CBN’s directive on off-site ATMs dips banks’ fortunes

…As banks pass burden to customers
John Omachonu & Ben Uzor Jr
Revenues to banks’ vaults have continued to nosedive following withdrawal of Automated Teller machines (ATMs) from off-site locations, as directed by the Central Bank of Nigeria (CBN). Besides, the hope of some industry operators that CBN would extend again the deadline for withdrawal which expired March 31, has been dashed as the apex bank said there is no going back.
But, the development is impacting negatively on the finances of banks, which have decided to resort to commissions from the self service machines following their aversion to credit as a result of clean up which has heightened major flaws in their risk management.
In fact revenues from the transactions have been experiencing improvement despite complaints from customers who have lost their life savings to fraudsters. However, some of the affected customers have always alleged insider information. For instance, from a total of revenue of N99.6 million in November last year, moved to N108.3 million in December, but nosedived to N90 million in January this year. Unconfirmed source put the revenue in March to about N100 million
As a way out, some banks have decided to pass the burden to their customers. For instance, last week, one of the banks sent a text message to its customers saying, “Dear customers, CBN mandated non branch ATMs to be handed to a Trust. So all transactions outside …branch ATMs will cost N100 from 9/4/10”). Before now, card users, whose accounts are domiciled with the banks were not charged for using off-site ATMs, but customers only paid when they used other banks ATMs.
But situations have changed as banks are now exploring survival means in the face of depleting revenue, occasioned by lack of intermediation businesses. But, CBN insisted last week that it will not rescind its directive that all off-site located ATMs be withdrawn or handed over to independent handlers, saying that its action is based on the need to protect the customers and also maintain sanity in the system. According to Mohammed Abdullahi, CBN spokesperson, “CBN is not considering a rethink as this is the best practice worldwide. The essence is to ensure checks and balances in the operations of the ATMs”.
According to him there were occasions in the past where some fraudulent practices involving customers losing thousands of cash through ATMs were allegedly linked to insider information or collusion with staff of banks. Mitchell Elegbe, chief executive officer, Interswitch Limited pointed out last week that the management of off-site ATMs was not the responsibility of banks, adding that CBN’s directive on offsite ATMs was laudable. He however added that improper execution on the part of the newly licensed IADs could discredit the policy and further create disorder in the e-payment industry.
“You don’t need anybody to tell you that it is wrong to see 15 ATMs in one location at the airport, that’s waste. So, the question is how did we get to a situation bank would put 15 ATMs in one location when at any point in time not more than one or two are been used, that’s unnecessary waste. I still can’t understand the logic of putting a bank of ATMs at the Hilton in Abuja when there are PoS terminals that accept card payments”, Elegbe said.
But banks have resolved to make up for the money spinning project, but which is supposed to be managed by the three independent ATM deployer s (IAD). Before the end of last month, out of a total of 10, 284 ATMs that were deployed by financial sector, 3, 485 (49 percent) were located outside the banks’ premises, with only 1,500 of the off-site figure, from UBA, First Bank, Diamond Bank, Wema and Ecobank, now being managed by ATM-C, the only independent ATM deployer (IAD) and operator of the quick cash ATM network.
CBN recently granted two Consortiums, Chams Access and CSS approval-in-principle to operate as ATM consortium in Nigeria, but are yet to commence operations despites CBN’s promise of conducting a post-approval-in-principle visit to the firms last month to ensure their readiness and compliance with the requirements.
But some bankers told Business Day last week that their expectation was that CBN will again extend the deadline to allow them choice of IAD to hand over their ATMs, which they spent millions of naira to acquire. Furthermore, some of the banks insisted that those that are handing over their ATMs to these IADs would have to conduct some level of due diligence to ensure that the right kind of companies are selected.
Business Day investigations have revealed that customers are paying for the short fall through excess charges. From the popular cost on transactions (COT) to commission on Automated Teller machines (ATMs), banks now send alert to customers indicating charges, sometimes for no transactions on regular basis. The customers’ woes are heightened by the current perceived excess liquidity in the system typified by the banks ‘ reluctance to expand their loan portfolio, and the attendant uncertainty which is making consumers to hold on to cash. Immediate implication is rising cases of defaults among individuals and corporate organizations, whose livelihood is being threatened by the charges.
But, Garba Mohammed, a customer of one of the banks said yesterday that the banks’ action amounts to transfer of aggression as these charges will further impoverish the investing public. Rasheed Shonubi, a bank customer said: “Every time I conduct ATM transactions outside ATMs, N100 is removed. I think that is outrageous for low income earners. This is one of the consequences of the removal of off-site ATMs. Let us be realistic, banks would have incurred a lot of costs in the process. Of course, they would definitely pass that cost to the end users.”