Poor ATM services: Time for fresh ideas?

There are different accounts relating when the first automated teller machine (ATM) was introduced in Nigeria.

In 2018, former Senate President, Bukola Saraki claimed he introduced the first ATM “twenty five years ago” (in 1993) when he was the chairman of Society Générale Bank before the use of banks. Saraki made the claim while addressing a motion on ‘Illicit and excessive charges by Nigerian Banks on customers account with focus on Automated Teller Machine (ATM) maintenance and withdrawal charges’, sponsored by Senator Olugbenga Ashafa.

First Bank however claims the first ATM was introduced in 35 Marina “as part of ease of convenience, round the clock banking” on May 4^th, 1991.

That notwithstanding, over twenty years after the first ATM was introduced, the amount of machines deployed across the country as at 2016, stood at 17,398.  Out of these, nearly 73 per cent are owned by 12 commercial banks. These banks operate a total of 12,621 ATMs in the country.

The banks include First bank (2,779); United Bank for Africa (1,750); Access Bank (1,564); Zenith Bank (1,395); Guaranty Trust Bank (1,165); Diamond Bank (1,054); Union Bank of Nigeria (800); Sterling Bank (776); First City Monument Bank (770); Unity Bank (311); and Wema Bank (270).

With the banking population estimated at 40 million, the available ATMs are grossly short of the demand. This and other factors – including cost of running the ATMs – are responsible for the persistent poor services bank customers experience in Nigeria.

There are many things that determine the efficiency of an ATM. The process includes getting a good site for the ATM. The cost of the site often depends on where it is located. Sites in urban areas definitely cost higher than those in rural areas. If the site is external, then the bank has to build the kiosk; this would include security doors and concrete reinforcement all through. The size of the site is a function of the number of the ATMs being provided.

The type of network is also a big part of the process. Usually the engineers rely on two radio connections. GSM networks or mobile wireless are hardly reliable so they are rarely used. The kiosk will also require air conditioners, at least two for one ATM. Given that it require minimum of 72 hours autonomy, there will be need for an inverter. An inverter for two ATM setup would cost N2.5 million. Finally, there is the purchase of the ATM itself; the cost of one goes for $15,000.

Other cost the bank may incur would be in supporting the ATM. Feeding the ATM cash happens about every two days, depending on the location. The average ATM cash withdrawal is N7,000. Also ATM support contract with NCR goes for about $1,300 per ATM per year.

“It’s easy to blame banks for ATM woes, there are issues related to Nigeria that other countries don’t have,” says Adedeji Olowe, CEO of Trium and a long term consultant in the financial services. “Putting cash into ATMs is a risky business; you need to get the cash and get MOPOL to follow these around. ATMs in Nigeria work harder than machines in other countries. Say maximum withdrawal is N20,000 – that’s about $60, 3 notes of $20 each. But that is around 40 notes of N500 each for the same ATM effort.”

Additionally, most notes used in Nigeria are dirty; hence they attract humidity and consequently get the machines to jam easily, necessitating many downtimes and repairs.

Should banks outsource the entire ATM service to a fintech with the capability to manage them and run them efficiently? There may is a strong case for outsourcing the service. For instance, the cost of ATM support contract is much less from fintech companies like Inlaks compared to what NCR will charge. Outsourcing could also mean that banks have more time on their hands to focus on providing better customer service.

But Olowe believes that outsourcing the ATM management will not solve any problem as the issues the banks face are Nigerian problems that outsources would face as well.

There have also been calls in recent times for banks to upgrade the technology to meet 21^st century standards. The existing ATM technology was deployed with the mindset of acquiring new customers. The changing times driven by young customers places emphasis on offering cutting-edge features, like the ability to take out cash from an ATM by using a code from a smartphone app, instead of inserting a debit card.

“In contrast to the financial services currently offered by ATMs, consumer expectations have become increasingly sophisticated in recent years,” notes Fintech Finance. “Today’s existing ATM channel is bogged down by the maintenance of legacy systems predicated on 20^th-century architecture, which was only fit for purpose when they were laid down in a pre-internet, pre-mobile, pre-online banking era.”

Bank of America is one of the banks that are currently redesigning their ATME screen displays to have the same look and feel as the company’s mobile application.

There is also emphasis on better customer service, for instance, should a customer necessarily have to physically be in a bank branch to obtain a card? Why can’t customers order their cards, pay, and their cards are delivered to their addresses? Banks could improve customer experience by including the option of delivering the cards. It will also reduce a lot of time should remove the form customers get issued when they come to collect their cards.