Automated Teller Machine (ATM) technology was 50 years on 2 September 2017. The innovation is one of the oldest financial technologies (Fintech) that has remained relevant and is likely to stay that way for many more years to come – so long as cash stays in existence.
The ATM has remained a dominant force in Nigeria’s digital payment evolution. In the first half of 2017 for example, transactions on the technology were as always, dominant compared to other e-payment channels. Volume and value of ATM transactions stood at 366.7 billion and N3.04 trillion. The volume of transactions rose by 4.9 per cent to 188 billion while the value increased by 2.9 percent to N1.54 trillion in the second quarter.
Nonetheless, transactions on ATMs have been matched by increasing queues on the machines nationwide. Femi Adeoti, chief executive officer of Inlaks Limited, a company that controls about a third of total ATMs in the country said the major reason for the queues was due to the limited number of ATMs available to all the banks in Nigeria.
There are only 17,000 ATM machine across the country today.
According to 2015 data from the World Bank, Nigeria with its over 180 million population has 16 ATMs per 100,000 adults whereas the Fiji with a population of 907,369 has 45 ATMs per 100,000 adults and South Africa with 56 million people has 69 ATMs per 100,000 adults.
Before ATM-as-a-service era
The practice for financial institutions across the world before now was to purchase ATM machines, run and carry out maintenance using an in-house team. Hence, every bank in Nigeria would have heavy control over the running of its ATM machines. This model however may not been sustainable for some reasons.
First the cost of purchasing an ATM machine is very high. A single ATM machine will usually cost somewhere around $3,000 (N1.078 million) and $10,000 (N3.595 million) outside depending on the type of machine. The price jacks up significantly when the price of shipment and clearing is added.
Aside from the ATM machine there is extra equipment such as clip to fill with money to refill the machine. The bank will also need to buy a truck they will use to service the ATMs and move around.
Second, the bank would only deploy a machine according to the best metrics that guarantee high returns. In other words, areas with low demography attract fewer machines while well populated areas or commercial districts have more machines.
Also, the cost of maintenance discourages banks from deploying ATM machines in remote or rural areas. ATMs need frequent attention. And financial institutions must employ workers and third-party service providers to take care of assorted routine services, replenish cash, clearing paper jams, fixing broken parts, processing transactions, upgrading hardware and software etcetera.
These challenges have compelled most banks to reduce the number of ATMs machines deployed and find solutions in new e-payment models like mobile money versions – USSD, QR, apps, Point of Sales (POS), etcetera. However, given that internet connectivity and e-financial literacy are real challenges, a lot of people are only comfortable using the ATM machines.
Enter ATM-as-a-service
The advent of digital technology and new innovation has changed the dynamics in many countries. ATM-as-a-service is the model being embraced by most financial institutions. It involves third party or non-financial institutions’ ownership and operation of the ATM machines.
According to Henry Erigha, senior manager, Computer Warehouse Group (CWG), a company that has persistently canvassed for adoption of ATM-as-a-service,
“The rationale behind ATM-as-a-service is the operational efficiency, whereby companies can focus on their core business and allow contractors take care of other areas of their business that are not very critical to them.”
An ATM service provider can help financial institutions more fully engage their customers by cost effectively adding new functions and services that provide an even better customer experience.
Johnson Ajani, a product manager in one of the banks, said the financial institutions are also earning extra revenue through advertisement placements on the ATMs. However, this can be enhanced further by an innovation savvy third-party provider. The banks not only save cost but generate more income.
Adeoti noted that ATM Consulting Engineers had wanted to pioneer the innovation in Nigeria but was to drop it along the line as a result of many issues. Now that the queues are getting worse, it will be worth revisiting.
