Rising maintenance cost, occasioned by growing customer demands for better efficiency of self-service channels, is compelling deposit money banks in Nigeria, Africa’s largest economy by Gross Domestic Product (GDP), to outsource their Automated Teller Machine (ATMs) deployment and management function to third party service providers, industry insiders have said. These third party providers, according to them, will be paid on the basis of each transaction. Available statistics show that there about 12,000 ATMs in the country. Banks dedicate significant financial and management resources to ongoing operation and support of their ATM networks, according to industry insiders. BusinessDay checks however reveal that the average annual support spend on an ATM in Nigeria, is $2,500. In stark contrast, this figure is half of what obtains in Indonesia and South Africa, both spending around $4,500 per ATM per annum. A new research study has shown that ATM maintenance costs are growing 7 percent annually. To this end, banks have been taking a closer look at alternative ways of managing their ATM networks, which is no longer a revenue generator as the Central Bank of Nigeria (CBN) had earlier cancelled the N100 monthly ATM card maintenance fee.
Tope Dare, director, sales & strategy, Infrastructure Business at Inlaks Computers, however confirmed this development in an interview. According to him, “the industry is moving in the direction where a third party provider takes away all the headaches of managing ATMs from banks as a turnkey project.
They provide the structure, inverters, connectivity links to bring the ATMs to service and then subsequently maintain the infrastructure.” An ATM network requires careful attention, including restocking cash and keeping up with security mandates. Market watchers are of the view that outsourcing of ATM management functions is a critical area currently being considered by many senior bank executives. “Not all banks have the competence to maintain so many ATMs on their own. As the industry matures, outsourcing becomes the norm because availability of capital is scarce and banks would not want to spend the capital on capital expenditure. OPEX is the way forward,” said Hatim Broachwala, analyst at Karvy Stock Broking Limited.
Improving overall customer experience on the ATM platform has become a priority for many banks now, in line with the mandates of the apex bank, according to industry insiders. Austin Okere, group managing director, Computer Warehouse Group (CWG) Plc, in a recent note, pointed out that the average customer experience of the ATM user in Nigeria, Africa’s most populous nation, is still a tale of woes. “This is mostly self-inflicted, and inadvertently by the same banks in whose major interest it should be to drive adoption to cut the relatively high cost of serving customers within the branch.” Industry insiders say that banks decision to go the outsourcing route may be unconnected to the stagnation of ATM penetration levels. Even with the widespread usage and adoption of ATMs, the population of machines has been stuck at the 11,000 mark for the past six years, resulting in an average of 11.39 machines per 100, 000 adults, according to latest industry findings.
A World Bank report shows that adults in the country account for about 56 percent (95.2m) of the total population (I67m). In stark contrast, Indonesia with an adult population of about 90m, more than doubled their ATM installed base from 16, 700 in 2011 to 36, 500 in 2012, resulting in 37 ATMs per 100,000 adult populations, about three times the ATM per adult capita in Nigeria.
There has been a general lull in Nigeria’s ATM market, according to industry insiders, largely due to the Central Bank of Nigeria’s (CBN) misadventure with the Independent ATM Deployers (IAD) experiment of 2008 which barred financial institutions from deploying ATMs outside their branches. This move, according to them, resulted in an abrupt halt in the momentum of ATM deployment by banks. But as bank struggle to minimise cost, and improve efficiency of self-service platforms in the current economic conditions, outsourcing has become an attractive option, analyst have said. Jaroslaw Knapik, senior analyst, financial services technology, at Ovum, said, “The idea of not owning the equipment but renting it together with associated services is a pain-reliever for many banks.”
According to him, vendor credibility is essential, and the larger institutions in particular will also seek reassurance that both their customer service levels and overall delivery strategy will not be compromised. Market watchers are of view that outsourcing or managed services approach offers banks the benefits of managing costs and maintaining compliance while providing the ability to rapidly deploy the latest, most innovative technologies. Industry analysts also say it places a long-term focus on achieving peak levels of ATM performance, which also bolsters customer satisfaction and expands the opportunity to increase revenues through cross-sales and new services.
Ben Uzor Jr
