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Offsite ATM Deployment: Banks Dare the CBN

By Lucky Fiakpa
The decision of the apex bank to extend the deadline for banks to evacuate all automated teller machines out of all public places followed its observation that banks were making little efforts to comply with its directive on the operation of ATM in public places, Lucky Fiakpa writes


It appears the Central Bank of Nigeria,    CBN, is not giving up on its decision to   get banks to evacuate all automated teller machines, ATM, out of all public places. The apex bank had earlier given a deadline of June 30, 2009 for all banks to comply. The regulator gave the order in a circular made available to the press on the April 7, 2009.

According to James Olekah, Director, Banking Operations, the Central Bank of Nigeria had observed with concern that banks were competing with the operations of the ATM Consortium in the deployment of the machines in public places.
Shortly after the directive, several lobby groups went to work. Efforts were made to get the CBN to back down on the directive. With the exit of the former CBN governor, Professor Chukwuma Soludo from office, it was thought that the new governor, Mr. Sanusi Lamido Sanusi, would reverse the order. It was therefore shocking to the banking industry when last week the apex bank announced extension of the deadline to August, an indication that the directive was still in force.

The decision of the apex bank to extend the deadline follows its observation that banks were making little efforts to comply with its directive on the operation of Automated Teller Machines in public places.

The finance regulatory body, therefore, decided to place an advert in some national newspapers, outlining the procedures for registering and establishing teller machines consortia that would be licensed to locate the teller machines in designated public places.

According to a circular issued on June 26, four days to the expiration of the initial deadline of June 30, the CBN decided to extend the deadline for the removal of the machines in public places by two months to August 31, 2009.
The circular, signed by A.S.F. Atoloye, Acting Director, Banking Operations, states that the directive to establish two Automated Teller Machine Consortia, ATMC, to manage offsite machines was for the purpose of effective management and operations of the machines.

Explaining the rationale for the initial directive, the CBN had stated as follows: “It would be recalled that one of the policies guiding the operations of ATM consortium (ATMC) is that the ATMC shall have the sole mandate to deploy ATMs at public places while the banks shall deploy ATMs only within their premises.

The CBN has observed with concern that the banks are competing with the ATMC in the deployment of ATMs in public places. A worrisome trend is the number of ATMs at the airports and hotel lobbies, which if unchecked would soon, congest these public places.

“Furthermore, in line with the Bank’s policy on shared payments infrastructure by the banking industry and the need to effectively respond to the rising demand for ATM services by the public, the CBN has decided to commence soon, the process of licensing an additional ATM consortium. This will bring the total number of ATM consortia in the economy to (2) two. The two (2) consortia shall be solely responsible for the deployment of ATMs in public places in line with this policy and best practices.”

ATM Deployment in other Countries
But the directive does not seem to sit well with experts in the know of the competition between Independent ATM Deployers (IADs) and banks worldwide. They argue that nowhere in the world is AIDs given exclusivity over offsite location of ATMs. They stated that all over the world what you find is banks competing with AIDs for offsite ATM deployment.

In some other countries, one could find concentration of ATMs in one place. In fact in some airports there are up to 50 ATMs, with one bank having up to five ATM in one place. This has led some people query the whole essence of the directive. In whose interest is the CBN directive? Is there somebody in the CBN or somebody up there interested in the second licence? The question has been flying freely in the public space.

For example in the United States, US, Cardstronic, which is the largest IAD in the world, does not have the largest number of offsite ATMs in the country. Bank of America does with about 17,000 ATMs out of which about 70 per cent are in offsite locations.

In the United Kingdom, UK, Barclays Bank has the largest number of ATMs and most of them are in offsite locations.
In South Africa, ATM solution, which is the largest IAD in Africa, with about 4000 ATMs, compete with banks for offsite deployment of ATMs especially ABSA Bank.

In Ghana TranSol is the only IAD and it has 21 ATMs deployed in petrol stations. But it still competes with other banks for offsite deployment of ATMs.

In Kenya Pesa Point is the most successful IAD. It has 120 ATMs. This however is less than that of Equity Bank, which has 35 branches and 250 ATMs.”

Apart from that, some people also argue that the timing of the directive is very unrealistic. They claim the banks were not consulted and offsite ATM deployment by banks is not one of the areas that is affecting the financial services negatively rather it has been an area of success and they would not want the CBN to truncate it.

Lobby Group
Apparently worried by the directive, the Chartered Institute of Bankers of Nigeria in conjunction with some banks have been seeking a reversal of the CBN’s order. According to the CIBN, the bankers are already in talks with the CBN on the issue.

Speaking at a media briefing in Lagos recently, the President, CIBN, Dr. Erastus Akingbola, said the institute and the banks had begun moves to secure a reversal of the order. “The CIBN and banks in the country are holding talks with the CBN on the issue and it is expected that the CBN will come out with a statement that will put the issue to rest.
There were quite a number of issues that we brought up in our discussions with the CBN, issues such as the definition of public spaces, public convenience and also the issue of monopoly if it is not allowed to be an all-comers affair,” he said.

Akingbola, however, commended the CBN on its activities aimed at ensuring that banks in Nigeria did not suffer the effect of the global crisis, adding that the regulator had worked hard in strengthening the banks, as well as ensuring stability in the banking system.

The Genesis
As it were, the directive could render useless about 60 per cent of all ATMs deployment in the country. Presently there are about 8,100 ATMs on the InterSwitch network in the country. But most of the phenomenal increase in ATMs deployment took place in the last three years.

Initially, owing to a number of factors ranging from cost of an ATM to infrastructural bottlenecks, the pace of ATM deployment in the country was very slow. To overcome this issue, eight banks (First Bank, Union Bank, Zenith Bank, Diamond Bank, UBA, Afribank, Fidelity Bank and Wema Bank) decided to pool resources together to form a consortium dedicated to ATM deployment in non bank locations.  This followed an approval by the CBN for the ATM Consortium to deploy ATMs in offsite locations.

This collaboration, however suffered a major setback with the banking consolidation exercise. Prior to the consolidation exercise, given the cost of an ATM which was put at about $30,000, the banks with their small capital base then could hardly afford one individually. This prompted the eight banks coming together to form the consortium for the roll out of ATMs facilities across the country.

But with consolidation concluded and huge capital at the disposal of banks – from N2 billion to more than N25 billion – many saw no need for the collaboration and therefore decided to go solo in the deployment of ATM facilities since they afford such exercises.

The result was an aggressive ATM roll-out by banks over the last three years, especially in pubic places like Airport, Hotels, University campuses, Hospitals, Petrol Stations etc. And in some places there are ATMs of the major banks competing for patronage.

Contrary View
Be that as it may, some people have also argued that the CBN directive may not be that bad. The argument is that the CBN may just be trying to avoid unhealthy competition for key locations between the banks and the banks versus the IADs. That they say, probably explains why the CBN is pushing for grouping of banks under different independent ATM deployer, so as to limit the competition to two or three companies.

The directive is a push from the CBN to approach the matter differently. For example, they say, it was the reforms announced by the CBN that gave the banks the motivation to merge and consolidate, so also the directive should be seen as a kind of push from the CBN that the banks should embrace a different approach of deploying ATMs even though this might not align with what obtains elsewhere.


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