Market News

By Geoff Iyatse (Lagos) and Joseph Chibueze (Abuja)

• Banks, PoS locked in stiffer competition
• Insecurity poses risk to off-site ATM deployment
• Digital-first banks may consider new partnerships to keep youth markets

To relieve banks of the burden of operating automated teller machines (ATMs) and handling cash, the Central Bank of Nigeria (CBN) has imposed new withdrawal charges on consumers who use this option.

The review may have stretched the journey to commoditise the naira by miles and increased the cost of banking. For some Nigerians, it also raises questions about the CBN’s commitment to financial inclusion.

With the new policy released yesterday, N20,000 cash withdrawal from a non-issuer institution is charged N100.
But off-site withdrawals (ATM located in non-bank premises) of N20,000, will henceforth be charged N100 plus a surcharge not exceeding N500 when the new price regime comes into effect on March 1, the Central Bank said in a circular dated February 10.

On-site and off-site card services on non-issuer banks are currently charged N35 per withdrawal after the first free monthly offers.

Supposing the current fee charges by agent banks would remain constant, cash calls would ultimately flow to the operators, especially in communities where banks are scanty.

But The Guardian’s quick market survey shows the operators, who are also serviced by ATMs, offer more convenience and faster service, could charge higher than the upper band of ATM fee even as the policy may introduce another level of competition between the two strands of cash ‘dispensers’.

First, most of the agent banks use cards issued by Opay, MoniePoint, Palmpay and sundry digital-first banks, who do not consider brick-and-mortar operations, including ATM points, as profitable business strategies.
Most of the operators, by business models, run on an asset-light model – a reason they have traded physical presence for heavy digital infrastructure investment.

In the near term, their card-carrying customers would continue to rely on ATM facilities deployed by conventional banks for withdrawals – a possibility that suggests usage of the cards would be less attractive.
This also means agent banks would need to charge higher to cover the high cost of using the cards issued by shadow banks.

But a source said the newcomers would need to weigh the consequences of their non-investment in ATMs for their operations in the coming weeks. A possible outcome of the review could be an aggressive deployment of ATMs, which the new policy has elevated to full commercial activities.

In youth-dominated communities such as university campuses, Opay, PalmPay and other fintech banks have become part of the pop culture owing to the ease of procurement, which is 100 per cent digital.

A source said the issuers would need to quickly roll out business operation strategies to sustain the important market base. The strategies, The Guardian learnt could include any partnership with existing infrastructure that would help the young people evade paying the upper-band charges.

The off-site surcharge fee introduced under the new price template may be the icing for the digital banks, who could leverage the commercial incentive to flood malls and parks with ATMs in the coming years.

But security challenges could turn into a major hurdle in this regard. Even the established banks started pulling back on investment and regular maintenance of ATMs since #EndSARS saga.

While the crisis lasted, there were cases of assaults on the technical support team of banks attending to ATMs while some machines were vandalised. Activities at ATMs and banks’ commitment to their operations have not returned to the pre-#EndSARS era.

Unless the security situation improves, the expected deployment of new ATMs to service new settlements and replace old ones may not happen as fast as expected.

According to findings, most bank ATMs have exceeded their lifespan, begging for replacement. But the lukewarm attitude towards what used to be a bragging right for the majority of banks, many would have been changed.

In the past three years, The Guardian learnt some banks have not invested in new ATM support as many would rather push their energy and resources to upgrade their digital infrastructure.

A consultant told The Guardian that the service rarely features on the cost items of many banks, who have long ‘outsourced’ their cash operations to their agents.

It is not the first time, the CBN would embark on policies to wean the banks from the burden of cash handling costs.

A few years ago, it introduced what it called bank-neutral cash hubs (BNCHs) to be located in business and busy areas to service the needs of customers who require huge cash.

Close to three years later, the BNCHs, which were to be sited in some places such as CMS and Lagos Island, have not taken off perhaps because the targeted operators did not see commercial value in the initiative.

So also, experts say cash availability needs more than ATM fee increase to improve.

The circular was signed by the Acting Director of the Financial Policy and Regulation department, John Onojah, and addressed to all banks and other financial institutions, the apex bank said the move is influenced by the rising cost and the need to improve the efficiency of ATMs nationwide.

“In response to rising costs and the need to improve the efficiency of Automated Teller Machine (ATM) services in the banking industry, the Central Bank of Nigeria (CBN) has reviewed the ATM transaction fees prescribed in Section 10.7 of the extant CBN Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, 2020 (the Guide).

“This review is expected to accelerate the deployment of ATMs and ensure that appropriate charges are applied by financial institutions to consumers of the service.

The off-site surcharge, which is the income of the ATM deployer/acquirer, shall be disclosed at the point of withdrawal to the consumer, it said.

The Founder/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the new withdrawal fees introduced by the CBN are tolerable given the rising cost of operations.

“The most significant change is the complete removal of the previous policy that allowed bank customers three free monthly withdrawals on ATMs belonging to other banks. This means that every withdrawal on another bank’s ATM will now attract a charge.

“Given the rising cost of operations, the new fees that have been introduced are tolerable because you also need to look at sustainability. These costs need to be covered. So, we also have to be fair to the banks especially as the fees are tolerable,” he said.

Godwin Oyedokun, a professor of Accounting and Financial Development at Lead City University, Ibadan, said the new regulation may help banks to reboot their ATMs.

“The introduction of a fee may indeed encourage banks to increase the deployment of ATMs, as the new charges create a direct incentive for banks to ensure their ATMs are robustly stocked to minimise costs for consumers.

While the CBN’s new policy may serve to encourage an increase in ATM deployment and may have an impact on consumer behaviour towards PoS usage, there is scepticism about whether it will solve the fundamental issues of cash scarcity and high transaction fees affecting consumers,” he said.

He noted that the success of the regulation will depend largely on how banks respond in terms of cash availability and whether the consumers perceive value in the services offered.

Continuous dialogue and assessments should be conducted to ensure that such policies genuinely serve the public interest rather than becoming an additional financial burden, he advised.