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FINTECH1000+ recommends for CBN to drive rapid adoption of Cash Deposit ATMs




FINTECH1000+ has recommended for the Central Bank of Nigeria (CBN) to take the initiative to drive rapid adoption of Cash Deposit ATMs in order to build scale and actualise the benefits to all stakeholders.

Digital Economy

Central Bank of Nigeria (CBN) Governor, Godwin Emifele

This is part of the recommendations contained in a communique released at the end of second Special Webinar of the FINTECH1000+ hosted online on August 12, 2020 with the theme: “What Future for ATMS in Nigeria – Death or Resurgence” with a total of 304 attendees from Nigeria and across Africa.

The communique was signed by Sola Fanowopo for FINTECH1000+.

The Webinar took place amidst elevated uncertainties arising from the Covid-19 Pandemic and the ensuing lockdown which is now gradually being relaxed by the government.

The Covod-19 pandemic has had major immediate impact on every sector of the economy and social life. It is also expected to have major long-term implications on human life, economic and social activities thereby defining a “New Normal”.

In this context, stakeholders came together to synergise their position on the relevance and role of ATM channel within that “New Normal” and future of banking and payments in Nigeria.



ATM and the World Market:

The debate on ATM relevance and future has been a recurring topical issue since the UK launch in 1967. Nevertheless, the ATM has remained resilient, adapting to consumer’s evolving needs and has retained consumer confidence as one of the most trusted and used banking channels worldwide

Participants during the webinar explored the worldwide outlook for ATMs which remains positive and expected to grow though at muted rates over the next 7 to 10 years when ATMs are expected to serve as Bank Branch of the future as banks step up branch closures.

Cash remains crucial to the lives of consumers, so the demand for ATMs as the most convenient and reliable channel to offer this essential service to consumers.

Nigeria (Benchmark against Peer Countries):

The webinar identified that Nigeria lags far behind peer countries with 16.3 ATMs per 100,000 Adults via-a-vis South Africa (67.3 ATMs) and Brazil (106.7 ATMs) and India

With three times population of South Africa, Nigeria has four times fewer ATMs per 100,000 Adults

With similar population to Brazil, Nigeria has 10X fewer ATMs per 100,000 Adults

Lessons from India:

Following the failed Indian de-monetisation policy, which also failed to achieve the envisaged mass migration to cashless, India has gone back to address the real needs of the population.

The revised ATM Policy recently put in place by Reserve Bank of India to attract the requisite investment for the growth and sustenance of the channel offers a ready template for Nigeria on the benefits of stakeholder collaboration in sustainable policy making.

Benchmark against South Africa:

The Webinar also highlighted the significant inadequacy of banking service touch points in Nigeria vis-à-vis South Africa, with a banking population of 31m versus 48m for Nigeria.

This can be confirmed by a benchmark of the Top 5 Banks which reveals that these banks together account of about 13,491 ATMs in Nigeria compared with over 33,156 in South Africa with an ATM:Branch ratio of 8 (South Africa) versus 5 for Nigeria.

These ​​explains the huge unprecedented crowding being experienced by consumers across ATM locations in Nigeria unlike anything else in the world.

Therefore, Nigerian consumers deserve better and CBN along with the entire industry need to act immediately to address this situation in the interest of consumers

Customer preference for ATMs va CBN’s regulations:

The Webinar noted that ATMs continue to rank as the consumer’s No 1 channel of choice based on the modest 22,000 ATMs deployed generating 839B in transaction volume. This compares very favourably against 266,039 Agents generating just 377B and 303,162 PoS Terminals generating 438B in transaction volume.

This is consistent with surveys which reveal that Consumers rank ATM No 1 for Trust at par with the Bank Branch. This is far ahead of the trust level accorded to all other channels such as PoS Terminal, USSD, Agency Banking.

Consequently, queues/crowding at ATM locations have become more severe and widespread causing major customer frustrations across the country despite the availability and huge investments being made to promote these alternative channels.

The low/mid income account holders (“Bottom of the Pyramid”) suffer the most from the extremely poor service arising from the crowding.

This is compounded by the high cost of alternative offering (Agent Banking) where such vulnerable consumers are compelled to pay as much as N500 (over 10 times the ATM End User Fee of N35) for accessing funds in their bank accounts.

A look at CBN’s regulatory impact on ATM Deployment

Speakers identified that stunted deployment growth rate of ATMs has been directly linked to past CBN policy interventions which have a compounded adverse effect on ATM economics progressively eroding the channel viability to date:

  • 2010: IAD Policy requiring banks to exit offsite ATM locations
  • 2012: Cancellation of N100 Cash Withdrawal ATM End User Fee
  • 2015: Introduction of N65 Cash Withdrawal ATM End User Fee
  • 2019: Introduction of N35 Cash Withdrawal ATM End User Fee

Stakeholders also noted the discriminatory regulation of ATM Deployment vis-à-vis PoS and Agent Banking demanding CBN prior approval before each deployment / relocation of individual ATMs with its attendant administrative bottlenecks and delays.

Banks have demonstrated perseverance by maintaining a minimum investment in ATMs to achieve the present network size and service quality.

At the current CBN mandated N35 End User Fee for ATM Cash Withdrawals (USD$0.09 based on current FX rate in Aug 2020).

This represents a mere 11% of the 2003 fee, a massive erosion in the economics of this high CAPEX/OPEX channel

Meanwhile, with corresponding high FX input due to the import dependence of key components (ATMs & related spare parts), the ATM channel has become largely unviable to the banks

This has made it increasingly difficult banks to allocate the requisite quantum of investment to the channel for expansion and service quality improvement

Altogether, the ATM has failed to meet the CBN Financial Inclusion Targets, neither has it met consumer/market demand for service quality and network expansion.

Nevertheless, the ATM channel today offers consumers at the bottom of the pyramid the best value such that despite the often having to travel long distances to neighbouring towns and neighbourhoods, Nigerians in large numbers continue to patronise the ATM with all its challenges rather than use some of the more accessible but more expensive alternatives such as Agency Banking.

Sola Fanawopo on IFINCA

Sola Fanawopo

The Webinar participants recommended as follows:

The main recommendations depict that the CBN/Government and banks need to refocus/realign all policy action towards meeting the needs of the under-served low/mid income Nigerians who are evidently being subjected to the most harrowing experience across the grossly inadequate ATM locations across the country.

The Group believes that policy action should urgently address crowding at ATMs (especially as part of a National Covid-19 mitigation plan); restoring economic viability for the channel; rapid expansion in ATM deployment; access to investment funding & FX availability for network expansion similar to what has been done for SANEF and incentive ATM deployment to remote/semi-urban/rural areas.

FINTECH1000+ also wants banks to address the Market Need as ATM will continue to play a complementary role in the banking and payments channel mix in Nigeria integrated to and supporting both the physical channels (Merchant PoS, Agency Banking and traditional Bank Branches) as well as the virtual channels (USSD, Internet and Mobile Banking Apps).

ATMs are also noted as will remain relevant as the only channel offering essential cash services on 24×7 basis and at the most affordable rate to the most vulnerable low/mid income consumers across the nation.

Rollout of additional ATMs to meet current shortfall and build capacity for the large unbanked population being onboarded via the numerous financial inclusions initiatives including the customers of the newly licenced payment service banks (PSB), has now become paramount.

Seen as the bank branch of the future, ATMs are expected to play a more critical role as part of branch transformation initiatives to serve customers affected by branch closures

ATM deployment to more offsite locations that are proximal (closer) to the target users hence banks should improve accuracy of selecting new ATM deployment locations by leveraging the latest affordable technologies for mapping consumer traffic (heat map), among other recommendations.