Automated Troubles

Lamido Sanusi, Governor of Central Bank

As the June 30, 2009 deadline set by the Central Bank of Nigeria (CBN), for deposit banks operating Automated Teller Machines (ATMs) outside their premises to remove them approaches, anxiety and panic grip the sector
By Bayo Amodu
The countdown has begun. By June 30, 2009, Nigerian banks are expected to have removed their Automated Teller Machines (ATM) from public places, particularly hotels and airport lobbies. This is according to a directive from the Central Bank of Nigeria, CBN, in April 2009. However, the directive has led to a situation where the apex bank, and the banks and now taking diverse positions on the issue.
According to a circular passed by the apex bank on April 7, 2009 and signed by CBN’s Director (Banking operations), James Olekah, the ATM consortium (ATM), an organisation formed by some banks and licenced for the business of deploying the ‘cash machines’ to locations other than banking premises, was mandated at the onset to solely deploy ATMs in public places, while banks were to limit it to their premises. As a result, the CBN said: “Banks should henceforth restrict the deployment of ATMs to their premises, (and) are advised to redeploy all existing ATMs in public places to their premises on or before June 30, 2009.”
The apex bank also announced that there are plans to licence another ATM consortium, in addition to the existing one, both of which would install ATMs in public places and in line with best practices. This, Olekah added, tallies with the policy on joint payment infrastructure in order to meet growing demands.
The banks that formed the consortium, pre-consolidation, include the United Bank for Africa, UBA, Zenith Bank Plc, Oceanic Bank, Diamond Bank Plc and some others. With a mandate for the CBN to operate outside of the banking halls, hotels, hospitals, shopping malls, etc- the ATMC saw a monopolistic opportunity in the deal and began operations with its first set of 30 Quickcash machines in the third quarter of 2004, but had to slow down due to lack of funds.
So, with the ATMC seemingly incapacitated, if not moribund, the banks quickly cashed in on the gap created by its non-performance and moved to meet rising demands for ATM services by bank customers. They thus seized the opportunity to churn out ATMs in a most competitive manner, even in offsite locations, and the result was proliferation of the cash machines’ in such locations, not by ATMC, but by the banks themselves. Soon, banks’ customers started enjoying the impact of the easy access to their accounts.
According to the managing Director, Interswith, a payment solutions platform provider with 25 Nigerian banks on its platform, Mitchel Elegbe, there is no contesting the fact that the introduction of ATM has changed the face of electronic payment in Nigeria.
From a modest entry of the product 20 years ago, the e-payment industry in Nigeria has witnessed wider acceptance. ATM was introduced into the Nigerian economy by the National Cash Register (NCR) for the defunct Societie Generale Bank of Nigeria (SGBN) in 1989. Banks are, however, now adopting self-service (ATMs) technology because it is cost effective in the long run. Bank customers say ATM offers convenience for them and provides banking services well beyond the traditional brick and mortar service period.
Elegbe also confirmed that Interswitch has witnessed increased transactions, with the high level of adoption of the technology by Nigerians. “Currently, Nigeria has about 7,300 Automated Teller Machines (ATMs) installed in various bank branches and off- bank premises such as shopping malls. As at January 1,2009, over 7,200 ATMs spread across the 36 states were connected to the Interswitch network.
“The total number of ATM transactions on the Interswitch network as at December 31,2008 was approximately 60 million transactions. The total number of transactions on the Interswitch network as at December 31,2007 was over 42 million transactions,” he disclosed.
The Source learnt that ATMC, seeing the growing demand for the technology was jolted by the realisation that the scheme could negatively affect their business if it failed to take action. Thus, it allegedly queried the CBN on the propriety, or otherwise, of banks encroaching on areas perceived as its exclusive preserve. But the apex bank’s response to that was simple: Banks must effect an immediate removal of the machines; and face squarely their core-banking businesses, because they are not even authorised to install the machines in those locations in the first place.
Managing Director of Interspeed Consulting, an electronic transactions consulting firm, Oluwajuwon Alabi, contended that banks are actually not supposed to put their ATMs in non-bank locations in the first instance. “The ATM Consortium has the mandate to deploy ATMs in offsite locations, and the banks know this by the mandate it was given; the consortium is the one that is supposed to be rolling out ATMs in offsite locations and banks know that they are not expected to encroach, or go contrary to the policy,” Alabi said.
The Irony of the issue, according to him, is that ATMC is actually owned by some of the banks; so, it’s like the banks competing against themselves.
However, the CBN’s order, to many people, is rather belated. Samuel Ajagbe, an ex-banker wondered why the apex bank is coming out with such measure at this time when the purported breach of the policy had been condoned for long.
Ajagbe: “How does the CBN expect the banks to remove the ATMs six years after they were installed? Where was the apex bank when those machines were being installed?”
The Source learnt that banks under their umbrella organisation, the Chartered Institute of Bankers of Nigeria (CIBN), are currently engaging the CBN in discussion to stop the directive on the removal of the ATM machines.
At a press briefing in Lagos recently, the President of the CIBN, Erastus Akingbola, said that the deposit banks have requested the CBN to make clarifications as to what constitutes a public place, where an ATM cannot be deployed. He added that even though it might not be good for about 10 banks to cluster ATMs in a given space, the CIBN will also not want the monopolisation of space by a single bank and expressed confidence that grey areas in the directive will be resolved before the June 30 deadline.
In a telephone interview with the The Source however, an official of the CBN said that although the directive stands, the expected complexities associated with complying with it would be addressed by the apex bank.
However, some of the ATM users and sources within the banks who spoke with The Source opined that should the CBN go ahead with the directive, the relative peace in banks would be shattered as customers would have no alternative but to henceforth besiege banking halls for small-time withdrawals which the ATMs have been taken care of.
A director with IKP Media Associates, a Lagos-based Public Relations outfit, Kingsley Eke said the sweeping order would unfortunately bring back the era of congestion in banking halls.
Also, an official of Skye Bank, who preferred anonymity, said that bank users would be deceiving themselves thinking they would be able to draw money outside bank premises as from June 30, unless the regulatory authorities are made to appreciate the enormity of challenges the order will create for banks and their customers.
But according to Ajagbe, it is not technically possible for the banks to remove the ATMs as directed by the CBN. The logic, he said, is that the apex bank may actually find a middle – ground whereby the banks will be asked to hand over the machines to the consortium on agreed terms.
“It is not technically possible to remove the ATMs in many locations; as doing this is even more difficult than putting the machines in the first instance, which is the point banks are making. The banks understand the mentality of the CBN. What I see is the likelihood of them yielding to pressure by the banks, say rather than remove them, they would instead cede the ATMs to ATMC,” Ajagbe posited.
The Source gathered that, ironically, banks in smaller African countries are embracing and acknowledging the inherent advantage of economies of scale in the outsourcing model. In Kenya, for instance, more banks have joined PesaPoint ATM network. In August 2008, the National Bank of Kenya became the seventh financial institution to be activated on the ATM network since it started operations in November 2005. Other banks on the PesaPoint ATM network, which specialises in the deployment of cash machines at off-banking locations, include Fina Bank, NIC Bank and Imperial Bank Limited, among others. Also, in Tanzania, East Africa, six local banks have teamed up to establish one ATM deployert to be known as “Umoja Switch.”
Will Nigeria’s apex bank bow to pressure and reverse the order or would it permit the banks to cede the ATMs to the ATM Consortium? Everyone eagerly awaits the June 30,2009 deadline.