted cash and 12.6% cited lack of trust in card or phone payments. (Microdata World Bank)
So the transition to a digital economy cannot simply be achieved by telling people: “Stop using cash.” The digital alternative must first become more reliable, accessible, trusted and convenient than cash.
We Need to Move From Cashless Ambition to Reliable Digital Infrastructure
The objective should not be to eliminate cash overnight. Cash remains important, particularly where digital infrastructure is weak. The real objective should be to build an ecosystem where people choose digital payments because they work, rather than because they are being forced to use them.
That requires investment in:
1. Reliable Internet Infrastructure
Digital banking cannot function reliably without dependable connectivity.
2. Resilient Banking Platforms
Banks and FINTECH companies need systems capable of handling high transaction volumes with minimal downtime.
3. Interoperability
Customers should be able to move money easily between banks, FINTECH platforms and payment systems.
4. Consumer Confidence
When transactions fail, customers need rapid resolution and transparent communication.
5. Affordable Digital Transactions
Digital payments should not become so expensive that cash remains economically attractive.
6. Digital Literacy
People need to understand how to use digital financial services safely and effectively.
7. Merchant Adoption
Digital payment acceptance must extend beyond major businesses into markets, small shops, transport, agriculture and informal commerce.
The Bigger Economic Question
The real question is not whether cash is good or bad. Cash has legitimate uses. The bigger question is:
How much economic value is a country losing because money cannot move efficiently?
- When a supplier waits for payment because the network is down, production may stop.
- When a business cannot access working capital, employees may remain unpaid.
- When a farmer receives cash instead of a secure digital payment, financial records may remain invisible.
- When a customer spends hours trying to access money, productivity is lost.
- When businesses hold large amounts of cash because they do not trust digital channels, capital becomes less efficient.
These are not merely banking problems. They are economic development problems.
From Buying Money to Making Money Work
A mature financial system should make money move, not make people struggle to move money. The purpose of financial technology is ultimately not to make banking look modern. It is to reduce friction in economic activity. The World Bank's Global Findex 2025 emphasises the relationship between financial inclusion, digital connectivity and the ability of people to make payments, save, borrow and manage financial risks. (World Bank)
That is the transformation developing economies should pursue. We should move from an environment where Money requires money to move to one where Money moves efficiently so that people can create more money, value and opportunity.
Conclusion: The Cost of Friction
“Buying money with money” is ultimately a story about friction. Every unnecessary journey, queue, withdrawal fee, failed transaction, delayed transfer, security risk and manual reconciliation represents friction in the economy. Individually, these costs may appear insignificant. Collectively, they are enormous.
A developing economy cannot afford to spend its scarce resources merely moving money around. The ultimate goal should be an economy where financial infrastructure is sufficiently reliable that entrepreneurs can concentrate on what they do best: creating products, providing services, employing people, investing capital and generating wealth.
Because the real measure of a financial system is not simply how much money exists. It is how efficiently that money can work. When we spend money to access money, we are paying the price of financial friction. When we build systems that allow money to move efficiently, we release capital, time and human productivity for economic growth.
That is the journey from buying money with money to making money work for the economy.
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